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					                                 Nationstar Mortgage
              Conventional Underwriting Guidelines
                          (Wholesale)




Nationstar Mortgage LLC, 700 E. Highway 121, Suite100, Lewisville, TX 75067. NMLS Unique Identifier #2119. The
information contained herein is for informational purposes only and is not intended and should not be construed as legal
advice. This information is not intended to be relied upon by third parties. Nationstar Mortgage disclaims any and all
representations (expressed or implied) with respect to the accuracy of the foregoing information. Some products may not
be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a
commitment to lend. The programs, rates, terms and conditions are subject to change at any time without notice. All rights
reserved. Trademarks are the property of Nationstar Mortgage.




           Nationstar Mortgage Conventional Underwriting Guidelines                           02/23/12       1

                                                Nationstar Internal
SECTION 1: GENERAL REQUIREMENTS .................................................................................... 4
  1.0  General Requirements..................................................................................................... 4
  1.1  Risk Factors Evaluated by DU/LP ................................................................................... 4
  1.2 Documentation Requirements........................................................................................... 6
  1.3  Eligible Recommendations .............................................................................................. 7
  1.4  Erroneous Credit Report Data ......................................................................................... 7
  1.5  Accuracy of Data, Tolerances, and Errors in the Credit Report ...................................... 9
  1.6  Validation of Qualified Parties ....................................................................................... 11
SECTION 2: CREDIT REQUIREMENTS ...................................................................................... 13
  2.0  Allowable Age of Credit Documents .............................................................................. 13
  2.1  Number and Age of Accounts ........................................................................................ 13
  2.2  Payment History ............................................................................................................ 13
  2.3  Previous Mortgage Payment History ............................................................................. 14
  2.4  Credit Utilization ............................................................................................................. 15
  2.5  Significant Derogatory Credit Events – Waiting Periods and Re-establishing Credit ... 15
  2.6  Extenuating Circumstances for Derogatory Credit ........................................................ 19
SECTION 3: EMPLOYMENT INCOME AND INCOME VERIFICATION ...................................... 21
  3.0  Requirements and Uses of IRS Form 4506-T ............................................................... 21
  3.1  Verbal Verification of Employment ................................................................................ 24
  3.2  Non-U.S. Citizen Borrowers .......................................................................................... 25
  3.3  Using Nontaxable Income to Adjust the Borrower’s Gross Income .............................. 26
  3.4  Salary and Commission Income .................................................................................... 27
  3.5  Verification of Salary and Commission Income ............................................................. 29
  3.6  Commission Income ...................................................................................................... 30
  3.7  Bonus and Overtime Income ......................................................................................... 30
  3.8  Part-Time, Second-Job, Multiple-Job, and Seasonal .................................................... 31
  3.9  Military Income............................................................................................................... 32
  3.10    Rental Income ............................................................................................................ 32
  3.11    Other Sources of Income ........................................................................................... 35
  3.12    Underwriting Factors and Documentation for a Self-Employed Borrower ................. 44
SECTION 4: ASSETS ................................................................................................................... 46
  4.0  Minimum Reserve Requirements .................................................................................. 46
  4.1  Interested Party Contributions (IPCs) ............................................................................ 49
  4.2  Asset Verification ........................................................................................................... 51
  4.3  Gifts................................................................................................................................ 52
  4.4  Individual Development Accounts ................................................................................. 52
  4.5  Verification of Assets for Non-U.S. Citizen Borrowers .................................................. 55
  4.6  Stocks, Stock Options, Bonds, and Mutual Funds ........................................................ 55
  4.7  Trust Accounts ............................................................................................................... 56
  4.8  Retirement Accounts ..................................................................................................... 57
  4.9  Personal Gifts ................................................................................................................ 57
  4.10    Gifts of Equity ............................................................................................................ 59
  4.11    Donations from Entities.............................................................................................. 59
  4.12    Disaster Relief Grants or Loans ................................................................................ 60
  4.13    Employer Assistance ................................................................................................. 60
  4.14    Sales Contract Deposit .............................................................................................. 62
  4.15    Anticipated Sales Proceeds ....................................................................................... 63
  4.16    Trade Equity .............................................................................................................. 64
  4.17    Credit for Value of Lot ................................................................................................ 65
  4.18    Rent Credit for Option to Purchase ........................................................................... 65
  4.19    Sweat Equity .............................................................................................................. 66
  4.20    Bridge/Swing Loans ................................................................................................... 66
  4.21    Borrowed Funds Secured by an Asset ...................................................................... 66
  4.22    Credit Card Financing ................................................................................................ 67
  4.23    Personal Unsecured Loans ....................................................................................... 67

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                                                        Nationstar Internal
  4.24    Sale of Personal Assets............................................................................................. 68
  4.25    Cash Value of Life Insurance .................................................................................... 68
  4.26    Anticipated Savings and Cash-on-Hand.................................................................... 68
SECTION 5: LIABILITIES AND DEBT OBLIGATION ................................................................... 69
  5.0  Borrower’s Monthly Housing Expense for Qualifying Purposes .................................... 69
  5.1  Monthly Debt Obligations .............................................................................................. 70
  5.2  Qualifying Impact of Other Real Estate Owned ............................................................. 72
  5.3  Debts Paid Off At/Prior to Closing ................................................................................. 75
SECTION 6: APPRAISAL/COLLATERAL REQUIREMENTS ....................................................... 77
  6.0  Introduction .................................................................................................................... 77
  6.1  Age of Appraisal and Age of Property Inspection Report .............................................. 77
  6.2  Appraiser Engagement .................................................................................................. 78
  6.3  Appraisal Format Requirement ...................................................................................... 81
  6.4  FMV Approach Requirements ....................................................................................... 82
  6.5  Required Signatures ...................................................................................................... 82
  6.6  Appraisal Reporting Requirements................................................................................ 82
  6.7  Property Requirements .................................................................................................. 83
  6.8  Pre-Funding Review Requirements............................................................................... 85
  6.9  Second Appraisal Reports ............................................................................................. 86
  6.10    Nationstar Mortgage Appraiser Approval Process .................................................... 87
  6.11    Nationstar Appraisal Quality Control Testing............................................................. 87
  6.12    Referrals of Appraisal Misconduct Reports ............................................................... 87
  6.13    Condominium Policy .................................................................................................. 87
SECTION 7: LOAN PURPOSE ................................................................................................... 107
  7.0  Purchase Transactions ................................................................................................ 107
  7.1  Limited Cash-Out Refinance Transactions .................................................................. 107
  7.2  Cash-Out Refinance Transactions .............................................................................. 109
  7.3  Continuity of Obligation ............................................................................................... 110
  7.5  General Mortgage Terms and Conditions ................................................................... 111
  7.6  Prohibited Refinancing Practices ................................................................................. 115
  7.7  Multiple Financed Properties for the Same Borrower .................................................. 116
  7.8  Construction-to-Permanent ......................................................................................... 118
SECTION 8: HOMEOWNERS INSURANCE REQUIREMENTS ................................................ 120
  8.0  Introduction .................................................................................................................. 120
  8.1  Insurance Coverage Requirements ............................................................................. 120
  8.2  Amount of Coverage .................................................................................................... 120
  8.3  Flood Insurance ........................................................................................................... 120
  8.4  Loss Payable Clause ................................................................................................... 120
SECTION 9: TITLE INSURANCE/CLOSING AGENTS .............................................................. 121
  9.0  Title Commitments ....................................................................................................... 121
  9.1  Title Issues ................................................................................................................... 121
  9.2  Waiver of Rescission ................................................................................................... 121
  9.3  Loan Closings .............................................................................................................. 122




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                                                       Nationstar Internal
              SECTION 1: GENERAL REQUIREMENTS
1.0     General Requirements
When underwriting loans with DU or LP, the Broker must do all of the following:

       Apply due diligence when reviewing the documentation in the loan file.
       Confirm the accuracy and completeness of the data, making sure that it did not fail to
        submit any data that might have affected the DU/LP recommendation.
       Determine if there is any potentially derogatory or contradictory information that is not
        part of the data analyzed by DU/LP.
       Employ prudent underwriting judgment in assessing whether a loan case file should be
        approved and delivered to Nationstar Mortgage.
       Ensure that the loan complies with all of the verification messages and approval
        conditions specified in the Underwriting Findings report.
       Review the credit report to confirm that the data that DU/LP evaluated with respect to the
        borrower’s credit history was accurate and complete.
       Take action when erroneous data in the credit report or contradictory or derogatory
        information in the loan file would justify additional investigation or would provide grounds
        for a decision that is different from the recommendation that DU/LP delivered.

For example, if a foreclosure was reported in the credit report but was not detected by DU/LP
(i.e., was not referenced in any verification messages), the lender must determine if the loan
complies with the applicable guidelines.

DU Resubmissions After Closing
In the event a corrected DU report is required to ensure data integrity after closing, the DU
resubmission must occur no later than 60 days after the note date.

1.1     Risk Factors Evaluated by DU/LP
Credit History
A relatively new credit history (a few recently opened accounts) may still be considered an
acceptable credit risk. Making payments as agreed on newly established accounts signifies lower
risk than not making payments as agreed.

Delinquent Accounts
Payment history is a significant factor in the evaluation of the borrower’s credit. DU/LP considers
the severity of the delinquencies, the length of time since the delinquencies, the number of
accounts that were not paid as agreed, and the type of accounts with delinquencies.

A history of payments that includes delinquent accounts of 30 days or more past-due, or a
history of paying bills late as evidenced by a number of accounts with late payments, will have a
negative impact on the borrower’s credit profile.




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                                        Nationstar Internal
Mortgage Accounts
A history of paying a mortgage loan late will have an even more negative impact on the credit
profile. The amount of time that has elapsed since an account was delinquent is included in the
evaluation of the payment history. The length of time since a delinquency (if any) has occurred,
the severity of delinquency, and the age of the mortgage accounts are also factored into the
credit analysis.

Borrowers may not bring past-due mortgage accounts current prior to closing in order to
circumvent policy regarding past-due mortgages.


Omitted Accounts
Supporting documentation is required when a credit report liability with a balance greater than
zero is omitted from the loan application.

Inquiries
DU/LP evaluates inquiries made within the most recent six months of the credit report date.
Historically, a high number of inquiries can indicate a higher degree of risk. Borrowers who have
frequently applied for, or obtained, new or additional credit represent a higher risk. All inquiries
must be documented with a statement from the borrower addressing whether the inquiries
resulted in new tradelines. Any new debt must be documented, and the debt considered in the
final AUS resulted.

Liquid Reserves
Liquid reserves are those financial assets that are available to a borrower after a loan closes.
Reserves are calculated as the total amount of liquid assets remaining after the loan transaction
closes divided by the proposed monthly housing expense.

DU/LP considers higher amounts of liquid reserves as more favorable than lower amounts or no
reserves. Mortgages to borrowers with higher amounts of liquid reserves tend to have lower
default rates. As with a low LTV ratio, DU/LP may consider high amounts of reserves as an offset
for other risks.

Loan Type/Amortization Type
The level of risk associated with each amortization type is as follows, listed from least amount of
risk to greatest:

       Fully amortizing fixed-rate mortgages
       Fully amortizing five-year, seven-year, and 10-year ARMs
       Six-month, one-year, and three-year ARMs as well as fixed-rate interest-only mortgages
       Interest-only ARMs




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                                        Nationstar Internal
Occupancy Type
The level of risk associated with occupancy type is as follows, listed from least amount to
greatest:

        Owner-occupied low LTV
        Owner-occupied high LTV
        Second home low LTV
        Second home high LTV
        Investment low LTV
        Investment high LTV

Total Expense Ratio
As the expense ratio increases, the level of risk also tends to increase. A high ratio will have the
greatest adverse impact on the recommendation when there are also other high-risk factors
present.

Property Type
DU/LP differentiates the risk based on the number of units, and in some cases the property type
(e.g., manufactured home and cooperative properties).

The level of risk associated with each property type is as follows, starting with those property
types representing the least amount of risk:

       One-unit properties that are not in a co-op project and are not attached condos
       Attached condos, units in cooperative projects, and two-unit properties
        Three- and four-unit properties
       Manufactured homes, including those in a condo or cooperative project

Nationstar does not allow the following property types:

       Co-op projects
       Manufactured homes with condominiums or co-ops

1.2 Documentation Requirements
DU/LP indicates the minimum verification documentation requirements necessary for the Broker
to process the loan application.

Documentation requirements are based on the specific risk factors present in each loan file. The
requirements appear in the Underwriting Findings report.




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                                        Nationstar Internal
1.3      Eligible Recommendations

Result                                               Eligible for delivery to Nationstar?

Approve/Eligible

Accept/Eligible                                      Yes, if all approval conditions have been met.

EA=1

Caution, A-minus/Eligible                            Yes, if all approval conditions have been met.

Approve/Ineligible
                                                     No, unless the Broker resolves the issue that
                                                     resulted in the ineligibility.
EA=1 Ineligible

Refer/Eligible

Caution, A-minus/Eligible
                                                     Not eligible for delivery
Refer with Caution/IV

Out of Scope

To determine whether the loan represents an acceptable credit risk, and is deliverable to
Nationstar Mortgage, the Broker must do all of the following:

        Review the conditions that resulted in the referral.
        Determine whether the mortgage meets the credit risk requirements Nationstar Mortgage
         applies to manually underwritten mortgage loans.
        Evaluate the accuracy of the data submitted.
        Evaluate any factors outside of the data considered by DU/LP when determining whether
         to approve the loan.
        Employ prudent underwriting judgment in assessing whether a loan that received a Refer
         recommendation should be approved by the Broker and delivered to Nationstar
         Mortgage.
        Evaluate the risk factors in a comprehensive manner.
        Document the loan file with the rationale that was applied in the course of making the
         final decision.
        Request additional verifications or documentation, as appropriate, and include this
         information in the loan file if the factors supporting the final decision cannot be delivered
         from the verifications listed in the Underwriting Findings report.
        Comply with all of the verification messages and conditions specified in the Underwriting
         Findings report.

1.4      Erroneous Credit Report Data


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                                         Nationstar Internal
The Broker must ensure that credit report data used in the underwriting analysis is accurate.
Significant, material credit errors in a borrower’s credit report require additional documentation.

Broker Action Regarding Derogatory Credit Reported in Error
The following types of written documentation to support erroneous information must be provided:

       A supplement to the credit report
       A new mortgage credit report
       Documentation from the credit provider that reported the error

When a loan is resubmitted to DU/LP with a credit report that has been corrected, copies of all
credit reports must be delivered in the final package.

Other Errors in the Credit Data
If the credit report contains derogatory information, and DU/LP does not recognize or consider the
derogatory information (as evidenced by the fact that the Underwriting Findings do not reflect the
derogatory information in the report), the Broker must determine if these factors would result in a
different recommendation being returned.

For example, the credit report indicates that the borrower had a previous foreclosure, but the
findings report does not reference the foreclosure, a reporting or data transfer error may have
occurred, thus preventing DU from considering the foreclosure in its analysis of the loan. The
Broker must take action to ensure that the information is considered in the risk analysis.




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                                        Nationstar Internal
1.5 Accuracy of Data, Tolerances, and Errors in the Credit
Report
The terms of the closed loan must match the terms of the final loan casefile submission or fall
within the tolerances listed in the following table.

Data Attribute and Description      Trigger                          Action Required

   Interest rate increase.         The result of these changes      Resubmit the loan casefile to
                                    cause the DTI ratio to:          DU/LP before loan closing.
   Discrepancies between the
    credit report payments and         Exceed 45%
    balances and those listed on
                                        or
    the online loan application,
    including the presence of          Increase by 3 percentage
    debt that is on the credit          points or more (if the
    report but not on the               recalculated DTI ratio is
    application.                        less than 45%)
   Additional debt(s) disclosed
    by the borrower or identified
    by the Broker during the
    mortgage process.
   Verified income is less than
    the income on the loan
    application submitted to DU.

                                    Interest rate decreases, not     No resubmission required.
                                    as the result of a permanent
                                    interest rate buydown.
Interest rate on fixed-rate and
adjustable-rate mortgages.
                                    Interest rate decreases as the   Resubmit the loan casefile to
                                    result of a permanent interest   DU before loan closing.
                                    rate buydown.

Verified income used to qualify     Income is greater than the       Resubmit the loan casefile to
the borrower for loans subject to   loan application indicates.      DU before loan closing.
HUD median income limits; for
example, as with community
lending mortgages.

Assets.                             DU returns a message that a      The Broker must verify, at a
                                    specific amount of assets        minimum, the specified
                                    must be verified.                amount for DU.
                                                                     LP findings will allow a
                                                                     variance of 10% in reserves
                                                                     only.




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                                        Nationstar Internal
Refinance Transactions-DU

The loan amount may increase        The loan amount tolerances are permitted provided the new
$500 or up to 1% of the loan        LTV/CLTV does not result in:
amount, whichever is less.
                                            Changes to the amount of required mortgage
The loan amount may decrease                 insurance coverage.
5% of the loan amount.
                                            Different loan-level price adjustments.
                                             or
                                            Changes to loan eligibility.

Refinance Transactions-LP

The loan amount decreases by        The loan amount tolerances are permitted provided the new
no more than 1%.                    LTV/CLTV does not result in:
                                            Changes to the amount of required mortgage
                                             insurance coverage.
                                            Different loan-level price adjustments.
                                    or
                                            Changes to loan eligibility.


Non-Applicant Debts/Accounts
   In cases where a credit report indicates possible non-applicant accounts it must be
   determined whether or not the accounts belong to the borrower. The Broker must determine if
   the recommendation is accurate based on the severity of the information. The Broker must
   manually evaluate the borrower’s credit in conjunction with all other risk factors.

   Typical non-applicant accounts include:

      Applicants who are Juniors/Seniors.
      Variances in addresses reflected in the credit report (potential fraud red flag).
      Non-related individuals who have identical names.
      Debts applied for under a different Social Security number (potential fraud red flag).
      Potential non-applicant accounts are included in the risk analysis and must be included in
       the debt ratio. If the debts do not belong to the borrower, supporting documentation must
       be placed in the file. The Broker must investigate whether the non-applicant accounts
       belong to the borrower and document the file accordingly.




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                                         Nationstar Internal
Potential Red Flag Messages
DU provides a number of “potential red flag” messages indicating inconsistencies in the loan
casefile and these are a strong indication of potentially fraudulent transactions. These messages
do not affect the recommendation but must be documented fully. Regardless of the presence of
these messages, it is the Broker’s responsibility to ensure accurate information in all areas of the
loan process and comply with applicable law, including the Fair Credit Reporting Act.

The following is a list of potential red flag messages.

       Rapid appreciation: Messages help identify purchase and refinance transactions with
        subject property values that, according to a recent prior sale, appear to have an
        excessive rate of appreciation.
       Quality control: Messages identify transactions that have risk characteristics that
        historically have been found to contribute to inflated property valuation.
       Excessive resubmissions: A message alerts Brokers when an unusually high number of
        loan resubmissions may be the result of data manipulation.
       Excessive value: A message helps identify refinance transactions submitted to the
        system where the Broker’s initial value estimate appears to be excessive.
       Manufactured home caution: A message alerts users when a property type was not
        submitted as a manufactured home, but Nationstar Mortgage’s property database
        indicates that it may be a manufactured home.

The Broker should document the file with independent research from a reliable source.

1.6     Validation of Qualified Parties
The agencies require confirmation on all loans that companies or individuals involved in the
origination, underwriting, or servicing of the mortgage transaction are not on the General Services
Administration (GSA) Excluded Party List or the HUD Limited Denial of Participation (LDP) List
Nationstar must meet this requirement on all loans.

Verification Requirements
Each loan file must contain verification that the following individuals and/or entities are not on the
GSA or HUD list. If there is a match on the list(s) for any of the individuals/entities in the table
below, perform an advanced search with the name and Social Security number.

FNMA Loans

   Borrowers, including “Also Known As” (AKAs) where the borrower’s name varies
    significantly.
   Appraiser
   Closing agent/title company
   Realtor(s)
   Property seller(s)
   Broker's originating loan officer (wholesale)



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                                         Nationstar Internal
Freddie Mac Exclusionary List

All loans delivered to Nationstar Mortgage for Freddie Mac products must contain proof that no
parties in the transaction are listed on the Freddie Mac Exclusionary List.




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                                      Nationstar Internal
                 SECTION 2: CREDIT REQUIREMENTS

2.0     Allowable Age of Credit Documents
Allowable Age of Credit Documents
Credit documents include credit reports and employment, income, and asset documentation. For
existing construction, the credit documents must be no more than 90 days old on the date the
note is signed. For new construction, the credit documents must be no more than 120 days old on
the date the note is signed.

2.1     Number and Age of Accounts
Number and Age of Accounts
The Broker must review the borrower’s credit report to determine whether he or she has an older
established credit history or a newly established credit history, and whether there are a significant
number of recently opened accounts or a mix of new accounts and older accounts.

A newly established credit history does not automatically represent a higher credit risk, since
making payments as agreed on newly opened accounts represents less of a risk than not making
payments as agreed on older, established accounts.

Credit histories that include older, established accounts represent lower credit risk. An older,
established credit history that includes a significant number of recently opened accounts may
indicate that the borrower is overextended, and thus will represent a higher credit risk.

2.2     Payment History
Payment History
The Broker must review the borrower’s credit report to determine the current status of each credit
account (including mortgage accounts), the timeliness of payments, and the frequency and
severity of any delinquent payments.

       Credit histories that include recent late payments (within the last 24 months) present a
        higher credit risk. When there are late payments and derogatory accounts within the last
        24 months, the Broker must determine whether the late payments represent isolated
        incidences or frequent occurrences. Delinquent payments must be evaluated in the
        context of the borrower’s overall credit history, including the number and age of accounts,
        credit utilization, and recent attempts to obtain new credit.
       Credit histories that include foreclosures, deeds-in-lieu, and public records information
        (such as bankruptcies, judgments, and liens) represent a higher credit risk and are
        subject to waiting periods before the borrower is eligible for mortgage financing.




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                                        Nationstar Internal
2.3     Previous Mortgage Payment History
Documenting Previous Mortgage History
The Broker must review the borrower's credit report to determine the status of all mortgage
accounts. Previous mortgages do not require independent verification provided the credit report
reflects 12 months of the most recent payment activity.

If adequate mortgage history is not available on the credit bureau, one of the following methods
must be used to document an acceptable payment history for previous mortgage(s):

       A standard mortgage verification
       Loan payment history from the servicer
       The borrower’s canceled checks for the last 12 months
        or
       The borrower’s year-end mortgage account statement, provided the statement includes a
        payment receipt history, and, if applicable, canceled checks for the months elapsed since
        the year-end mortgage account statement was issued


Standard Mortgage Verifications from Servicers
A standard mortgage verification from the servicer/holder is acceptable provided it includes the
following information:

       Unpaid principal balance and monthly payment amount
       Present status of the mortgage, such as current, 30 days’ delinquent, etc.
        and
       Borrower’s payment history

When a servicer/holder fails to provide all of the requested information, the borrower must provide
canceled checks. The checks must:

       Be legible
       Identify the mortgage servicer/holder as the payee
       Indicate the date the check was deposited in the servicer/holder’s account

Existing Mortgage Payment Requirements
On the date of the loan application, the borrower’s existing mortgage must be current, which
means that no more than 45 days may have elapsed since the last paid installment date.

Excessive Mortgage Delinquency
Loans with excessive prior mortgage delinquencies are not eligible for delivery to Nationstar
Mortgage.

Excessive prior mortgage delinquency is defined as any mortgage tradeline that has one or more
delinquencies over 30 days (60, 90, 120 days) within the 12 months.

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                                       Nationstar Internal
2.4     Credit Utilization
The borrower’s credit report must be evaluated by reviewing use of revolving credit and
comparing the current balance on each open account to the amount of credit that is available to
determine whether the borrower has a pattern of using revolving credit. Credit histories that
include revolving accounts with a low balances-to-limits ratio generally represent a lower credit
risk, while those that include accounts with a high balances-to-limits ratio represent a higher
credit risk.

A credit history that includes recently opened accounts that are at or near their limits may indicate
that the borrower is overextended and should be carefully evaluated to determine additional risk.
When combined with a delinquent payment history, it is an indication that the borrower has not
managed his or her credit successfully.

2.5 Significant Derogatory Credit Events – Waiting Periods and
Re-establishing Credit
General Information
The presence of significant derogatory credit events dramatically increases the likelihood of a
future default and represents a significantly higher level of default risk. Examples of significant
derogatory credit events include bankruptcies, foreclosures, deeds-in-lieu of foreclosure,
preforeclosure sales, and short sales. Preforeclosures and short sales are considered the same
risk.

The Broker must determine the cause and significance of the derogatory information. Sufficient
time must have passed since the date of the derogatory event to demonstrate that the borrower
has re-established an acceptable credit history. The Broker must make the final decision about
the acceptability of a borrower’s credit history when significant derogatory credit information
exists.

Copies of appropriate documentation must be obtained for the significant derogatory credit event.
The documentation must:

       Effective date of a previous foreclosure, deed-in-lieu or preforeclosure sale as
        established by a trustee’s deed or other conclusive documentation.
       Proof of bankruptcy discharge or dismissal date through credit report listing of public
        records or court documentation.
        And
       Identify debts that were not satisfied by the bankruptcy.

Debts that were not satisfied by a bankruptcy must be paid off or have an acceptable, established
repayment schedule with no delinquencies after the date of the bankruptcy.




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                                        Nationstar Internal
Bankruptcy (Chapter 7 or Chapter 11)
A four-year waiting period is required, measured from the discharge or dismissal date of the
bankruptcy action.

Exceptions for Extenuating Circumstances

A two-year waiting period is permitted if extenuating circumstances can be documented, and is
measured from the discharge or dismissal date of the bankruptcy action.

Bankruptcy (Chapter 13)

The waiting period required for Chapter 13 bankruptcy actions is measured as follows:

       Two years from the discharge date
        or
       Four years from the dismissal date.

The shorter waiting period based on the discharge date recognizes that borrowers have already
met a portion of the waiting period within the time needed for the successful completion of a
Chapter 13 plan and subsequent discharge.

A borrower who was unable to complete the Chapter 13 plan and received a dismissal will be
held to a four-year waiting period.

Exceptions for Extenuating Circumstances

A two-year waiting period is permitted after a Chapter 13 dismissal if extenuating circumstances
can be documented. There are no exceptions permitted to the two-year waiting period after a
Chapter 13 discharge.

Multiple Bankruptcy Filings

For a borrower with more than one bankruptcy filing within the past seven years, a five-year
waiting period is required, measured from the most recent dismissal or discharge date.

Exceptions for Extenuating Circumstances

A three-year waiting period is permitted if extenuating circumstances can be documented, and is
measured from the most recent bankruptcy discharge or dismissal date. The most recent
bankruptcy filing must have been the result of extenuating circumstances.

Foreclosure
A seven-year waiting period is required, and is measured from the completion date of the
foreclosure action as reported on the credit report trustee’s deed.




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                                       Nationstar Internal
Exceptions for Extenuating Circumstances

A three-year waiting period is permitted if extenuating circumstances can be documented, and is
measured from the completion date of the foreclosure action. Additional requirements apply
between three and seven years, which include:

       Maximum LTV ratios of the lesser of 90% or the maximum LTV ratios for the transaction
        per the applicable Nationstar Mortgage Eligibility Matrix for the product.
       The purchase of a principal residence is permitted.
       Limited cash-out refinances are permitted for all occupancy types pursuant to the
        eligibility requirements in effect at that time.

Second home investment properties and cash-out refinances require a seven-year waiting period.

Deed-in-Lieu of Foreclosure and Preforeclosure Sale
A deed-in-lieu of foreclosure is a transaction in which the deed to the real property is
transferred back to the servicer/holder. A preforeclosure sale or short sale is the sale of a
property in lieu of a foreclosure resulting in a payoff of less than the total amount owed, which
was pre-approved by the servicer.

DU/LP cannot identify preforeclosure or short sales in the credit report data. Brokers must
manually apply the preforeclosure sale requirements regardless of the underwriting
recommendation.

Note: In the following table, References to LTV ratios include LTV, CLTV, and HCLTV ratios.




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                                        Nationstar Internal
Summary of all Waiting Period Requirements

Derogatory Event         Waiting Period Requirements         Waiting Period with Extenuating
                                                             Circumstances

Bankruptcy – Chapter     Four years                          Two years
7 or 11

Bankruptcy – Chapter            Two years from                    Two years from discharge
13                               discharge date                     date
                                Four years from                   Two years from dismissal
                                 dismissal date                     date

Multiple Bankruptcy      Five years if more than one         Three years from the most recent
Filings                  filing within the past seven        discharge or dismissal date
                         years

Foreclosure              Seven years                         Three years
                                                                   Additional requirements after
                                                                    three years, up to seven
                                                                    years:
                                                                   90% maximum LTV ratios*
                                                                   Purchase, principal
                                                                    residence
                                                                   Limited cash-out refinance,
                                                                    all occupancy types

Deed-in-Lieu of          Two years – 80% maximum             Two years – 90% maximum LTV
Foreclosure and          LTV ratios*                         ratios*
Preforeclosure Sale
                         Four years – 90% maximum
                         LTV ratios*
                         Seven years – LTV ratios per
                         the Eligibility Matrix

*The maximum LTV ratios permitted are the lesser of the LTV ratios in this table or the maximum
LTV ratios for the transaction per the Eligibility Matrix.

Exceptions for Extenuating Circumstances

A two-year waiting period is permitted if extenuating circumstances can be documented, with
maximum LTV ratios of the lesser of 90% or the maximum LTV ratios for the transaction per the
applicable Nationstar Mortgage Eligibility Matrix for the product.).




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                                       Nationstar Internal
Requirements for Re-establishing Credit
After a bankruptcy, foreclosure, deed-in-lieu of foreclosure, or preforeclosure sale, the borrower’s
credit will be considered re-established if all of the following are met:

       The waiting period and the related additional requirements are met.
       The loan receives a recommendation from DU/LP that is acceptable.
       The borrower has traditional credit established after the derogatory event. Nontraditional
        credit or “thin files” are not acceptable.

2.6     Extenuating Circumstances for Derogatory Credit
Extenuating circumstances are nonrecurring events that are beyond the borrower’s control such
as sudden, significant, and prolonged reduction in income or a catastrophic increase in financial
obligations.

Significant documentation must be provided to validate the extenuating circumstance including a
copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.
Additional documentation may include a copy of insurance papers or claim settlements, property
listing agreements, lease agreements, tax returns [covering the periods prior to, during, and after
a loss of employment, etc.).

The borrower must provide a letter explaining the relevance of the documentation which supports
reason for the extenuating circumstances and confirm the nature of the event.

Authorized User Tradelines
Authorized User tradelines should be evaluated in order to ensure that they are an accurate
reflection of the borrower's credit history. If the Broker believes the authorized user tradelines are
not an accurate reflection of the borrower's credit history, the Broker should evaluate the
borrower's credit history without the benefit of these tradelines and use prudent underwriting
judgment when making its final underwriting decision. In order to assist the Broker in its review of
authorized user tradelines. If the borrower has several authorized user accounts but only has a
few accounts of his/her own, the Broker should establish:

       The relationship of the borrower to the owner of the account.
       If the borrower uses the account.
        And
       If the borrower makes the payments on the account.

If the authorized user tradeline belongs to another borrower on the mortgage loan, no additional
investigation is needed.




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                                        Nationstar Internal
If the borrower has several tradelines in good standing and only a minor number of authorized
user accounts, determination that:

       The authorized user accounts had minimal, if any, impact on the borrower's overall credit
        profile.
        And
       The information reported on the credit report is an accurate reflection of the borrower's
        credit history.

Authorized user tradelines that belong to a non-purchasing spouse when need not be considered
in the analysis.

Disputed Credit Report Tradelines
Confirm the accuracy of disputed tradelines reported on the borrower's credit report. If it is
determined that the disputed tradeline information is accurate, the disputed tradelines must be
considered in the credit risk assessment.

Duplicate Public Records
Items that typically appear in the Public Records section of the credit report (judgments,
bankruptcies, foreclosures, and tax liens) are often duplicated because the credit agencies may
not attempt to merge items of this severe nature. As a result, these items may also appear in
more than one verification message in the Underwriting Findings report. If it is clear from the
credit report data that the items are duplicates (identical account numbers, date filed, and dollar
amounts), the Broker can disregard the duplicates and document the item once. However, if it is
unclear from the credit report whether any of the items are duplicated, the Broker should treat
each item individually and obtain the required documentation for each item, as indicated in the
verification messages.

Judgments, Garnishments, and Liens
Open judgments, garnishments, and all outstanding liens that are in the Public Records section
of the credit report must be paid off at or prior to closing.

Documentation of the satisfaction of these liabilities, along with verification of funds sufficient to
satisfy these obligations, must also be maintained in the permanent loan file.


Past-Due, Collections, and Charge-Off Accounts
Accounts that are reported as past due (not reported as collection accounts) must be brought
current.

       For one-unit, owner-occupied properties, borrowers are not required to pay off
        outstanding collections or charge-offs – regardless of the amount – provided the
        collection will not threaten Nationstar’s first-lien position.
       For two- to four-unit owner-occupied and second homes, collections and charge-offs
        totaling more than $5,000 must be paid in full prior to or at closing.
       For investment properties, individual accounts equal to or greater than $250, and
        accounts that total more than $1,000 must be paid in full prior to or at closing.


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                                         Nationstar Internal
                  SECTION 3: EMPLOYMENT INCOME
                     AND INCOME VERIFICATION

3.0     Requirements and Uses of IRS Form 4506-T
Required Transcripts
All loans require the borrowers to sign the 4506-T form at the time of application, and at the time
of closing. In addition, the Broker must provide transcripts to validate the accuracy of income.

Required Transcripts
The following transcripts must be obtained from the IRS, based on the automated underwriting
system (AUS) documentation requirements, as follows:

 If AUS Income Documentation Requirement is:            IRS Transcript required is:

 YTD Paystub and/or one year W-2                        One year 1040 tax transcript*

 YTD paystub and two years W-2s                         Two years 1040 transcript*

 YTD income information - one year 1040/1099            One year 1040 tax transcript*

 YTD income information - two years 1040/1099           Two years 1040 tax transcripts*

 Business Returns - one or two years                    One or two years 1120 or 1065 tax
                                                        transcripts*

W2-only transcripts are not acceptable. A full transcript(s) is required and must be reviewed for
variances to the findings, or for additional information not disclosed on the 1003 including, but not
limited to:

       Unreimbursed business expenses
       Businesses owned
       Other income or losses
       Variances in address
       Ownership of rental properties
       Marital status
       Dependents
       Borrowers’ names

Variances must be clarified and corrected if necessary.




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                                         Nationstar Internal
Unreimbursed business expenses showing on the tax transcripts must be deducted from income
unless verification that the expense was a one-time occurrence can be obtained. Other income
losses reporting on the tax transcripts must be disclosed on the 1003 unless proof a business has
been closed and liabilities paid or the loss will not be recurring in the current or future years.

*Note: Borrowers that have filed an extension must provide the most recent years signed
       extension form and obtain the prior year’s tax transcript. If a borrower has not filed tax
       returns, or the extension for the most current year has exceeded the 10/15 extension
       cutoff period, the borrower will not qualify until the required 4506-T tax year transcripts are
       received. It typically takes four to six weeks to add new filings or corrections to the IRS
       database.

Income Documentation and 4506-T Transcript: Same Year
If the documentation used to calculate the borrower's income (such as 2009 W-2 from employer)
is the same year as the information obtained from the IRS, the information must match exactly
(differences for rounding purposes are acceptable).

There are some instances, however, when a variation between the income documentation and
the IRS transcript is acceptable. For example, if the income documentation requirement is one
year-to-date paystub, there is a likelihood of variation between the paystub and the W-2 transcript
from the IRS. The following questions may assist in determining whether the differences between
the income documentation and IRS transcripts are reasonable, or if additional documentation is
needed:

       Did the borrower file a joint return but is on the loan application alone?
       Did the borrower change jobs? Is he/she in the same line of work but with a different
        company?
       Did the borrower receive a promotion or merit increase?
       Did the borrower’s compensation structure change (base to commission, salary versus
        hourly)?
       In the previous year(s), did the borrower receive bonus or overtime compensation that is
        no longer offered?
       Is the borrower now receiving bonus or overtime compensation that was not offered
        previously?
       Is there undisclosed self-employment loss for a non-borrowing spouse?




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                                        Nationstar Internal
Income Documentation and 4506-T Transcript: Prior Year
Between January 1 and October 15 of each year, the 4506-T transcripts from the prior year may
not be available if the borrower has not yet filed his/her tax returns, recently filed, or filed an
extension. The following documentation is required in those scenarios:

       January 1 through May 31 closings: IRS tax transcript(s) from prior year(s) will be
        required along with income documentation as required by AUS.
        Example: A loan closing 5/15/11 would require current income documentation per AUS,
        along with the 2009 IRS tax transcript and 2008 transcript if two years income is being
        used to qualify. Self-employed borrowers must provide a copy of 2010 tax returns, profit
        and loss statement, or other supporting documentation deemed acceptable by the
        Underwriter, to support the income being used to qualify.
       June 1 through October 31 closings: The prior year’s tax transcript should be requested
        from the IRS. If an extension is filed, additional documentation may be required for self-
        employed borrowers. If the transcript indicates the borrower has not filed for the prior
        year, a signed IRS extension form 4868 must be obtained from the borrower, and the
        prior year(s) tax transcript(s) must be obtained.
        Example: A 6/1/11 closing would require the 2010 IRS tax transcript, or 2010 4868
        extension form and 2009 IRS tax transcript, at a minimum, unless the AUS requires
        additional years’ income verification (2008). Self-employed borrowers must provide a
        profit and loss statement, or other supporting documentation deemed acceptable by the
        Underwriter, to support the income being used to qualify.
       October 31 through December 31 closings: The prior year(s) tax transcript(s) are required
        per AUS income documentation requirements. Borrowers who have not filed their prior
        year’s tax returns by the October 15 extension cutoff, or have not filed an extension after
        April 15, are not eligible for financing until the tax forms are filed.

Income History Verification
Depending on the borrower’s type of income and the Desktop Underwriter (DU)/Loan Prospector
(LP) findings, Nationstar must verify one or two years income history with transcripts.

         Years    For…

         One             W-2 borrowers, unless 2106 unreimbursed expenses are
                          present.
                         Self-employed borrowers when the DU/LP findings only
                          require one year.

         Two      Whenever a two-year average of income is used to qualify (including
                  self-employed income, rental income, dividend/interest income).




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                                        Nationstar Internal
4506-T Transcripts Satisfy Other Underwriting Requirements
Completed tax transcripts which come directly from the IRS can satisfy the following conventional
underwriting requirements:

       Signed tax returns as required by DU/LP with the exception of Conventional loans > 80%
        that require MI
       Borrower(s) signature on tax returns
       Proof of the borrower’s Social Security number
       W-2s, when the borrowers have worked at the same company for two years or more
       Separate tax and insurance statements on rental property, when those payments are
        reflected on Schedule E

3.1     Verbal Verification of Employment

In addition to standard documentation required to verify adequacy and stability of income, a
verbal or written Verification of Employment (VOE) form is required within 10 days of closing for
all loans except self-employed borrowers.

Written VOE in Lieu of Verbal VOE
If the employer will not provide a verbal VOE, then a written VOE must be sent to the employer to
be completed, signed, and dated within 10 days of closing.

When the VVOE is obtained from a third party verification source such as The Work Number, the
     10-day timeframe is measured from the date of the vendor’s report, not the date the
     information was updated in the vendor’s database. The information must have been
     updated within the past 35 days.

Salaried, Hourly, and Commission Income Borrowers
Prior to performing the verbal VOE, the address and phone number for each borrower’s current
employer must be independently verified using directory assistance, Internet sites, telephone
directories, or by contacting the applicable licensing bureau.

If the borrower is in the military, a military Leave and Earnings Statement dated within 30 days of
the note date is acceptable in lieu of a verbal VOE.

A print-out of the evidence received must be placed on top of the income documentation in the
file.




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                                       Nationstar Internal
Self-Employed Borrowers
For self-employed borrowers, acceptable third-party confirmation of the existence of the
borrower’s business is required. This confirmation must be obtained within 30 days of closing.
Verification from a third party such as a CPA, regulatory agency, department of corporations, or
the applicable licensing bureau is acceptable. Documentation from one of these sources must be
printed and placed on top of the income documentation in the loan file.

In addition, a phone listing and address for the borrower’s business using the Internet, directory
assistance, or telephone directory must be documented in the loan file. A print-out or copy of the
listing must be placed on top of the income documentation in the loan file. If the borrower does
not have a business phone number listing, but uses a personal cell phone number, the Broker
must certify that the cell phone number it is in service, and that it is answered by the borrower as
his/her place of business.

3.2     Non-U.S. Citizen Borrowers
Verification of Income for Non-U.S. Citizen Borrowers
Nationstar will consider non-U.S. citizen borrowers for financing with a legal status of Permanent
Resident Alien.

Ineligible Borrowers
The following borrowers are ineligible for financing from Nationstar:

       Non-Permanent Resident Aliens
       Non-Resident Aliens (Foreign Nationals)
       Borrowers without a valid Social Security number (SSN)
       Individuals with diplomatic immunity
Documentation of Legal Status
Non-US Citizens must provide a copy of one of the following as evidence of their legal right to live
and work in the US prior to underwriting:

       Permanent Resident Alien:
            o   An I-551 Permanent Resident Card (Green Card) issued by the U.S.
                Citizenship & Immigration Services (USCIS)
                or
            o   A passport stamped Processed for I-551, temporary evidence of lawful
                admission for permanent residence. Valid until (Date) that has been validated
                by a DHS agent stating I485 approved. This evidences the holder has been
                approved for, but not issued, a Permanent Resident Card.
        Note: Green Card status can be checked on the DHS website at
              https://egov.uscis.gov/cris/jsps/index.jsp.
       Non-Permanent Resident Alien: Not Eligible.




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                                        Nationstar Internal
       Non-Resident Aliens (Foreign Nationals): This term applies to any person other than a
        U.S. citizen, U.S. permanent legal resident alien. Non-Resident Aliens are ineligible
        borrowers.
The following table describes verification of income for borrowers who are not U.S. citizens.

Employment Type                                    Employment and Income Verification
                                                   Requirements

Salaried or commissioned borrower employed         Same as a U.S. citizen.
by a U.S. company or individual

Self-employed                                      Same as a U.S. citizen.

Employed by a foreign corporation or a foreign     The Broker must obtain:
government and paid in foreign currency
(“foreign income”)                                    Copies of the borrower's signed federal
                                                       income tax returns filed with the IRS for the
                                                       most recent two-year period.
                                                       and
                                                      Documentation to satisfy the standard
                                                       documentation requirements (e.g.,
                                                       paystubs or payroll earning statements
                                                       covering the borrower's earnings for the
                                                       most recent period, including year-to-date
                                                       earnings and prior years' earnings in lieu of
                                                       W2s). All income must be translated to
                                                       U.S. dollars.



3.3 Using Nontaxable Income to Adjust the Borrower’s Gross
Income
The Broker may gross up all tax-exempt income once it has been established and documented
that such income is likely to continue (and remain untaxed) into the foreseeable future.

The Broker must provide documentation, such as but not limited to tax returns, in the Mortgage
file to verify that the income is not taxable in order to "gross up" the tax-exempt income for
qualifying. If the Seller is not able to provide documentation to evidence that the income is not
taxable, the Seller cannot "gross up" the tax-exempt income for qualifying.

To gross up tax-exempt income, the Broker may use either 25% or the current federal and State
income tax withholding tables to determine an amount which can be prudently employed to adjust
or "gross up" the Borrower's actual income.




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                                       Nationstar Internal
3.4     Salary and Commission Income
Length of Employment
Nationstar generally requires at least a two-year history of the receipt of stable income.

When a borrower has been generating income for two or more years from either part-time or full-
time work with any number of employers, the Broker may generally base its underwriting decision
on the borrower’s current income.

A borrower who has an income history of less than 24 months may be considered if the Broker is
able to document the borrower’s income as being stable, predictable, and likely to continue.

Stable and Predictable Income
Nationstar underwriting guidelines emphasize the continuity of a borrower’s stable income.
Borrowers who change jobs frequently, but continue to earn consistent and predictable income,
are an acceptable credit risk.

The Broker must demonstrate the likelihood of consistent income through verification of previous
and current employment and income. Less stable types of income that must be closely analyzed
include commissions, bonuses, substantial amounts of overtime pay, or employment that is
subject to time limits, such as contract employees or tradespersons.

Adequacy of Income
The Broker must document and assess the borrower’s ability to repay the mortgage.

Continuity of Income
The Broker must document the likelihood of continued receipt of income for at least three years.

Unless there is evidence that the income will no longer be received, the Broker should conclude
that the income will continue.

Income from sources such as alimony and child support must be evidenced to be likely to
continue for three years. Adequate documentation, such as divorce decree and birth certificates
must be delivered in the file.

For income types with no defined expiration date such as Social Security Disability Insurance
benefits or Veterans Disability Compensation benefits the income is considered stable,
predictable, and likely to continue unless other evidence exists to the contrary.




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                                        Nationstar Internal
Documenting Employment and Income
The Broker must substantiate employment and income by documenting all of the following:

       The source of income
       The stability of income for the previous two years, or the length of time the borrower has
        been employed.
       The most recent paystub or payroll earnings statement including earnings for the most
        recent period and year-to-date earnings.
       The likelihood of continued income over a three-year period.

Determining the Need for Federal Income Tax Returns
The Broker must obtain copies of the individual signed federal income tax returns, along with
copies of tax transcripts for the past two years for the following types of borrowers.

       25% or more of earnings are derived from commissions.
       Employed by family members.
       Employed by interested parties to the transaction.
       Rental income
       Unreimbursed business expenses.
       Income from periodic employment or employment that is subject to time limits, such as a
        contract employee.
       Income from partnerships or corporations in which they have a 25% or greater ownership
        interest.
       Income from capital gains, royalties, real estate, or other m non-employment earnings
        reported on IRS Form 1099.
       Income that cannot otherwise be verified by an independent and knowledgeable source.
       Foreign income.




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                                       Nationstar Internal
3.5     Verification of Salary and Commission Income
Standards for Verification of Employment and Income
The Broker must verify employment and income for salaried and commissioned borrowers.

Documentation Provided by the Borrower

                                          Requirements

Obtain a paystub that is dated no earlier than 30 days prior to the initial loan application date.
The paystub must include year-to-date earnings. Additional paystubs may be required if the most
recent does not include sufficient information to calculate income.

Obtain W-2 forms covering the most recent two-year period.

All documentation must either be computer-generated or typed by the borrower’s employer, or
downloaded from the Internet. Documents must clearly identify the employer’s name and source
of information.

The documents must clearly identify the borrower as the employee and show the employee’s
gross year-to-date earnings.

The information must be complete and legible.

The original source of the information must be a third party, such as the borrower’s human
resources department, personnel office, payroll department, company’s payroll vendor, or
supervisor.



Documentation Provided by the Borrower’s Employer
The Broker may use the Request for Verification of Employment (Form 1005 or Form 1005(S)) to
determine the adequacy and continuation of income for a salaried or commissioned borrower.
From 1005 may also be used to document stability of bonus and overtime income.

Documentation Provided by a Third-Party Employment Verification Vendor
The Broker may receive employment and income verification directly from a third-party
employment verification vendor (such as the Work Number). These verifications are acceptable
as long as:

       The Broker has determined that the vendor has provided reliable and accurate
        information
        and
       The Broker understands it will be held accountable for the integrity of the information
        obtained from this source.

If necessary, the Broker must supplement these verifications by obtaining any missing information
from the borrower or his/her employer.


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                                       Nationstar Internal
3.6     Commission Income

                              Verification of Commission Income

Commission income must be averaged for a 24 month period in order to establish reliable
income.
Commission income that has been received for 12 to 24 months may be considered subject to
additional documentation that exhibits positive factors to reasonably offset the shorter income
history. Verification of a likelihood of continuance must be included

Commission income that represents 25% or more of the borrower’s total annual income requires
copies of the borrower’s signed federal income tax returns that were filed with the IRS for the past
two years, as well as confirmation of the borrower’s current employment and year-to-date
earnings. In order for the commission income to be used in qualifying, the commission income
reported on the tax returns must cover at least a 12-month period.

Annual earnings must be level or increasing from one year to the next. Declining income may not
be considered as stable income for qualifying.

Any non-reimbursed business expenses must be subtracted from the gross commission income.



3.7     Bonus and Overtime Income

                        Verification of Bonus and/or Overtime Income

Bonus and/or overtime income must have a documented history for the last two years.
Projected bonus and/or overtime pay is not an acceptable source of income.

The employer must confirm that the bonus and/or overtime income is likely to continue.

A two years average of bonus and/or overtime income must be used to determine the amount of
income that may be considered.

Annual earnings must be level or increasing from one year to the next. Declining income may not
be considered as stable income.
Bonus income received annually, quarterly, or monthly is acceptable, even if the amount of the
bonus fluctuates, providing that the trend is not decreasing.

If the borrower has recently changed positions (but not employers), determine the effect of the
change on the borrower’s eligibility and opportunity to receive bonus and/or overtime pay.




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                                       Nationstar Internal
3.8     Part-Time, Second-Job, Multiple-Job, and Seasonal

                                 Verification of Part-Time Income

Verify the stability of income for the previous two years with no gaps of employment.
Occasionally a Broker can accept less than a two-year history, but no less than a 12-month
history, if there is a strong likelihood that the borrower will continue to receive the income, and the
Broker develops an average monthly income for the part-time job.
Verify the income with W-2 forms.

Verify that the income has a strong likelihood of continuation.

If a borrower who has historically been employed on a part-time basis indicates that he or she will
now be working full-time, obtain written confirmation from the borrower’s employer.


                               Verification of Second-Job Income

Verify the stability of income for the previous two years with no gaps of employment.
Occasionally a Broker can accept less than a two-year history, but no less than a 12-month
history, if there is a strong likelihood that the borrower will continue to receive the income, and the
Broker develops an average monthly income for the second job.
Verify the income with W-2 forms.

Verify that the income has a strong likelihood of continuation.

Determine if there has been any change in the borrower’s overall employment status that might
jeopardize the continuance of income from the second job.


                               Verification of Multiple-Job Income

Verify the stability of income for the previous two years with no gaps of employment.
Occasionally a Broker can accept less than a two-year history, but no less than a 12-month
history, if there is a strong likelihood that the borrower will continue to receive the income, and the
Broker develops an average monthly income for the multiple jobs.
Verify the income with W-2 forms.

Verify that the income has a strong likelihood of continuation.


                                 Verification of Seasonal Income

Verify that the borrower has worked in the same job (or the same line of seasonal work) for the
past two years.

Confirm with the borrower’s employer that there is a reasonable expectation that the borrower will
be rehired for the next season.

For seasonal unemployment compensation, a two year history of receipt must be document with
federal income tax returns. Otherwise, unemployment compensation cannot be used to qualify
the borrower.




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                                         Nationstar Internal
3.9     Military Income

Military Income

Flight or hazard pay, rations, clothing allowance, quarters’ allowance, and proficiency pay are
acceptable sources of stable income, as long as the Broker can establish that the particular
source of income will continue to be received in the future. Generally, this must be documented
by providing an LES statement reflecting an acceptable remaining term of enlistment and/or a
statement from the veteran’s commanding officer.
Income paid to military reservists is acceptable if the Broker can exhibit the same stability and
continuity as that of a second job income.


3.10 Rental Income
Eligible Properties
Rental income from the following property types is acceptable if it can be determined that the
income is likely to continue:

       One-unit investment properties.
       Two- to four-unit properties, even when the borrower occupies one of the units.

Ineligible Properties
Rental income from a second home cannot be used to qualify.

Calculating Monthly Net Rental Income (or Loss)
When the security property for the mortgage being delivered to Nationstar Mortgage will be
rented, the Broker must:

       Determine the cash flow and operating income derived from the rental property. The
        appraiser should complete an Operating Income Statement (Form 216).
       Determine the gross income to be used in determining the income-producing ability of the
        subject property using the appropriate form:
            o   Single-Family Comparable Rent Schedule (Form 1007)
                or
            o   Small Residential Income Property Appraisal Report (Form 1025)




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                                        Nationstar Internal
The Broker then calculates the monthly net rental income (or loss) as described in the following
tables.

Rental Income From the Subject Property

Does Borrower Have History       Documentation                     Calculate Monthly Net Rental Income
of Receiving Rental Income       Requirements                      (or Loss)
From Property?

Yes.                             Document the cash by              Analyze the borrower’s cash flow using
                                 analyzing Schedule E of the       Fannie Mae form 1084 and calculate
                                 most recent two years income      the net rental income (or loss),
                                 tax returns.

No.                              Document the rental income        The market rent established by the
                                 by obtaining an appraiser’s       appraiser or the current rent based on
                                 opinion of market rent and,       the existing lease agreement.
                                 copies of the current lease
                                                                   Multiply the gross rent times 75% to
                                 agreement.
                                                                   calculate net rental income.

When the borrower owns additional property that is rented, the Broker must calculate the monthly
net rental income (or loss) in accordance with the following table.

Rental Income From Property Other Than the Subject Property

Does Borrower Have History       Documentation                     Calculating Monthly Net Rental
of Receiving Rental Income       Requirements                      Income (or Loss)
From Property?

Yes.                             Document the cash by              If using the lease agreement multiply
                                 analyzing Schedule E of the       the gross rent times 75% to calculate
                                 most recent two years income      net rental income.
                                 tax returns. .A copy of the
                                 current lease agreement may
                                 be used only if a property is
                                 not listed on Schedule E
                                 because it was acquired
                                 subsequent to filing the tax
                                 return,

No.                              Obtain copies of current lease    Multiply the gross rent times 75% to
                                 agreements.                       calculate net rental income.




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                                       Nationstar Internal
Treatment of the Income (or Expense)

If the net rental income (or loss) relates to…   Then…

The borrower’s principal residence.                     The monthly net rental income must be
                                                         added to the borrower’s total monthly
                                                         income.
                                                        Any net rental loss must be added to
                                                         the borrower’s total monthly
                                                         obligations.
                                                        The full amount of the mortgage
                                                         payment (PITIA) must be included in
                                                         the borrower’s total monthly obligations
                                                         when calculating the debt-to-income
                                                         ratio.

A property other than the borrower's principal          The monthly net rental income
residence.                                               (excluding the full amount of the
                                                         related mortgage payment) must be
                                                         added to the borrower’s total monthly
                                                         income.
                                                        Any monthly net rental loss must be
                                                         added to the borrower’s total monthly
                                                         obligations.
                                                        The full PITIA for the rental property is
                                                         factored into the amount of the net
                                                         rental income (or loss); therefore, it
                                                         should not be counted as a monthly
                                                         obligation.
                                                        The full PITIA for the borrower's
                                                         principal residence must be counted as
                                                         a monthly obligation.




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                                       Nationstar Internal
3.11 Other Sources of Income
Alimony or Child Support

Verification of Income From Alimony or Child Support

Document that alimony or child support will continue for at least three years:
       Divorce decree, separation agreement (if the divorce is not final), or any other type of
        written legal agreement or court decree that indicates payment of alimony or child
        support and states the amount of and period of time over which it will be received. In the
        absence of a separation agreement that specifies alimony or child support payments, the
        Broker should not consider any proposed or voluntary payments as income.
       Any other type of written legal agreement or court decree describing the payment terms
        for the alimony or child support.
        or
       Any applicable state law that mandates alimony, child support, or maintenance
        payments. The document must specify the conditions under which the payments must be
        made.

Check for limitations on the continuance of the payments, such as the age of the children for
whom the support is being paid or the duration over which alimony is required to be paid.

Document the borrower’s regular receipt of the full payment, as verified by:
       Deposit slips
       Court records
       Copies of signed federal income tax returns that were filed with the IRS
       Copies of the borrower’s bank statements showing the regular deposit of these funds

Review the payment history to determine its suitability as qualifying income.
Full, regular, and timely payments must be made:
       12 months or longer for income to be considered stable.
             o   Between six and 12 months for income to be considered stable, provided the
                 income does not represent more than 30% of the total gross income used to
                 qualify the borrower for the mortgage.
             o   Fewer than six months for income to be considered unstable (although, if the
                 income is adequately documented, the Broker may use it to justify a higher
                 qualifying ratio).
       If full or partial payments are made on an inconsistent or sporadic basis, the income is
        considered unsuitable for qualifying or justifying higher qualifying ratios.




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                                       Nationstar Internal
Automobile Allowance
For an automobile allowance to be considered as acceptable stable income, a borrower must
have received payments for at least two years. The Broker must include all associated business
expenditures in its calculation of the borrower’s total debt-to-income ratio.

Automobile allowances received for less than two years should not be used when calculating the
borrower’s total debt-to-income ratio. However, this income may be used to justify a higher
qualifying ratio.

There are two methods for calculating the income associated with an automobile allowance:

       Actual cash flow approach: If the borrower reports automobile allowances on IRS Form
        2106 or IRS Form 1040, Schedule C:
            o   Funds in excess of the borrower’s monthly expenditures are added to the
                borrower’s monthly income.
            o   Expenses in excess of the monthly allowance are included in the borrower’s total
                monthly obligations.

        If the borrower used IRS Form 2016 and recognized “actual expenses” instead of the
        “standard mileage rate,” the Broker must look at the Actual Expenses section to identify
        the borrower’s actual lease payments and make appropriate adjustments.

       Income and debt approach: If the borrower does not report the allowance on either
        Form 2106 or Schedule C, the full amount of the allowance is added to the borrower’s
        monthly income, and the full amount of the lease or financing expenditure for the
        automobile is added to the borrower’s total monthly obligations.

Boarder Income
Rental income from boarders in a one-unit property that is also the borrower’s principal residence
or second home is not considered acceptable stable income.




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                                       Nationstar Internal
Capital Gains Income
Income received from capital gains is generally a one-time transaction; therefore, it should not be
considered as part of the borrower’s stable monthly income. However, if the borrower needs to
rely on income from capital gains to qualify, the income must be verified in accordance with the
following requirements.

Verification of Capital Gains Income

Document a two-year history of capital gains income by obtaining copies of the borrower’s signed
federal income tax returns that were filed with the IRS for the past two years.

Develop and use an average income from the last two years. Evidence that borrower owns
additional property or assets that can be sold if extra income is needed to make future mortgage
payments.


Verification of Disability Income

Verify the amount of disability payments and verify continuance by obtaining a copy of the
borrower’s disability policy or benefits statement.

Confirm the borrower’s current eligibility for the disability benefits by obtaining a statement from
the benefit’s payer (insurance company, employer, or other qualified and disinterested party).

If the benefits have a defined expiration date, verify that the remaining term is at least three years
from the date of the mortgage application. If a borrower is currently receiving short-term disability
payments that will decrease to a lesser amount within the next three years because they are
being converted to long-term benefits, the long-term benefits must be used as income to qualify
the borrower.




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                                        Nationstar Internal
Employment-Related Assets as Qualifying Income
The following table provides the requirements for employment-related assets that may be used as
qualifying income:

Asset Requirement

Assets used for monthly income stream must be owned individually, or the co-owner of the asset
must be a co-borrower of the subject property.

Assets must be liquid and available to the borrower with no penalty.

       Non-self-employed severance package or non-self-employed lump sum retirement
        package (i.e., a lump sum distribution) must be documented with a distribution letter from
        the employer (1099R) and deposited to a verified asset account.
       401(k) or IRA, SEP, KEOGH retirement accounts: The borrower must have unrestricted
        access without penalty to the accounts, and can only use if distribution is not already set
        up or the distribution amount is not enough to qualify. The account must be documented
        with the most recent monthly, quarterly, or annual statement.

If the assets are in the form of:
       Stocks, bonds, and mutual funds: 70% of the value (remaining after costs for the
        transaction) may be used to determine the income stream.
       Retirement accounts: 70% of the value (remaining after costs for the transaction) may be
        used to determine the income stream.
Note: The 10% penalty for early withdrawal is not applicable as the borrower must be eligible to
      withdraw the funds with no penalty.

Net documented assets: The sum of eligible documented assets minus discount (if retirement,
stocks, bonds, mutual funds) minus any funds that will be used for closing or required for
reserves.

Ineligible assets: Non-employment related assets (e.g., stock options, non-vested restricted
stock, lawsuits, lottery winnings, sale of real estate, inheritance, divorce proceeds, etc.).




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                                       Nationstar Internal
All of the following loan parameters must be met in order for employment-related assets to be
used as qualifying income:

Parameter                                         Nationstar Requirement

Maximum LTV/CLTV/HCLTV                            70%

Minimum Credit Score                              620
                                                  Standard: Per Eligibility Matrices

Loan Purpose                                      Purchase and limited cash-out refinance only

Occupancy                                         Principal residence and second home only

Number of units                                   One- to four-units

Income Calculation/Payout Stream                  Divide “Net Documented Assets” by 360
                                                  months (30 – year term must be used
                                                  regardless of borrower age or amortization
                                                  term)

Note: If the mortgage loan does not meet the above parameters, employment-related assets may
      still be eligible under other standard income guidelines, such as “Interest and Dividends
      Income,” or “Retirement, Government Annuity, and Pension Income.”

Foreign Income Earned by U.S. Citizens
Foreign income is income that is earned by a U.S. citizen that is employed by a foreign
corporation or a foreign government and is paid in foreign currency. Borrowers may use foreign
income to qualify if the following requirements are met:

Verification of Foreign Income

     Copies of signed federal income tax returns filed with the IRS for the past two years that
     include foreign income.

     Documentation to satisfy the standard documentation requirements. All income must be
     translated to U.S. dollars.




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                                       Nationstar Internal
Foster-Care Income
Income received from a state- or county-sponsored organization for providing temporary care for
one or more children may be considered as acceptable stable income if the following
requirements are met.

Verification of Foster-Care Income

Verify the foster-care income with one of the following:
       Letters of verification from the organizations providing the income.
       Copies of the borrower’s signed federal income tax returns that were filed with the IRS
       Copies of the borrower’s deposit slips or bank statements confirming regular deposit of
        the payments.

Document that the borrower has a two-year history of providing foster-care services. If the
borrower has not been receiving this type of income for two full years, the income may still be
counted as stable income if:
       The borrower has at least a 12-month history of providing foster-care services.
        And
       The income does not represent more than 30% of the total gross income that is used to
        qualify the borrower for the mortgage.

Verify that the borrower is likely to continue to provide such services at a level that supports the
amount of income needed to qualify for the mortgage.


Verification of Income From Interest and Dividends

Verify the borrower’s ownership of the assets on which the interest and/or dividend income was
earned.

Document a two-year history of the income, as verified by:
       Copies of signed federal income tax returns that were filed with the IRS
        or
       Copies of account statements.

Develop an average of the income received for the past two years.

Verify that the income can be expected to continue for a minimum of three years from the date of
the mortgage application.

Subtract any assets used for down payment or closing costs from the borrower’s total assets
before calculating expected future interest or dividend income.




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                                        Nationstar Internal
Mortgage Differential Payments Income
An employer may subsidize an employee’s mortgage payments by paying all or part of the
interest differential between the employee’s present and proposed mortgage payments.

The differential payments should be added to the borrower’s gross income. The payments may
not be used to directly offset the mortgage payment, even if the employer pays them to the
mortgage lender rather than to the borrower.

Verification of Income From Mortgage Differential Payments

Obtain written verification from the borrower’s employer confirming the subsidy and stating the
amount and duration of the payments.

Verify that the income can be expected to continue for a minimum of three years from the date of
the mortgage application.


Non-Occupying Co-Borrower Income
DU does not consider non-occupant co-borrower's income as qualifying income. The LTV ratio for
a mortgage loan with a non-occupant co-borrower must be 95% or less for loan casefiles
underwritten with DU. DU will analyze the risk factors in the loan casefile without the benefit of the
non-occupant co-borrower's income or liabilities and will not require verification of employment or
income for the non-occupant co-borrower.

LP will consider income from non-occupant co-borrowers. For Accept Mortgages and A-minus
Mortgages with a non-occupying Borrower, the Seller is not required to calculate or evaluate the
occupant borrower's monthly housing or debt ratio.

Verification of Income From Notes Receivable

Verify that the income can be expected to continue for a minimum of three years from the date of
the mortgage application.

Obtain a copy of the note to establish the amount and length of payment.

Document regular receipt of income for the past 12 months, as verified by:
       Deposit slips
       Copies of signed federal income tax returns that were filed with the IRS (or
       Copies of the borrower’s bank statements showing consistent deposits of the funds.
        Payments on a note with less than a twelve month history may not be used as stable
        income. However, notes that specify a minimum duration of three years, but they may be
        used to justify a higher qualifying ratio.




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                                        Nationstar Internal
Verification of Public Assistance Income

Document the borrower’s receipt of public assistance income with letters or exhibits from the
paying agency that state the amount, frequency, and duration of the benefit payments.

Document a two-year history of income from public assistance.

Verify that the income can be expected to continue for a minimum of three years from the date of
the mortgage application.

The Housing Choice Voucher Program (more commonly known as Section 8) is an acceptable
source of income. There is no requirement for the Section 8 voucher payments to have been
received for any period of time prior to the date of the mortgage application or for the payments to
continue for any period of time from the date of the mortgage application.

Verification of Retirement and Pension Income

Document regular and continued receipt of the income, as verified by:
       Letters from the organizations providing the income
       Copies of retirement award letters
       Copies of signed federal income tax returns that were filed with the IRS
       IRS W-2 or 1099 forms
        or
       Copies of the borrower’s two most recent bank statements

If retirement income is paid in the form of a monthly distribution from a 401(k), IRA, or Keogh
retirement account, determine whether the income is expected to continue for at least three
years.


Verification of Income From Royalty Payments

Obtain copies of the borrower’s signed federal income tax returns that were filed with the IRS for
the past two years, including the related IRS Form 1040, Schedule E.

Document that the borrower has received royalty payments for at least 12 months, and that
payments will continue for a minimum of three years.




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                                       Nationstar Internal
Verification of Social Security Income

Document regular receipt of payments, as verified by:
       A copy of the Social Security Administration’s award letter
       Copies of signed federal income tax returns that were filed with the IRS (IRS W-2 forms
        or
       Copies of the borrower’s recent bank statements.

If the Social Security benefits have a defined expiration date, confirm that the remaining term is at
least three years.


Tip Income
Tip income may be used to qualify with verification that the borrower has received it for the last
two years and the employer indicates that the tip income will in all probability continue. An
average of the past two years’ tip income to determine the amount of income that may be
considered in qualifying the borrower.

Trust Income
Lump-sum distributions made before closing may be used for the down payment or closing costs.
The funds must be verified by a copy of the check or a trustee’s letter that shows the distribution
amount.

Verification of Trust Income

Obtain a copy of the trust agreement or the trustee’s statement confirming the amount, frequency,
and duration of payments.
If the trust documentation does not include information about the historical level of distributions
from the trust, copies of the borrower’s signed federal income tax returns that were filed with the
IRS for the past two years, including the related IRS Form 1040, Schedule E must be provided.

Verify that the trust income will continue for at least three years.


Verification of Income From Unemployment Benefits

Document that the borrower has received the payments predictably for at least two years by
obtaining copies of signed federal income tax returns that were filed with the IRS.

Verify that the income is likely to continue.




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                                         Nationstar Internal
Verification of VA Benefits Income

Document the borrower’s receipt of VA benefits with a letter or distribution form from the VA.
Education benefits are not acceptable income because they are offset by education expenses

Verify that the income can be expected to continue for a minimum of three years from the date of
the mortgage application.



3.12 Underwriting Factors and Documentation for a Self-
Employed Borrower
Factors to Consider for a Self-Employed Borrower
Any individual who has a 25% or greater ownership interest in a business is considered to be
self-employed.

The following factors must be analyzed before approving a mortgage for a self-employed
borrower:

       Stability of the borrower’s income.
       Financial strength of the business.
       Demand for the product or service offered by the business.
       Location and nature of the borrower’s business.
       Ability of the business to continue generating sufficient income to enable the borrower to
        make the payments on the requested mortgage.
       Marketability of the property that is security for the mortgage as a private residence
        (rather than as the location of a business), since the property could be the source of
        repayment for the mortgage should the borrower’s business fail.

Length of Self-Employment
Nationstar Mortgage generally requires Brokers to obtain a two-year history of the borrower’s
prior earnings. Borrower’s who have shorter history of self-employment – 12 to 24 months – may
be considered, as long as the borrower’s most recent signed federal income tax returns reflect
the receipt of such income as the same (or greater) level in a field that provides the types of
services as the current business or in an occupation in which the borrower had similar
responsibilities to those undertaken in connection with the current business. In such cases, the
Broker must give careful consideration to the nature of the borrower’s level of experience, and the
amount of debt the business has.

Verification of Income
Verification of a self-employed borrower’s employment and income must be obtained from the
borrower copies of his or her signed federal income tax returns (both individual returns and
business returns) that were filed with the IRS for the past two years (with all applicable schedules
attached). Tax transcripts may be supplied in lieu of the actual tax returns.



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                                        Nationstar Internal
The requirement for business tax returns may be waived if:

       The borrower is paying the down payment and closing costs with his or her own funds.
       The borrower has been self-employed in the same business for at least five years.
        and
       The borrower’s individual tax returns show an increase in self-employment income over
        the past two years.

Analysis of Borrower’s Personal Income
Fannie Mae Cash Flow Analysis (Form 1084) should be used to calculate the borrower’s adjusted
income.

Analysis of Borrower’s Business Income
A written evaluation of the analysis of the borrower’s business income must be provided including
a comparison to other businesses in the same industry to estimate the potential for long-term
earnings.

The purpose of this analysis is to:

       Measure year-to-year trends for gross income, expenses, and taxable income for the
        business.
       Determine (on a yearly or interim basis) the percentage of gross income attributed to
        expenses and taxable income.
        and
       Determine a trend for the business based on the change in these percentages over time.

The Broker may use Fannie Mae’s Comparative Income Analysis (Form 1088) or any other
method of trend analysis that enables it to determine a business’s viability.

Income Verification for Self-Employed Co-Borrowers
When a salaried (or commissioned) borrower and a self-employed co-borrower jointly apply for a
mortgage and the self-employed co-borrower’s income will not be used for qualifying purposes,
the self-employed co-borrower’s last two years individual and business tax returns are not
required. Instead, the self-employed co-borrower may provide a copy of the first page of his or
her latest individual federal income tax return, which will enable the Broker to determine whether
there was a meaningful business loss. When that is the case, the Broker must determine if this
loss will have a significant impact on the borrower’s ability to repay the mortgage and may need
to request additional information about the self-employed co-borrower’s business income in order
to reach a final underwriting decision.




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                                       Nationstar Internal
                               SECTION 4: ASSETS

4.0     Minimum Reserve Requirements
Earnest Money Deposit
The Broker must verify that earnest money deposit funds are from an acceptable source and the
borrower has sufficient assets remaining to complete the mortgage transaction (down payment,
closing costs, and pre-paids) and to provide reserves, if required.

Liquid Financial Reserves
Liquid financial reserves include cash and other assets that are easily converted to cash by the
borrower:

       Drafting or withdrawing funds from an account
       Selling an asset
       Redeeming vested funds
        Or
       Obtaining a loan secured by assets from a fund administrator or an insurance company

Acceptable Sources of Reserves

       Checking or savings accounts
       Investments in stocks, bonds, mutual funds, certificates of deposit, money market funds,
        and trust accounts (reduced by the applicable percentage)
       The amount vested in a retirement savings account (reduced by the applicable
        percentage)
       The cash value of a vested life insurance policy

Unacceptable Sources of Reserves

       Funds that have not been vested
       Funds that cannot be withdrawn under circumstances other retirement, employment
        termination, or death
       Stock held in an unlisted corporation
       Stock options and non-vested restricted stock
       Personal unsecured loans
       Interested party contributions
       Cash proceeds from a cash-out refinance transaction




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                                         Nationstar Internal
Determining Required Minimum Reserves
Minimum required reserves vary depending on the transaction.

Occupancy status and amortization type           Principal residence/interest-only: 24 months
of the subject property
                                                 Second home/fully amortizing: two months
                                                 Second home/interest-only: 24 months
                                                 Investment property: six months

Number of units in the subject property       Two- to four-units: six months

Number of other financed properties the       Refer to Minimum Reserve Requirements
borrower currently owns

Status of the primary residence               Refer to Minimum Reserve Requirements
(pending sale or converting to second
home or investment property)


Minimum Reserve Requirements Tables
The following table provides minimum reserve requirements for Nationstar Mortgage loans
secured by a principal residence.

Subject Property: Principal     Reserves (PITIA) in Months
Residence

Number of Units and             Borrower will have 1-4              Borrower will have 5-10
Transaction Type                financed properties                 financed properties

1-unit only                     DU: Per DU                          DU: Per DU

2-4 units only                  DU: Per DU                          DU: Per DU

However, if the borrower also   If 30% equity or more on            If 30% equity or more on
has a:                          previous principal residence:       previous principal residence:
                                         2 months on subject
       Current Principal                                                  2 months on subject
                                          property, and
        Residence (Pending                                                  property, and
                                         2 months on previous
        Sale)                                                              2 months on previous
                                          primary; or
                                                                            principal; or
       Current Principal                If less than 30% equity
                                                                           If less than 30% equity
        Residence                         on previous principal
                                                                            on previous principal
                                          residence:
       (Converting to a                                                    residence:
                                         6 months on subject
        Second Home)                                                       6 months on subject
                                          property, and
                                                                            property, and
       Current 1-4 unit                 6 months on previous             6 months on previous
        Principal Residence               principal residence.              principal residence.
        (Converting to
        Investment Property)



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                                        Nationstar Internal
Subject Property:             Reserves (PITIA) in months
Second Home

Number of Units               Borrower will have 1-4            Borrower will have 5-10
                              financed properties               financed properties

1-unit                        Subject property:                 Subject property:
                                 DU Per DU                        DU Per DU
                                 Other financed properties:       Other financed properties:
                                  Two months on each
                                                                    Six months on each
                                  financed second home or
                                                                    financed second home or
                                  investment property.
                                                                    investment property.
                                  Must be calculated and
                                                                    Must be calculated and
                                  documented for loan case
                                                                    documented for loan case
                                  files underwritten with DU.
                                                                    files underwritten with DU.




Subject Property:             Reserves (PITIA) in months
Investment

Number of Units               Borrower will have 1-4            5-10 financed properties
                              financed properties

1-4 units                        DU: Per DU                       DU: Per DU

                                 Other financed properties:       Other financed properties:
                                  Two months on each                Six months on each
                                  financed second home or           financed second home or
                                  other investment property.        other investment property.

                                  Must be calculated and            Must be calculated and
                                  documented for loan case          documented for loan case
                                  file underwritten with DU.        file underwritten with DU.




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4.1     Interested Party Contributions (IPCs)
Overview
Interested party contributions (IPCs) are costs that are normally the responsibility of the
property purchaser that are paid by another party who has a financial interest in, or can influence
the terms and the sale or transfer of, the subject property. Interested parties to a transaction
include, but are not limited to:

       Property seller
       Builder/developer
       Real estate agent or broker
       An affiliate who may benefit from the sale of the property and/or the sale of the property
        at the highest price possible

IPCs are either financing concessions or sales concessions. Nationstar considers the following to
be IPCs:

       Funds that are paid directly from the interested party to the borrower
       Funds that flow from an interested party through a third-party organization, including
        nonprofit entities, to the borrower
       Funds that flow to the transaction on the borrower’s behalf from an interested party,
        including a third-party organization or nonprofit agency
       Funds that are donated to a third party, which then provides the money to pay some or all
        of the closing costs for a specific transaction

Nationstar does not permit IPCs to be used to make the borrower’s down payment, meet financial
reserve requirements, or meet minimum contribution requirements.

Interested Party Contributions Limits

Occupancy Type                          LTV/CLTV Ratio                 Maximum IPC



Principal residence or second home      Greater than 90%                         3%

                                        75.01% – 90%                             6%

                                        75% or less                              6%

Investment property                     All CLTV ratios                          2%




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Undisclosed Interested Parties Contributions
Mortgages with undisclosed IPCs are not eligible. Examples of these types of contributions
include, but are not limited to:

       Moving expenses
       Payment of various fees on the borrower’s behalf
       “Silent” second mortgages held by the property seller
       Other contributions that are given to the borrower outside of closing and are not disclosed
        on the HUD-1 Settlement Statement

Financing Concessions
Financing concessions that are paid on the borrower’s behalf are subject to Nationstar’s IPC
limits. Financing concessions are:

       Financial contributions from interested parties that provide a benefit to the borrower in the
        financing transaction
       Payments or credits related to acquiring the property
       Payments or credits for financing terms, including pre-paids

Typical fees and/or closing costs paid by a seller in accordance with local custom, known as
common and customary fees or costs, are not subject to IPC limits.

Financing concessions can also include prepaid items, such as:

       Interest charges (limited to no more than 30 days of interest)
       Real estate taxes covering any period after the settlement date (only if the taxes are
        being impounded by the servicer for future payment)
       Hazard insurance premiums (limited to no more than 14 months)
       Homeowner association (HOA) dues covering any period after the settlement date
        (limited to no more than 12 months)
       Initial and/or renewal mortgage insurance premiums
       Escrow accruals required for renewal of borrower-purchased mortgage insurance
        coverage

Sales Concessions
Sales concessions are IPCs that take the form of non-realty items. They include cash, furniture,
automobiles, decorator allowances, moving costs, and other giveaways, as well as financing
concessions that exceed limits. The value of sales concessions must be deducted from the sales
price when calculating the LTV and CLTV.




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Interest Rate Buydowns
If a temporary or permanent interest rate buydown is being offered to the borrower, the cost of the
subsidy to fund that buydown must be included in the IPC calculation, if received from an
interested party or a Broker affiliated with an interested party.

The Broker must determine if the cost of the subsidy meets allowable IPC limits. This can be
accomplished by confirming the current market interest rate (in other words, the rate that is
offered without the payment of any discount points) and the discount points being charged to
obtain the interest rate being offered with the buydown.

Payment Abatements
A payment abatement is considered to be a financing concession since it is an incentive
provided to the borrower by an interested party, in which the interested party provides funds to
pay or reimburse a certain number of monthly payments on the borrower’s behalf. The payment
of HOA fees is not considered an abatement unless the payment of the fee extends for more than
12 months. The payment of HOA fees for 12 months or less is considered an interested party
contribution.

Loans with payment abatements of any type are not eligible.

4.2     Asset Verification
Depository Assets
Depository assets (checking and savings accounts, money market funds, and certificates of
deposit), must be documented per DU/LP findings:

       One monthly bank statement
       Two consecutive monthly bank statements


Large Deposits
The underwriter must investigate any indications of borrowed funds including recently opened
accounts, recent large deposits, or account balances that are considerably greater than the
average balance over the previous few months. Large deposits are defined as the cumulative
amount of all non-payroll deposits which exceed 20% of all borrower's gross monthly income. A
written explanation of the source of funds must be obtained from the borrower, verification of the
source of funds obtained

Documentation Requirements

       Request for Verification of Deposit (Form 1006 or Form 1006S).
       Copies of bank statements or investment portfolio statements. The statements must
        cover account activity for the most recent two-month period (or, if account information is
        reported on a quarterly basis, for the most recent quarter).
       Copies of most recent retirement account statements reflecting the borrowers vested
        amount and any loans or withdrawals of funds.



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Documents that are faxed or downloaded from the Internet must clearly identify the name of the
depository or investment institution and the source of information.

Bank statements must be dated within 45 days of the initial loan application. Quarterly bank
statements must be dated within 90 days of the initial loan application, and the Broker must
confirm that the funds in the account have not been transferred to another asset account that is
verified with more current documentation.




4.3     Gifts
Gifts or donations from entities (grants) are permitted; however, the Broker must refer to the
appropriate Mortgage Insurance company guidelines for eligibility on loans that exceed 80% LTV.

When a gift is entered…                 Then…

In Section VI Assets as a gift.         The funds are included in available funds.
                                        It is important that the gift amount is identified separately as
                                        a gift even if the funds have already been deposited in a
                                        liquid asset account owned by the borrower.
                                        The balance of the liquid asset account entered in the loan
                                        application must be adjusted accordingly to prevent
                                        duplicate entry of funds. Funds that have already been
                                        deposited must be deducted from the available balance to
                                        prevent duplication.



In Section II as a source of down       The funds are not included in the available funds.
payment.


Net Worth of Business
When net worth of business should be entered in Section VI A of the 1003: If the borrower is
using proceeds from the sale of his or her business, the net proceeds should be entered in a
depository account, such as a checking or savings account. The income from this business must
not be used in income calculations.

Other Liquid Asset
Enter the value of personal assets (including net cash value of life insurance, automobiles, or
other personal assets that will be sold) that will be converted to a liquid asset (or sold) prior to
closing.

4.4     Individual Development Accounts
Some nonprofit agencies will match the funds a borrower regularly deposits into a savings
account that has been designated as an account that is used solely for the accumulation of funds
to purchase a home. Such accounts are referred to as individual development accounts
(IDAs).

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Non-profit agencies that offer IDA programs have options with respect to accumulating and
holding the matching funds, which include:

       The use of an account that is separate from the home buyer’s savings account.
       Separately designated matching funds within a single agency.
       The use of a trustee account that contains both the home buyer’s funds and the agency’s
        matching funds.

The funds are disbursed from the non-profit agency account to the closing agent via either a
single check or multiple checks.

It is acceptable to allow the separate disbursement of funds from the agency and from the home
buyer, as long as the terms of the IDA program are met.

Use of IDA Funds to Meet Borrower Minimum Contribution Requirements

IDA Repayment Terms                                  Allowable Use of Matching Funds

The nonprofit agency:                                The borrower may use the matching funds to
                                                     supplement the down payment, provided he or
       Requires repayment of the matching           she has met the minimum borrower
        funds.                                       contribution requirements from his or her own
                                                     funds.
       Agrees to defer or forgive repayment
        provided that certain conditions are         The minimum borrower contribution must come
        met.                                         from the borrower's own funds unless:
        Or                                                  The LTV or CLTV ratio is less than or
                                                             equal to 80%.
       Files a lien against the property.
                                                             or
                                                            The borrower is purchasing a one-unit
                                                             principal residence and meets the
                                                             requirements to use gifts, donated
                                                             grant funds, or funds received from an
                                                             employer to pay for some or all of the
                                                             borrower's minimum contribution-
                                                             subject to Mortgage Insurance
                                                             guidelines.

The nonprofit agency:                                The borrower may use the matching funds for
                                                     some or all of the down payment without first
       Does not require repayment of the            being required to meet the minimum borrower
        matching funds.                              contribution requirement from his or her own
                                                     funds- subject to Mortgage Insurance
        And                                          guidelines for LTV’s that exceed 80%.
       Does not file a lien against the
        property.




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Checklist for IDAs

Checklist for IDAs

□       Document how the nonprofit agency’s IDA program operates.

□       Verify the rate at which the agency matches borrower deposits into the account.

□       Determine that the borrower satisfied the program’s vesting requirements.

□       Document the borrower’s regular payments into the account and the agency’s regular
        deposits of matching funds into the account.


4.5       Verification of Assets for Non-U.S. Citizen Borrowers
The following documentation must be obtained to verify funds that a non-U.S. citizen borrower
recently deposited in a U.S. depository institution:

         Documented evidence of funds transfer from the country from which the borrower
          immigrated.
         Establishes that the funds belonged to the borrower prior to the date of the transfer.
         The sources of all funds can be verified just as they would for a borrower who is a U.S.
          citizen.

4.6       Stocks, Stock Options, Bonds, and Mutual Funds
Verification of all of the following is required:

         Ownership of the account or asset.
         Value of the asset at the time of sale or liquidation
         Receipt of funds realized from the sale or liquidation




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Asset Type                        Determining the Value of the Asset

Stocks and mutual funds           Determine the value of the asset at the time of sale or
                                  liquidation (net of any margin accounts) with either:
                                          The most recent monthly or quarterly statement from
                                           the depository or investment firm.
                                           Or
                                          A copy of the stock certificate, accompanied by a
                                           newspaper stock list that is dated as of or near the
                                           date of the loan application.
                                  When used for reserves, the value of stocks and mutual
                                  funds must be discounted by 30%.
                                  Non-vested restricted stock is not an acceptable source of
                                       reserves.

Stock options                     Value of vested stock options can be documented by:
                                          A statement that lists the number of options and the
                                           option price.
                                           And
                                          The current stock price documenting the gain that
                                           would be realized from sale of the optioned stock.
                                  Vested stock options are not an acceptable source for
                                  reserves.
                                  Non-vested stock options are not an acceptable source of
                                  funds.

Government bonds                  The value of government bonds must be based on their
                                  purchase price unless the redemption value can be
                                  documented.
                                  When used for reserves, the value of bonds must be
                                  discounted by 30%.



4.7    Trust Accounts
Trust account funds must be documented with:

      Written documentation of the value of the trust account from either the trust manager or
       the trustee.
       And
      Documentation supporting the conditions under which the borrower has access to the
       funds. This documentation must reflect that the impact that withdrawal of funds will have
       on trust income used for qualifying.




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4.8     Retirement Accounts
Verify the ownership of the accounts and the borrower's actual receipt of the funds realized from
the liquidation of the asset.

When funds from retirement accounts are used for reserves, documentation must include the
ability to withdraw funds. If the retirement account only allows withdrawals in connection with the
borrower’s employment termination, retirement, or death, the account must not be considered as
reserves. Retirement accounts that do not allow any type of withdrawal may not be considered.

To account for withdrawal penalties and estimated taxes, the reserve amount must be reduced to
60% of the vested amount (less any outstanding loans).

4.9     Personal Gifts

Gifts

A borrower of a mortgage loan secured by a principal residence or second home may use funds
received as a personal gift from an acceptable donor. Gift funds may fund all or part of the down
payment, closing costs, or financial reserves subject to the minimum borrower contribution
requirements below. Gifts are not allowed on an investment property.


Acceptable Donors
A gift can be provided by:

       A relative, defined as the borrower’s spouse, child, or other dependent, or by any other
        individual who is related to the borrower by blood, marriage, adoption, or legal
        guardianship
        or
       A fiancé, fiancée, or domestic partner

    If the borrower receives a gift from a relative or domestic partner who has lived with the
    borrower for the last 12 months, or from a fiancé or fiancée, the gift is considered the
    borrower’s own funds

The donor may not be, or have any affiliation with, the builder, the developer, the real estate
agent, or any other interested party to the transaction.




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Minimum Borrower Contribution Requirements
The following table describes the minimum borrower contribution requirements for transactions
that contain gifts.

LTV, CLTV, or           Minimum Borrower Contribution Requirement from Borrower’s Own
HCLTV Ratio             Funds

80% or less                    One- to four-unit         A minimum borrower contribution from the
                                principal residence       borrower’s own funds is not required.
                               Second home

Greater than 80%        One-unit principal residence      A minimum borrower contribution from the
                        (Except for high-balance          borrower's own funds is not required
                        mortgage loans)                   provided that Mortgage Insurance
                                                          guidelines are met

                               Two- to four-unit         The borrower must make a 5% minimum
                                principal residence       borrower contribution from his or her own
                                                          funds.
                               Second home
                               High-balance mortgage
                                loans



Documentation Requirements
The gift letter must:

       Specify the dollar amount of the gift.
       Specify the date the funds were transferred.
       Include the donor’s statement that no repayment is expected.
        and
       Indicate the donor’s name, address, telephone number, and relationship to the borrower.

When a gift from a relative or domestic partner is being pooled with the borrower’s funds to make
up the required minimum cash down payment, the following items must also be included:

       A certification from the donor stating that he or she has lived with the borrower for the
        past 12 months and will continue to do so in the new residence.
       Documents that demonstrate a history of borrower and donor shared residency. The
        donor’s address must be the same as the borrower’s address.




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Verifying Donor Availability of Funds and Transfer of Gift Funds
The Broker must verify that sufficient funds to cover the gift are either in the donor’s account or
have been transferred to the borrower’s account. Acceptable documentation includes the
following:

       A copy of the donor’s check and the borrower’s deposit slip
       A copy of the donor’s withdrawal slip and the borrower’s deposit slip
       A copy of the donor’s check to the closing agent
        or
       A settlement statement showing receipt of the donor’s check

When the funds are not transferred prior to settlement, document that the donor gave the closing
agent the gift funds in the form of a certified check, a cashier’s check, or other official check.


4.10 Gifts of Equity

Gifts of Equity
Enter a gift of equity in Section VI A.

Documentation Requirements

       A signed gift letter and
       The HUD-1 Settlement Statement listing the gift of equity

Gifts of Equity and Interested Party Contributions
If the requirements listed in this topic are met, the gift of equity is not subject to Nationstar
Mortgage’s interested party contribution requirements

4.11 Donations from Entities
Acceptable entities include:

       Churches
       Municipalities
       Non-profit organizations (excluding credit unions)
       Public agencies




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Minimum Borrower Contribution Requirements

LTV, CLTV, or        Minimum Borrower Contribution Requirement from Borrower’s Own
HCLTV Ratio          Funds

80% or less          One- to four-unit principal     A minimum borrower contribution from the
                     residence                       borrower’s own funds is not required

Greater than 80%     One-unit principal residence    A minimum borrower contribution from the
                     (except for high-balance        borrower’s own funds is not required
                     mortgage loans)                 provided that all Mortgage Insurance
                                                     guidelines are met.

                            Two- to four-unit       The borrower must make a 5% minimum
                             principal residence     borrower contribution from his or her own
                                                     funds.
                            High-balance
                             mortgage loans


Documentation Requirements
A copy of the letter awarding the gift or grant to the borrower or a copy of the legal agreement
that specifies the terms and conditions must be provided. The documents must include language
indicating that repayment of the gift or grant is not expected, and how the funds will be
transferred.

The transfer of gifts or grants must be documented with a copy of the donor’s canceled check, a
copy of the settlement statement showing receipt of the check, or similar evidence.

4.12 Disaster Relief Grants or Loans
Borrowers may use lump-sum disaster relief grants or loans to satisfy minimum borrower
contribution requirement. No borrower contribution is required unless needed to meet Mortgage
Insurance requirements.

4.13 Employer Assistance
Forms of Employer Assistance
The employer assistance may be in the form of:

       A grant
       A direct, fully repayable second mortgage or unsecured loan
       A forgivable second mortgage or unsecured loan
        or
       A deferred-payment second mortgage or unsecured loan




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A borrower may use funds provided (for principal residence only) by an employer to fund all or
part of the down payment or closing costs subject to the minimum borrower contribution
requirements below. Employer assistance can also be used for financial reserves for all types of
assistance with the exception of unsecured loans (which may only be used for the down payment
and closing costs).

Funds must come directly from the employer, including through an employer-affiliated credit
union.

When employer assistance is extended as a secured second mortgage, it must satisfy criteria for
mortgages that are subject to subordinate financing.

If the secured second mortgage or unsecured loan does not require regular payments of either
principal and interest or interest only, no payment is required to be calculated in the qualifying
ratios. Regular payments are required to be included in the calculation of the debt-to income
ratio.

Minimum Borrower Contribution Requirements

LTV, CLTV, or           Minimum Borrower Contribution Requirement from Borrower’s Own
HCLTV Ratio             Funds

80% or less             One- to four-unit principal         A minimum borrower contribution from the
                        residence                           borrower’s own funds is not required. All
                                                            funds needed to complete the transaction
                                                            can come from employer assistance.

Greater than 80%        One-unit principal residence        A minimum borrower contribution from the
                        (except for high-balance            borrower’s own funds is not required
                        mortgage loans)                     subject to all Mortgage Insurance
                                                            guidelines being met.


                               Two- to four-unit           The borrower must make a 5% minimum
                                principal residence         borrower contribution from his or her own
                                                            funds. Employer assisted funds can be
                               High-balance mortgage       used to supplement reserves (except for
                                loans                       unsecured loans, which may not be
                                                            applied to reserves). (Subject to all
                                                            Mortgage Insurance guidelines being
                                                            met.)




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Documentation Requirements

       The program is an established company program, not just an accommodation developed
        for an individual employee.
       The dollar amount of the employer’s assistance.
       An unsecured loan from an employer with an award letter or legal agreement from the
        note holder. Must disclose the terms and conditions of the loan.
       The terms of any other employee assistance being offered to the borrower (such as
        relocation benefits or gifts).
       Document that the borrower received the employer assistance funds directly from the
        employer (or through the employer-affiliated credit union).


4.14 Sales Contract Deposit
Cash Deposit on Sales Contract (Earnest Money)
In order to give the borrower credit for earnest money that is not already reflected in a liquid
account, the Broker must enter the earnest money amount as follows.

If the earnest money check…                         Then…

Has cleared the borrower’s bank account.            The amount can be entered as Other Credit in
                                                    Section VII, where it is assumed to be verified.

Has not cleared the borrower’s bank account.        The amount can be included in a depository
                                                    account, such as a checking or savings
                                                    account.

                            Do not enter the amount in both places.


Verification of Source of Funds
A Request for Verification of Deposit (Form 1006 or Form 1006S) or bank statements must
indicate that the average balance for the past two months was large enough to support the
amount of the deposit. The documentation must cover the period up to (and including) the date
the check cleared the bank account.

If it cannot be determined that these funds were withdrawn from the borrower’s account,
additional verification of the source and evidence that the funds have actually changed hands
from the borrower should be provided. Large earnest money deposits and deposits that exceed
the amount customary for the area should be closely evaluated.

Documentation for Receipt of the Deposit
Receipt of the deposit must be verified by either a copy of the borrower’s canceled check or a
written statement from the holder of the deposit-such as receipt from the title company.




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4.15 Anticipated Sales Proceeds

Net Equity (From Properties Pending Sale)
If net equity is calculated from data in Section VI R and is also entered in Section VI A, DU will
use the amount from Section VI A.

When the net equity is…               Then the DU/LP finding must reflect …

Positive.                             Equity added the amount to the funds available for closing.

Negative.                             Equity subtracted the amount from the funds available for
                                      closing.


Determining the Amount of Net Proceeds
The following table describes how to determine the amount of net proceeds based on a
borrower’s anticipated equity.

Sales Price           Net Proceeds Calculation
Established?

Yes.                  Sales Price – (Sales Costs + All Liens) = Estimated Proceeds

No.                   90% of Listing Price – All Liens = Estimated Proceeds
                      Note: The 10% adjustment factor that is applied to the listing price must be
                            changed depending on market conditions.


Proceeds from Sold Properties
Proceeds from properties that have already been sold should be included in a depository
account, such as a checking or savings account.

Sales Proceeds Needed for Down Payment and Closing Costs
A copy of the fully executed HUD-1 Settlement Statement on the existing home must be provided.

Corporate Relocation Plans
Obtain a copy of the executed buyout agreement to document the source of funds. The sales
contract or a listing agreement is not considered an acceptable source.




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4.16 Trade Equity
The seller’s equity contribution for the traded property must be a true-value consideration
supported by a current appraisal.

The borrower must make the minimum required contribution from his or her own funds unless:

       The LTV or CLTV ratio is less than or equal to 80%.
        or
       The borrower is purchasing a one-unit principal residence and meets the requirements to
        use gifts, donated grant funds, or funds received from an employer to pay for some or all
        of the borrower's minimum contribution.

The trade should be evidenced by two separate contracts that have the buyer and the seller on
one contract reversing roles on the second contract.

Calculating the Equity Contribution
The equity contribution is determined by subtracting the outstanding mortgage balance of the
property being traded, plus any transfer costs, from the lesser of either the property’s appraised
value or the trade-in value agreed to by both parties.

Documentation Requirements
The transfer deed must be recorded, and the following documentation supplied:

       A search of the land records to verify the ownership of the property and to determine
        whether there are any existing liens on the property.
       Proof of title transfer and satisfaction of any existing mortgage liens for which the
        borrower was liable.




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4.17 Credit for Value of Lot

When Was Land Acquired?          Market Value of Land         Documentation Requirements

More than 12 months              Its current appraised        N/A
preceding loan application.      value.

Less than 12 months              The lesser of its sales      The Broker must document the
preceding loan application.      price or the current         borrower’s cash investment by
                                 appraised value.             obtaining:
                                                                       A certified copy of the HUD-
                                                                        1 Settlement Statement (or
                                                                        similar settlement
                                                                        statement)
                                                                        and
                                                                       A copy of a warranty deed
                                                                        showing that there are no
                                                                        outstanding liens against
                                                                        the property
                                                                        or
                                                                       A copy of a release of any
                                                                        prior lien(s)

The borrower acquired the        Its current appraised        If the borrower acquired the land
land at any time as a gift, an   value.                       less than 12 months preceding loan
inheritance, or other non-                                    application, the Broker must
purchase transaction.                                         document the acquisition of the land
                                                              and transfer of ownership of the
                                                              land.



4.18 Rent Credit for Option to Purchase
Credit for the down payment is determined by calculating the difference between the market rent
and the actual rent paid for the last 12 months. The market rent is determined by the appraiser in
the appraisal for the subject property.

Documentation Requirements
Obtain the following documentation:

       A copy of the rental/purchase agreement evidencing a minimum original term of at least
        12 months which states the monthly rental amount and the terms of the lease.
       Copies of the borrower’s rent canceled checks or money order receipts for the last 12
        months.
       Market rent as determined by the subject property appraisal.




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4.19 Sweat Equity

Sweat equity is not an acceptable source of funds,

4.20 Bridge/Swing Loans
Bridge loans must be identified in the DU/LP findings appropriately and must not be reflected as
checking/savings or other type of liquid asset. Bridge loans should be considered in the Net
Equity calculation for properties that are pending sale. The amount of the bridge loan should be
subtracted from the net proceeds to avoid counting this asset twice. The bridge loan must also be
entered into the liability section of the 1003.

       The bridge loan cannot be cross-collateralized against the new property.
       Document the borrower’s ability to successfully carry the payments for the new home, the
        current home, the bridge loan, and other obligations.

There is a 15-year limitation on the term of bridge loans.

4.21 Borrowed Funds Secured by an Asset

Secured Borrowed Funds
Borrowers can borrow against an asset they own, such as a 401(k) account or other real estate.
The amount of the secured loan should be entered as Secured Borrowed Funds in Section VI
A. The secured loan amount should be subtracted from the market value of the actual asset, and
the net asset value should be entered in the appropriate field in Section VI A.

Loans that are secured against a liquid asset owned by the borrower (such as a 401(k) or mutual
fund) do not have to be entered as liabilities. Loans that are secured against real estate, or any
other non-liquid asset, must be entered as liabilities in Section VI Liabilities.

Assets that may be used to secure funds include:

       Automobiles
       Artwork
       Collectibles
       Real estate
       Financial assets, such as:
            o     Savings accounts
            o     Certificates of deposit
            o     Stocks
            o     Bonds
            o     401(k) accounts




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                                            Nationstar Internal
Secured Loans as Debt
Debts secured by non-liquid assets must be considered as a debt. If the secured loan does not
require monthly payments, an equivalent amount must be calculated and considered as a
recurring debt.

Loans are secured by the borrower’s financial assets. Monthly payments for the loan do not have
to be considered as long-term debt.

Reducing the Asset by the Amount Borrowed
If the borrower uses the same financial asset as part of his or her financial reserves, the Broker
must reduce the value of the asset by the amount of proceeds and related fees for the secured
loan.

Documentation Requirements

       The terms of the secured loan.
       Evidence that the party providing the secured loan is not a party to the sale.
       Evidence that the funds have been transferred to the borrower.

4.22 Credit Card Financing
For Fannie Mae loan products, credit card financing for the payment of common and customary
fees paid outside of closing up to a maximum of 2% is acceptable.

For Freddie Mac loan products, the maximum amount charged or advanced may not exceed the
greater of 2% of the Mortgage amount or $1,500.

Documentation Requirements

       Confirm that the borrower has sufficient liquid funds to cover these charges in addition to
        funds needed for other closing costs and the down payment. or
       Recalculate the credit card payment, to account for the new charges, and include the
        updated payment in the qualifying ratio calculation.

4.23 Personal Unsecured Loans
Personal unsecured loans are not an acceptable source of funds for the down payment, closing
costs, or financial reserves.




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4.24 Sale of Personal Assets
Documentation Requirements

         The borrower’s ownership of the asset
         The value of the asset, as determined by an independent and reputable source
         The transfer of ownership of the asset, as documented by either a bill of sale or a
          statement from the purchaser
         The borrower’s receipt of the funds documented with deposit slips, bank statements, or
          copies of the purchaser’s canceled check

4.25 Cash Value of Life Insurance

If…                                                  Then…

If penalties for failure to repay the loan are       Payments on a loan secured by the cash value
limited to the surrender of the policy.              of a borrower’s life insurance policy do not
                                                     have to be considered qualification.

If additional obligations are indicated.             The obligation amount must be factored into
                                                     the total qualification, or subtracted from the
                                                     borrower’s financial reserves.



Documenting Borrower Receipt of Funds
Obtain either a copy of the check from the insurer or copy of the payout statement issued by the
insurer.

4.26 Anticipated Savings and Cash-on-Hand
Anticipated Savings
Anticipated savings is not an acceptable source of funds.

Cash-on-Hand
Cash-on-hand is not an acceptable source of funds.




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      SECTION 5: LIABILITIES AND DEBT OBLIGATION
5.0 Borrower’s Monthly Housing Expense for Qualifying
Purposes
Borrower’s Monthly Housing Expense for Qualifying Purposes

 Mortgage Type                                  Qualifying Interest Rate

 Fully Amortizing

 Fixed-rate mortgages                           Note rate
                                   1
 Six-Month to Five-Year ARMs                    Greater of the fully indexed rate or the note rate
                                                plus 2%

 Seven- to 10-Year ARMs                         Note rate

 Mortgages with an Interest-Only Feature

 Fixed-rate mortgages                           Note rate
                            1
 Three- to Five-Year ARMs                       Greater of the fully indexed or the note rate plus
                                                2%
                            1, 2
 Seven- to Ten-Year ARMs                        Greater of the fully indexed rate or the note rate

 Broker ARM Plans

 Broker ARM Plans                               Interest rate entered in the ARM Qualifying
                                                Rate field. If an interest rate is not entered, DU
                                                uses the note rate plus 2%

Note: The fully indexed rate is defined here as the index plus the margin as entered in the online
      loan application.




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5.1     Monthly Debt Obligations
Alimony/Child Support/Separate Maintenance Payments
Alimony, child support, or maintenance payments that must continue to be made for more than 10
month must be considered as part of the borrower’s recurring monthly obligations. Voluntary
payments do not need to be taken into consideration.

Business Debt in Borrower’s Name
In order to exclude a monthly obligation that appears on the borrower’s personal credit report that
the borrower states is being paid by the borrower’s business, all of the following conditions must
be met:

       The account in question does not have a history of delinquency.
       The business provides acceptable evidence that the obligation was paid out of company
        funds (such as 12 months of canceled company checks).
        And
       The cash flow analysis of the business took payment of the obligation into consideration.

The payment may not be excluded if:

       If the business does not provide sufficient evidence that the obligation was paid out of
        company funds.
       If the business provides acceptable evidence of its payment of the obligation, but the
        Broker’s cash flow analysis of the business does not reflect any business expense
        related to the obligation (such as an interest expense – and taxes and insurance, if
        applicable – equal to or greater than the amount of interest that one would reasonably
        expect to see given the amount of financing shown on the credit report and the age of the
        loan). It is reasonable to assume that the obligation has not been accounted for in the
        cash flow analysis.
       If the account in question has a history of delinquency. To ensure that the obligation is
        counted only once, the net income should be adjusted by the amount of interest, taxes, or
        insurance expense, if any, that relates to the account in question.

Court-Ordered Assignment of Debt
When a borrower has outstanding debt that was assigned to another party by court order (such
as under a divorce decree or separation agreement) and the borrower does not receive a release
of liability from the creditor, the borrower has a contingent liability the debt may be excluded from
the monthly obligations.

The Broker is not required to evaluate the payment history for the assigned debt after the
effective date of the assignment. The Broker cannot disregard the borrower’s payment history for
the debt before its assignment.




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                                        Nationstar Internal
Co-Signed Loans
When a borrower co-signs for a loan to enable another party (the primary obligor) to obtain credit
– but is not the party who is actually repaying the debt – the borrower has a contingent liability.

The liability does not need to be considered as part of the borrower’s recurring monthly debt
obligations if the Broker can verify a history of documented payments on the co-signed debt by
the primary obligor, and ascertain that there is not a history of delinquent payments for that debt
(since this could be an indication that the co-signer might have to assume the obligation at some
point in the future).

The debt may be excluded as long as, the primary obligor should have been making payments on
the debt for at least 12 months The liability does need to be considered as part of the borrower’s
recurring monthly debt obligations if:

       Payment by the primary obligor cannot be sufficiently documented.
       A sufficient payment history has not been established for the debt.
        Or
       The primary obligor has a history of being delinquent in making payments on the debt.

Home Equity Lines of Credit
When the mortgage also has a HELOC that provides for a monthly payment of principal and
interest, or interest only, the payment on the HELOC must be considered as part of the
borrower’s recurring monthly debt obligations. If the HELOC does not require a payment, there is
no recurring monthly debt obligation so the Broker does not need to develop an equivalent
payment amount.

Deferred Installment Debt
Deferred installment debts, such as deferred student loans, must be included as part of the
borrower’s recurring monthly debt obligations.

If the borrower’s credit report does not indicate the monthly amount that will be payable at the end
of the deferment period, alternate documentation must be obtained to determine the future
monthly payment. Acceptable documentation may include copies of the borrower’s payment
letters or forbearance agreements. If alternate documentation is not available, a minimum of 2%
of the outstanding balance must be used.

Installment Debt
All installment debt that is not secured by a financial asset must be considered part of the
borrower’s monthly obligations if there are more than 10 monthly payments remaining. An
installment debt with fewer monthly payments remaining must still be considered if it significantly
affects the borrower’s ability to repay.

Lease Payments
Lease payments must be considered as recurring debt regardless of the number of months
remaining on the lease.




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Loans Secured by Financial Assets
Financial assets (life insurance policies, 401(k) accounts, individual retirement accounts,
certificates of deposit, stocks, bonds, etc.) used as security for a loan do not have to be included
in the borrower’s obligations.

Documentation must be provided such as a copy of the loan instrument that shows the borrower’s
financial asset as collateral for the loan. The value of the asset must be reduced by the amount of
the secured loan (and any related fees) when calculating required cash to close and reserves.

Non-reimbursed Employee Expenses
When a borrower has non-reimbursed business expenses, (such as classroom supplies,
uniforms, meals, gasoline, automobile insurance, and/or automobile taxes) a 24 month average
must be used in order to determine the borrower’s recurring monthly debt obligation. This
information must be calculated based on the IRS Form 1040 including all schedules (Schedule A
and IRS Form 2106), netting out any automobile depreciation claimed on IRS Form 2106.

Revolving Charge/Lines of Credit
Revolving charge accounts and unsecured lines of credit should be treated as long-term debts,
If the credit report does not show a required minimum payment amount and there is no
supplemental documentation to support a payment of less than 5%. The greater of 5% or $10 of
the outstanding balance must be used as the monthly debt.

5.2     Qualifying Impact of Other Real Estate Owned
Mortgage Assumption
When a borrower sells a mortgaged property and the property purchaser assumes the
outstanding mortgage debt without a release of liability, the borrower has a contingent liability.

The payment does not have to be considered as a part of the borrower’s recurring debt if the
property purchaser has at least a 12-month history of making regular, timely payments for the
mortgage. Document this by obtaining:

       Evidence of the transfer of ownership.
       A copy of the formal, executed assumption agreement.
        And
       A credit report indicating that consistent and timely payments were made for the
        assumed mortgage.

If documentation of timely payments during the most recent 12-month period cannot be obtained,
the applicable mortgage payment must be counted as part of the borrower’s monthly debt.

Property Settlement Buyout
When a borrower’s interest in a property is bought out by another co-owner of the property
documentation must be obtained to confirm the transfer of title to the property, this liability does
not have to be considered as part of the borrower’s recurring debt.



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Current Principal Residence Pending Sale
If the borrower's current principal residence is pending sale, but the transaction will not close with
title transfer to the new owner prior to the new transaction, the current PITIA and the proposed
PITIA must be used in qualifying the borrower for the new mortgage loan. Documentation of
minimum reserves of six months PITIA for both properties is required.

A reduction to two months reserves if 30% equity in the existing principal residence is
documented in accordance with the Equity in the Current Principal Residence requirements
below.

The current principal residence's PITIA does not have to be used in qualifying the borrower as
long as the six months of reserves (or two months with documented equity) for both properties
are documented and the following additional documentation is provided:

       The executed sales contract for the current residence, and
       Confirmation that any financing contingencies have been cleared.

Conversion of Current Principal Residence Requirements

Conversion of Current Principal Residence to a Second Home

If the borrower is converting a current principal residence to a second home, both the current and
proposed mortgage payments (PITIA) must be used to qualify. the borrower for the new
transaction. In addition, the minimum reserve requirements must be met.

Equity in the Current Principal Residence

If the current principal residence is retained and converted to a second home or investment
property, document the borrower's equity in the existing principal residence with an appraisal,
automated valuation model, or Broker Price Opinion, minus outstanding liens. The resulting LTV
will determine the required amount of reserves and the qualification requirements of the current
principal residence's PITIA on the borrower's total debt-to-income ratio.

Conversion of Current Principal Residence to Investment Property

If the borrower is converting a current principal residence to an investment property, ensure the
borrower has sufficient equity to support both the current PITIA and the new mortgage being
originated. The percent of equity in the current principal residence must be documented in
accordance with the Equity in the Current Principal Residence requirements.

To confirm leasing of the newly converted property or unit (for a two- to four-unit property), obtain
a copy of each of the following:

       Fully executed lease agreement
       Security deposit from the tenant
       Bank statement showing the deposited security funds




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Calculate the net rental income and qualify the borrower according to the following requirements.

For a one-unit property, if documented            Then...
equity in the current principal residence is…

Greater than or equal to 30%.                     75% of gross rental income may be used as
                                                  income.

Less than 30%.                                    No rental income will be allowed.


For a two- to four-unit property,    Then, for the unit previously       And, for the remaining
if documented equity in the          occupied by the borrower…           units, the Broker may
current principal residence is…                                          either...




Greater than or equal to 30%.        The Broker may use 75% of the       Calculate the net rental
                                     gross rental income from the        income (or loss) from
                                     newly executed lease                the pages of the
                                     agreement.                          borrower's most recent
                                                                         two years of signed
Less than 30%.                       No rental income may be             federal income tax
                                     counted.                            returns and the related
                                                                         Schedule E. Refer to
                                                                         3.10 Rental Income.
                                                                         Leases are permitted
                                                                         only if the property is
                                                                         not listed on Schedule
                                                                         E because it was
                                                                         acquired subsequent to
                                                                         filing the tax return.




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                                       Nationstar Internal
 If the percentage of equity in the            Then...
 current principal residence is...

 Greater than or equal to 30% for a one-       The borrower must be qualified with the new PITIA,
 unit residence.                               and 75% of the gross rental income may be
                                               credited to offset the current principal residence's
                                               PITIA.

 Less than 30%.                                The borrower must be qualified with the new PITIA
                                               plus the full amount of the current principal
                                               residence's PITIA.

 Greater than or equal to 30% for a two- to    The borrower must be qualified with the new PITIA
 four-unit residence.                          plus PITIA on the current principal residence minus
                                               75% of gross rental income from the newly leased
                                               unit, plus, if applicable, any credit from existing
                                               leased units.

 Less than 30% for a two- to four-unit         The borrower must be qualified with the new PITIA
 residence.                                    plus PITIA on the current residence minus, if
                                               applicable, any credit from existing leased units
                                               only.



5.3     Debts Paid Off At/Prior to Closing
Payoff or Paydown of Debt for Qualification
Payoff or paydown of debt solely to qualify must be carefully evaluated and considered in the
overall underwriting decision. The borrower’s history of credit use should be a factor in
determining whether the appropriate approach is to include or exclude debt for qualification.

       Installment loans that are being paid off or paid down to 10 or fewer remaining monthly
        payments should generally not be included in the borrower’s debt.
       If a revolving account is to be paid off and closed, a monthly payment on the current
        outstanding balance does not need to be included in the borrower's debt.
       If a revolving or open account is to be paid off but not closed, a monthly payment on the
        current outstanding balance should generally be considered as long-term debt.

Open 30-Day Charge Accounts
Open 30-day charge accounts must be paid off at or prior to closing if the borrower is unable to:

       Document sufficient assets to cover the unpaid balance.
        Or
       Document that the charges will be reimbursed by his or her employer.




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                                         Nationstar Internal
Collections, Charge-Offs, Judgments, Garnishments, and Liens
Delinquent credit – including taxes, judgments, charged-off accounts tax liens, mechanics’ or
materialmen’s liens, and liens that have the potential to affect first lien position or diminish the
borrower’s equity – must be paid off at or prior to closing.

Collection accounts or charged-off accounts do not have to be paid off at or prior to closing if the
balance of an individual account is less than $250 or the total balance of all accounts is $1,000 or
less unless relief is granted through DU/LP.

Collection accounts or charged-off accounts that exceed the above limits do not have to be paid
off at or prior to closing, provided all of the following are documented:

       A strong credit profile
       Meaningful financial reserves
       Evidence that the accounts pose no threat to the first mortgage lien
       Evidence that the outstanding accounts are not likely to affect the borrower’s equity
        position




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                                         Nationstar Internal
              SECTION 6: APPRAISAL/COLLATERAL
                       REQUIREMENTS

6.0     Introduction
Nationstar will comply with Appraiser Independence Requirements (AIR) guidelines,
described below.

Appraisal reports must meet USPAP appraisal standards.

An appraiser must be, at a minimum, certified by the state in which the property to be appraised
is located, in accordance with the provisions of Title XI of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989.

6.1     Age of Appraisal and Age of Property Inspection Report

When…                                             Then…

Appraisal reports are more than four months       Appraisers must perform an update which
old on the date of the note and mortgage –        includes both of the following:
regardless of whether the property was
appraised as proposed or existing construction.          Inspect the interior of the property.
                                                         Review current market data to
                                                          determine whether the property has
                                                          declined in value since the date of the
                                                          original appraisal.

A property inspection for a loan casefile         Appraiser must prepare a new DU Property
underwritten with DU is more than four months     Inspection Report (Form 2075).
old on the date of the note and mortgage.



If…                                               Then…

The appraiser indicates the property value has    The lender must obtain a new appraisal for the
declined.                                         property.

The appraiser indicates the property has not      The lender should request the appraiser to
declined in value.                                provide an update to the appraisal, based on
                                                  the appraiser’s exterior inspection of the
                                                  property and knowledge of current market
                                                  conditions. The inspection and the appraisal
                                                  update must occur within the four months that
                                                  precede the date of the note and mortgage.




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                                      Nationstar Internal
6.2     Appraiser Engagement
The Broker shall be responsible for selecting, retaining, and providing for payment of all
compensation to the appraiser in accordance with AIR guidelines.

Valuation delivery (estimates) to appraisers is prohibited, except for copies of the Sales Contract.
Sales Contracts can be made available to the vendor interface or directly to the appraiser.

The appraisal delivered to Nationstar Mortgage must reflect Nationstar as the lender.

Appraiser Independence Requirements (AIR) Safeguards
In compliance with AIR, no employee, director, or agent of the Broker, or any other third party
acting as joint venture partner, independent contractor, appraisal company, appraisal
management company, or partner on behalf of Broker, shall influence or attempt to influence the
development, reporting, result, or review of an appraisal through coercion, extortion, collusion,
compensation, inducement, intimidation, bribery, or in any other manner including but not limited
to:

    1. Withholding or threatening to withhold timely payment or partial payment for an appraisal
       report.
    2. Withholding or threatening to withhold future business for an appraiser, or demoting or
       terminating or threatening to demote or terminate an appraiser.
    3. Expressly or impliedly promising future business, promotions, or increased compensation
       for an appraiser.
    4. Conditioning the ordering of an appraisal report or the payment of an appraisal fee or
       salary or bonus on the opinion, conclusion, or valuation to be reached, or on a
       preliminary value estimate requested from an appraiser.
    5. Requesting that an appraiser provide an estimated, predetermined, or desired valuation
       in an appraisal report prior to the completion of the appraisal report, or requesting that an
       appraiser provide estimated values or comparable sales at any time prior to the
       appraiser’s completion of an appraisal report.
    6. Providing to an appraiser an anticipated, estimated, encouraged, or desired value for a
       subject property or a proposed or target amount to be loaned to the borrower, except that
       a copy of the sales contract for purchase transactions may be provided.
    7. Providing to an appraiser, appraisal company, appraisal management company, or any
       entity or person related to the appraiser, appraisal company, or appraisal management
       company, stock or other financial or non-financial benefits.
    8. Removing an appraiser from a list of qualified appraisers, or adding an appraiser to an
       exclusionary list of disapproved appraisers, in connection with the influencing or attempt
       to influence an appraisal as described above (this prohibition does not preclude the
       management of appraisers lists for bona fide administrative or quality-control reasons
       based on written policy)
        and
    9. Any other act or practice that impairs or attempts to impair an appraiser’s independence,
       objectivity, or impartiality, or violates law or regulation, including, but not limited to, the
       Truth in Lending Act (TILA) and Regulation Z, or the Uniform Standards of Professional
       Appraisal Practice (USPAP).


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                                        Nationstar Internal
Loan Production Staff
Members of the Broker’s loan production staff, as well as any employee of the Broker who is 1)
compensated on a commission basis upon the successful completion of a loan or 2) reports,
ultimately, to any officer of the Broker not independent of the loan production staff and process,
shall be forbidden from:

       Selecting, retaining, recommending, or influencing the selection of any appraiser for a
        particular appraisal assignment, or for inclusion on a list or panel of appraisers approved
        to perform appraisals for the Broker or forbidden from performing such work.
        and
       Having any substantive communications with an appraiser or appraisal management
        company relating to or having an impact on valuation, including ordering or managing an
        appraisal assignment.


Borrower Receipt of Appraisal
The Broker shall ensure that the borrower is provided a copy of any appraisal report concerning
the borrower’s subject property, promptly upon completion, at no additional cost to the borrower,
and in any event no less than three days prior to the closing of the loan. The borrower may waive
this three-day requirement by signing a waiver.

Nationstar or any third party specifically authorized by Nationstar (including, but not limited to,
appraisal companies, appraisal management companies, and broker lenders) shall be
responsible for selecting, retaining, and providing for payment of all compensation to the
appraiser.

All orders for new loans (originations) will be placed either:

       Electronically, through the RealEC Portal (or if a vendor is not an authorized user of
        RealEC, then the order will be placed on the vendor’s website or other approved
        website).
        or
       Directly to the appraiser.

Valuation delivery (estimates) to appraisers is prohibited, except for copies of the Sales Contract.
Sales Contracts can be made available via the RealEC vendor interface (also via FNC portal
where used) or directly to the appraiser.

Nationstar will not accept an appraisal provided by the customer except under the following
conditions set forth in the paragraph below.




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                                         Nationstar Internal
Nationstar may accept an appraisal prepared by an appraiser for a different lender, including
where:

       A mortgage broker has facilitated the mortgage application (but not ordered the
        appraisal). For third-party originated transactions, the appraisal must be less than 30
        days from the effective date at the time the application is received. Appraisals over 30
        days will not be accepted and a new appraisal will be required.
        Or
       The appraisal report is supplied by a customer, provided that Nationstar:
             o   Obtains written assurances from such other lender that such other lender
                 followed current Fannie Mae (AIR) guidelines with the loan being originated.
                 and
             o   Determines that such appraisal conforms to its requirements for appraisals and is
                 otherwise acceptable.

Required Approvals for Appraisal Transfers
For all transferred appraisals, the loan must have a minimum FICO score of 660.

EVP-Wholesale approval is required for appraisal transfers that are more than 30 days old.

Exceptions require both VP-Underwriting and EVP-Wholesale approval.

The Nationstar Appraisal Review staff may:

       Order appraisals.
       Conduct appraisal reviews or other quality control, both pre- and post-funding.
       Develop, deploy, or use internal AVMs.
       Prepare appraisals in connection with transactions other than loan origination
        transactions, such as loan workouts for Loss Mitigation.

Operations Staff
Nationstar’s Operations processors will generally be responsible for:

       Selecting, retaining, and recommending or influencing the selection of appraisers for a
        particular assignment or inclusion on a list or panel of appraisers to perform appraisals,
        or a list of appraisers forbidden from performing such work.
       Any communications with an appraiser or appraisal management company including the
        ordering or managing of an appraisal assignment.

Any appraisal or appraisal management issue raised by operations processors will be directed to
the EVP Operations who will maintain the confidentiality of, and not disclose, such issue to the
EVP Production and, if necessary, the EVP Operations will raise such issue directly to the Chief
Credit Officer (CCO) (the Appraisal Wall). Any such appraisal issues that arise to the EVP
Operations level will be documented by the EVP of Operations in an Appraisal Information File
which will be subject to audit. The foregoing Appraisal Wall will ensure that the collateral
evaluation process is not influenced or interfered by Nationstar’s loan production staff. Refer to
the Appraisal Management Organization Chart, below, for an illustration of the Appraisal Wall.


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                                       Nationstar Internal
In connection with loan origination activities, Nationstar may order appraisals through a third party
intermediary which will, in turn, order the appraisals through a VMC. The VMC will ultimately
select the appraiser. This structure provides Nationstar with two layers of independence in
regards to selection of appraisers and the collateral evaluation process.

In connection with loan origination activities, Nationstar may select, retain, and compensate an
appraiser (or remove an appraiser) other than through the third party intermediary or through a
VMC, provided that such appraiser is selected (or removed) by the EVP Operations in
consultation with the CCO, and the selection (or removal) is documented in the Appraisal
Information File. The Appraisal Wall in this structure ensures the collateral evaluation process will
not be influenced or interfered by loan production.

Loan Closing Requirement
The Borrower is required to receive a copy of their appraisal no less than three days prior to
closing. The loan closing date should be scheduled no sooner than seven days from the date of
the appraisal unless a signed waiver of the three-day requirement is received from the
borrower(s).

6.3     Appraisal Format Requirement
Required Forms
All appraisals must be completed on the most recent revision of the appropriate Fannie
Mae/Freddie Mac form with all appropriate addenda:

       Form 1004 (rev March 2005) for detached, single family unit
       Form 1004MC is required. (Nationstar Mortgage Announcement 08-30) effective April 1
       Form 1004D (March 2005) Appraisal Update and/or Completion form
       Form 1073 (rev March 2005) for Condominium
       Form 1075 (rev March 2005) for Condominium drive by appraisals
       Form 1025 (rev March 2005) for two- to four-family units
       Form 2055 (rev March 2005) or 704 for drive by appraisals (when product parameters
        allow)
       Form 2075 Desktop Underwriter Property Inspection Report (DU only)

Required Photos
Original 35mm or similar quality laser/digital color photos showing:

       Front, rear, and street scene of subject.
       Front of all comparable sales.
       Outbuildings, pools, and special features.
       Interior photos, including kitchen. Any homes in process of repair, recently rehabbed, or
        deferred maintenance require photos of such deferred or repair.




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Required Exhibits

       Detailed location map showing location of subject and all comparable sales.
       Building sketch showing exterior dimensions. Floor plan sketch is required for unique or
        functionally obsolete properties.
       Report pages with original or protected laser/digital signature(s) of appraiser(s).
       Form 439 (Statement of Limiting Conditions).
       Supplemental Addendum.


6.4     FMV Approach Requirements
The appraiser must consider the three traditional approaches in estimating the value of the
property, i.e., cost, sales comparison, and income. If the subject property is a multi-unit rental
property, the appraiser must complete the income approach. The appraiser must make both an
exterior and interior inspection of the property. All rooms of the subject must be inspected.

6.5     Required Signatures

 License Type                  Sign-off

 Certified                             Can sign alone on left side.
                                       Can sign off on right side for other licensed, registered, or
                                        trainee with inspection of subject and drive by inspection
                                        of comps.

 Registered, Apprentice, or            Can only sign on left side.
 Trainee status
                                       Must have a sign-off on right side by a Licensed or
                                        Certified Appraiser.
                                       Supervisory inspections required.

 Unlicensed individuals                Should not sign report.
 (Not acceptable on any
 federally-related                     Must be inspected and signed off by a Certified or
 transaction.)                          Licensed Appraiser.


6.6     Appraisal Reporting Requirements
Site Value
When the estimated site value exceeds 30% of the estimated market value of the subject,
comment by the appraiser is required on the impact to marketability and whether it is common to
the area.




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Age of Sales
Comparable sales should be dated within six months of the date of the appraisal. If no recent
comparable sales are available, older sales (up to one year) must be carefully explained. Sale
number four and greater may be over one year when used to support major areas of concern.

Distance
All comparable sales should be within one mile or 10 city blocks of the subject property. Urban
properties should have some sales located on the same street or within three city blocks. Sales
should not be located across major natural or man-made boundaries, such as rivers, lakes,
interstate highways, and county or state lines, without extensive explanation and support by the
appraiser. At least one sale should always be in the same subdivision, condo project, or HOA. If it
is necessary to go further than five miles for any comparable sale, the property should be
classified as rural and appraisal review required.

Property Type
The appraiser should make an attempt to provide comparable sales that are the same age,
design, appeal, and quality as the subject property. If the subject is a manufactured home, all
comparable sales in the sales comparison approach must be manufactured homes.

Condominiums also require all condominium comparables.

If the subject property is new construction located in a tract development, at least one
comparable sale should be a resale, or located outside the specific housing tract or development
in which the subject property is located, to support marketability.

6.7     Property Requirements
Obsolescence and Repairs
The appraiser must comment on all forms of physical, functional, and economic obsolescence,
and specify the cause of each. If repairs are needed, the appraiser must list and estimate the cost
of the repairs. Repairs exceeding 10% of the property value are excessive and require an
Underwriting Manager sign-off if repairs are not completed prior to final approval.

All properties must be appraised as is.

Appraisal reports Subject to completion per plans and specs are only acceptable for review if
the property is greater than 90% completed as of the date of the report, and then conditioned
upon the receipt of an Appraisal Update and Completion Report 1004D, with front and rear
photos, prior to closing. The Appraisal department must sign off on the 1004D if a collateral
review was performed. Otherwise an Underwriting Manager sign-off is required.

Subject to repairs also requires the appraiser to state an as is value of the property along with
an itemization of the repairs and a cost estimate. Appraisal Review’s sign-off will always be on
the as is value. A loan cannot be approved with a Subject to value. A 1004D, with pictures of the
required repairs verifying completion, and an as is value are required prior to approval and
closing. No escrows are allowed.

Properties determined to be unique in design/functionally, or economically obsolete or physically
unacceptable as collateral will be noted on the review form and elevated to an Underwriting
Manager. These types of properties are not eligible for financing.

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Fair Property Condition
Properties rated in Fair condition, or Average Minus are not eligible for financing. The Appraiser
must comment on the impact to the subject’s marketability and cost to cure of the condition.
Properties rated Fair must be repaired, and the appraiser must perform a re-inspection, with
photos, upgrading the condition of the property.

Square Footage
Subject properties with living areas of less than 800 square feet are generally not acceptable as
collateral. However, exceptions may be made by an Underwriting Manager provided that the
comparables are of the approximate same size as the subject, and are common to the area.

Acreage
The property site should be of a size, shape, and topography that is generally conforming and
acceptable in the market area. The appraisal must include the actual size of the site and not a
hypothetical portion of the site.

For example, the appraiser may not appraise only five acres of an un-subdivided 40-acre parcel.
The appraised value must reflect the entire 40-acre parcel.

Multiple Lots/Parcels
Each appraisal report should represent the value of only one parcel of land and improvements
thereon. On occasion, reports are received which include more than one lot or Assessor’s Parcel
Number (APN). In the case of multiple lots with separate APNs, the determination of acceptability
is whether the extra lot(s) are vacant, attached, and valued as excess land, and not as separate
buildable parcels. If the extra parcel(s) is/are multiple APNs, the appraiser should combine his/her
areas into one site size and adjust them to the sales. The decision to combine values will be at an
Underwriting Manager’s option. It may be necessary to obtain a survey showing location of
improvements and rights to ingress and egress.

Structural
Any recommendation by the appraiser regarding structural issues or settlement must be
addressed in a licensed engineer’s report. The report must reflect that no corrective action is
required and the structure is sound. If repairs are required, repairs must be completed prior to
closing with a paid receipt from the contractor and a 1004D, with photos, from the appraiser. No
escrows are allowed.

Pest Inspections
A notation by the appraiser referencing pest infestation will require an inspection by a licensed
pest control specialist. All recommended treatment must be performed prior to closing.

Verification will be a completion certificate and paid receipt from the pest company performing the
work.




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Outbuildings
The contributory value of any outbuilding barns, arenas, workshops, stables, and other special
purpose buildings and improvements will be deducted from the market value if photos of any
outbuilding given value are not obtained. A new value will be assigned in the outside tolerance
sign-off box. It will be the decision of an Underwriting Manager to make any exceptions to include
outbuilding values. In no case will value be given to personal property, such as above-ground
pools, portable buildings, or satellite dishes. Mother-in-law suites and site built guesthouses,
which have finished living areas, may be assigned a reasonable and supportable contributory
value.

Required Statements and Addendum
If any guidelines are exceeded, an addendum explaining the impact on marketability and whether
it is common and customary for the area is required. All properties classified as Legal-Non-
conforming use must include a statement from the appraiser as to whether the property can be
rebuilt in its existing design, use, and utility, and any impact on marketability.

Significant increases in value, such as market conditions, home improvements, or additions, over
the last 24 months must be addressed by the appraiser.

6.8     Pre-Funding Review Requirements
The following appraisals require a pre-funding Collateral Review by the Nationstar Mortgage
Appraisal department.

Required Mandatory Collateral Review

       Loan > 417,000
       Level 5 Appraiser
       Non-VMC appraisal
       Value increase (w/sale) in last 12 months

In addition to the above mandatory review list, any report considered out of tolerance or poor
quality will require a full internal review.

Automated Valuation Models (AVM)
AVMs from approved vendors may be used to confirm values. In certain circumstances, a
confirmation of value outside tolerance levels may require a pre-funding appraisal review.




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Approved AVM Vendor(s)

        Vendor                   RealQuest (First American) – Value Point 4

        Vendor address           Realquest.com

        Value field              Estimated Value

        Ineligible for AVM       Non-disclosure states which include:
                                 AK, ID, IN, KS, LA, MS, MO, MT, NM, ND,TX, UT, WY



6.9       Second Appraisal Reports
Acceptability of Subsequent Appraisals
A Broker must not order, obtain, use or pay for a second or subsequent appraisal in connection
with a mortgage financing transaction unless:

         There is a reasonable basis to believe that the initial appraisal was flawed or tainted and
          such basis is clearly and appropriately noted in the mortgage file.
          or
         Such appraisal is done pursuant to written, pre-established bona fide pre- or post-funding
          appraisal review or quality control processes or underwriting guidelines, and so long as
          the seller adheres to a policy of selecting the most reliable appraisal, rather than the
          appraisal that states the highest value.
          or
         A second appraisal is required by law.

Nationstar policy is to adhere to AIR, consistent with Nationstar policy on second appraisals, as
follows.

Two appraisal reports are required on:

         All loans where the first reviewed report is from a Level 5* appraiser.
         All loans where the value is not supported.


Field Reviews and Drive by Appraisals
Field reviews and drive by appraisals required by an audit finding must be ordered through an
approved Nationstar Appraisal Management Company.




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6.10 Nationstar Mortgage Appraiser Approval Process
Level 5 Appraisers
Appraisers, who in the opinion of Nationstar Mortgage management represent an unacceptable
risk, may be placed at Level 5.

In accordance with AIR, Nationstar’s Quality Control and Legal departments must approve any
removal of an appraiser from a list of qualified appraisers (which includes an appraiser being
downgraded from Level 4 to Level 5). Any removal must be made with prompt written notice to
the appraiser which must include evidence of the appraiser’s inappropriate conduct according to
AIR.

All additions to Level 5 are permanent. Once an appraiser is Level 5, the name will not be
removed. If the Level 5 appraiser is a principal or owner of any appraisal company, every
appraiser in that company is also considered to be Level 5.


6.11 Nationstar Appraisal Quality Control Testing
The Nationstar Quality Control department will comply with existing Fannie Mae appraisal review
guidelines (Selling Guide, Part I, Section 301.01), as well as Freddie Mac guidelines (Guide
Chapter 48).

Specifically, Nationstar will randomly select 10% (or other bona fide statistically significant
percentage) of the appraisals or valuations, including the results of automated valuation models,
broker’s price opinions, or “desktop” evaluations. Nationstar will provide to Fannie Mae or Freddie
Mac a report of any adverse, negative, or irregular findings of such quality control testing, and any
findings indicating non-compliance with any provision of this Code of Conduct, with respect to
loans sold to Nationstar Mortgage and Freddie Mac respectively.

6.12 Referrals of Appraisal Misconduct Reports
Subsequent to a documented review of the facts by Nationstar Quality Control, if there exists a
reasonable basis to believe an appraiser or appraisal Management Company is violating
applicable laws, or is otherwise engaging in unethical conduct, Nationstar QC shall promptly refer
the matter to the applicable State appraiser certifying and licensing agency or other relevant
regulatory bodies.

6.13 Condominium Policy
Overview
All condominium projects must meet FNMA guidelines in order to be eligible for purchase.
Nationstar Mortgage must conduct a review of the project in order to meet underwriting delivery
guidelines.

DU Refi Plus, Homepath and Homepath Renovation loans are exempt from this policy.
Nationstar’s Condo questionnaire and HOA budget is not required. NSM must ensure the
property is not a condotel, motel or hotel and comply with all insurance requirements for the
individual unit, as required by law.




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Refer to the Condo, PUD Eligibility page on eFannieMae.com for the complete list of
condominium projects that meet Fannie Mae Project Standards for final project acceptance, as
outlined in the Fannie Mae Selling Guide.




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Acceptable Review Types
There are four review types which are acceptable

   1. Limited Review: Conducted on established projects or new detached projects.
   2. Condo Project Manager (CPM): An expedited, online approval system through FNMA,
      which can be conducted on established projects or new projects (except Florida).
      Nationstar requires CPM approvals for investment condos or condos consisting of two to
      four units.
   3. Full Review: A more comprehensive lender review, conducted on established condos in
      Florida only, for LTV’s > 75%. Refer to the Florida Condos section.
   4. Project Eligibility Review Service (PERS): Required on all new or newly-converted
      attached condo projects in Florida. Refer to the Florida Condos section. Also required on
      new condo projects that contain one or more units with less than 400 square feet of
      space and, newly converted non-gut rehabilitation condo projects.


Definitions

Term                      Definition

New Project               A project where at least one of the following is true:


                                 Fewer than 90% of the total units have been conveyed to unit
                                  purchasers other than the developer.
                                 The project is not fully completed, or is subject to additional
                                  phasing.
                                 Control of the homeowners association (HOA) has not been
                                  turned over to the unit owners.

Established Project       A project where all of the following are true:


                                 The project is fully complete and not subject to additional
                                  phasing.
                                 At least 90% of the total units are conveyed to unit
                                  purchasers other than the developer.
                                 The unit owners control the HOA.




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Condo Project Eligibility Requirements

Established Project

       At least 90% of the total units in the project have been sold to unit purchasers.
       Project is 100% complete, including all units and common areas/elements.
       Project is not subject to additional phasing or annexation.
       Control of the HOA has been turned over to the unit owners.

New Project

       Fewer than 90% of the total units in the project have been sold to unit purchasers.
       Project is not fully completed.
       Project is newly-converted.
        Or
       Project is subject to additional phasing or annexation.


Two- to Four-Unit Project

       No single entity owns more than one unit within the project.
       All units, common areas/elements, and facilities within the project, including those owned
        by any master association, are 100% complete.
       All but one unit is owner-occupied.

All units in the project are owned in fee simple or leasehold, and the unit owners must be the sole
owners, and have rights to the use of the project’s facilities and common areas/elements.

Ineligible Project Types
The following types of projects are ineligible for FNMA purchase:
       Projects that are managed and operated as a hotel or motel.
       Projects that include registration services, or offer unit rentals on a daily basis.
       Hotel or motel conversions (or conversions of other similar transient properties)
       Any project that includes the word “hotel” or “motel” in its name.
       Any project that restricts the owner’s ability to occupy the unit.
       Projects with mandatory pooling agreements which require unit owners to rent their units,
        or gives a management firm control over the occupancy of the units.
       Projects with non-incidental business operations which are owned or operated by the
        homeowner’s association, such as a restaurant, spa, or health club.
       Projects characterized as investment opportunities or listed as investment securities (with
        documents filed with the Securities and Exchange Commission).
       Timeshares.


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   Houseboat projects.
   Common interest apartments or community apartment projects, where several owners as
    tenants-in-common or an HOA have an undivided interest in a residential apartment
    building and land, and have exclusive rights of occupancy to specific apartments in the
    building.
   Projects with 20% or more total space used for non-residential purposes.
   New projects where the builder/seller is offering financing structures or interested party
    contributions beyond the max allowed by FNMA.
   Projects where a single entity owns more than 10% of the total units in the project.
   Multi-dwelling unit condos or co-ops – projects that permit ownership of more than one
    unit, but are secured by only one deed, and financed by a single mortgage.
   Projects with a legal but non-conforming use of the land, if they cannot be rebuilt to the
    same usage and/or density if 100% destroyed.
   Projects that involve the leasing of the land and the improvements to a co-op corporation,
    even if that corporations owns part of the building.
   Projects with any environmental hazards noted.
   Projects for which the homeowners’ association, or co-op corporation is named as a party
    to pending litigation, or for which the project sponsor or developer is named as a party to
    pending litigation that relates to the safety, structural soundness, habitability, or functional
    use of the project.
        o   Projects for which the lender determines that pending litigation involves minor
            matters are not considered ineligible projects, provided the lender concludes that
            the pending litigation has no impact on the safety, structural soundness,
            habitability, or functional use of the project. The following are defined as minor
            matters:
                    Non-monetary litigation involving neighbor disputes or rights of quiet
                     enjoyment.
                    Litigation for which the claimed amount is known, the insurance carrier
                     has agreed to provide the defense, and the amount is covered by the
                     association or co-op corporations’ insurance.
                    The homeowners’ association or co-op corporation is named as the
                     plaintiff in a foreclosure action, or as a plaintiff in an action for past due
                     homeowners’ association dues.
                    If the lender is aware of pending litigation and is unable to determine
                     whether the litigation may be deemed a minor matter, the lender may
                     contact Fannie Mae’s Project Standards team to determine whether
                     Fannie Mae will accept delivery of mortgages secured by units in the
                     project.




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Condo Project Type Codes
When approving a condominium project, it is imperative that the project is identified correctly for
delivery. In TMO, when the property type is indicated as a condo on screen UO0S008 (Property
Information), the condo project approval options must also be completed at the bottom of the
screen. The approval option corresponds to the delivery code assigned by FNMA or FHLMC (and
is reflected on the 1008’s Project Classification section). These classifications are:

Fannie Codes:

       Type P: Limited Review – New detached projects
       Type Q: Limited Review – Established projects
       Type R: Full Review or CPM Expedited Review – New projects
       Type S: Full Review or CPM Expedited Review – Established projects
       Type T: Fannie Mae Review/PERS review/Special Approval Designation
       Type U: FHA-approved projects (applicable to FHA loans only)

Freddie Codes:

       New Project: CPM Expedited Review or Full Review
       Established Project: CPM Expedited Review or Full Review
       2-4 Unit Project: CPM Expedited Review or Full Review
       Streamlined Review: Limited Review, attached project
       Detached Project: Limited Review, detached project
       Reciprocal Review: Approved through FNMA as a Type R,S, or T condo or through CPM


Project Insurance Requirements

Hazard Insurance

Nationstar must review the entire condo project insurance policy to ensure the owners’
association maintains a master or blanket type of insurance policy, with premiums being paid as a
common expense. The policy must cover all of the general and limited common elements that are
normally included in coverage. These include fixtures, building service equipment, and common
personal property and supplies belonging to the homeowners’ association. The policy also must
cover fixtures, equipment, and replacement of improvements, and betterment coverage to cover
any improvements that the borrower may have made. If the master or blanket policy does not
cover the unit's interior, then the borrower must obtain a “walls-in” policy, commonly known as an
HO-6 policy.

The HO-6 insurance policy must provide coverage in an amount that is no less than 20% of the
condo unit’s appraised value. The standard requirement for a 5% deductible applies.




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Flood Insurance

For projects located in a Special Flood Hazard Area (SFHA), the following insurance
requirements apply:

       The policy must cover common element buildings and any other common property.
       When the project consists of high-rise or other vertical buildings, the homeowners’
        association must obtain a Residential Condominium Building Association Policy for each
        building that is located in an SFHA. The policy must cover all of the common elements
        and property, as well as each of the individual units in the building.
       A separate policy is required for each dwelling unit that secures a mortgage that is
        delivered when an HOA refuses to obtain a Residential Condominium Building
        Association Policy, or when the Residential Condominium Building Association Policy
        does not comply with Fannie Mae’s insurance requirements.
       The coverage required for the individual unit should be based on the coverage
        requirement for first mortgages secured by one- to four-unit properties, as specified
        above. Owners of co-op units are not generally required to obtain individual flood
        insurance policies.

Liability Insurance

       Nationstar must verify liability insurance coverage as part of its review of a project.
        However, it is not necessary to verify liability insurance coverage for Type E planned unit
        development (PUD) projects, or PUD and condo projects processed under the Limited
        Project Review procedures.
       The homeowners’ association must maintain a commercial general liability insurance
        policy for the entire project, including all common areas and elements, public ways, and
        any other areas that are under its supervision. The insurance must also cover
        commercial spaces that are owned by the homeowners’ association, even if those
        spaces are leased to others. The commercial general liability insurance policy must
        provide coverage for bodily injury and property damage that result from the operation,
        maintenance, or use of the project’s common areas and elements.
       The amount of coverage must be at least $1 million for bodily injury and property damage
        for any single occurrence. For co-op projects that consist of elevator buildings, the
        minimum coverage is $3 million. Higher amounts of coverage may be required if similar
        amounts are usually required by mortgage investors in other projects in the area.
       If the policy does not include “severability of interest” in its terms, Nationstar requires a
        specific endorsement to preclude the insurer’s denial of a unit owner’s claim because of
        negligent acts of the homeowners’ association (or co-op corporation), or of other unit
        owners.
       The policy should provide for at least 10 days written notice to the HOA (or Co-op
        Corporation) before the insurer can cancel or substantially modify it. For condo and co-op
        projects, similar notice also must be given to each holder of a first mortgage or share loan
        on an individual unit in the project.




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Fidelity Insurance

Projects Requiring Fidelity Insurance

Fidelity insurance is required for condo projects consisting of more than 20 units. This
requirement applies to all condo review processes. In states that have statutory fidelity insurance
requirements, Nationstar will accept those requirements in place of its own. Nationstar must verify
coverage as part of its review of the project.

Who Should Be Covered

The HOA must have blanket fidelity insurance coverage for anyone who either handles or is
responsible for funds that it holds or administers, whether or not that individual receives
compensation for services. The insurance policy should name the homeowners’ association as
the insured, and the premiums should be paid as a common expense by the association. A
management agent that handles funds for the HOA should be covered by its own fidelity
insurance policy, which must provide the same coverage required of the homeowners’
association.

Amount of Coverage

The policy must cover the maximum funds that are in the custody of the HOA or its management
agent at any time while the policy is in force. A lesser amount of coverage is acceptable if the
project’s legal documents require the HOA and any management company to adhere to one or
more of the following financial controls.

Note: Even with the following financial controls, the fidelity insurance coverage must equal at
      least the sum of three months of assessments on all units in the project.

       Separate bank accounts are maintained for the working account and the reserve account,
        each with appropriate access controls, and the bank in which funds are deposited sends
        copies of the monthly bank statements directly to the HOA.
       The management company maintains separate records and bank accounts for each HOA
        that uses its services, and the management company does not have the authority to draw
        checks on, or transfer funds from, the HOA’s reserve account.
       Two members of the Board of Directors must sign any checks written on the reserve
        account.

Cancellation/Modification Requirements

The policy for a condo project must include a provision that calls for ten days written notice to the
HOA (or insurance trustee) before the policy can be canceled or substantially modified for any
reason.

Title Insurance

The title insurance policy for a condo or PUD unit mortgage must describe all components of the
unit estate.

For condo unit mortgages, an ALTA 4-06 or 4.1-06 endorsement or its equivalent is required. For
PUD unit mortgages, an ALTA 5-06 or 5.1-06 endorsement or its equivalent is required. These
endorsements must be attached to each policy or incorporated in the text of the policy.



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If the unit owners own the common areas of the project as tenants in common, the policy for each
unit mortgage must reflect that ownership.

If the HOA owns the common elements, areas, or facilities of the project separately (or holds
them in a leasehold estate), the title insurance on those areas must insure that ownership. This
title policy must show that title to the common elements, areas, or facilities is free and clear of any
objectionable liens and encumbrances, including any statutory or mechanic’s liens for labor or
materials related to improvements on the common areas that began before the title policy was
issued.

The title policy must protect Nationstar by insuring all of the following:

       The mortgage is superior to any lien for unpaid common expense assessments. (In
        jurisdictions that give these assessments a limited priority over a first or second mortgage
        lien, the policy must provide assurance that those assessments have been paid through
        the effective date of the policy.)
       Insured against any impairment or loss of title of Fannie Mae’s first or second lien caused
        by any past, present, or future violations of any covenants, conditions, or restrictions of
        the master deed for the project. (It must specifically insure against any loss that results
        from a violation that existed as of the date of the policy.)
       The unit does not encroach on another unit or on any of the common elements, areas, or
        facilities. (The policy also must insure that there is no encroachment on the unit by
        another unit or by any of the common elements, areas, or facilities.)
       The mortgage loan is secured by a unit in a condo project that has been created in
        compliance with the applicable enabling statutes.
       Real estate taxes are assessable and lienable only against the individual condo unit and
        its undivided interest in the common elements, rather than against the project as a whole.
       The owner of a PUD unit is a member of the HOA and the membership is transferable if
        the unit is sold.

Limited Review Process
The FNMA Limited Review process allows Nationstar to deliver individual loans secured by units
in a project, based on loan-level characteristics and DU recommendations. A Limited Review is
sometimes called a spot approval, as it is intended to be used on a spot loan (loan-by-loan)
basis. Limited reviews are allowed at the branch/underwriter level.




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Eligibility Requirements

Any project reviewed using the Limited Review process must meet all of the following criteria:

       The project is not an ineligible project.
       The project is not comprised of manufactured homes.
       The project must be an established project.
       No more than 20% of the total square footage of the project can be used for commercial
        purposes.
       All units in the project must be owned in fee simple or leasehold.
       No more than 15% of the total units in the project may be 30 days past due on their HOA
        dues.
       Nationstar cannot be a “preferred” lender of the HOA or the developer, targeting the
        project with specific marketing efforts.

Additional Requirements for Detached Condo Units

       The mortgage is secured by a single detached unit in the condo project.
       The mortgage is not secured by a manufactured home.
       The appraiser has commented on any effect of buyer resistance of the condo form of
        ownership on the market value of the subject, and has reflected this in the appraisal
        report.
       If the project is new, the appraiser must use at least one detached condominium comp,
        either within the project or from a competing project, if the condo unit is offered by a
        builder other than the one that built the subject unit.
       All required title, hazard, and flood insurance requirements for condominiums are met.

Documentation Requirements

The following checklist must be completed by the Nationstar underwriter in order to meet all
eligibility requirements for the Limited Review process.

       Nationstar’s Limited Review Checklist

The checklist breaks down the eligibility requirements in a simple yes/no format. Underwriters
must review the checklist carefully, and are responsible to ensure that the subject unit meets
FNMA’s eligibility criteria above.

Maximum Loan to Value (LTV)/ Combined LTV (CLTV) for Limited Review

All Nationstar loans must be submitted through Desktop Underwriter (DU).

       Primary residence: 90% (75% in Florida)
       Second home: 75% (70% in Florida)
       Investment property: Not allowed




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Condo Project Manager (CPM) Expedited Review
Condo Project Manager (CPM) is a web-based tool provided by FNMA to assist lenders in
determining if a project will meet FNMA’s eligibility requirements. Nationstar can process CPM
submissions either at the branch or corporate underwriting level, and is responsible for
documenting the file with the CPM decision. With CPM submissions, Nationstar represents and
warrants that all data provided to CPM is correct and that the project meets all eligibility
requirements.

CPM Certifications

Upon entering the project into Condo Project Manager, including answering all eligibility
questions, CPM immediately renders a certification decision on the project. CPM project
certifications are valid for six months on all new projects, and one year on established projects.
CPM can update any certification provided the project is resubmitted with updated project data.
These certifications are similar to DU decisions and include:

       Fannie Mae Acceptance Completed: FNMA has completed a full review of the project
        and the project is eligible.
       Unavailable: The project is ineligible for any expedited review.
       No Fannie Mae Status: There is no project phase level status available.
       Guide ineligible: Nationstar has answered yes to one of the questions that does not meet
        required reps and warrants. The loan is ineligible for delivery to FNMA.
       Certified by Lender: Nationstar has successfully answered all the questions in the
        Expedited Review process and the system has qualified the project and certified it by
        providing an expiration date.
       Lender Certification Expired: The project information must be updated in CPM in order to
        recertify the project with a new expiration date.
       Call Project Standards: Projects must be recertified within 24 months of the original
        certification. This message will appear when trying to certify a project that is greater than
        this 24 month window. Occurs in areas of declining market value or declining values
        within the project.
       Incomplete Certification: A review was started on the subject project but Nationstar did
        not complete the process by submitting the project for review.
       Not certified by Lender: Nationstar has entered the project into the system but not started
        the certification process.




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Eligibility Requirements

Similar to DU, all eligibility requirements are built into CPM. Requirements include:

       Condo projects consisting of manufactured homes are ineligible.
       CPM can be used to determine project acceptance of both new and established projects.
       Projects < five units have specific eligibility requirements under the Expedited Review
        process.
       Presale and investor concentration, in some cases, is more flexible than the Full Review
        process.
       Must review the actual HOA budget for established projects, or the projected budget for
        new projects.
       Budget must be adequate, have 10% in reserves for capital expenditures and deferred
        maintenance, and provide funding for insurance deductible amounts.
       For new projects, Nationstar reps and warrants all legal document requirements are met.
       The project must be covered by the kinds of insurance (hazard, flood, liability, and
        fidelity) that FNMA requires.
       No more than 15% of the total units in the project are 30 or more days past due on their
        HOA dues.
       No single entity (the same individual, investor group, partnership, or corporation) may
        own more than 10% of the total units in the project. In the case of a project that has fewer
        than 10 units, no single entity may own more than one unit.
       Nonresidential space does not exceed 20% of the project’s total square footage.

Documentation Requirements

The following documents must be reviewed by a Nationstar underwriting manager in order to
meet all eligibility requirements for the CPM process:

       Condo Project Manager HOA Questionnaire
       A current copy of the HOA budget
       Verification that the HOA dues are current for the subject unit

The condo questionnaire must be completed by an authorized representative of the HOA. The
questionnaire breaks down the eligibility requirements in a simple yes/no format. Underwriting
managers must review these questionnaires carefully, and are responsible to ensure that the
subject unit meets FNMA’s eligibility criteria above. The budget must also be reviewed to verify all
of the following:

       It is adequate (includes allocations for line items pertinent to the type of condo).
       It provides for the funding of replacement reserves for capital expenditures and deferred
        maintenance with at least 10% of the budget.
       It provides adequate funding for insurance deductible amounts.




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Condominiums in Florida
Due to the saturation of the condominium market in the state of Florida, both FNMA and FHLMC
have required lenders to take extra steps to insure the collateral is both sound and saleable.
Nationstar uses the Full Review, Limited Review, CPM Expedited Review, Special Approval
Designation , and the Project Eligibility Review Service (PERS) approval processes in Florida.

FNMA Special Approval Designation for Established Condo
Projects
Fannie Mae (FNMA) has implemented a Special Approval designation for newly originated
purchase transactions and refinances of existing FNMA-owned or -securitized mortgage loans
under their standard mortgage eligibility requirements. FNMA has taken this measure to maintain
liquidity and stability to the Florida condominium market.

The Special Approval designation is an additional project delivery requirement for condominium
projects that may have initially met FNMA’s eligibility requirement, but may no longer be eligible.
The reasons for projects losing their original eligibility status include the following:

       Significantly weakened homeowner’s association (HOA) budgets
       Unpaid common expenses including:
            o    pest control
            o    property insurance
            o    water
            o    pool service
            o    garbage collection
       Increased vacancies and REOs
       Length of time to effect the foreclosure process

Effective Dates for Special Approval Designations
FNMA will conduct all the reviews of the condo projects and will assign the Special Approval
designations. Special Approval designations will be effective for periods between nine and
eighteen months. NSM originators must confirm that a property is on the condo project Special
Approval designations list, on the date that the loan application is taken, in order for it to be
eligible for delivery to FNMA. For the list of projects with the Special Approval designation refer to
Special Approval Designation for Established Florida Condos List on eFannieMae.com.

Note: Special Approval designations may be discontinued by FNMA at any time. The list must be
      checked frequently for all Florida property loans originated by NSM. However, projects on
      the list will remain through the expiration date originally assigned by FNMA.


Documentation Requirements

Lenders are relieved of standard condominium project eligibility representations and warranties
for condominium projects identified under the Special Approval designation. Nationstar’s Condo
questionnaire and HOA budget are not required. NSM must comply with any and all insurance
requirements for an individual unit, as required by law.


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Full Review Process (Established Condos in Florida)

Nationstar uses the Full Review process only on established condos where the loan is > 75%
LTV. Full Reviews must be conducted at the Corporate underwriting level.

Eligibility Requirements

Any project reviewed using the Full Review process must meet all of the following criteria:

       The project is not an ineligible project.
       The project is not comprised of manufactured homes.
       The project must be an established project (as defined previously).
       No more than 20% of the total square footage of the project can be used for commercial
        purposes.
       All units in the project must be owned in fee simple or leasehold.
       No more than 15% of the total units in the project may be 30 days past due on their HOA
        dues.
       Nationstar cannot be a “preferred” lender of the HOA or the developer, targeting the
        project with specific marketing efforts.
       For condo conversions, all rehabilitation work must have been completed in a
        professional manner.
            o   If the conversion does not involve gut rehabilitation (complete renovation which
                takes the property down to the shell of the structure), an engineer’s report is
                required to verify all necessary repairs are completed, and replacement reserves
                are identified for all capital improvements by review of the HOA budget.
            o   For conversions that were legally created within the last three years, the
                architect’s or engineer’s report that was originally used for the conversion must
                be obtained. The report must comment favorably on the structural integrity of the
                project and the condition and remaining useful life of all major project
                components, including all mechanical, electrical and plumbing systems,
                elevators, boilers, and roof.
       All units, common elements, and facilities within the project must be 100% complete.
       The project cannot be subject to additional phasing or annexation.
       At least 51% of the total units in the project must be conveyed to purchasers as principal
        residences or second homes (non-owner occupied loans only).
       The HOA actual budget must be reviewed to determine that the budget:
            o   Is adequate (includes allocations for line items pertinent to the type of condo).
            o   Provides for the funding of replacement reserves for capital expenditures and
                deferred maintenance equal to at least 10% of the budget.
                And
            o   Provides adequate funding for insurance deductible amounts.
       All facilities related to the project must be owned by the unit owners or the HOA.


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      The developer may not retain any ownership interest in any of the facilities related to the
       project.
      The amenities and facilities (including parking and recreational facilities) cannot be
       subject to a lease between the unit owners, or the HOA, and another party.
      Separate metering of individual units is recommended but not generally required. For
       projects in which the units are not separately metered, Nationstar must:
           o   Determine that having multiple units on a single meter is common and customary
               in the local market where the project is located.
               And
           o   Confirm that the project budget includes adequate funding for utility payments.
      Unit owners in the project must have the sole ownership interest in, and rights to the use
       of the project’s facilities, common elements, and limited common elements.
      At least 90% of the total units in the project must be sold.
      Control of the HOA must have been turned over to the home owners.
      No single entity (the same individual, investor group, partnership, or corporation) may
       own more than 10% of the total units in the project. In the case of a project that has fewer
       than 10 units, no single entity may own more than one unit.
      The project must meet all FNMA insurance requirements as noted in Section B of this
       policy statement.
      The project must be well-managed. If the project is professionally managed, the contract
       must be for a reasonable term, and the contract’s termination provision must not require
       a penalty payment or advance notice of more than 90 days.
      The project must be located on one contiguous parcel of land.
       Note: The project may be divided by a public street.
      The structures within the project must be within a reasonable distance from each other.
      Common elements and facilities, such as recreational facilities and parking, must be
       consistent with the nature of the project and competitive in the marketplace.


Additional Requirements for Condo Projects Consisting of Two to Four Units

      No single entity (the same individual, investor group, partnership or corporation) may own
       more than one unit within the project.
      All units, common elements/areas, and facilities within the project, including those owned
       by any master association, must be 100% complete.
      All but one unit in the project must be sold and owner-occupied.
      The unit owners must be the sole owners of, and have exclusive rights to the use of, the
       project’s facilities and common elements/areas.
      Nationstar must review the HOA projected budget to determine that:
           o   It is adequate (includes allocations for line items pertinent to the type of condo).
           o   It provides for the funding of replacement reserves for capital expenditures and
               deferred maintenance at least 10% of the budget.


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                And
            o   It provides adequate funding for insurance deductible amounts.

Documentation Requirements

The following documents must be reviewed by a Nationstar Underwriting VP in order to meet all
eligibility requirements for the Full Review process, which must be kept with the file Complete
FNMA form 1073 appraisal


       All applicable insurance policies including master insurance policy
       Completed HOA Condominium Questionnaire
       Complete project budget
       Recorded condominium declarations
       Condominium by-laws
       Articles of Incorporation (if applicable)

Owner Occupancy Ratio Requirements for Bank-Owned REO Units

When calculating owner-occupancy ratios, any bank-owned REO units that are for sale (and not
presently rented) may be counted as owner-occupied when calculating the 51% owner-
occupancy requirement for delivery of investment condos. The REO must be for sale as an
owner-occupied unit.

Project Eligibility Review Service (PERS) (For New Condos in Florida Only)

Presently, the PERS project approval option is mandatory for any new condo project or newly
converted condo project in Florida. Nationstar corporate underwriting must submit a complete
project package to FNMA, and FNMA will issue one of the following eligibility determinations once
their review is complete. Turnaround time to review a complete submission package may run 10
business days or longer.

Eligibility Determinations

       Conditional Project Approval: The project is acceptable once specified conditions are
        met. Typical conditions include presale and/or completion requirements. Conditional
        approvals are valid for six months.
       Final Project Approval: All project review conditions have been cleared, and the project is
        acceptable to FNMA. Final project approvals are valid for 12 months.
       Ineligible: The project is ineligible for FNMA.
       Suspension of the Application: Additional information and documentation is needed in
        order for FNMA to render a decision on the project.

Submission Package Documentation Requirements

The following completed forms (which can be found at www.efanniemae.com) must accompany
the full submission package.

Note: The forms listed below are available on the Single-Family Forms page of eFannieMae.com.

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       PERS Document Checklist (FNMA form 1030)
       Application for Project Approval (form 1026)
       Warranty of Project Presales (form 1029)
       Final Certification of Substantial Completion (form 1081)
       Statement of Insurance and Fidelity Bond Coverage (form 1071)
       Analysis of Annual Income and Expenses – Operating Budget (form 1073A)
       Project Development/Master Association Plan (form 1051)
       Warranty of Condominium Project Legal Documents (form 1054)
       Attorney Memorandum of Legal Document Review

In addition, the following additional supporting documentation must be included in the full
submission package:

       Sample contract of sale
       Sample unit appraisal
       Phase 1/Phase 2 Environmental Hazard Assessment
       Marketing materials with unit floor plans and pricing analysis
       Engineer’s survey/property condition assessment
       Plat map/site plan
       Master project insurance certificate (if issued)

Upon receipt of the application for project approval, FNMA will assign a CPM project ID number,
which must be used on all subsequent correspondence for proper identification.

Project Review Fees

Project review fees are assessed by FNMA regardless of the approval decision.

       Voluntary review: Base review fee of $1200 plus $30 per unit in the project (or legal
        phase) up to a maximum of $15000 for the project.
       Mandatory review (FL new condos, e.g.): Base review fee is waived, and only $30 per
        unit fee up to a maximum of $15000 for the project.
       Subsequent phase: The greater of $600 or $30 per new unit in additional legal phases of
        a previously approved new project.
       Extensions: The greater of $500 or $30 per unit for the legal phase or project.conditional
        and final extensions are granted as appropriate to a maximum of six months.


Maximum LTV/CLTV’s for Florida Condos

Refer to Agency matrices for LTV/CLTV maximums.



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Legal Document Review Requirements
The table below provides Fannie Mae's requirements for the review of the condo project's legal
documents.


Project Type                               Review of Condo Project's Legal Documents
                                           Required?

Established Condo Projects                 No. Lenders do not have to represent or warrant
                                           compliance with Fannie Mae condo project legal
                                           document requirements.

Two- to Four-Unit Projects                 No. Lenders do not have to represent or warrant
                                           compliance with Fannie Mae condo project legal
(New and Established)
                                           document requirements.

New Condo Projects                         CPM and Lender Full Review: Yes. The lender must
                                           represent and warrant that the condo project's legal
(excluding two- to four-unit projects)
                                           documents comply with Fannie Mae's requirements
                                           listed below. Attorney review of condo project legal
                                           documents is optional.

                                           PERS: Yes. The lender must represent and warrant
                                           that the condo project's legal documents comply with
                                           Fannie Mae's requirements listed below. A qualified
                                           attorney engaged by the lender must review the condo
                                           project legal documents and determine that the
                                           documents are in compliance with Fannie Mae's
                                           requirements listed below.
                                           This determination must be documented by the
                                           attorney in writing but need not rise to the level of a
                                           formal, written legal opinion. The attorney may be the
                                           same person who prepared the legal documents or an
                                           attorney employed by the lender, but he or she cannot
                                           be an employee, principal, or officer of the developer or
                                           sponsor of the project. The lender must complete the
                                           Warranty of Condominium Project Legal Documents
                                           (Form 1054) and attach the attorney review as part of
                                           the PERS submission process. The lender must retain
                                           all legal documents and make them available to Fannie
                                           Mae upon request.




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Condo Project Legal Document Requirement: Compliance with Laws
In addition to representing and warranting that the condo project has been created and exists in
full compliance with the state law requirements of the jurisdiction where the condo project is
located and all other applicable laws and regulations, Nationstar must also represent and warrant
the following with respect to the project's legal documents.

Limitations on Ability to Sell/Right of   Any right of first refusal in the condo project documents will
First Refusal                             not adversely impact the rights of a mortgagee or its
                                          assignee to:

                                                 Foreclose or take title to a condo unit pursuant to
                                                  the remedies in the mortgage.
                                                 Accept a deed or assignment in lieu of foreclosure
                                                  in the event of default by a mortgagor.
                                                 Sell or lease a unit acquired by the mortgagee or its
                                                  assignee.

Rights of Condo Mortgagees and            The project documents must give the mortgagee and
Guarantors                                guarantor of the mortgage on any unit in a condo project the
                                          right to timely written notice of:

                                                 Any condemnation or casualty loss that affects
                                                  either a material portion of the project or the unit
                                                  securing its mortgage.
                                                 Any 60-day delinquency in the payment of
                                                  assessments or charges owed by the owner of any
                                                  unit on which it holds the mortgage.
                                                 A lapse, cancellation, or material modification of any
                                                  insurance policy maintained by the HOA.
                                                 Any proposed action that requires the consent of a
                                                  specified percentage of mortgagees.

First Mortgagee’s Rights Confirmed        No provision of the condo project documents gives a condo
                                          unit owner or any other party priority over any rights of the
                                          first mortgagee of the condo unit pursuant to its mortgage in
                                          the case of payment to the unit owner of insurance
                                          proceeds or condemnation awards for losses to or a taking
                                          of condo units and/or common elements.

Unpaid Dues                               Any first mortgagee who obtains title to a condo unit
                                          pursuant to the remedies in the mortgage or through
                                          foreclosure will not be liable for more than six months of the
                                          unit’s unpaid regularly budgeted dues or charges accrued
                                          before acquisition of the title to the unit by the mortgagee. If
                                          the condo association’s lien priority includes costs of
                                          collecting unpaid dues, the lender will be liable for any fees
                                          or costs related to the collection of the unpaid dues.




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Amendments to Documents           Required provisions related to amendments to project
                                  documents are as follow:

                                        The project documents must provide that
                                         amendments of a material adverse nature to
                                         mortgagees be agreed to by mortgagees that
                                         represent at least 51% of the votes of unit estates
                                         that are subject to mortgages.
                                        The project documents must provide for any action
                                         to terminate the legal status of the project after
                                         substantial destruction or condemnation occurs or
                                         for other reasons to be agreed to by mortgagees
                                         that represent at least 51% of the votes of the unit
                                         estates that are subject to mortgages.
                                        The project documents may provide for implied
                                         approval to be assumed when a mortgagee fails to
                                         submit a response to any written proposal for an
                                         amendment within 60 days after it receives proper
                                         notice of the proposal, provided the notice was
                                         delivered by certified or registered mail, with a
                                         return receipt requested. Notwithstanding the
                                         foregoing, project documents that were recorded
                                         prior to August 23, 2007, may provide for implied
                                         approval to be assumed when a mortgagee fails to
                                         submit a response to any written proposal for an
                                         amendment within 30 days after it receives proper
                                         notice of the proposal, provided the notice was
                                         delivered by certified or registered mail, with a
                                         return receipt requested.




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                        SECTION 7: LOAN PURPOSE

7.0     Purchase Transactions
General Purchase Transaction Eligibility Requirements

General Requirements

The minimum borrower contribution requirements for the selected mortgage loan type must be
met.

Proceeds from the transaction must be used to:
       Finance the acquisition of the subject property.
       Finance the acquisition and rehabilitation of the subject property.
       Convert an interim construction loan or term note into permanent financing.
        Or
       Pay off the outstanding balance on the installment land contract or contract for deed.

Proceeds from the transaction may not be used to give the borrower cash back other than an
amount representing reimbursement for the borrower’s overpayment of fees and/or a legitimate
pro-rated real estate tax credit in locales where real estate taxes are paid in arrears.


Non-Arm's Length Transactions
Nationstar will not allow purchase mortgage loans if the borrower has a relationship or business
affiliation (any ownership or employment) with the builder, developer, or seller of the property.

7.1     Limited Cash-Out Refinance Transactions
Eligibility Requirements
Limited cash-out refinance transactions must meet the following requirements:

       The transaction is being used to pay off an existing first mortgage by obtaining a new first
        mortgage secured by the same property.
       A subordinate lien used to purchase the property may also be paid off and included in the
        new mortgage.
       Continuity of obligation must be demonstrated.
       The subject property must not be currently listed for sale. It must be taken off the market
        on or before the application date, and the borrowers must confirm their intent to occupy
        the subject property.




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Ineligible Transactions

       No continuity of obligation.
       No outstanding first lien on the subject property.
       The proceeds are used to pay off a subordinate lien that was not used to purchase the
        property.
       A short-term refinance mortgage loan that combines a first mortgage and a non-purchase
        money subordinate mortgage into a new first mortgage or any refinance of that loan
        within six months.

       The subject property is currently listed for sale.
       The existing mortgage is a “restructured mortgage”

Eligible Transactions

       Modifying the interest rate and/or term for existing mortgages.
       Paying off the unpaid principal balance of the existing first mortgage (including
        prepayment penalties).
       Financing the payment of closing costs, prepaid items, and points.
       Cash back does not exceed the lesser of 2% of the balance of the new refinance
        mortgage or $2000.
       Buying out a co-owner pursuant to an agreement.
       Paying off a subordinate mortgage lien (including prepayment penalties) used to
        purchase the subject property. Documentation must be provided to show that the entire
        amount of the subordinate financing was used to acquire the property.

The following are acceptable forms of documentation:

       A copy of the HUD-1 Settlement Statement for the purchase of the property.
       A copy of the title policy from the purchase transaction that identifies the subordinate
        financing.
       Other documentation from the purchase transaction that indicates that a subordinate lien
        was used to purchase the subject property.

Existing Subordinate Liens That Will Not Be Paid Off
The existing liens must be clearly subordinate to the new refinance mortgage. The refinance
mortgage must meet eligibility criteria for mortgages that are subject to subordinate financing.

New Subordinate Financing
When a borrower obtains new subordinate financing with the refinancing of a first mortgage loan
the transaction is still considered as a limited cash-out refinance provided the first mortgage loan
meets the eligibility criteria for a limited cash-out refinance.

It is acceptable for borrowers to obtain cash from the proceeds of the new subordinate mortgage.



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Refinances to Buy Out an Owner’s Interest
A transaction that requires one owner to buy out the interest of another owner (e.g., as a result of
a divorce settlement or dissolution of a domestic partnership) is acceptable as a limited cash-out
refinance provided that the secured property was jointly owned for at least 12 months preceding
the date of the mortgage application.

All parties must sign a written agreement that states the terms of the property transfer and the
proposed disposition of the proceeds from the refinance transaction. Refinances of a property
which was recently inherited require documentation that the security property was jointly owned
by all parties for at least 12 months preceding the date of application.

Borrowers who acquire sole ownership of the property may not receive any of the proceeds from
the refinancing.

Exceptions to Limited Cash-Out Refinance Requirements for DU Refi Plus
and Refi Plus
Certain exceptions to the standard limited cash-out refinance requirements exist for DU Refi Plus
loans. The borrower is not permitted to pay off any existing subordinate liens with the proceeds of
a new DU Refi Plus. The borrower may only receive up to $250 cash back at closing. Refer to the
Nationstar FNMA DU Refi Plus and Nationstar FNMA DU Refi Plus MI Guidelines matrices for
additional exceptions.

7.2     Cash-Out Refinance Transactions
Eligibility Requirements
Cash-out refinance transactions must meet the following requirements:

       The transaction must be used to pay off existing mortgages, or be a new mortgage on a
        property that does not have a mortgage lien against it.
       Continuity of obligation must be demonstrated.
       Properties listed for sale in the six months preceding the application date are limited to
        70% LTV/CLTV/HCLTV ratios (or less if mandated by the specific product, occupancy, or
        property type). Properties that were listed for sale must have been taken off the market
        on or before the application date.
       The property must have been purchased by the borrower at least six months prior to the
        loan application. For the maximum allowable LTV/CLTV/HCLTV ratios and credit score
        requirements for cash-out refinances, refer to the Underwriting matrices (NSM Agency
        Matrix with LTV </= 80% and NSM Agency Matrix with LTV > 80% (AE)

Ineligible Transactions

       The mortgage is subject to a temporary interest rate buydown.
       The subject property was purchased by the borrower within the six months preceding the
        application.
       The subject property is currently listed for sale.
       The existing mortgage is a “restructured mortgage.




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Eligible Transactions

       Paying off the unpaid principal balance of the existing first mortgage.
       Financing the payment of closing costs, prepaid items, and points.
       Paying off any outstanding subordinate mortgage liens of any age.
       Taking equity out of the subject property that may be used for any purpose.
       Financing a short-term refinance mortgage loan that combines a first mortgage and a
        non-purchase-money subordinate mortgage into a new first mortgage or a refinance of
        the short term refinance loan within six months.

7.3     Continuity of Obligation
For all refinance transactions there must be a continuity of obligation if there is currently an
outstanding lien that will be satisfied through the refinance transaction.

Continuity of obligation is met when any one of the following exists:

       At least one borrower is obligated on the new loan who was also a borrower obligated on
        the existing loan being refinanced.
       The borrower has been on title and residing in the property for at least 12 months and
        has either paid the mortgage for the last 12 months or can demonstrate a relationship
        (relative, domestic partner, etc.) with the current obligor.
       The loan being refinanced and the title to the property are in the name of a natural person
        or a limited liability company (LLC) as long as the borrower was a member of the LLC
        prior to transfer. Transfer of ownership from a corporation to an individual does not meet
        the continuity of obligation requirement.
       The borrower has recently inherited, or was legally awarded (divorce, separation, or
        dissolution of a domestic partnership), the property. Loans with an acceptable continuity
        of obligation may be underwritten, priced, and delivered as either cash-out or limited
        cash-out refinance transactions based on the requirements for each type of transaction.




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No Acceptable Continuity of Obligation
If the borrower is currently on title but is unable to demonstrate an acceptable continuity of
obligation, or if there is no outstanding lien against the property, the loan is still eligible for
delivery as a cash-out refinance with the following additional restrictions.

Outstanding Liens             Purchase Date               LTV Ratio Requirements

No. (The property was         Within the six- to 12-      The LTV/CLTV/HCLTV ratios must be based
purchased for cash;           month period prior to       on the lesser of the original sales price/
previous mortgages            the application date        acquisition cost (documented by the HUD-1
have been paid off, etc.)     for the new financing.      Settlement Statement) or the current
                                                          appraised value.

                              More than 12 months         The LTV/CLTV/HCLTV ratios must be based
                              prior to the application    on the current appraised value.
                              date for the new
                              mortgage.

Yes.                          The borrower has            The maximum LTV ratios are limited to 50%
                              been on title for at        based on the current appraised value.
                              least six months.




7.5     General Mortgage Terms and Conditions
First Mortgage Loan Limits
First mortgage loan limits are defined in terms of general loan limits and high-cost area loan
limits:

       The general limits apply to the majority of the mortgage loans.
       The high-cost area loan limits apply to mortgage loans secured by properties in
        designated high-cost areas. The high-cost area loan limits vary across the country.
        Eligibility for loan limits in this category (high-balance mortgage loans) may vary-refer to
        the NSM High-Balance Loan Matrix




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Acceptable Terms
The term of a first mortgage may not extend more than 40 years beyond the date that is one
month prior to the date of the first payment.

All guidelines for loans with a term of 30 years also apply to those with a term of 40 years, unless
otherwise specified in the Underwriting matrices (NSM Agency Matrix with LTV </= 80% and
NSM Agency Matrix with LTV > 80% (AE)).

Personal Property
Personal property may not be included as additional security for any mortgage.

Special Assessments, Mortgage Amounts, and Impact Considerations
If special assessments have been levied against the property and they are not paid before or at
closing, the maximum mortgage amount must be reduced by the amount of the unpaid special
assessments. Taxes, special assessments and liens that are not yet due and payable do not
require a reduction in the maximum mortgage amount.

Documentation must be provided to show that the current installments of taxes and assessments
(or future installments of special assessments that have been levied), including those which may
have been attached as prior liens, but which are not now in arrears, have been paid, or that
sufficient deposits are being collected to pay them.

Restructured Loans
Mortgage loans that have previously been restructured are not eligible. The following types of
restructured loans are ineligible:

       Forgiveness of a portion of principal and/or interest on either the first or second
        mortgage.(modification)
       Application of a principal curtailment by or on behalf of the investor to simulate principal
        forgiveness.
       Conversion of any portion of the original mortgage debt to a “soft” subordinate mortgage.
        or
       Conversion of any portion of the original mortgage debt from secured to unsecured.

Escrow Deposit Accounts
Nationstar does not require an escrow deposit for hazard or flood insurance premiums for an
individual unit in a condo or PUD when the project in which the unit is located is covered by a
blanket insurance policy purchased by the homeowners’ association.

If a special assessment levied against the property was not paid at loan closing, the special
assessment must be included in the escrow deposit account.




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Escrow Waivers
Escrows may be waived provided the standard escrow provision remains in the mortgage loan
legal documents. Escrow deposit accounts for the payment of premiums for borrower-purchased
mortgage insurance (if applicable) may not be waived.

When the requirement for an escrow deposit account is waived, Nationstar retains the right to
enforce the requirement in appropriate circumstances.

Escrow waivers are not based solely on the LTV ratio of a loan, but also on whether the borrower
has the financial ability to handle the lump-sum payments of taxes, insurance, and other items
described above.

If an escrow account is not established, Brokers must provide borrowers with a timely, clearly
written disclosure that advises them of the implications of not establishing an escrow account.
The disclosure must:

       Inform borrowers of any applicable fees associated with the waiver of escrows.
       Advise borrowers that in most cases they may contact their servicer to set up an escrow
        account if they decide to at a later date.
       Advise borrowers that they are responsible for personally and directly paying the non-
        escrowed items, in addition to paying the mortgage.
        And
       Explain the consequences of a failure to pay non-escrowed items, including the
        requirement of placement of insurance. Forced place insurance generally results in a
        higher cost and less coverage for the borrower.
       Disclose to borrowers an estimate of the first year’s real estate taxes and insurance
        payment, including estimated due dates.

Points and Fees Limitation
The total points and fees charged to the borrower cannot exceed the greater of 5% of the
mortgage amount or $1,000. These amounts may be further limited by state/local regulations.
Nationstar Mortgage will not purchase any loan closed with fees in excess of state, federal, or
agency high cost limits.

       Points and fees counted against this limitation include:
              o   Origination fees
              o   Underwriting fees
              o   Broker fees
              o   Finder’s fees
              o   Charges imposed by Brokers as a condition of making the loan whether they are
                  paid to the Broker or a third party




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   Points and fees that do not have to be counted against this limitation include:
        o   Fees paid for actual services such as attorneys’ fees, notary’s fees, and fees
            paid for property appraisals, credit reports, surveys, title examinations and
            extracts, flood and tax certifications, and home inspections
        o   The cost of mortgage insurance
        o   The costs of title, hazard, and flood insurance policies
        o   State and local transfer taxes or fees
        o   Escrow deposits for the future payment of taxes and insurance premiums
   Bona fide discount points are specifically excluded from the agency points and fees
    limitation, but may be included in state or local high cost restrictions. Discount points will
    be determined to be bona fide if they:
   Are knowingly paid by the borrower (which can be demonstrated by the discount points
    being fully disclosed to the borrower); and are funded through any source for the purpose
    of reducing the interest rate on the loan; and result in a meaningful reduction of the
    interest rate, provided that, prior to discount, the rate was consistent with current market
    rates based on the credit characteristics of the mortgage.

    A meaningful reduction is defined as a minimum of 25 basis points reduction in the
    interest rate for each discount point paid, provided all other terms of the mortgage remain
    the same.

    Loan-level price adjustments (LLPAs) are not considered bona fide and must be counted
    in the points and fees limitation, as such discount points are neither funded for the
    purpose of reducing the interest rate on the loan nor result in a meaningful reduction of
    the interest rate on the loan.

    LLPAs can be recouped by the Broker as bona fide discount points if the Broker
    documents the interest rate was reasonably increased to recoup the LLPA, the borrower
    was offered the opportunity to pay discount points to lower the interest rate, and the
    discount points otherwise meet the criteria related to bona fide discount points described
    above.
   Other miscellaneous fees and charges that, in total, do not exceed .25% of the loan
    amount may be excluded from the points and fees limitation. Miscellaneous fees and
    charges do not include any fees and charges specifically named in the points and fees
    limitation policy, whether included or excluded.




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Fees and Payments for the Purchase of Preforeclosure or Short Sale
Properties
Borrowers may pay additional fees or payments in connection with acquiring a property that is a
preforeclosure or short sale that are typically the responsibility of the seller or another party.
Including:

       Short sale processing fees.
        These fees are not considered common and customary charges and therefore must be
        treated as a sales concession if any portion is reimbursed by an interested party to the
        transaction.
       Payment to a subordinate lien holder.
        And
       Payment of delinquent taxes or delinquent HOA fees.

The following requirements apply:

       The borrower (buyer) must be provided with written details of the additional fees or
        payments, and the additional necessary funds to complete the transaction must be
        documented.
       The servicer who is agreeing to the preforeclosure or short sale must be provided with
        written details of the fees or payments and has the option of renegotiating the payoff
        amount to release its lien.
       All parties (buyer, seller, and servicer) must provide their written agreement of the final
        details of the transaction which must include the additional fees or payments. This can be
        accomplished by using the Request for Approval of Short Sale or Alternative Request for
        the Approval of Short Sale forms published by the U.S. Treasury Supplemental Directive
        09–09 or any alternative form or addendum.
       The HUD-1 Settlement Statement must include all fees and payments included in the
        transaction.

7.6     Prohibited Refinancing Practices
Solicitation for Refinancing
Brokers may not specifically target Nationstar borrowers for offers to refinance. Brokers may
advertise refinancing opportunities generally, or to a specific type of mortgage (e.g., ARM
mortgage).

Brokers may not encourage a borrower to refrain from making payments on his/her mortgage
loan.

Prearranged Refinancing Agreements
A Broker may not process a mortgage if Nationstar Mortgage (or any affiliate or third-party
originator) and the borrower have entered into an arrangement for special terms (such as
reduced fees) for a future refinance of the mortgage.




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Agreements to Advance Borrower Payments
Refinancing arrangements that call for the Broker to advance a number of payments on the
borrower’s behalf and then to refinance the mortgage once the agreed-upon payments have been
advanced are not permitted.

7.7     Multiple Financed Properties for the Same Borrower
Loan and Borrower Requirements

       The loan must comply with limitations on the maximum number of financed properties,
        including ownership interests in financed properties, as well as eligibility, underwriting,
        and reserve requirements.
       The borrower must have sufficient assets to close after calculating reserve requirements.
        For minimum reserve requirements.

DU Refi Plus loans are exempt from these policies. Refer to the Nationstar FNMA DU Refi Plus
and Nationstar FNMA DU Refi Plus MI Guidelines matrices for additional information.

Limits on the Number of Financed Properties
If the mortgage is secured by the borrower’s principal residence, there are no limitations on the
number of financed properties that the borrower owns.

If the mortgage is secured by a second home or an investment property, the borrower may own
or be obligated on up to four financed properties (including his or her principal residence).
Exceptions to this policy require Underwriting VP pre-approval.

Standard eligibility and underwriting policies apply if the borrower is financing a second home or
investment property and will have one to four financed properties; however, if the borrower will
have five to 10 financed properties, the mortgage loan must comply with the eligibility,
underwriting, and requirements described herein.

The financed property limit applies to the borrower's ownership of one- to four-unit financed
properties or mortgage obligations on such properties and is cumulative for all borrowers. These
limitations apply to the total number of properties financed, not to the number of mortgages on the
property or the number of mortgages sold to Nationstar Mortgage.




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Type of Property Ownership                                    Property Subject to Limitations?

Joint ownership of residential real estate. (This is          Yes, if the owned property is
considered to be the same as total ownership of an            financed.
individual property.)
Note: Other properties owned or financed jointly by the
      borrower and co-borrower are only counted once.

Ownership of commercial real estate.                          No.

Ownership of a multifamily property consisting of more than   No.
four dwelling units.
Joint or total ownership of a property that is held in the    No.
name of a corporation, even if the borrower is the owner of
the corporation.

Ownership in a timeshare.                                     No.

Obligation on a mortgage debt for a residential property      Yes.
(regardless of whether or not the borrower is an owner of
the property).

Eligibility Requirements for Investor and Second Home Borrowers with
Five to 10 Financed Properties
With the exception of high-balance mortgage loans, investor and second home borrowers with
five to 10 financed properties must meet the following eligibility requirements.

Transaction Type         Number of Units          Maximum LTV/CLTV/        Minimum Credit
                                                  HCLTV                    Score

Second Home or Investment Property

Purchase                 1 unit                   75%/75%/75%              720

Limited Cash-Out         1 unit                   70%/70%/70%              720
Refinance



High-balance mortgage loans for borrowers that will have five to 10 financed properties are
subject to the LTV/CLTV/HCLTV and credit score requirements in the Underwriting matrices
(NSM Agency Matrix with LTV </= 80% and NSM Agency Matrix with LTV > 80% (AE)




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Underwriting and Delivery Requirements for Investor and Second Home
Borrowers with Five to 10 Financed Properties

Underwriting or Delivery Characteristic        Policy

Bankruptcy or Foreclosure                      The borrower cannot have any history of
                                               bankruptcy or foreclosure within the past seven
                                               years.

Mortgage Delinquencies                         The borrower cannot have any delinquencies (30-
                                               day or greater) within the past 12 months on any
                                               mortgage loans.

Rental Income                                  Rental income on the subject investment property
                                               must be fully documented
                                               Rental income from other properties owned by the
                                               borrower must be supported by two years' most
                                               recent signed federal income tax returns or as long
                                               as the property has been owned, if less than two
                                               years.
                                               DU messages permitting reduced rental income
                                               documentation must be disregarded and full
                                               documentation must be obtained.

Minimum Reserve Requirements                   The borrower must have reserves for the subject
                                               property and for other properties. See the Minimum
                                               Reserve Requirements section in this guide.



7.8     Construction-to-Permanent
When closing as a refinance, the borrower must demonstrate ownership of the lot prior to
applying for the construction loan. Additionally, the owner of the lot must be a borrower on that
construction loan.


Loan-to-Value (LTV) Calculations
When closing as a refinance, the borrower must demonstrate ownership of the lot prior to
applying for the construction loan. Additionally, the owner of the lot must be a borrower on that
construction loan.

Loan-to-Value (LTV) Calculations
LTV calculations mainly focus on the type of transaction that is being performed.

Down Payment Requirements
If the borrower’s cash investment is the lot, the borrower must provide a HUD-1 statement
showing the purchase of the land, as well as a copy of the warranty deed or release of lien
showing no liens presently exist on the lot.

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Documentation Requirements
Prior to closing, the appraiser must provide a Certificate of Completion, including photos of the
completed property. Additionally, a Certificate of Occupancy (CO) must be obtained from the
applicable government authority, usually at the county or local level. The CO should indicate that
all work is complete, built to code, and the property is fit to be occupied.

LTV Calculations

Purchase Money Transactions


Divide the original loan amount of the construction-to-permanent loan by the lesser of:

       The current as-completed appraised value of the property (both lot and improvements)
        Or
       The purchase price (sum of all documented costs of the construction plus the sales price
        of the lot)

The borrower must make a minimum down payment of 5% unless the LTV/CLTV is 80% or less;

        Or

       The borrower is purchasing a one unit principal residence and meets the requirements to
        use gifts, donated grant funds, or funds received from an employer to pay for some or all
        of the borrowers’ minimum contribution (excludes High Balance loans).

Refinance Transactions (Limited Cash-out Only)

Divide the original loan amount of the construction-to-permanent loan by the current as
completed appraised value (of both lot and improvements).




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              SECTION 8: HOMEOWNERS INSURANCE
                         REQUIREMENTS

8.0     Introduction
Homeowner’s insurance coverage is required on all loans at time of closing.

8.1     Insurance Coverage Requirements
Proof of adequate dwelling coverage is required. A copy of the homeowner insurance policy
(declaration pages) or binder must be obtained for adequate coverage, correct address,
ownership interest, and expiration date.

All insurance policy expiration dates must be 60 days or greater from the date of purchase.
Expiration dates less than 60 days from the date of purchase will require at minimum 12 months
premium to be paid prior to purchase.

For condominium units, an HO6 policy in the minimum amount of 25% of the value must be
provided.

8.2     Amount of Coverage
The homeowner’s policy must provide dwelling coverage in the amount of either option 1 or
option 2, below, whichever is less:

    1. The loan amount plus any priority lien or 80% of replacement cost, whichever is greater.
    2. Replacement cost of the dwelling (total estimated cost new under the cost approach on
       the appraisal or as determined by the insurance company).

8.3     Flood Insurance
A flood certification must be obtained on all loans by the branch prior to final approval.

Appraisals and Flood Certifications indicating that the subject property is located in Flood Zone A
or V requires a flood insurance policy in addition to dwelling coverage.

8.4     Loss Payable Clause
Nationstar Mortgage
Insurance Center
P.O. Box 7729
Springfield, OH 45501-7729




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      SECTION 9: TITLE INSURANCE/CLOSING AGENTS
9.0     Title Commitments
The title commitment must be dated within 90 days prior to loan closing and provide the following
information:

       Current owner of property should match borrower on all refinances (except for land
        contracts/contracts for deed). On purchase money loans, owner must match seller on
        purchase and sales contract.
       Legal description which matches appraisal.
       All liens and encumbrances which must be cleared prior to closing or paid at closing.
       Amount and disposition of real estate taxes on property. Delinquent taxes must be paid
        current at closing. Taxes due and not yet delinquent must also be paid if any prior years
        taxes are currently delinquent.
       All “delinquent” taxes and all taxes “due” within two calendar months of “funding date”
        must be paid prior to purchase.
       Copy of deed or information on last transfer of property. A 12-month chain of title is
        required on all loans. (Transfers in the prior 12 months will require additional information,
        including purchase price or conveyance amount and name of prior owner). A 24-month
        chain of title is required on all first time homebuyers.

9.1     Title Issues
       Property with life estate interest requires the life estate holder’s signature on the
        mortgage and rescission.
       Nationstar does not currently allow closing in the name of a trust.
       Property in the process of home improvements requires mechanics lien releases from all
        contractors prior to closing.
       Property in a corporate name is not eligible.
       All individuals on title must sign the mortgage, truth in lending, and rescission. Some
        states require non-titled spouses to also sign (e.g., community property, dower right
        states). Check with the title agent and review the commitment for the respective state.

9.2     Waiver of Rescission
Rescission periods may not be waived on any loan.




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9.3     Loan Closings
Closings are not allowed in the following situations:

       In a customer’s home
       At a broker’s office
       In a public location such as a restaurant
       Closings without the Closing Agent present

Documents must be notarized and a copy of the executed documents must be provided to the
customer at time of closing.




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