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					                                                               Correspondent Partner
                                                                      Announcement
                                               “Striving to be the Best…not the biggest.”

Issue Date      6/26/12             Effective Date       As Noted                CPA     2012-021


USDA Revisions and Clarifications

Purpose             This Announcement includes the following topics:
                     Revision to USDA Refinance Pilot regarding Closing Costs and Prepaids.
                     Quick View Refinance Matrix.
                     Revisions to Refinance Appraisal Requirements.
                     Clarification to Household Income requirements.
                     Clarification to Student Loan debt requirements.


Effective Date      As Noted


Refinance           USDA has announced that they will accept the inclusion of customary Closing
Pilot – Closing     Costs and PrePaids (CC/PP) in the mortgage amount for the Refinance Pilot.
Costs and
Prepaids            Effective for USDA loans locked under the USDA Pilot Refinance Program
                    on/after Tuesday, 6/26/12, MSI will accept the inclusion of CC/PP in the loan
                    amount.
                     MSI has provided clarification based on USDA’s FAQ in our updated USDA
                        Product Suite. Please see the Rural Refinance Pilot updates in the 6/26/12
                        version of the USDA Product Suite on the Web Site for full details.


Quick View          MSI will add the attached Quick View Refinance Matrix to our USDA Quick
Refinance           Reference Product Sheet on the Web Site.
Matrix               We have attached the matrix for your convenience.


Refinance           Effective for loans submitted to Underwriting on/after 6/26/12, MSI has
Appraisal           simplified our appraisal guidelines:
                     Non-Streamline: A new appraisal is required; repairs cannot be included in
                        the amount financed.
                     Streamline: This option does not require a new appraisal.

                    As always, USDA guidelines must be followed.
                     HUD Handbook 4150.2 and 4905.1 certifications are no longer required on
                        refinances. This has been removed from our underwriting guidelines. See the
                        updated USDA Product Suite for details.
                        •    A standard 1004 appraisal is still required for the non streamline
                             refinance.

                                                                                   Continued on next page




CPA-12-021                                                                                          Page 1 of 2
This communication is intended for use only by mortgage professionals and business partners of
Mortgage Services III, LLC (MSI).
                                                               Correspondent Partner
                                                                      Announcement
                                               “Striving to be the Best…not the biggest.”

Issue Date      6/26/12             Effective Date       As Noted                CPA     2012-021


USDA Revisions and Clarifications, Continued

Household           Effective Immediately MSI has clarified requirements for Household Income:
Income               Household income must be documented in the same manner as qualifying
                        income.
                     Household income may be adjusted by child care costs for dependents less
                        than 12 years of age; the adjustment must be documented. In accordance
                        with ANA4543 the following new documentation guidelines apply:
                        •   “Documentation can be in the form of tax returns, third party verifications,
                            canceled checks, or money order receipts. Child support payments and/or
                            private school tuition paid by an applicant are not eligible child care
                            expenses.”


Student Loan        Effective Immediately, MSI has added clarification for Student Loan Income
Debt                Based Repayment (IBR).

                        Income Based Repayment (IBR)
                         •  IBR amounts are not fixed payments and may increase annually.
                         •  IBR payments of $0 are not eligible to be used in the debt ratio, a
                            payment must be considered for this liability.
                         •  When an applicant provides documentation of an IBR agreement and
                            payment from the student loan servicer, the following apply:
                            o If the IBR payment is less than $100 and 1% of the total loan balance
                                is more than $100, a minimum payment of $100 must be included in
                                the debt ratios.
                            o If the current IBR payment is over $100, lenders may use that
                                payment amount in the debt ratios.


Seller Guide        The Seller Guide and any other applicable posted documents will be updated
                    within 2 business days of the effective date of each topic.


Questions           If you have questions, contact your Account Executive.




CPA-12-021                                                                                          Page 2 of 2
This communication is intended for use only by mortgage professionals and business partners of
Mortgage Services III, LLC (MSI).
                                                             Quick Reference Product Sheet

                                                                              Rural Development Loans


                                                      USDA Refinance Comparison Matrix
                                                   Standard Rate Term                  Streamline Refinance                        USDA Pilot AN4634
                  Guideline
                                                  Refinance w/ appraisal                   No appraisal                          (Only in specific states)
GUS                                             Yes                                    Manual only                       Manual only
Direct or GRH                                   Both                                   GRH only                          Both (need appraisal on Direct)
Minimum Payments Made                           Four (4)                               Four (4)                          Twelve (12)
Mortgage Lates*                                 None in past 12 months                 None in past 12                   None in past 12 months
                                                                                       months
Appraisal                                       Yes full 1004                          No                                Direct only (Full 1004 or 2055 AMC)
Cash Back at close                              $0.00 **                               $0.00                             $0.00
Principal Reduction allowed                     Yes                                    Yes                               Yes
Max Loan amount                                 Up to 101.5% of the                    Unpaid Principal                  Unpaid Principal balance +1.5% fee
                                                appraised value                        balance +1.5% fee                 + Closing Costs/Prepaids
Ratio limits                                    36/48 with a GUS accept                31/43                             Waived
Credit Report                                   Full trimerge report                   Full trimerge report              Full trimerge report
GRH Fees                                        1.5% up front +.3% annual              1.5% up front +.3%                1.5% up front +.3% annual
                                                                                       annual
Income Docs                                     Full income                            Full income                       Full income Documentation ***
                                                Documentation                          Documentation
Income Eligibility                              Must meet income                       Must meet income                  Must meet income eligibility
                                                eligibility                            eligibility
Add/Remove Borrower                             Yes                                    Yes                               No, unless deceased
Interest Rate                                   < Existing Note rate                   < Existing Note rate              Minimum 1% lower than note rate
FEMA 81-93 (Flood cert)                         Required                               Required                          Required
HUD Handbook Cert                               Not Required                           Not Required                      Not Required
Repairs financed?                               No                                     No                                No
Inspections (eg.                                Not Required                           Not Required                      Not Required
Well/Septic/Termite)
* AN4635 requires any lates within the last 36 months evaluated by the lender and accompanied with a full LOX from the borrower
** The appraisal fee may be returned with proof the funds were withdrawn directly from the borrower's own funds (ie. bank account or
debit card ------credit cards are not considered the borrower's own funds)
***Income must still be calculated for income eligibility, AN4543 requires eligibility income to be documented in the same manner as
income for qualifying.

This is a summary of the refinance Products. It is not intended to replace standard underwriting guidelines or USDA AN Publications.
Please refer to the USDA Product Suite for full details.




 MSI provides the Product Sheet as a quick reference for mortgage professionals only. Product guidelines are subject to change without notice.
                                  See the MSI Seller Guide for full details prior to selling any loans to MSI.


Version 6/26/12                                                                                                                     Page 2 of 2

				
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