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					                Icon Residential Lenders Lending Guide
                           Table of Contents


Section 100                  Introduction

Section 200                  Philosophy

Section 300                  Broker Eligibility/Broker Approval

Section 400                  Submission Process

Section 500                  Icon’s IQ System

Section 600                  General Underwriting Guides

Section 700                  Mortgage Insurance

Section 800                  Lock Policy

Section 900                  Funding/Closing

Section 1000                 Compliance

Section 1100                 QC




Icon Lending Guide – Table of Contents                            Revised 4/18/12
100 - Introduction

Icon Residential Lenders, LLC (Icon) are mortgage service providers whose objective is to
provide customers a variety of competitive lending programs while maintaining the highest quality
loan standard and providing excellent customer service. Created on the belief that our people are
our greatest asset and our clients deserve the very best in terms of effort, care, and intellectual
capacity while staying focused on results. Icon does business across the country in all states
except Alaska and U.S. territories.

This guide is intended to provide Icon’s standard requirements and policies and procedures. The
material in this guide is organized in chapters and then divided sections and subsections. This
guide contains a Table of Contents, policies, procedures and forms.

Icon may issue written updates to the guide for important policy and procedure changes, and
new/revised loan programs. It is the customer’s responsibility to review and comply with all
updates and changes to this guide.

Announcements will be communicated to Icon’s staff. Brokers will be notified through their Icon
Account Executive. All announcements are posted on Icon’s website for reference. The
information contained in the announcement thereby becomes a part of this guide.

Icon’s website is accessible at www.iconwholesale.com. Users do not require a username or
password. Icon’s website provides users quick access to the tools and references for
successfully doing business with Icon. Included on the website are Icon’s contacts, Icon’s
Lending Guide, announcements, rate sheets, forms, Icon’s approved partners, information on DO
Sponsor and Icon IQ.

Icon IQ allows customers to conduct business with Icon electronically. Customers can review
their pipeline, price loans, compare programs, register loans and upload loans and conditions.

Icon’s Account Executives are available for questions regarding pricing, program guidelines, loan
scenarios, and web support.

Icon’s knowledgeable and experienced operations staff is dedicated to helping the broker meet
their borrower’s needs. The operations team can assist with questions concerning specific loan
information, status, turn times, etc. The operation team is available from 8am to 5pm PST.

Icon reserves the right to make changes to this guide without notice.




Icon Lending Guide – Section 100                                                    Revised 06/15/10
200 – Philosophy

Icon’s business objective is to lead the mortgage industry with motivated, streamlined processes
that leverage existing relationships, while maintaining profitable, sustainable and controlled
growth. Icon focuses on building a lending entity with the best service levels and customer
experiences, supported by competitive pricing and products.

Icon strategy continually develops and implements unique synergies and competencies to build
profitability and keep costs low. Icon strives to make the loan process one of the easiest in the
business. Icon creates client relationships of enduring value using high-touch personalized client
service. Furthermore, Icon provides highly competitive loan programs that strongly communicate
to our clients that we are here to offer a unique partnership that will allow our clients to achieve
the best execution with exceptional customer service.

Icon’s Risk Management focuses on execution, efficiencies, cost controls and exit strategy. We
begin with the end in mind, and doing business in a new way, implementing unique strategies that
capitalize on the evolution of the mortgage industry. Competitive loan programs are a necessity
to retain market attention. Competitive pricing and loan programs focused on the needs of our
clients is a key to long-term success. The ability to respond promptly to the market changes and
client request/input is crucial.

Icon strives to be on the pinnacle of change. We are proactive versus reactive. Icon studies
current value drivers closely, anticipates change and transforms the operating models and
business architectures accordingly. Icon believes that today’s innovative lender must have the
capability to transform business performance by increasing the value of the customer franchise,
by lowering operating costs and increasing customer loyalty through competitive pricing
supported by exceptional customer service standards.

By designing flexible business arrangements, Icon has positioned itself for the future. Icon builds
relationships based on value added services to the client with technology, reporting capabilities,
production and execution.

At Icon, we focus on building a relationship driven business, not a transaction driven business.
We are committed to building long lasting partnerships with our direct customers, vendors, and
investors. Building strong relationships is the key to Icon’s success

With fresh, forward thinking, individually centric, ultimately unique customer experiences, Icon will
become the best example of lending in the mortgage banking industry.




Icon Lending Guide - Section 200                                                      Revised 12/11/09
                    Section 300 - Broker Eligibility/Broker Approval

                                   Table of Contents

300 – Introduction
301 – General Eligibility Requirements
302 – New Application Document Requirements
302.01 Submission Requirements for Conforming Programs Broker Approval
302.02 Submission Requirements for FHA Broker Approval
302.03 Submission Requirements for VA Authorized Agent
303 – Notification of Change
303.01 What to Submit
303.02 When to Submit
304 – Regulatory Compliance
305 – Annual Recertification
306 – Quarterly Evaluations
307 – Quarterly Reviews for FHA Originators
308 - Audits
309 – Availability of Records




Icon Lending Guide – Section 300                                         Revised 6/20/12
         300       Introduction

         Mortgage Brokers who wish to participate in the Icon Residential Lenders, LLC (“Icon”) Wholesale
         Lending Program must meet the eligibility requirements that are described in this Lending Guide.

         301       General Eligibility Requirements (Conventional)

         The Broker must meet the requirements stated below, unless such requirements are waived by
         Icon, in order to participate in the program:

          Experience               The Management Staff of the Broker will be reviewed for
                                   demonstrated knowledge, expertise and experience in the mortgage
                                   field.

          Standards                The Broker must follow generally accepted mortgage lending
                                   practices with respect to its loan origination activities.

          Net Worth*               $25,000 in accordance with generally accepted accounting principles.

          Legal                    1) The Broker must be duly organized, validly existing, and in good
          Standing                    standing under the laws of the jurisdiction of its organization.
                                   2) The Broker must be qualified to transact business and properly
                                      licensed in each jurisdiction where it originates mortgage loans.
                                   3) The Broker must be in good standing with all applicable
                                      regulatory authorities and not subject to any actions, sanctions, or
                                      extraordinary supervision of its operations.
                                   4) The Broker must have the power and authority to enter into and
                                      comply with all of the terms of the Broker Lending Agreement
                                      (including the terms and conditions of this Wholesale Lending
                                      Guide), and the Broker must execute such Agreement.
                                   5) The Broker’s compliance with the terms and conditions of the
                                      Broker Lending Agreement and this Wholesale Lending Guide will
                                      not violate any provisions of its articles of incorporation, charter or
                                      by-laws or any other instrument relating to the conduct of its
                                      business, the ownership of its property, or any other agreement to
                                      which it is a party or to which it is bound.

          Maintaining              The Broker must continue to meet the Eligibility Requirements
          Eligibility              described in this Section to maintain its eligibility and approval to
                                   participate in the Icon Wholesale Lending Program. Subsections 303,
                                   304, 305, and 306 provide details on the review process, and audit
                                   and record availability requirements.

          Compliance               The Broker must do business in a manner consistent with FNMA’s
          With Laws                lending policies, as set forth in FNMA’s Selling Guide, Part A, Subpart
                                   A3, Chapter A3-2-01 and A3-2-02. (You may access FNMA’s Selling
                                   Guide at www.efanniemae.com).

          Icon may request evidence of the Broker’s compliance with each of these
          eligibility criteria at any time.
          * Net Worth Requirements: Each Broker must have a minimum net worth of $25,000 in
          accordance with generally accepted accounting principles. Exceptions to this standard
          may be considered on a case-by-case basis subject to Senior Management Approval.

Icon Lending Guide – Section 300                                                                    Revised 6/20/12
         302      New Application Documentation Requirements

         302.01 Submission Requirements for Conforming Programs Broker Approval

         Brokers requesting approval to participate in the Icon Conforming Programs must submit the
         following documents. An approved signatory of the company must execute all documents.
                  Completed Broker Application.
                  NOTE: Federally regulated institutions are exempt from providing social security
                        numbers.
                  Completed Broker Lending Agreement. Any changes or alterations must be approved by
                  Icon Senior Management.
                  Corporate Resolution or LLC Operating Agreement or Articles of Organization.
                  Executed Loan Fraud Zero Tolerance Policy Acknowledgement
                  Resume for all officers and key personnel with > 10% ownership. Federally regulated
                  institutions are exempt from the resume policy.
                  Executed W-9.
                  QC plan, policies and procedures.
                  Current financials that include an Income Statement and Balance Sheet:
                       The Income Statement and Balance Sheet must be from the most recent six (6)
                       months. If the YTD information does not cover the most recent six (6) months the
                       prior years Income Statement and Balance Sheet will be required.
                       When reviewing the net worth of the broker, Icon will consider the quality of the
                       assets that are listed on the Balance Sheet. Items such as artwork, vehicles, etc.
                       may be excluded from the net worth calculations if they represent a significant
                       percent of the capital.
                  Copies of broker licenses for all states of licensure or First Line Data Confirmation of
                  Licensing.
                  Signed DU User Agreement
                  Signed IQ Set-up form.

         Icon reserves the right to require additional documentation and/or information as it deems
         necessary.
         Brokers must submit their completed Broker Application package to their Account Executive.




Lending Guide – Section 300                                                                           6/20/12
         302.02 Submission Requirements for FHA Broker Approval

         Brokers requesting approval to participate as an FHA broker with Icon must meet the following
         requirements:
                  Broker must currently be an approved broker or be in the process of approval with Icon.
                  The broker must submit a completed FHA Sponsorship Request Form. Brokers may
                  obtain the FHA Sponsorship Request Form from Icon’s website or from their Account
                  Executive.
                  Brokers that are currently approved as a Full Eagle broker must submit their FHA
                  Originator ID number and Q.C. plan
                  Brokers without prior FHA experience are required to submit the following along with the
                  FHA Sponsorship Request Form:
                              Processor resume indicating two years FHA processing experience, or
                              Copies of approval letters/email indicating approval to submit FHA loans from
                              two other wholesale lenders.
         Icon reserves the right to require addition documentation and/or information as it deems
         necessary.
         Brokers should submit their completed FHA Broker Application package to their Account
         Executive.

         302.03 Submission Requirements for VA Broker Approval

         Brokers requesting approval to participate as a VA broker with Icon must meet the following
         requirements:

                  Broker must currently be an approved broker or be in the process of approval with Icon.
                  Broker must submit a completed VA Authorized Agent Request Form to Icon along with
                  the following:
                       Broker’s VA Approval Letter
                       A check for $100.00 made out to the Department of Veterans Affairs (not required if
                       requesting approval to submit VA IRRRL transactions only). This is an annual fee
                                                             st
                       that expires each year on December 31 .
                       NOTE: The VA fee is required per request (e.g. a request for the corporate office
                             plus any number of branches would require a $100.00 fee. If a separate
                             request is made for additional branches another $100.00 fee would apply).
         Icon reserves the right to require addition documentation and/or information as it deems
         necessary
         Brokers should submit the above documentation to Icon’s Client Administration department.




Lending Guide – Section 300                                                                           6/20/12
         303      Notification of Change

         303.01 What to Submit

         The Broker must notify Icon, in accordance with the requirements of the Broker Eligibility section
         (Section 301) of the Icon Wholesale Lending Guide, of any changes to the information described
         below.
                  Name, address, management, affiliates, insurance claims or modifications, or a change
                  not covered elsewhere.
                  Merger, acquisition, transfer of stock, transfer of assets to non-Icon approved entities,
                  merger or acquisition of your parent, related servicing relationships.
                  Regulatory actions, management actions, judgments, and new or terminated business
                  relationships.

         Notification of changes submitted by the broker does not constitute approval of the change, and
         Icon reserves the right to require additional information.

         303.02 When to Submit

         Broker must submit the required notification of change no less than 75 days prior to a proposed
         transfer of assets without accompanying liabilities to an entity that is not Icon-approved OR
         assets of a Mortgage-related function without the transfer of accompanying liabilities to an entity
         that is not Icon-approved.

         304      Regulatory Compliance

         The Broker agrees to notify Icon of any suspension, sanction, or disciplinary action taken against
         it by FNMA/FHLMC, GNMA, and/or HUD/VA, or any other federal, state or local governing
         authority within five business days of notification to the Broker.

         The Broker warrants that ongoing compliance with all applicable governing laws, rules and
         regulations, including but not limited to the following:
                  Real Estate Settlement Procedures Act (RESPA)
                  Fair Credit Reporting Act (FCRA)
                  Fair Housing Act
                  Fair Lending Act
                  Truth-in-Lending Act
                  Consumer Protection Act
                  Home Ownership and Equity Protection Act
                  Equal Credit Opportunity Act (ECOA)
                  Home Mortgage Disclosure Act (HMDA)
                  Patriot Act of 2001
                  Mortgage Disclosure Improvement Act of 2009 (MDIA)
                  Appraiser Independence Requirements

Lending Guide – Section 300                                                                           6/20/12
         305      Annual Recertification
         Each year, on or before the broker’s approval date, Icon will issue a Recertification Letter and the
         broker must deliver the following documents, in addition to any additional documentation
         requested in the letter, to Icon for annual review:
                  Annual Broker Recertification Form
                  Updated licenses for all states in which the broker is originating loans or First Line Data
                  report with the same verifications.
                  Updated financials
                  Updated resumes if change in management
                  MARI update
                  QC plan, policies and procedures
                  Google search update
         Brokers should submit their completed annual review package to their Account Executive within
         15 days of the receipt of the Recertification Letter. Failure to provide the requested
         documentation will result in deactivation.

         306      Quarterly Evaluations
         Quarterly, Icon reviews or evaluates the performance of its approved brokers. Brokers with low
         pull-through or who have low production may be deactivated. If a broker is deactivated for low
         volume or pull-through rates, the broker is eligible to reapply with Icon after 3 months. A new
         Broker Application Package will be required.

         307      Quarterly Reviews for FHA Originators
         Each quarter Icon will run a Neighborhood Watch Delinquency report on brokers who submit FHA
         loans to Icon to ensure the loans meet Icon’s guidelines. Brokers not meeting Icon’s guidelines
         will be deactivated.

         308      Audits

         Icon or its appointed agent may audit the Broker’s mortgage loan origination operations, and
         examine the books and records relating to any mortgage loan received by the Broker and funded
         by Icon. The Broker will facilitate such audits and provide Icon or its agent access to the Broker’s
         office, books, and records at reasonable times during the Broker’s normal business hours.




Lending Guide – Section 300                                                                            6/20/12
         309      Availability of Records

         All Brokers are required to respond promptly to any request for documents or records that Icon
         may require pertaining to the business dealings between the Broker and Icon. A failure to
         respond in a timely manner to such requests will cause Icon to conclude that the Broker cannot
         produce such documents, in accordance with all agreements in effect between the Broker and
         Icon at the time of loan funding, or the current agreement(s) in effect at the time of the request. In
         such cases Icon will take appropriate actions based on the Broker’s inability to produce the
         requested documentation, including mortgage loan repurchase and/or suspension of the Broker’s
         approval Status.
         In the event that Icon is required to take legal action to obtain access to contested documents or
         records, the Broker will be liable for any legal fees, costs, and other related expenses that are
         incurred in enforcing their rights of access.




Lending Guide – Section 300                                                                            6/20/12
      Section 400 – Loan Submission & Submission Standards

                                   Table of Contents


400 – Loan Submission

401 – Submission Standards
401.01 Regular Submission Standards
401.02 FHA Submission Standards
401.03 VA Standard Submission
401.04 VA IRRRL Submission

402 – Mortgage Disclosure Improvement Act (MDIA)

403 – IQ Submissions

404 – Additional Submission Requirements




Icon Lending Guide – Section 400                         10/17/12
400 – Loan Submission

Brokers have the option to submit loans to Icon for underwriting via e-mail, fax, Icon’s IQ2
System, or courier/mail service. All submissions require a completed submission form, which is
located under the Forms tab on Icon’s website at www.iconwholesale.com.

Brokers are required to complete the broker approval process prior to submitting loans; loans
submitted by a broker without formal approval by Icon will not be underwritten until the approval
process is complete.

Loans may be submitted to Icon via the following methods:

    •    Email - Regular submissions - westsubmissions@iconresidential.com
    •    Email – FHA submissions – fhasubmissions@iconresidential.com
    •    Email – VA Submissions – vasubmissions@iconresidential.com
    •    Email – Registration of loans – registration@iconresidential.com
    •    Fax - 949-258-5583
    •    Icon’s IQ2 System - Refer to Section 500 – Icon’s IQ2 System for uploading procedures
    •    Courier –          Icon Residential Lenders
                            2301 Campus Dr., Ste 100
                            Irvine, CA 92612

401 - Submission Standards

All loan submissions are required to have the minimum documentation listed below. Submissions
without the minimum documentation will be placed on hold for the missing documents. The
broker and the Icon Account Executive will be notified of the missing items. If the missing items
are not received by Icon within 72 hours of notification, the file will be cancelled.

The cut off time for new submissions is 2:00 pm Pacific Standard Time.

401.01 - Regular Submission Standards

Regular file submissions can be e-mailed, faxed, mailed, or uploaded through IQ2 as detailed in
Section 400.

Regular submissions require the following:
    •    Completed Icon Submission Form
    •    Submission Fee Sheet
    •    Fannie Mae 3.2 – Required to be uploaded through IQ2; no other form of submission is
         allowed.
    •    DU Findings – If DU Findings not assigned to Icon, Icon will run a new credit report
    •    1008
    •    Typed 1003 - signed or unsigned. If unsigned, a signed Borrowers Credit Authorization is
         required.




Icon Lending Guide – Section 400                                                            10/17/12
    •    Signed Borrowers Credit Authorization or Initial 1003, signed and dated within
         compliance, by borrower and loan officer. Borrowers Credit Authorization must be signed
         and allow/assign to Icon the ability to pull borrower’s credit, verify income, assets, etc.
         NOTE: A general Borrowers Signed Authorization is not acceptable.
    •    Credit report - cannot be > 30 days old at time of submission; if older than 30 days a new
         credit report will be required
    •    Signed 4506-T
    •    Assets (purchase transactions as required by DU)
    •    Income documentation
         •    Salaried borrowers: Paystub and W2. Most recent years’ tax returns required if
              other real estate owned
         •    Self-employed borrowers: Most recent years’ tax returns
    •    Sales Contract (if applicable)
    •    All of broker’s initial disclosures signed by borrower.
    •    State specific disclosures as required.

401.02 - FHA Submission Standards
FHA file submissions can be e-mailed, faxed, mailed or uploaded through IQ2 as detailed in
Section 400.

FHA submissions require the following:

    •    Completed Icon FHA Submission form

    •    Submission Fee Sheet
    •    Transmittal Summary
    •    Typed 1003 – signed or unsigned. If unsigned, a signed Borrowers Credit Authorization
         is required.
    •    1003 Addendum
    •    Signed Borrowers Credit Authorization or Initial 1003, signed and dated within
         compliance, by borrower and loan officer. Borrowers Credit Authorization must be signed
         and allow/assign to Icon the ability to pull borrower’s credit, verify income, assets, etc.
    •    NOTE: A general Borrowers Signed Authorization is not acceptable
    •    Income documentation:
         • Salaried borrowers: Paystub and W2. Most recent years’ tax returns required if
         other real estate owned.
         •    Self-employed borrowers: Most recent years’ tax returns
    •    Sales contract (if applicable)
    •    Fannie Mae 3.2 – Required to be uploaded through IQ2; no other form of submission is
         allowed.
    •    DU findings report (if applicable)



Icon Lending Guide – Section 400                                                             10/17/12
    •    Signed 4506-T
    •    Credit report - cannot be > 30 days old at time of submission; if older than 30 days a new
         credit report will be required)
    •    FHA Connection printout (casefile assigned to Grand Bank, N.A.)
    •    Important Notice to Homebuyer
    •    Informed Consumer Choice Disclosure
    •    For Your Protection: Get a Home Inspection (purchase transactions only)
    •    All broker initial disclosures, signed by the borrower, as required by state and federal law.
    •    State specific disclosures as required.

401.03 – VA Standard Submission
VA file submissions can be e-mailed, faxed, mailed or uploaded through IQ2 as detailed in
Section 400.

VA submissions require the following:
    •    Completed Icon VA Submission Form
    •    Completed VA Submission Fee Sheet
    •    Signed initial 1003
    •    Signed Borrowers Credit Authorization or Initial 1003, signed and dated within
         compliance, by borrower and loan officer. Borrowers Credit Authorization must be signed
         and allow/assign to Icon the ability to pull borrower’s credit, verify income, assets, etc.
    •    Income documentation:
         •    Salaried borrowers: Paystub and W2. Most recent years’ tax returns required if
              other real estate owned.
         •    Self-employed borrowers: Most recent years’ tax returns
    •    Proposed loan worksheet (VA Form 26-8923)
    •    FNMA 3.2 – Required to be uploaded through IQ2; no other form of submission is
         allowed.
    •    DU findings report (if applicable). If DU not assigned to Icon, Icon will run a new credit
         report
    •    Credit report - cannot be > 30 days old at time of submission; if older than 30 days a new
         credit report will be required.
    •    Signed 4506-T (not required on IRRRLs)
    •    Clear CAIVRS
    •    Current payoff demand
    •    New VA case number with Grand Bank, N.A. as the lender
    •    Prior loan validation
    •    Signed VA indebtedness (VA Form 26-8937)
    •    Copy of ID



Icon Lending Guide – Section 400                                                               10/17/12
    •    Copy of social security card
    •    All broker initial disclosures, signed by the borrower, as required by state and federal law
    •    State specific disclosures as required


401.04 – VA IRRRL Submission


VA file submissions can be e-mailed, faxed, mailed or uploaded through IQ2 as detailed in
Section 400.
VA IRRRL submissions require the following:

     •   Completed Icon VA Submission Sheet

     •   Authorization to Receive Electronic Disclosures

     •   VA IRRRL Submission Fee Sheet or itemized fee worksheet or complete estimated HUD-
         1 with all fees included

    •    Good Faith Estimate (GFE)

    •    Notice of Intent to Proceed – required to be submitted when any fee other than the fee for
         the credit report will be charged

    •    Anti Steering Disclosure – required on loans with Lender Paid Compensation

     •   VA Case number indicating Grand Bank N.A. as the sponsor

     •   Initial 1003 – signed by the borrower(s) and loan officer

     •   Initial HUD/VA 26-1802a (Addendum to the 1003) signed by the borrower(s) and loan
          officer

     •   Photo ID and copy of Social Security Card (ensure that no income is reflected on the
         item)

     •   Credit report less than 30 days old from one of Icon’s approved vendors

     •   Complete copy of the current Note

     •   Current payoff demand

     •   Icon’s VA Indebtedness Questionnaire (available on Icon’s website, Forms tab and select
         VA Indebtedness Questionnaire)

     •   Nearest Living Relative (not living with the veteran)

     •   Current preliminary title report for the states of AZ, CA, HI, ID, NM, NV, OR, UT and WA

     •   Hazard insurance




Icon Lending Guide – Section 400                                                              10/17/12
     •   Disclosures, including state specific disclosures

402 - Mortgage Disclosure Improvement Act (MDIA)

MDIA loan registration requires the following:

    •    Submission form
    •    Typed 1008/1003. Must be sent to Icon within 24 hours of the time loan application was
         taken.
    •    Submission Fee Sheet
    •    Fannie Mae 3.2
    •    Signed Borrower Email Authorization form, if applicable.


403 – IQ2 Submissions

Loans may be submitted via Icon’s IQ2 portal.

Refer to the appropriate list above for documentation requirements. Icon does require the broker
to e-mail or fax the completed submission form to the appropriate addresses/fax number as
notification that the uploaded file is ready for submission.

Refer to Section 500 of the Lending Guide for instructions on IQ2.

Loans that are placed in “Submitted” status in IQ2 must have a complete submission package
uploaded within ten (10) days of submission. Submitted loans that are not complete after ten (10)
days will be cancelled. Refer to Section 800 – Lock Policy for specific details.

404 – Additional Submission Requirements

E-mail capacity can be limited. Loan files exceeding 5mb may not be received by Icon due to the
file capacity. It is recommended that files exceeding 5mb are sent in multiple attachments to
ensure receipt by Icon.

Loans must be fully submitted within ten (10) days of the initial lock or the lock is subject to
cancellation. Refer to Section 800 – Lock Policy for specific details.




Icon Lending Guide – Section 400                                                                   10/17/12
500 – Icon IQ

Icon IQ is an online tool enabling the client to conduct each step of the loan process online. In
addition, clients can monitor the status of the loan as well as manage their respective pipeline.
Icon IQ provides the following functions:

    •       Quick Pricer
    •       Loan Registration
    •       Loan Eligibility/DU
    •       Loan Documents Upload Feature
            •     Upload the entire credit package to Icon for underwriting
            •     Upload underwriting conditions for review and sign off.
    •       Rate Lock
    •       Loan Pipeline Management
            •     View All loans submitted to Icon
            •     Check status of loans in real time
            •     Printable pipeline reports
•   Administrative Functions
    •       Administer users within their own company

Icon IQ is accessible through Icon’s website at www.iconwholesale.com.

Clients are required to have a username and password. A completed and signed IQ
Administrator Set-Up form is required as part of the Broker Application process. This form allows
clients to receive a username and password in order to access IQ. The IQ Set-Up Form can be
found on Icon’s website under the Broker Approval link.

An IQ User Guide with instructions for navigating within Icon IQ is also available on the website.

Client support is available through Icon’s IQ Help Desk Monday through Friday 8:00 am – 5:00
pm PST. Contact the Help Desk as follows:

        •       Phone: (888) 706-4483
        •       Email: iconiq@iconresidential.com




Icon Lending Guide - Section 500                                                       Revised 4/22/10
                       Section 600 - General Underwriting Guidelines
                                         Table of Contents


600 – Introduction
610 - Underwriting Philosophy
620 - Predatory Lending
630 - State Regulations & Restrictions
640 – Eligibility
641 - Borrower Eligibility
641.01 Eligible Borrowers
641.02 Ineligible Borrowers
641.03 Co-Borrower
641.04 Non-occupant Co-Borrower
641.05 Non-Borrowing Spouse
641.06 Separated Borrower
641.07 Living Trust/Inter Vivos
641.08 Power of Attorney
641.09 Permanent Resident Alien
641.10 Non-permanent Resident Alien
641.11 First Time Homebuyer
641.12 Payment Shock
641.13 Non-arms Length Transaction
641.14 At-interest Transaction

642 - Eligible Transactions
642.01 Purchase Transactions
642.01.1 Auction Transactions
642.01.2 FHA Short Sale
642.02 Refinance Transactions
642.02.1 Limited Cash-Out (Rate/Term)
642.02.2 Cash-out
642.02.3 Texas Section 50(a)(6) (Texas cash-out)
642.02.4 FHA Short Payoff
642.03 Inherited Properties
642.04 Construction to Permanent
642.04.1 Limited Cash-Out Refinance (Rate/Term)



Icon Lending Guide – Section 600                                       Revised 10-22-12
642.05 Contract of Sale/Land Contract
642.05.1 Purchase
642.05.2 Refinance
642.06 Lease Option
642.07 Continuity of Obligation
642.08 Multiple Properties Owned
642.09 Multiple Loans to One Borrower
642.10 Ineligible Transactions

643 - Documentation Eligibility

650 – Credit
650.01 Traditional Credit
650.02 Non-Traditional Credit
650.03 Credit Report
650.04 Unacceptable Credit Report Practices
650.05 Consumer Credit Bureau Blocks
650.06 Credit Score
650.07 Determining the Representative Score
650.08 Reviewing Credit History & Analysis of Risk
650.09 Social Security Number
650.10 Potential Red Flags on Credit Report
650.10.1 Incorrect, Duplicate and Multiple SSN
650.10.2 Credit Report Alerts
650.10.3 Address & Employment Discrepancies
650.10.4 Inquiries
650.10.5 Changes in Credit Usages
650.11 Authorized Users
650.12 Payment History
650.13 Mortgage/Rental History
650.14 Derogatory Credit
650.14.1 Past Due
650.14.2 Disputed Accounts
650.14.3 Bankruptcy/Foreclosure/Deed-in-Lieu/Short Sale
650.14.4 Forbearance
650.14.5 Consumer Credit Counseling
650.14.6 Tax Liens and Judgments
650.14.7 Unpaid Collections/Charge-offs


Icon Lending Guide – Section 600                          Revised 10-22-12
660 - Ratios/Liabilities
660.01 Housing Ratio
660.02 Debt-to-Income Ratio
660.03 Conversion of a Principal Residence
660.04 Qualifying Ratios
660.05 Liabilities
660.05.1 Debt Payoff/Consolidation
660.05.2 Revolving
660.05.3 Installment Debt
660.05.4 Lease Payments
660.05.5 Deferred Installment Debt
660.05.6 Loans Secured by Retirement Accounts
660.05.7 Business Debt
660.05.8 HELOC
660.06 Contingent Liabilities/Co-Sign
660.06.1 Court Ordered Assignments of Debt
660.06.2 Property Settlement “Buyout”
660.06.3 Mortgage Assumptions
660.07 Other Types of Liabilities
660.07.1 Alimony/Child Support
660.07.2 Garnishment
660.07.3 Bridge Loans
660.07.4 Demand Loans
660.07.5 Net Rental Loss/Negative Rental Income
660.07.6 Un-Reimbursed Business Expenses
660.07.7 Overdraft Protection
660.07.8 Payroll Deductions
660.07.9 Special Assessments

670 - Employment & Income
670.01 Employment Stability
670.02 Verbal Verification of Employment
670.03 Sources of Income
670.03.1 Wage Earner
670.03.2 Automobile Allowance
670.03.3 Bonus Income
670.03.4 Commission Income



Icon Lending Guide – Section 600                  Revised 10-22-12
670.03.5 Military Income
670.03.6 Overtime Income
670.03.7 Part-Time, Second Job & Multiple Job Income
670.03.8 Seasonal Job Income
670.03.9 Trailing Spouse/Co-borrower Income
670.03.10 Self-Employed Income
670.03.11 Non-Salaried Income, Fixed Income, & Additional Sources of Income
    670.03.11(a) - Alimony /Child Support
    670.03.11(b) - Boarder Income
    670.03.11(c) - Capital Gains
    670.03.11(d) - Disability Benefits
    670.03.11(e) – Education Benefits
    670.03.11(f) - Foster Care Income
    670.03.11(g) - Interest and Dividend Income
    670.03.11(h) - Mortgage Differential Payments
    670.03.11(i) - Notes Receivable
    670.03.11(j) - Public Assistance Income
    670.03.11(k) - Rental Income
    670.03.11(l) - Retirement or Pension Income
    670.03.11(m) - Royalty Income
    670.03.11(n) - Social Security Income
    670.03.11(o) -Trust Income
    670.03.11(p) - Unemployment Benefits
    670.03.11(q) - VA Benefits
    670.03.11(r) – Tip Income
670.03.12- 4506-T Forms

680 – Assets
680.01 Ineligible Sources of Assets
680.02 Acceptable Sources of Assets
680.02.1 - Checking/Savings Accounts
680.02.2 - Business Funds
680.02.3 - Deposit on Sale
680.02.4 - Government Bonds
680.02.5 - IRA/Retirement/Keogh Accounts
680.02.6 - Inheritance
680.02.7 - Insurance Settlement



Icon Lending Guide – Section 600                                              Revised 10-22-12
680.02.8 - Life Insurance
680.02.9 - Pooled Funds
680.02.10 - Stocks, Bonds, & Other Investments
680.02.11 - Trust Account
680.02.12 - Bridge or Swing Loan
680.02.13 - Trade Equity
680.02.14 - 1031 Exchange
680.02.15 - Lease/Rent with Option to Purchase
680.02.16 - Land Equity
680.02.17 - Borrowed Secured Funds
680.02.18 - Community Seconds and Subsidy Programs
680.02.19 - Subordinate Financing
680.02.19 – Portfolio DU Refi Plus Subordinate Financing
680.02.20 - Seller Carry Back
680.02.21 - Sale of Personal Property
680.02.22 - IRS Refund
680.02.23 - Repayment of Debt
680.02.24 - Existing Home Equity
680.02.25 - Gift Funds
680.02.26 - Gifts of Equity
680.02.27 - Gifts from a Relative
680.02.28 - Gifts from a Church, Municipality, or Non-profit Organization
680.02.29 - Contributions by Interested Third Parties

    680.02.29 (a) - Interested Party Contributions
    680.02.29 (b) - Sales Concessions

690 - Property Valuation
690.01 Appraiser Requirements
690.02 Appraisal Requirements
690.03 Unacceptable Appraisal Practices
690.04 Acceptable Appraisal Forms
690.04.1 - Single Family Residence
690.04.2 - Multi-Family Residences
690.04.3 - Condominium Units
690.05 Required Appraisal Attachments
690.06 Additional Appraisal Requirements
690.07 Electronic Appraisals



Icon Lending Guide – Section 600                                            Revised 10-22-12
690.08 Age of the Appraisal
690.09 Acceptable Age of Appraisal for Loans requiring a Second Appraisal
690.10 Final Inspections/Completion Report & Appraisal Update
690.11 Declining Markets
690.12 Recently Remodeled or Renovated Properties
690.13 Other Property Characteristics
690.13.1 - Accessory Apartments/Non-permitted Additions/Granny or In-Law Units
690.13.2 - Deed Restrictions
690.13.3 - Deferred Maintenance
690.13.4 - Electrical Systems
690.13.5 - Environmental Hazards
690.13.6 - Excess Land/Acreage
690.13.7 - Foundation Settlement
690.13.8 - Functional Kitchen
690.13.9 - Heating Systems
690.13.10 - Illegal & Non-Conforming Use
690.13.11 - Leaseholds
690.13.12 - Multiple Dwellings
690.13.13 - Plumbing
690.13.14 - Private Roads
690.13.15 - Private Water Supply
690.13.16 - Repair Requirements
690.13.17 - Rural Properties
690.13.18 - Security Bars
690.13.19 - Sewage Disposal System
690.13.20 - Survey
690.13.21 - Termite Report and Clearance
690.13.22 – Roof Inspection
690.14 Ineligible Properties
690.15 Analysis of the Appraisal
690.16 Appraisal Reviews
690.16.1 – Appraisal Reviews for High Balance Conforming Loans

690.17 Condominiums & PUDs
690.17.1 - New Projects
690.17.2 - Established Projects
690.17.3 - Ineligible Projects



Icon Lending Guide – Section 600                                                 Revised 10-22-12
690.17.4 - Types of Project Review
690.17.5 - Limited Review
    690.17.5(a) - Attached Units
    690.17.5(b) - Detached/Site Condominiums
690.17.6 – CPM Expedited Project Review
    690.17.6(a) - New Projects
    690.17.6(b) - Established Projects
690.17.7 - FHA Approved Projects
690.17.8 - Fannie Mae Review
690.17.9 - Lender Full Review
    690.17.9(a) - Additional Requirements for Lender Full Review for Established Projects (excluding 2-4
    unit projects)
    690.17.9(b) - Additional Requirements for Lender Full Review for New Projects (excluding 2-4 unit
    projects)
    690.17.9(c) - Additional Requirements for Two-Four Unit Projects
    690.17.9(d) - Evaluation of the Condominium Documents
        Common Ares & Facilities
        Project Management
        Articles of Incorporation
        CC&Rs, By-Laws
        Budget
        Insurance
        Condominium Questionnaire
690.18 PUDs (Attached & Detached)

Refer to Icon’s website for specific program matrices.




Icon Lending Guide – Section 600                                                          Revised 10-22-12
600 – Introduction

Icon Residential Lenders (Icon) is dedicated to the origination of quality loans. This manual and the
underwriting guidelines that follow provide criteria, direction and consistency for underwriting loans.
Although Icon’s loans are sold to many investors, our programs follow Fannie Mae and FHA standard
guidelines. The intent of this manual is to provide the guidelines that differ from the published policies of
Fannie Mae and FHA. However, this manual is not all inclusive of all situations that may arise from loan to
loan. These guidelines are parameters and are not definitive. Icon utilizes prudent mortgage compliance
underwriting when evaluating loans. These underwriting guidelines may change without notice to meet our
investors’ requirements and market needs.

610 - Underwriting Philosophy

Icon implements the fundamental requirement that the terms of the loan be related to the probability of the
borrower’s repayment and to the value and marketability of the mortgaged property.

Icon will underwrite, analyze, and perform a quality control audit on each file. Each loan is underwritten with
emphasis placed on the overall quality of the loan. Occasionally, Icon may apply underwriting criteria which
is either more stringent or more flexible than current market conditions. The loan package must contain
sufficient information to enable the underwriter to conclude an informed and knowledgeable decision. In the
event the loan requires different parameters then those stated in this manual, the more conservative
guideline will apply.

In determining a credit decision, Icon evaluates the three “C’s” of underwriting: credit, collateral, and
capacity.

Briefly stated, the credit is evaluated for borrower’s willingness and ability to repay the mortgage in addition
to all other current obligations. In addition, borrower has demonstrated a history of paying the obligations in
a timely manner. The collateral is evaluated to ensure the market value is accurately represented; the
improvement conforms to the neighborhood and has good marketability. All aspects of the borrower’s profile
are evaluated to determine if the borrower has the stability of employment, the savings history, and a
demonstrated performing credit history resulting in the borrower’s capacity to repay the mortgage in a timely
manner.

Each of these topics will be discussed in greater detail in the manual.

620 - Predatory Lending

Icon Residential Lenders is committed to the practices of fair lending. All persons involved with the
mortgage origination process are expected to comply with all laws and regulations which apply to the
mortgage industry. Each individual is responsible for becoming familiar with and practicing the fair lending
regulations set forth by the federal and state government.

Icon Residential Lenders complies with the provisions of the Equal Credit Opportunity Act when evaluating
an applicant’s loan request. Icon does not discriminate against any applicant on the basis of race, color,
religion, national origin, sex, marital status, family status, age, receipt of public assistance or if the individual
has exercised in good faith any right under the Consumer Credit Protection Act.

Icon Residential Lenders will not permit any High Cost loans as defined by HOEPA or any “High Cost”,
“threshold”, “covered”, or “predatory” loans as defined by federal, state or local law.




Icon Lending Guide – Section 600                                                                   Revised 10-22-12
630 - State Regulations & Restrictions

Icon Residential Lenders will lend in all states except Alaska. Some programs offered by Icon may not be
available in specific states due to state law. It is the responsibility of the submitting broker to ensure the loan
complies with all state regulations. Copies of all federal and state required disclosures are to be included in
the loan file at the time of submission.

No payments to the mortgage broker are permitted unless the service was actually rendered and is
reasonably related to the value of the service. This includes, but is not limited to the Mortgage Broker Fee
and Yield Spread Premium. At the time of application, the mortgage broker must disclose the exact amount
of the total compensation the broker will receive from any source, including the lender. Any undisclosed
fees or fees in excess of the initial disclosure will be credited to the borrower to pay closing costs, if
permitted by program guidelines.

All refinance transactions must have a net tangible benefit to the borrower. Icon’s underwriter must use
standard industry practices to verify borrower’s income, employment, assets, etc and to determine the
borrower has the ability to repay the loan.
New York – All transactions secured by a property in New York requires the use of an Icon approved closing
attorney.
North Carolina – North Carolina’s rate spread home loan applies to the following loans:
        The borrower is a natural person,
        The debt is incurred primarily for personal, family or household purposes,
        The principal amount of the loan does not exceed the Fannie Mae conforming loan limits for a single
         family dwelling,
        The loan is secured by a manufactured home or a 1-4 unit family dwelling, either existing or the loan
         proceeds will be used for construction, and is, or will be, the borrower’s primary residence.
A rate spread home loan is defined as a loan where the APR exceeds each of the following thresholds:

        For First Lien Loans: (i) the yield on U.S. treasury securities having comparable periods of
         maturity on the 15th day of the month prior to the loan application by 3% or more; (ii) the
         conventional mortgage rate published in FRB Statistical Release H-15 for fixed-rate first
         mortgages during the week preceding the week in which the interest rate is set by 1.75% or more;
         and (iii) the average prime offer rate for a comparable transaction as of the date the interest rate is
         set by 1.5% or more.
        For Junior Lien Loans: (i) the yield on U.S. treasury securities having comparable periods of
         maturity on the 15th day of the month prior to the loan application by 5% or more; (ii) the
         conventional mortgage rate published in FRB Statistical Release H-15 for fixed-rate first
         mortgages during the week preceding the week in which the interest rate is by 3.75% or more; and
         (iii) the average prime offer rate for a comparable transaction as of the date the interest rate is set
         by 3.5% or more.
If the loan meets the above criteria, the loan is a rate spread home loan and is ineligible for financing with
Icon.

Rhode Island – All refinance transactions that are paying off an existing mortgage that refinanced the
property within the previous five (5) years must have a net tangible benefit to the borrower. A copy of the
Rhode Island Home Loan Protection Act Disclosure Net Tangible Benefit form (Form 3 HLPA) must be
signed by the broker and/or lender and the borrower and included in the loan file.




Icon Lending Guide – Section 600                                                                 Revised 10-22-12
Virginia – Icon’s underwriter must complete the Virginia Anti-Flipping Worksheet for all refinances paying off
an existing mortgage that refinanced the property within the previous 12 months. A copy of the existing note
may be required.

640 – Eligibility

Icon Residential Lenders will only extend credit to individual applicants/borrowers. An applicant is defined
as anyone who applies for funds in the form of a loan secured by real property with the obligation of repaying
the debt in full with interest. The borrower is the individual obligated to repay the loan secured by the
mortgage premises. For the loan to be eligible, the applicant(s) must conform to certain eligibility
requirements.

641 – Borrower Eligibility

641.01 – Eligible Borrowers
Eligible borrowers are:
        A natural person.
        U.S. citizens or permanent resident aliens and must have a valid social security number.
        Non-permanent resident aliens with valid social security number. Refer to Section 641.10 – Non-
         Permanent Resident Alien for requirements.
        Borrowers who have attained the legal age according to the local and state jurisdiction where the
         property is located. The borrower must be able to enter into a binding contract prior to the execution
         of the Note and Security Instrument. There is no maximum age limit for the borrower.

641.02 - Ineligible Borrowers
Ineligible borrowers are:

        Borrowers without a valid, legitimate social security number
        Foreign nationals
        Borrowers with diplomatic immunity
        Borrowers who do not meet the eligibility requirements set forth in this manual.
        Corporations, estates, life estates, limited or general partnerships, not-for-profit organizations,
         schools, churches, etc.
        Co-signer. A co-signer is an applicant who does not take title to the security property. A co-signer
         does not have an interest in the subject property but executes the loan application and signs the
         mortgage note. A co-signer is ineligible for financing with Icon.
        Borrower’s who are employed by the submitting broker or brokerage, regardless of job function.
        Borrowers using a General Power of Attorney or a Specific Power of Attorney on cash out refinance
         transactions or non-owner occupied transactions, or loans closing in the name of a trust.




Icon Lending Guide – Section 600                                                                 Revised 10-22-12
641.03 - Co-Borrower

A co-borrower is an individual who applies jointly with the applicant for shared or joint credit and who takes
title to the property and is obligated on the mortgage and the note. The co-borrower must execute the Note
and the Security Instrument.

The income, assets, liabilities of the co-borrower must be documented if used as a basis for loan
qualification.

The liabilities of the co-borrower or co-signer must be considered if the borrower resides in a community
property state, if the subject property is located in a community property state, or if the borrower is relying on
other property located in a community property state as a basis for repayment of the loan.

641.04 - Non-Occupant Co-Borrower

A non-occupant co-borrower is a credit applicant who:

        Do not occupy the subject property as a principal residence;

        May or may not have an ownership interest in the subject property as indicated on the title;

        Sign the note or security instrument;

        Have joint liability for the note with the borrower(s); and

        Do not have an interest in the property sales transaction such as the property seller, the builder, or
         the real estate broker.

The following applies when a non-occupant co-borrower is on the loan:

        The maximum LTV is 90%.
        The occupying borrower must contribute a minimum of 5% of the purchase price towards the down
         payment from his/her own funds.
        The occupying borrower must demonstrate the ability and willingness to repay the mortgage.
        The maximum ratios for the occupying borrower are 35% / 43% regardless of AUS Findings.
         Exceptions to the maximum ratios will be determined on a case-by-case basis. The loan must
         contain compensating factors and receive an AUS Approve/Eligible Finding. A pricing adjustment
         may apply.
        The income from the non-occupant co-borrower cannot be used for qualifying.

         NOTE: The income can offset certain weaknesses that may be in the occupant borrower’s loan
               application, such as limited financial reserves or limited credit history.

                   DU will analyze the risk factors in the loan without the benefit of the non-occupant co-
                   borrower’s income. DU will not require verification of the employment or income.

        Although the income from the non-occupant co-borrower can be used to offset certain weaknesses
         of the occupying borrower (i.e.: limited reserves, limited credit history, higher than normal qualifying
         ratios), the income from the non-occupant borrower cannot be used to offset significant or recent




Icon Lending Guide – Section 600                                                                Revised 10-22-12
         instances of major derogatory credit in the occupant borrower’s credit history or lack of stable
         employment history.
        The non-occupying co-borrower must be a blood or legal relative, domestic partner, fiancée or
         fiancé.
        If the occupying borrower does not meet the above requirements, the loan will be reviewed as an
         investment property.
        Some programs may not permit non-occupant co-borrowers. Refer to program description for
         eligibility.
        Transactions with a non-occupant co-borrower are subject to MI availability on LTVs > 80%.

The Agency Conforming fixed rate loan product allows the maximum qualifying ratios requirement of
35%/43% for the occupying borrower to be waived provided all of the following criteria is met:
        The LTV is ≤ 80%
        There is no subordinate financing
        Subject is 1-unit
        Purchase or limited cash out refinance
        AUS Approve/Eligible finding

NOTE: The income from the non-occupant co-borrower still cannot be used for qualifying even if the
      borrower meets the above criteria.

641.05 - Non-Borrowing Spouse/Non-Purchasing Spouse

Icon Residential Lenders will accept loan applications from married applicants whose spouse is not a part of
the loan transaction. A non-borrowing spouse may have rights in a property either as a co-owner of the
property, state community property rights, or marital rights laws. The non-borrowing spouse is required to
execute the security instrument and all applicable documents as applicable per statutory or decisional law of
the state to create a valid lien, pass clear title, and waive rights to the property.

Non-borrowing spouse signature requirements, as detailed above, will apply to non-borrowing domestic, civil
union partners and same sex marriage borrowers on loans secured by property located in the following states:

        California
        District of Columbia
        Connecticut
        Illinois
        Iowa
        Massachusetts
        Nevada
        New Hampshire
        New Jersey
        Oregon
        Vermont




Icon Lending Guide – Section 600                                                              Revised 10-22-12
641.06 - Separated Borrower

If a borrower is separated, documentation is necessary to determine the division of assets, liabilities, and
potential obligations.

If the borrower is legally separated, a copy of the recorded legal separation agreement is required in order to
exclude specific obligations that would otherwise be included in the borrower’s qualifying ratios.

641.07 - Living Trust/Inter Vivos Revocable Trust

Icon Residential Lenders will accept loans in the name of an Inter Vivos Revocable trust (also called a living
trust, family trust, or revocable living trust). A copy of the recorded trust documents should be included with
the loan submission. At least one of the individuals must be a Primary Beneficiary and an occupying
borrower whose income and assets are used to qualify for the loan. Also, if no institutional trustee was
appointed, this same individual must be a trustee.

The living trust agreement must contain specific language giving the trustee the power to revoke the trust.
The trustor can change or cancel the trust at any time for any reason during the trustor’s lifetime. The ability
to revoke the trust allows the trustor to regain control of the property.

The mortgaged property held in the trust may be owner occupied single family (condo and PUD included), or
a second home. Investment property is not permitted. At least one of the trustor’s whose income and
assets are used to qualify must occupy the property.

The trustee must execute the Note, the Security Instrument, and all applicable riders/addendums. Each
applicant must execute the promissory Note and all applicable addendums. The trustee is to execute the
appropriate documents using the following format:
“(Name of Trustee), Trustee of the (Name of Trust) under trust instrument dated (Date of Trust), for the
benefit of (Name of Beneficiary)”. The beneficiary is the borrower.

Trustee is also to execute the acknowledgement of all terms and covenants contained in the Security
Instrument and applicable riders. If borrower does not execute this, the borrower must sign as a trustee and
as an individual.

An Attorney’s Opinion Letter from the borrower’s attorney is required to verify the following:
        The trust was validly created and is duly existing under applicable law
        The trust is revocable
        The borrower is the settler of the trust and the beneficiary of the trust
        The trust assets may be used as collateral for a loan
        The trustee is:
             Duly qualified under applicable law to serve as trustee
             Is the borrower
             Is the settler
             Is fully authorized under the trust documents and applicable law to pledge or otherwise
              encumber the trust assets

In lieu of an Attorney’s Opinion Letter verifying the above, a Trust Certification from the title company is
permitted in the following states:




Icon Lending Guide – Section 600                                                                 Revised 10-22-12
Alabama, Arizona, Arkansas, California, Delaware, District of Columbia, Idaho, Iowa, Kansas, Maine,
Michigan, Minnesota, Missouri, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Ohio,
Oregon, Pennsylvanian, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, and
Wyoming.

The title commitment cannot contain any exceptions to coverage based on the mortgaged property being
held in a trust.

A Power of Attorney is not allowed if the loan is closing in the name of a trust. The trustee must execute the
documents.

Loans may be closed in the name of one trust only; multiple trusts are ineligible.

641.08 - Power of Attorney

Icon will allow a Specific Power of Attorney appointed by the borrower for purchase and rate/term refinance
transactions. A Power of Attorney (POA) is ineligible on:
        Cash out refinance transactions
        Loans closing in the name of a trust.
        Investment property transactions.
A signed letter of explanation is required from the borrower as to why the borrower cannot sign the final
documents and is appointing a POA for the transaction

Requirements for the Power of Attorney:
        Cannot be a party to the transaction
        Is preferably a family member of the borrower.
        Must be specific to the transaction and indicate the property address.
        Must be signed and dated on or before the date of the Note.

The POA must be approved by Icon Management prior to docs. The original 1003, original initial disclosures,
and purchase contract (if applicable) signed by the borrower is required.

641.09 - Permanent Resident Alien

A Permanent Resident Alien is defined as an individual who is granted the right to work and live permanently
in the United States. Although Permanent Resident Aliens are not U.S. citizens, they are entitled to the
same rights, products, programs, and lending parameters as U.S. citizens.

A borrower who is a Permanent Resident Alien must meet the following requirements:
        Borrower has been employed in the United States with a 2-year employment history that is expected
         to continue for at least 3-years.
        Borrower must have a 2-year credit and income history.
Borrowers with less than a 2-year employment history in the United States may require additional credit,
asset and income references/documentation to support the credit decision. Only documentation that meets
the same standards for authenticity, accuracy, and completeness that applies to other types of
documentation should be considered.

A copy of the front and back of the borrower’s Green Card is required for all permanent resident aliens
whose income and/or assets are being used to qualify for a loan.



Icon Lending Guide – Section 600                                                             Revised 10-22-12
NOTE: The Green Card states “Do Not Duplicate” for the purpose of replacing the original card.
      The U.S. Citizenship and Immigration Services (USCIS) does however allow photocopying of the
      Green Card. Making an enlarged copy or copying on colored paper may alleviate any concern the
      borrower may have with photocopying.

641.10 – Non-permanent Resident Alien

Non-permanent resident aliens are required to provide evidence of work authorization status per program
requirements.

All standards for determining stable monthly income, adequate credit history and sufficient liquid assets must
be applied in the same manner to non-permanent resident alien borrower(s). A valid social security number
is required.

The following are acceptable evidence of the borrower’s work authorization status:

        An unexpired Employment Authorization Document (EAD) issued by the United States Citizenship
         and Immigration Services (USCIS), or
        An unexpired visa.

The following are acceptable visa types:

   E-1, Treaty Trader. The E-1 visa is essentially the same as the H-1 or L-1 visa. The title refers to the
    foreign country’s status with the United States.

   G Series (G-1, G-2, G-3, G-4, and G-5). G Series Visas are given to employees of international
    organizations that are located in the United States. Examples include United Nations, Red Cross,
    UNICEF and the International Monetary Fund. Applicants with diplomatic immunity are not eligible.
    Verification that the applicant does not have diplomatic immunity must be obtained from the applicant’s
    employer and/or from the applicant’s passport.
    NOTE: World Bank employees with a G series visa are ineligible.

   H-1, Temporary Worker. The H-1 visa is the most common type of visa. This visa is given to foreign
    citizens who are temporarily working in the United States.

   L-1, Intra-Company Transferee. L-1 visas are given to professional employees whose company’s main
    office is in a foreign country.

   TN, NAFTA Visa. This visa is used by Canadian or Mexican citizens for professional or business
    purposes.
If the authorization for temporary residency status will expire within one year and a prior history of residency
status renewals exist, continuation may be assumed. If there are no prior renewals, the likelihood of renewal
must be determined, based on information from the USCIS.




Icon Lending Guide – Section 600                                                              Revised 10-22-12
641.11 - First Time Homebuyer

Agency guidelines define a first time homebuyer (FTHB) as an individual who is purchasing a property and
has not had any ownership interest (sole or joint) in a residential property during the previous 3 year period
preceding the date of purchase of the subject property. Acceptable occupancy types are as follows:

        Primary residence
        Second home
        Non-owner occupied (investment) property
First time homebuyers purchasing an owner-occupied primary residence may be a part of a non-arms length
transaction.

641.12 - Payment Shock

Payment shock applies to the percentage of increase of the proposed housing payment in relation to the
existing housing payment. Payment shock is considered when determining the risk and evaluating the
borrower. Generally, Icon prefers the payment shock to be less than 200%. However, borrowers with a
higher payment shock are eligible based on the entire loan documentation, credit depth, employment history,
reserves, etc. Not all programs limit the payment shock but payment shock may apply in cases of layered
risk.

For example: borrower rents for $1200 per month. Proposed PITI on purchase transaction is $3500. The
payment shock is 192%. $1200 - $3500 divided by $1200 = 191.67%.

641.13 – Non-Arms Length Transactions

A non-arms length transaction exists anytime the applicant has a personal or business relationship with any
other entity related to the loan. Examples of non-arms length transactions are family sales or transfers,
builder/developer transactions, renters buying from landlords, employees working for a family
member/relative. Non-arms length transactions are considered on a case-by-case basis on owner-occupied
transactions only.

There are no exceptions to the parameters and documentation requirements listed below:

   Principals, senior managers, employees or family members of a submitting broker or lender are
    ineligible.
   Model home builder leasebacks are ineligible.
   Borrowers employed by the Seller, in the construction or lending trades:
        1-2 unit properties only
        Relationship must be disclosed on original application.
        Second appraisal by Icon approved appraiser required.
        A loan secured by the builder/developer for a property owned by the builder/developer is ineligible.
        If the property is new construction, only primary residences are eligible if the borrower has an
         affiliation with the builder/developer/seller.
   In-Family Sales:
        Principal residence only
        24 month satisfactory credit rating on existing mortgage required (i.e. no family bail-out)



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        Transactions that involve family members purchasing the property from another family member and
         the property is a short sale are ineligible.
   Borrower employed by a family member:
        Borrower must provide the last 2 years 1040’s and a current paystub.
        Executed and processed 4506-T.
        Documentation is required evidencing borrower does not have 25% or greater interest in the family
         business; if borrower does have 25% or greater interest, the borrower will be considered self
         employed and qualified accordingly.
   Buying from landlord:
        Eligible with 12 months cancelled checks.
        Transactions that involve the tenant purchasing the property from the landlord and the property is a
         short sale are ineligible.

All non-arms length transactions require the appraiser to acknowledge the non-arms length transaction as
well as comment if the market value of the property has been affected by the non-arms length transaction.

Second home and investment properties that are a non-arms length transaction are ineligible.

Section 641.14 – At-interest Transactions

An at-interest transaction involves persons who do not have close ties or are not related but may have a
greater vested interest in a transaction. An example would be a person who plays more than one role in the
same transaction (listing/selling agent and mortgage broker). At-interest transactions inherently carry an
increased risk due to the greater vested interest in the transaction by one of the parties. The following are
examples of at-interest transactions:
        Builder also acting as realtor/broker
        Realtor/broker selling own property
        Realtor/broker acting as listing or selling agent as well as the mortgage broker.

At-interest transactions are considered non-arms length transactions and will be considered on a case-by-
case basis.

The following at-interest transactions are ineligible.
        The broker is selling their own property
        The broker is acting as the listing agent as well as the mortgage broker.
    NOTE:      Icon will consider an at-interest transaction when the broker is acting as the selling agent
               (buyer’s agent) as well as the mortgage broker as follows:
                        Agency Conforming and High Balance: Owner-occupied transactions only.
                        Portfolio Conforming and High Balance: Owner-occupied, second home and
                         investment transactions
    The broker cannot have any other relationship or close ties to the borrower other than the broker/realtor
    relationship.
Second home and investment properties that are an at-interest transaction are ineligible except as noted
above.
At-interest transactions are subject to the following requirements:

        Borrower must provide a copy of the canceled earnest money check to verify payment to the seller.


Icon Lending Guide – Section 600                                                             Revised 10-22-12
        The borrower must be able to verify that 5% of the sales price has been saved, however these funds
         do not have to be used toward the down payment.
        Borrower is not now, nor has been in the previous 24 months, on title to the property.
        A payment history of the existing mortgage on the subject property evidencing no delinquent
         payments in the most recent 12-months
        A written explanation of the relationship between the borrower and the seller and the reason for the
         purchase must be provided by the borrower.
        At minimum, an enhanced desk review or a 2055 is required. Additionally the appraiser must verify
         the properties last sale date and price and must provide recent listing and/or marketing materials.
         The purchase contract must also be reviewed. Refer to Section 690.16 – Appraisal Reviews for
         Icon’s approved Appraisal Review Companies.

642 - Eligible Transactions

642.01 - Purchase Transactions
A purchase transaction is a transaction in which the proceeds are used to finance the purchase of a
property. The LTV is based on the lower of the sales price or current appraised value. A copy of the fully
executed purchase contract and all attachments or addenda is required for all purchase transactions. Any
changes/alterations to the purchase contract must be initialed by all parties involved in the transaction.
Icon requires the seller to be on title a minimum of 90 days. Icon will allow the purchase of a property where
the seller is the owner of record ≤ 90 days on the Portfolio Program only, subject to MI company guidelines.
Properties in which the seller has been on title less than 6 months and the value has increased will be
prudently evaluated. The appraiser must justify any increase in value. When utilizing an ARM product on
the Agency Conforming or Agency High Balance program, the seller is required to be on title a minimum of
12 months. If the property has been sold >3 months but <12 months the loan will require additional
underwriter review to ensure that there has been no foreclosure bail-out, a distressed sale, inflated value
due to unsubstantiated improvements, etc.
Purchase transactions in which the seller is a corporation and not an individual (i.e. an REO property, an
LLC, etc,) will require documentation that the individual signing the purchase contract is an authorized
representative of the corporation.

The borrower cannot receive any monies back from the transaction unless the cash back is for overpayment
or reimbursement of borrower’s fees, or reimbursement for costs paid by the borrower in advance.
Cancelled checks from the borrower are required to evidence the fees paid.

Icon will not accept a re-negotiated purchase contract that increases the sales price after the appraisal has
been completed if:

        The appraised value is higher than the originally contracted sales price that was provided to the
         appraiser, and
        The new purchase agreement and/or addendum to the purchase agreement is dated after the
         appraisal, and
        The only change to the purchase agreement was the sales price.
If the purchase agreement was renegotiated after the completion of the appraisal, the LTV will be based on
the lower of the original purchase price or the appraised value, unless:
        The renegotiation was only for seller paid closing costs and/or pre-paids where seller paid closing
         costs/pre-paids are common and customary for the area and are supported by the comparables, or



Icon Lending Guide – Section 600                                                             Revised 10-22-12
        The purchase contract was amended for a new construction property due to improvements that
         have been made that impact the tangible value of the property. An updated appraisal must be
         obtained to validate the value of the improvements.

642.01.1 – Auction Transactions

Properties purchased at auction are subject to the following.

Eligible property types:
        Single family residence (attached or detached)
        2-4 units

All occupancy types are eligible. Investment transactions require a minimum credit score of 720 (unless a
specific program is more restrictive) and a 5% reduction of the LTV/CLTV.

The maximum LTV/CLTV is calculated from the lesser of the accepted bid plus the auction buyer’s premium
or the appraised value. Only the auction buyer’s premium can be added to the accepted bid to determine
the total purchase price.

The auction terms must be included as part of the purchase contract provided to the appraiser for review. If
the combined auction buyer’s premium and the sales/marketing charges or fees exceed 12% of the total
purchase price, the amount over 12% must be deducted from the purchase price.

Any expenses for repairs that will be itemized on the seller’s side of the HUD-1 require full documentation of
the repair(s) including but not limited to contracts, supporting work orders, or other acceptable
documentation in order to exclude these charges from the 12% cap. If documentation is not provided, the
repair fees must be included in the 12% cap.

Real Estate Owned (REO) properties obtained through an auction must have a Collateral Consultation
Review (CCR) performed by RELS. Icon will order the CCR

The following requirements apply to the auction house:
        Must be licensed, if required, and in good standing in the state where the auction took place.
        Must have been in business, at minimum, one year.

The following additional auction house requirements apply if the subject property was not previously
occupied OR the property was previously occupied and the appraiser identifies multiple auctions in the same
neighborhood (as defined by the appraiser).
        Auction house or auctioneer has no ownership interest in the properties being auctioned
        Auction house or auctioneer is not affiliated with the seller/developer of the property
        The contract between the auction house and seller has been reviewed and the requirements for all
         parties are reasonable and in line with industry standards, including, but not limited to:
             Services rendered and fees charged are reasonable and standard for the transaction.
             No price guarantee is made aside from establishment of a minimum bid or reserve price.

Parties named on the contract must match the supporting documentation (i.e. appraisal, title, etc.)




Icon Lending Guide – Section 600                                                               Revised 10-22-12
642.01.2 – FHA Short Sale

Borrowers obtaining an FHA insured mortgage after a short sale are eligible as detailed below.

Eligible Borrowers

Borrowers are eligible for a new FHA insured mortgage as follows:
        The borrower was current on their mortgage and other installment debts at the time of the short
         sale, and
        The proceeds from the short sale served as payment in full.

Ineligible Borrowers

Borrowers are not eligible for a new FHA insured mortgage as follows:
        The borrower pursued a short sale agreement on their primary residence to take advantage of
         declining market conditions, and
        The borrower is purchasing, at a reduced price, a similar or superior property located within a
         reasonable commuting distance.

Borrowers in default at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA
insured mortgage for three (3) years from the date of the sale.

Borrowers who sold their home under FHA’s pre-foreclosure sale program are not eligible for a new FHA
insured mortgage for three (3) years from the date FHA paid the claim associated with the pre-foreclosure
sale.

Borrowers in default at the time of the short sale may be considered for an FHA insured mortgage on a
case-by-case basis if:

        The default was due to circumstances beyond the borrower’s control (i.e. the death of the primary
         wage earner, long term un-insured illness, etc.), and
        The credit report indicates the borrower had satisfactory credit prior to the circumstances that
         caused the default.

642.02 - Refinance Transactions

A refinance transaction replaces an existing loan(s) with a new loan to current owners, or places financing
on a property currently owned by the borrower where no financing exists. Refinance transactions will be
classified as either Limited Cash-out (Rate/Term) or Cash-out and must have a benefit to the borrower. This
can be evidenced by one or more of the following:

        Lower payment
        Lower interest rate
        Convert from ARM to fixed rate
        Pay off a balloon payment
        Convert from negative amortization loan to a fully-amortizing loan
        Consolidate debt
        Pay off tax lien


Icon Lending Guide – Section 600                                                               Revised 10-22-12
        Cash to pocket

NOTE: Depending upon the property’s location, additional evidence of benefit to the borrower may be
      required due to state or local regulations.

Properties listed for sale within the six months prior to underwriting are eligible for Icon financing with
evidence that the property was taken off the market prior to the application date.

642.02.1 - Limited Cash-Out (Rate/Term)

The LTV for any limited cash-out refinance is calculated on the current appraised value. Although there is
no minimum title-seasoning or mortgage seasoning requirement for limited cash-out refinance transactions,
Icon will prudently evaluate refinance transactions in which the borrower recently acquired title to the
property or recently refinanced the property.

Refinance transactions that are paying off an existing lien which was used to purchase the subject property
with less than one year mortgage seasoning, the LTV/CLTV will be based on the current appraised value.
Any increases in value must be adequately documented (i.e. comparables support increase in value and
market values are increasing, documentation of home improvements, or a copy of the original appraisal
showing subject property transferred below market value). If the increase in value cannot be supported, the
lower of the original purchase price or the new appraised value is used to determine the LTV/CLTV.

A limited cash-out may also be used to pay off an existing reverse mortgage. If the borrower receives cash
back greater than 2% of the loan amount or $2,000, whichever is less, then the transaction would be
considered a cash-out refinance and subject to cash-out guidelines

If the existing lien being paid off is less than 12 months and was cash out refinance transaction with a LTV
greater than 80%, the new loan is ineligible as a rate and term transaction.

If the existing lien being paid off was closed within the previous 6 months and the previous transaction was
cash out refinance, the new transaction will be considered cash out. The note date of the existing lien and
the note date of the new lien will be used in determining the 6 months time frame.

A property listed for sale within the previous six (6) months but was taken off the market prior to the
application date is eligible for a rate/term refinance transaction, however the borrower must provide written
confirmation of their intent to occupy the property if it is the borrower’s primary residence.

A restructured loan, a loan in which the terms of the original loan have changed resulting in the modification
of the original loan terms and/or forgiveness of a portion of the loan, is eligible for a refinance transaction
when the borrower has made twenty four consecutive months of timely mortgage payments under the terms
of the restructured loan (24 months of consecutive payments after the restructure) and the loan meets all
other refinance guidelines.

All refinance transactions must have a benefit to the borrower.

Borrowers must be obligated on the current mortgage loan. Refer to Section 642.07 - Continuity of
Obligation for details.

The mortgage amount is limited to sufficient funds required to accomplish the following:

        Pay off the unpaid principal balance of the existing first lien mortgage, including any prepayment
         penalty




Icon Lending Guide – Section 600                                                                 Revised 10-22-12
        Pay off the unpaid principal balance of any existing subordinate mortgage that was used to
         purchase the subject property, including any prepayment penalty. A copy of the Final HUD-I
         executed by buyer and seller from the previous transaction may be required.
        Pay closing costs (including prepaid expenses)
        Disburse incidental cash to the borrower of no more than $2,000 or 2% of the loan amount,
         whichever is lower. The maximum cash back to the borrower on the DU Refi Plus program is
         $250.00.
        Principal curtailments are not permitted with the exception of the DU Refi Plus program which allows
         minimal curtailments.

The proceeds from a rate and term transaction to buyout an ex-spouse is permitted as long as the borrower
provides a copy of the recorded settlement agreement indicating the spouse is to be bought out.
Texas rate/term refinance transactions, that are not subject to Texas 50(a)(6) requirements, are eligible for a
Renewal and Extension Rider if the loan is secured by the borrowers’ primary residence. The new loan
amount cannot exceed the payoff amount of the prior loan plus closing costs and any amounts that may
have been advanced by the lender. The borrower cannot receive cash-back and loan proceeds cannot be
used to pay off any other debts. The proceeds of the new loan are used to renew and extend a purchase
money first and if applicable, a purchase money second or qualified home improvement loan.
When a first mortgage lien that is being renewed and extended, it is not required to have a subordination
agreement on the second lien, unless the title company requires a subordination agreement to ensure that
the lien will remain in first lien position.
A Renewal and Extension Rider, provided by the title company must be recorded with the deed of trust in
lieu of the subordination agreement. Any loan that is shown as being paid off on the
HUD-1 must be listed on the Renewal and Extension Rider
NOTE:        This policy only applies to rate/term refinance transactions located in the state of Texas
             and only when the rate/term is not subject to Texas 50(a)(6) requirements.

642.02.2 - Cash-Out

A refinance is considered cash-out if it exceeds any of the limitations indicated for rate/term refinances, or if
it involves disbursement of loan proceeds to pay off or pay down unsecured or unseasoned debt.

The amount of cash disbursed in the form of paying off or paying down any unsecured or unseasoned debt
plus cash to the borrower may not exceed the limits specified in the program details based on occupancy,
CLTV, and documentation type. The maximum DTI on a cash-out transaction is 45%.

There is a 6-month title-seasoning and 6 months mortgage seasoning requirement for all cash out refinance
transactions. Any prior refinances (limited cash out or cash out) must have closed at least 6 months prior to
the note date of the new transaction.

The following also applies to cash-out transactions:


              If the property was acquired less than 6 months from the application date, the loan is ineligible
               for cash out refinance transaction on the Agency program.
              A cash-out refinance within six months of a purchase, when no financing was obtained for the
               purchase transaction, is allowed on the Portfolio program, subject to the following:
                  The maximum amount of the new loan cannot be greater than the actual documented
                   amount of the borrower’s initial investment in purchasing the property plus the financing of



Icon Lending Guide – Section 600                                                                Revised 10-22-12
                   closing costs, prepaid fees, and points (subject to the maximum LTV/CLTV for the product).
                   LTV is based on the current appraised value.
                  The purchase transaction was an arms-length transaction.
                  The HUD-1 from the original transactions is required to confirm that there was no mortgage
                   financing used to obtain the property.
                  The source(s) of the funds used to purchase the property can be documented (i.e. bank
                   statements, personal loan documents, HELOC against another property) and were the
                   borrower’s own funds. If gift funds were used to purchase the property, the transaction is
                   ineligible
              NOTE:       The preliminary title documentation must not indicate any existing liens on the subject
                          property. If the source of the funds to purchase the property was a HELOC secured
                          by another property, the new HUD-1 must reflect that the HELOC has been paid off
                          with the proceeds from the new cash-out transaction.
                  An “Approve/Eligible” Finding from DU is required and the transaction must meet all other
                   cash-out eligibility requirements
   If the property is owned free and clear (i.e. purchased for cash or any previous mortgage loan(s) have
    been paid off) and was purchased within the previous 6-12 months prior to the underwriting date, the
    LTV will be based on the lower of the sales price/acquisition cost or current appraised value.
   If the property is owned free and clear and was purchased more than 12 months from the underwriting
    date, the LTV will be based on the current appraised value.
   Properties listed for sale within the six months prior to underwriting are eligible with evidence that the
    property was taken off the market prior to the application date. Maximum LTV for cash-out refinance is
    the lower of 70% or maximum for product/occupancy/property type.

Properties with less than one year seasoning may require documentation supporting any increases in value.

642.02.3 – Texas Section 50(a)(6) (Texas cash-out)

A Texas Section 50(a)(6) mortgage is a mortgage originated under provisions of the Texas constitution
which allows a borrower to take cash-out from a homestead property as long as specific requirements are
met. Texas law determines if the mortgage is a Texas Section 50(a)(6) and the Texas definition of a “cash-
out refinance” or a “limited cash-out refinance” may differ from standard definitions. Once a loan is a Section
50(a)(6) loan, any subsequent refinance of the homestead is also considered to be a Section 50(a)(6) loan
and subject to all of its provisions. The title commitment will identify if the loan is a Section 50(a)(6) loan.

The following are the general eligibility requirements for Texas Section 50(a)(6) loans.

        The property securing the loan must be an owner-occupied, 1-unit, primary residence and be
         classified as a homestead under Texas law. The following property types are eligible:
             Single family residence
             Planned Unit Development (PUD)
             Condominium.
        The property cannot exceed 10 acres, no exceptions. If adjacent property is owned, a survey must
         be provided that indicates the subject property is a separate parcel.
        The homestead must have access to and from a public roadway.
        The property cannot be classified for agriculture use according to the ad valorem tax designation.



Icon Lending Guide – Section 600                                                                Revised 10-22-12
        The maximum LTV/CLTV allowed under Section 50(a)(6) is 80%.
        Only one Section 50(a)(6) loan may be secured by the homestead property at any time.
        Twelve (12) month seasoning required when the existing loan is a Texas Section 50(a)(6) loan (first
         or second), determined by the Note date.
        Any spouse must execute the mortgage however the spouse is not required to be on the Promissory
         Note. All individuals on title and their spouse must sign all Texas cash-out documents. Only
         homestead owners can be on title at closing.
        Properties in a trust are ineligible.
        Power of Attorney is ineligible.
        FHA/VA transactions are ineligible.
The fees and charges on the loan cannot exceed 3% of the loan amount excluding prepaid items and YSP.
Discount points used to reduce the interest rate are not included in the 3% however discount points used for
closing costs must be included in the 3%. Fees paid to third parties (e.g. appraisal, credit report, origination,
pest control, title report, title insurance, third party closing costs, etc. ) may be paid by the borrower but are
included in the 3%. If closing costs are > 3%, fees must be reduced prior to close. Refunds to the
borrower are not permitted. Premium pricing is allowed if it is disclosed to the borrower at time of initial
application.

NOTE:     For discount points charged on the HUD-1 Settlement Statement to be considered bona fide and
          not required to be part of the 3% test, the borrower must be provided a choice of an interest rate
          with or without discount points. If the borrower selects a rate that
          requires the payment of discount points, the borrower(s) will be required to sign an Election to Pay
          Discount Points affidavit at closing.

The loan cannot close until twelve (12) days after the borrower has received and executed the Notice
Concerning Extension of Credit. The loan file must contain the Notice Concerning Extension of Credit,
individually signed and individually dated by all owners of the property and their spouses. The beginning of
the 12-day waiting period will never begin prior to the following:
             The receipt of the full credit file, which includes the signed and dated Notice Concerning
              Extension of Credit.
         NOTE: If the signed and dated copy of the Notice Concerning Extension of Credit is not provided
               in the credit file, the 12-day waiting period will not begin until Icon receives the signed and
               dated Notice.
There is a three (3) day right of rescission on all Section 50(a)(6) loans. The 3-day right of rescission cannot
begin until the closing date, following the 12-day waiting period.
The borrower’s first payment must be due no later than 60 days from closing.

There is a 6-month title seasoning required for all Texas cash-out refinance transactions.

Cash-out refinance transactions use the current appraised value to determine LTV/CLTV when the property
has a lien against it, regardless of the length of time the borrower has owned the property. If the property is
owned free and clear and was purchased within 6-12 months prior to the application date, the LTV is based
on the lower of the sales price/acquisition price, documented by the HUD-1 or the current appraised value.
Increase in property value must be supported. If the property was purchased within 6 months prior to the
underwriting date, the loan is ineligible for cash-out.

If the borrower has an existing Section 50(a)(6) second lien and the new first mortgage will be a cash-out
then the existing second lien must be paid off.



Icon Lending Guide – Section 600                                                                Revised 10-22-12
The following are considered cash-out refinance transactions:
        Borrower is paying off a first and/or second mortgage that is not a Texas Section 50(a)(6) loan AND
         getting cash-out from the refinance.
        Borrower is paying off a first mortgage that is a Texas Section 50(a)(6) loan but is not getting any
         cash-out AND paying off a second lien that is not a Texas Section (50(a)(6) that was not used
         entirely to purchase the subject property or paying off a valid Texas home improvement loan.

        Borrower is paying off a first mortgage that is not a Texas Section 50(a)(6) loan AND is paying off a
         second lien that is a Texas Section 50(a)(6) loan and:
             The borrower is getting cash back from the refinance transaction, OR
             The borrower is not getting cash-out but is paying off the Texas Section 50(a)(6) second
              mortgage

The following documentation is required:

        A full appraisal, that includes an interior and exterior inspection, is required. The borrower(s) and
         the lender must sign a written acknowledgement as to the fair market value of the property on the
         date the loan closes. The appraisal must be attached to the acknowledgement.
        A survey or Survey affidavit is required on all loans as follows:
             A Survey Affidavit, in lieu of a new survey, is acceptable if the original survey is ≤10 years old
              and the survey shows the property in its present condition and no changes in boundary lines,
              fences or other improvements have been made. The Survey Affidavit must be acceptable to the
              title company.
             If original survey is > 10 years a new survey will be required. The new survey must:
                  Provide a legal description of the property to be covered by the loan,
                  Exclude any property designated as “agricultural” or “timber” on tax records,
                  Be no more than 10 acres,
                  Show access to a public road, and
                  Exclude any rental use improvements or any other non-homestead use property.
        All individuals on title and their spouses must sign the Texas Home Equity Affidavit and Agreement
         (First Lien). (Fannie Mae Form 3185).
        The borrower(s) must be provided a complete and accurate copy of the final HUD-1 or HUD-1A and
         closing cannot occur less than one (1) business day thereafter. Borrowers are required to sign the
         Borrower’s Certification of Receipt of Settlement Statement and the Accuracy Thereof form at
         closing. Any changes made to the HUD-1 after the borrowers have signed will require an additional
         24 hour waiting period.
        Borrower’s must receive a copy of all documents signed at closing and are required to sign the
         Texas Home Equity Receipt of Documents form.
        All loans must have a Texas Home Equity Loan Closing Instructions Addendum.
        A Texas Loan Policy of Title Insurance (Form T-2) is required. The policy must be supplemented by
         a Restrictions, Encroachments, Minerals Endorsement (Form T-19), an Equity Loan Mortgage
         Endorsement (Form T-42), including the optional coverage provided by paragraph 2(f), and a
         Supplemental Coverage Equity Loan Mortgage Endorsement (Form T-42.1). Deletions of the
         endorsements are not allowed.




Icon Lending Guide – Section 600                                                               Revised 10-22-12
        An Election to Pay Discount Points affidavit must be signed at closing by the borrower if the
         borrower has selected an interest rate that requires the payment of discount points.
        The legal instruments required for Texas Section 50(a)(6) loans are the following Fannie Mae forms:
             Texas Home Equity Security Instrument – Form 3044.1
             Texas Home Equity Note (Fixed Rate) – Form 3244.1
             Texas Home Equity PUD Rider (if applicable) – Form 3150.44
             Texas Home Equity Condominium Rider (if applicable) – Form 3140.44

642.02.4 – FHA Short Payoff

Borrowers are eligible for an FHA rate/term refinance transaction when the existing note holder(s) will write
off the amount of the indebtedness that cannot be refinanced into the new FHA insured mortgage as follows:
        The borrower is current on their existing mortgage, and
        There is insufficient equity in the home based on its current appraised value, and/or
        The borrower experienced a reduction in income and does not have the capacity to repay the
         existing mortgage on the property.

In cases where the existing note holder(s) are not willing to write down the indebtedness, a new subordinate
lien may be obtained for the amount of which the payoff is short (subject to FHA Guidelines). If payments on
the new subordinate financing are required, they must be included in the qualifying ratios unless the
payments have been deferred for a minimum of 36 months.

642.03 - Inherited Properties
Inherited properties are eligible for a rate/term or cash-out refinance transaction with applicable
documentation (i.e. death certificate, court order, etc.). Borrower must qualify under program guidelines and
the reason for the title transfer must be explained.
642.04 - Construction to Permanent Financing

The conversion of construction-to-permanent financing involves the granting of a long-term mortgage to a
borrower for the purpose of replacing interim construction financing that the borrower has obtained to fund
the construction of a new residence.

The borrower must hold title to the lot, which may have been previously acquired or be purchased as part of
the transaction. All construction work (including any work that could entitle a party to file a mechanics' or
material-men's lien) must be completed and paid for—and all mechanics' liens, material-men's liens, and any
other liens and claims that could become liens relating to the construction must be satisfied. The borrower
must be the primary obligor on the mortgage or deed of trust note for the permanent financing.

A construction-to-permanent financing mortgage may be closed as a limited cash-out refinance or a cash-
out refinance transaction. When a refinance transaction is used, the borrower must have held legal title to
the lot before he or she applied for the construction financing and must be named as the borrower for the
construction loan.

The same loan-to-value ratio requirements that apply for other purchase money and refinance transactions
apply to a construction-to-permanent financing mortgage. However, the method for determining the loan-to-
value ratio will vary based on the type of transaction and the length of time the borrower has held legal title
to the lot (and, in some instances, how title was acquired).




Icon Lending Guide – Section 600                                                              Revised 10-22-12
642.04.1 - Limited Cash-Out Refinance (Rate/Term)

When a rate/term refinance transaction or a cash-out refinance transaction is used in connection with a lot
that the borrower acquired 12 or more months before applying for the construction financing, the loan-to-
value ratio is determined by dividing the unpaid principal balance of the construction-to-permanent mortgage
by the current appraised value for the property (both the lot and the improvements).

If the borrower acquired the lot within the 12 months preceding the date of the application for the
construction financing, the loan-to-value ratio is determined by dividing the unpaid principal balance of the
construction-to-permanent mortgage by the lesser of:
        The current appraised value for the property (both the lot and the improvements), or
        The total acquisition costs (which are the sum of the costs of the improvements and the sales price
         of the lot).

The file must include the appraiser's certificate of completion and a photograph of the completed property. In
addition, if the proceeds of the construction loan were used to build a new residence, a copy of a certificate
of occupancy (or an equivalent form) from the applicable government authority is also required.

642.05 - Contract of Sale/Land Contract

A land contract (also known as contract for deed, contract sale, contract purchase, an Agreement of Sale in
Hawaii) is a form of seller financing in which the seller retains title to the property while the buyer makes
regular payments to the seller. Once the buyer pays the number of payments and/or amount specified in the
contract, the seller conveys the title to the buyer. A mortgage in which the proceeds are used to pay the
outstanding balance of a land contract or contract for deed may be considered as either a purchase or a
refinance transaction.

642.05.1 - Purchase

If the land contract or contract for deed was executed within the 12 months prior to the loan application date,
the transaction will be considered a purchase. Proceeds are used to pay the outstanding balance on the
installment land contract only. No loan proceeds can be disbursed to the borrower. The LTV is calculated
on the lower of:

        The appraised value at the time the new mortgage is closed, or
        The total acquisition cost. The total acquisition cost is defined as the purchase price indicated in the
         original land contract plus any out of pocket expenses paid by the borrower for rehabilitation,
         renovation, or energy conservation improvements.

642.05.2 - Refinance

If the land contract or contract for deed was executed more than 12 months prior to the loan application
date, the transaction will be treated as a rate/term refinance. Proceeds from the refinance transaction may
include the sum of the outstanding balance of the installment sales contract and the costs incurred for
rehabilitation, renovation, or energy improvements. A new appraisal is required and the LTV must be
calculated using the appraised value of the new mortgage transaction.




Icon Lending Guide – Section 600                                                               Revised 10-22-12
642.06 - Lease Option

A transaction in which a borrower holds a lease with an option to purchase the subject property will be
treated as a purchase transaction. The LTV will be based on the lesser of the purchase price or the current
appraised value.

The seller may give the borrower credit toward the down payment based on a portion of previous rent
payments by the borrower. Copies of cancelled checks evidencing the monthly rent payment per the
purchase agreement are required. A comparable rent schedule is required to verify the borrower paid in
excess of the current market rents. Any monies paid in excess of the current market rents may be credited
back to the borrower.

642.07 - Continuity of Obligation

A continuity of obligation is required for all refinance transactions. A continuity of obligation exists when one
or more of the following occur:

        At least one borrower on the existing mortgage is a borrower obligated on the new mortgage.
        The borrower on title has been on title (but is not on the existing mortgage) and has been occupying
         the subject property for at least 12 months and has paid the mortgage for the previous 12 months
         (cancelled checks, front and back are required) or can demonstrate a relationship (spouse, relative,
         or domestic partner) with the current obligor.
        The existing loan being paid-off and the title are held in the name of a natural person or a limited
         liability corporation (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.
        The borrower recently inherited or was legally awarded the property (divorce/separation settlement).

If the borrower is on title and there is no continuity of obligation, the loan will be treated as a cash- out
refinance. The following applies:

        If the property is owned free and clear (i.e. purchased for cash or any previous mortgage loan(s)
         have been paid off) and was purchased within the previous 6-12 months prior to the application
         date, the LTV will be based on the lower of the sales price/acquisition cost, documented by the
         HUD-1 or current appraised value.
        If the property is owned free and clear and was purchased more than 12 months from the
         application date, the LTV is based on the current appraised value.
        If the borrower has been on title for a minimum of 6 months and there is an existing lien, the
         maximum LTV is 50% based on the current appraised value.

Properties gifted to the borrower are subject to the following:

        If the property is owned free and clear and there was not a transaction involved when the borrower
         was put on title, there is a 12-month seasoning requirement before the borrower can receive cash-
         out.
        If there is a lien on the property and the borrower has been on title a minimum of 6 months, the loan
         will be treated as a cash-out refinance and the maximum LTV is 50% based on the current
         appraised value.




Icon Lending Guide – Section 600                                                                  Revised 10-22-12
642.08 - Multiple Properties Owned

When the subject property is the borrower’s principal residence, generally there is no limit to the number of
financed properties a borrower may own, however, when utilizing an ARM product on the Agency
Conforming and Agency High Balance program, the maximum number of properties owned is four (4)
regardless of the subject properties occupancy type.

When the subject is a second home or investment property, the borrower may not own more than 4
properties that are currently being financed, including the borrower’s principal residence with the exception
of the Portfolio Conforming and Portfolio High Balance programs that allow 5-10 financed properties subject
to specific criteria as detailed on the matrices.

If a property is held in the name of a corporation and the borrower is the joint owner of the corporation, the
property will not be included in the number of financed properties as long as there is no mortgage reported
on the borrower’s credit report.

642.09 - Multiple Loans to One Borrower

Icon limits its exposure to the same borrower to a maximum of 4 loans, with an aggregate loan amount of $2
million. The Jumbo program limits the total number of properties, financed or owned free and clear to 4.
Financed properties cannot exceed a cumulative loan amount of $2 million dollars.

642.10 - Ineligible Transactions

The following are considered ineligible transactions:

        A borrower who currently owns a multi-unit property as his primary residence and is purchasing
         another owner occupied multi-unit property located in the same city/town.
        Restructured loans are generally ineligible. A restructured loan is a mortgage loan in which the
         terms of the original transaction have changed resulting the in the forgiveness of the mortgage or a
         restructure of the mortgage either through a modification or the origination of a new loan that results
         in any of the following:
                  Forgiveness of a portion of the principal and/or interest on either the first or second Lien.
                  Application of a principal curtailment by or on behalf of the investor to simulate forgiveness.
                  Conversion of any portion of the original mortgage debt to a soft subordinate mortgage.
                  Conversion of any portion of the original mortgage debt from secured to unsecured.
                  Payoff demands that are significantly lower than what is reporting on the credit
                   report or VOM as the high balance of the loan will be carefully examined.

         Icon will allow the refinance of a previously restructured loan when the borrower has made 24
         consecutive payments under the terms of the new restructured loan (24 months of consecutive
         payments after the restructure). The borrower must meet all other refinance guidelines.
        Transactions that do not meet the continuity of obligation requirement as outlined in Section 642.07
        Flip/bail out properties.
        Refinance transactions without a continuity of obligation.
        Refinance transactions without a benefit to the borrower.
        Purchase transactions were the Seller wants to lease back the subject property is not allowed,
         regardless of the duration of the lease back period.



Icon Lending Guide – Section 600                                                                  Revised 10-22-12
        A transaction with an escrow holdback to bring the condition of the property to average or complete
         construction after the close of escrow.
        A transaction where more than one appraisal was obtained in an effort to secure an appraised value
         which substantiated the sales price of the subject property.
        A transaction where the property is subject to resale restrictions is ineligible utilizing an ARM
         product.
        A purchase transaction where the property is subject to a private transfer fee covenant that was
         created on or after February 8, 2011 and the fee collected does not directly benefit the property.

643 - Documentation Eligibility

Icon requires standard documentation for all loans as defined in this Lending Guide.

Credit reports cannot be older than 60 days at the time of funding. Loans with a credit report greater than 60
days at funding will require a new credit report and will be subject to review. If new liabilities are indicated
the underwriter will recalculate the DTI and if the new DTI exceeds 3% or more the loan will be re-submitted
to DU, with the updated information, to determine if the loan is still eligible.

Mortgage/rental verification should be within 60 days at the time of closing. If the mortgage is not reported
on the credit report, a VOM is acceptable provided it is from a known lending institution. VORs are
acceptable from a property management company. Borrowers who rent from an individual are required to
provide the most recent 12 months cancelled rent checks to evidence the rental payment history. In
addition, private party mortgages and borrowers renting from an entity affiliated with the transaction require
12 months cancelled rent checks.

Income documentation requires the borrower’s most recent 30 day paystub with YTD earnings and previous
years’ W2. Paystub cannot be older than 30 days at time of funding. Asset documentation cannot be older
than 60 days at time of funding. At underwriter’s discretion, more current income and/or asset
documentation may be required.

A verbal verification of employment must be completed within 3 days of closing.

Self employed borrowers require verification of the business from a third party (CPA, regulatory agency or
applicable licensing bureau) and verification of business listing/phone number using the telephone book,
internet or directory assistance. Internet sites such as 411.com, Chamber of Commerce sites and
Manta.com, which allow business owners to add their own information, are not allowed to document the
existence of a business.

The title commitment cannot be older than 90 days at the time of docs and 120 days at the time of funding.
A title supplement or gap letter will be required when the title commitments exceeds 90 days. A new title
report is required when the commitment exceeds 120 days.

The Closing Protection Letter and Survey cannot exceed 60 days at the time of docs.

The appraisal must be dated within 120 days of the Note date. A new appraisal, with three new
comparables, will be required if the original appraisal is more than 120 days from the Note date. At
underwriter discretion, a recertification with new comparables may be required at the time of underwriting
when the appraisal is 90 days old.

Applications and early disclosures aged in excess of 90 days will be require a new application be provided
and re-issue of the early disclosures.



Icon Lending Guide – Section 600                                                                Revised 10-22-12
650 - Credit

A borrower’s credit history is considered to be one of the strongest indicators of the borrower’s willingness
and ability to repay the mortgage. A borrower who maintains an excellent long credit history is more apt to
continue managing his credit obligations in a timely manner. In contrast, a borrower whose credit history
indicates continual slow pays will most likely not change his pay habits with a new mortgage.

A printed/written credit report is required for all borrowers applying for financing through Icon. Each
borrower must have an acceptable credit profile. The borrower’s credit history should demonstrate his
willingness and ability to manage his financial obligations in a timely manner is a key element in determining
the comprehensive risk for a mortgage.

The borrower’s overall credit history, including but not limited to, credit score, repayment patterns, credit
utilization, and level of experience in using credit has an affect on the eventual default risk of a mortgage.
As such, the underwriter will assess the risk through a comprehensive review of the borrower’s credit history.

DU will generally determine the credit eligibility on the Agency Conforming Program. Icon will defer to the DU
Findings for trade line requirements, credit depth, mortgage/rental history requirements, pay history, adverse
credit requirements, re-established credit requirements, and consumer credit counseling.
Bankruptcy/foreclosure/short sales, refer to Section 650.14.3 – Bankruptcy/Foreclosure/Deed-in-Lieu for
specific Icon requirements.

The following Credit section defines the parameters for all other programs.

650.01 - Traditional Credit

Traditional credit history is used to determine the credit risk by evaluating the borrower’s established credit
history. Traditional credit consists of revolving, installment, and mortgage trades.
Minimum trade lines will be determined by DU Findings.
650.02 - Non Traditional Credit

Non traditional credit consists of different reference sources such as utilities, insurance premiums, cell
phone, etc and is used in lieu of traditional credit trades. Icon does not extend financing to borrowers with
only non-traditional credit references.

650.03 - Credit Report
Conventional and Government Non-streamline Transactions
Icon will accept the submitting broker’s credit report provided it is generated through DU. The credit report
cannot be greater than 60 days at the time of the Note date.

        If the original credit report will be over 60 days on the Note date, a new credit report will be obtained
         by Icon.

FHA Streamline and VA IRRRL’s

Icon will accept the submitting broker’s credit report provided it is from an approved credit vendor as follows:
        Credco
        Credit Plus
        Informative Research


Icon Lending Guide – Section 600                                                                Revised 10-22-12
A traditional credit report includes both credit and public record information for each applicant.

The credit report requirements are as follows:
        Cannot be greater than 60 days old at the time of funding.
             If original credit report will be over 60 days at funding, a new credit report will be obtained by
              Icon.
             If new liabilities are indicated, the loan will be subject to review by the underwriter and if the DTI
              increased by 3% or more the loan will be re-submitted to DU, with the updated information, to
              determine if it is still eligible.
        Must identify each applicant by name and verify the individual’s social security number.
        Any social security number discrepancy must be disclosed by the Credit Reporting Agency.
        Be an original report with no corrections, erasures, white out, etc.
        Show the names of the national repositories used to compile the information.
        Be issued by a consumer reporting agency that obtains or verifies all information from sources other
         than the borrower.
        Provide the name, address and phone number of the reporting agency preparing the report.
        Provide a credit score from each repository accessed.
        Report all inquiries made within the previous 90 days.
        Search all repositories for each locality in which the borrower has resided during the previous 2 year
         period.
        Access at least three national repositories and identify those which were accessed for compiling
         report. Acceptable repositories are Equifax, Experian, and Trans Union.
        Verify all disclosed accounts including but no limited to the date the account was opened, the high
         credit limit, the current status, the current balance, required payment, the date of the last activity on
         the account, and a payment history which provides a historical status of each account with the
         number of times the account has been past due. If a creditor does not include a reference on an
         open account, a separate written verification may be required at underwriter’s discretion. Open
         accounts must have been updated within 90 days of the credit report.
        Contain a search of at least two public record sources and disclose any tax liens, judgments,
         bankruptcies, and foreclosures that are reportable under the Fair Credit Reporting Act.

650.04 - Unacceptable Credit Reporting Practices

The credit repository should not change information compiled from the credit bureau. Duplicate information
is permitted to be deleted as well as translate codes to “plain” language or make appropriate adjustments to
resolve conflicting information.

The credit repository should only change information that is brought to the credit repository’s attention by a
creditor, the borrower/applicant or a party that is not associated with the sale, purchase or mortgage
financing.

Examples of unacceptable credit report practices are:

        Deletion of trade lines that pertain to a bankruptcy.



Icon Lending Guide – Section 600                                                                  Revised 10-22-12
        The addition of a payment amount to a creditor’s trade line when the creditor does not require a
         payment.
        Restriction of information collected to a period of time shorter than seven years.
        Remove any derogatory information without written authorization of the creditor.
        Failure to report social security number discrepancies.

650.05 - Consumer Credit Bureau Blocks

Icon requires a credit report for each applicant from each of the 3 national credit repositories. Consumers
have the ability to block or freeze access to their credit when they are victims of identity theft. The reporting
agencies will advise of a security block or security freeze. All security freezes from all bureaus will need to
be lifted in order for Icon to decision a loan.

650.06 - Credit Score

The credit score has proven to be a consistent predictor of performance compared to traditional underwriting
and processing methods. To ensure the validity of the credit score, each trade line should reflect all
repositories that report the score. This will identify which trade lines were considered when generating each
credit score. Underwriters will closely review the scores, the credit score codes, and the borrower’s credit
history to ensure validity. Credit score codes must be consistent with trade line information. For example, if
the credit score code identifies delinquent accounts, the credit report must also contain delinquent trades.
Scores that do not appear to represent an accurate picture of the borrower’s credit risk will not be
considered usable.

Each borrower is required to have one valid credit score on all of Icon’s conventional loan programs. When
utilizing an ARM product on the Agency Conforming or Agency High Balance program the borrower is
required to have a minimum of two (2) credit scores.

Icon will allow one borrower on a transaction to not have a credit score on the FHA program subject to the
following:

        Loan must receive an “Approve/Eligible” Finding.
        Only one borrower cannot have a credit score.
        DTI cannot exceed 31%/43% regardless of DU Findings.
        Two (2) months reserves are required. Reserves must be from borrower’s own funds.
        All borrowers must occupy the subject property.
        The borrower(s) with the credit score(s) must have a strong credit profile with no derogatory credit.
         If the credit profile of the primary borrower does not meet requirements the loan will be downgraded
         to “Refer” and the loan will be ineligible.

650.07 - Determining the Representative Score

The representative credit score is determined as follows:

        If there are three (3) valid credit scores, the middle score is used.
        If there are three (3) valid credit scores and one is a duplicate, the duplicate is used.
        If there are two (2) valid credit scores, the lower of the two is used.
        If there is one (1) valid credit score that score is used.


Icon Lending Guide – Section 600                                                                 Revised 10-22-12
650.08 - Reviewing Credit History & Analysis of Risk

The borrower’s willingness to repay debt is a key factor when determining the risk of the mortgage
transaction. The borrower’s credit history must support a responsible attitude towards credit. At times,
additional documentation may be required to establish this.

Determining the acceptability and strength of the borrower’s credit entails reviewing the entire credit history.
The underwriter must evaluate the following credit aspects in order to conclude an acceptable credit history
exists:

        Type and amount of outstanding credit
        Length of borrower’s credit history
        The use of the available credit
        Recent changes in the number of open accounts or overall amount of outstanding credit.
        Payment history and status of all accounts
        Recent inquiries showing on the credit report.
        Any public records or adverse items

650.09 - Social Security Number

All borrowers must have a valid, legitimate social security number. Borrowers without a valid, legitimate
social security number are ineligible for Icon financing. In addition, borrowers who have a history of using
invalid/illegitimate social security numbers are not eligible for Icon financing

650.10 - Potential Red Flags on the Credit Report

650.10.1 - Incorrect, Duplicate and Multiple Social Security Numbers

When a social security number search returns conflicting information, it can be an indicator of a red flag.
Incorrect, duplicate and multiple social security numbers shown on the credit report will require further
review. To eliminate any confusion, Icon requires a legible copy of the borrower’s social security card or a
legible printout from the Social Security Administration verifying the borrower’s number.

        Incorrect social security number - the information associated with the social security number entered
         is not available.

        Duplicate social security number – the information indicates more than one individual is associated
         with the social security number entered.

        Multiple social security number – information indicates an individual has more than one social
         security number.

        Deceased Borrowers – information states the person to whom the social security number was
         issued has been reported deceased.

650.10.2 - Credit Report Alerts

Pursuant to the Fair and Accurate Credit Transactions Act, consumers have the right to protect themselves
from identity theft. As a measure to protect against this, consumers can request that a credit reporting



Icon Lending Guide – Section 600                                                               Revised 10-22-12
agency pass a fraud flag to users who request their credit report. Active military personnel can also request
the credit reporting agency to pass an active duty flag.

Icon’s underwriter will evaluate each of the bureaus to ensure there is no fraud or active duty flags reporting.
If there is an alert on the credit report, Icon’s underwriter must follow the instructions of the consumer on the
credit report before proceeding with the loan file. A borrower cannot be declined for an alert. Icon and/or
the submitting broker will need to provide documentation evidencing they have contacted the borrower if the
credit report reflects a fraud alert. Documentation supporting communication with the borrower is to be
placed in the credit file.

650.10.3 - Address & Employment Discrepancies

The credit reporting agency will indicate if the address and/or employment provided by the creditor differ
from the address on the credit report. Any discrepancy should be reviewed and resolved as it may be a red
flag for fraudulent activity.

650.10.4- Inquiries

The credit reporting agency will list all inquiries within the last 90 days. A letter of explanation from the
borrower is required on all credit inquiries that appear on the credit report. The letter of explanation must
specifically address each individual inquiry and indicate if new credit was extended. If new credit was
extended, the underwriter will reevaluate the loan to determine if the new credit will affect the borrower’s
ability to repay the loan.

FHA requires all inquiries made within the last 90 days, with no new credit established, to be explained by
the borrower.

650.10.5 - Changes in Credit Usages

Recent changes in the borrower’s credit usage may be an indication of the borrower having difficulty
maintaining his financial obligations. The underwriter should review all trades to determine if there has been
a recent significant increase in the number of open accounts and/or the number and amount of outstanding
balances.

650.11 - Authorized Users

Icon will not consider an account in which the borrower is an authorized user as an eligible trade.

650.12 - Payment History

A borrower’s ability to handle financial obligations is a good indicator of how the borrower will repay the new
mortgage. Although all of the credit history is evaluated, an emphasis is placed on the pay history of the
previous 24 months.

650.13 - Mortgage/Rental History

With the exception of the Agency Conforming program, a 24 months mortgage/rental history is required for
all borrowers. The credit report must provide the entire mortgage payment history. If the mortgage history
reporting on the credit report is less than 24 months, a history from the mortgage servicer or 12 months
cancelled checks are required. If the lien holder is a private party, the borrower must provide 12 months
consecutive cancelled checks (front and back), depending on the selected program. When utilizing an ARM
product on the Agency High Balance program a loan will be ineligible if there are any housing payment
delinquencies of 0x60 or greater within the last 12 months regardless of the LTV or DU Findings.



Icon Lending Guide – Section 600                                                               Revised 10-22-12
When a rental verification is required, a rental verification may be accepted in the form of a credit report
trade line or a direct verification of rent (VOR) provided by a professional management company. A VOR
from an individual other than a professional management company is not acceptable. If the landlord is not a
professional management company, then 12 months consecutive cancelled checks (front and back) are
required to verify the rental history.

A verification of mortgage or a verification rent cannot be used to build a trade line in an effort to meet the
minimum established trade line requirements.

Refer to the individual program details for requirements on mortgage delinquency.

In the case of a non-arms length transaction in which the borrower rents from a family member or if the
borrower currently rents the subject property, 12 months cancelled checks (front and back) are required to
demonstrate the rental history.

650.14 - Derogatory Credit

The DU Findings will determine the acceptability of derogatory credit on the Agency Conforming, Portfolio
Conforming and FHA programs with the exception of unpaid collections and charge-offs. Refer to Section
650.14.7 – Unpaid Collections/Charge-offs for requirements.

FHA programs require a letter of explanation for all derogatory credit.

The following policy applies to all other loan programs:

Generally, adverse credit is not allowed in the previous 24 months. Adverse credit is defined as any trade
reporting ≥ 90 days, collections, charge-offs, judgments, garnishments, tax liens, etc. All open items must
be paid prior to or at closing with the exception of medical collections < $250 per incident or $1000
cumulative, which may be excluded from this requirement and will not be required to be paid off.

650.14.1 - Past Due
Any past due accounts are required to be paid current prior to or at closing.

650.14.2 - Disputed Accounts

If the borrower states the information reported by the credit bureau is inaccurate or incorrect (i.e.: lates,
public records, tradelines that do not belong to the borrower, etc), documentation must be provided by the
creditor that the account in question does not belong to the borrower or that the reported payment history is
inaccurate and no further action is required.

If the tradeline does belong to the borrower and the reported payment history is accurate, it must be taken
into consideration in the credit risk assessment regardless of the age of the account or the dispute. A new
credit report, with the tradeline no longer reported as disputed, is required.




Icon Lending Guide – Section 600                                                                Revised 10-22-12
650.14.3 - Bankruptcy/Foreclosure/Deed-in-Lieu/Short Sale

Unless stated differently in the program details, a borrower is not eligible for financing if the borrower has a
bankruptcy discharged in the previous 4 years and/or a foreclosure settled within the previous 7 years.

A bankruptcy can either be a Chapter 7 in which the borrower discharges all debt or a Chapter 13 in which
the borrower completes a reorganization of debt.

The following table summarizes the waiting periods for bankruptcy filings.

Derogatory Event                   Waiting Period (both financial mismanagement and extenuating circumstances)
Chapter 7 or 11 Bankruptcy         4 years
Chapter 13 Bankruptcy                 2 years from discharge date
                                      4 years from dismissal date
Multiple Bankruptcy Filings        5 years if more than one filing in the previous 7 years


A foreclosure is defined as any 120-day mortgage late within the last 48 months, notice of default, settlement
on a real estate secured trade line, and forbearance agreements. The age of the foreclosure is calculated
from the date settled or the date of the most recent 120-day mortgage late.

Borrowers are required to have re-established credit from like sources (i.e.: revolving, installment, mortgage)
paid satisfactorily. For bankruptcy, the borrower is to have a re-established credit history determined by the
waiting periods defined above. For foreclosure, borrower must have at minimum a seven year re-
established credit history and the borrower must be purchasing an owner-occupied property. A letter of
explanation is required from the borrower.

A foreclosure requires the following:
        A 7 year waiting period.
        A 3 year waiting period with a maximum 90% LTV or program maximum, whichever is less, when
         the foreclosure was due to documented extenuating circumstances and subject to the following:
             Purchase of primary residence only
             Rate/term transactions are permitted for all occupancy types subject to eligibility guidelines.
A deed-in-lieu of foreclosure requires the following:
        2-year waiting period with a maximum 80% LTV or program maximum, whichever is less.
        4-year waiting period with a maximum 90% LTV or program maximum, whichever is less.
        7-year waiting period, the maximum LTV allowed per program guidelines.
        2-year waiting period with a maximum 90% LTV or program maximum, whichever is less, when the
         deed-in-lieu of foreclosure was due to documented extenuating circumstances.

A re-established good credit history consists of:
        Minimum 4 years (bankruptcy), 7 years (foreclosure) and 2 years (deed-in-lieu) re-established or
         reaffirmed credit with like sources.
        Minimum credit score of 680.
        Trade line requirements are determined by DU Findings.
        No past due or late since the discharge on the mortgage/rental rating.


Icon Lending Guide – Section 600                                                                          Revised 10-22-12
        No more than 2x30 lates on installment or revolving trade lines in the previous 24 months.
        No 60 day lates since the discharge.
        No new public record, collection or charge-off.
NOTE: Second home and investment properties are ineligible when the borrower is < 7 years from the
      foreclosure completion date. Cash-out transactions are also ineligible < 7 years from the foreclosure
      completion date
A short sale, including a pre-foreclosure event, requires the following:
        Short sale due to financial mismanagement:
             Minimum of 4 years, and up to 7 years, must have elapsed since the completion of the short
              sale.
             The borrower may purchase a primary residence, second home or investment property with the
              greater of 10% minimum down payment or the minimum down payment required for the
              transaction.
             Borrower must have re-established an acceptable credit history.
             Minimum 680 credit score required.
        Short sale due to documented extenuating circumstances:
             A minimum of 2 years must have elapsed since the completion of the short sale.
             The borrower may purchase a primary residence, second home or investment property with the
              greater of 10% minimum down payment or the minimum down payment required for the
              transaction.

650.14.4 - Forbearance

Forbearance is an agreement to rearrange the terms of the original mortgage. For evaluation purposes,
forbearance or a loan workout is considered a foreclosure. A letter of explanation is required from the
borrower.

650.14.5 - Consumer Credit Counseling

Borrowers who have previously participated in consumer credit counseling are eligible for financing provided
the following exits:

        A minimum of 12 months have passed since the completion of the consumer credit counseling
         program.
        All accounts are paid satisfactorily.
        The borrower has demonstrated the ability to manage his credit since completion of the consumer
         credit counseling program.

Borrowers who participated in Consumer Credit Counseling and do not meet the above parameters will be
evaluated with exceptions granted on a case-by-case basis.

NOTE: For FHA transactions refer to the FHA matrix for requirements for borrowers who are participating in
      consumer credit counseling.




Icon Lending Guide – Section 600                                                            Revised 10-22-12
650.14.6 - Tax Liens and Judgments

All open tax liens and judgments must be paid off prior to or at closing. Tax liens and judgments are not
allowed to remain open as they could effect Icon’s first lien position. Loan proceeds may not be used to pay
off tax liens or judgments.

A letter of explanation from the borrower regarding the tax lien or judgment may be required by the
underwriter.

650.14.7 - Unpaid Collections/Charge-offs

Excessive unpaid collections and charge-offs are required to be paid prior to or at closing regardless of DU
Findings. Medical collections and charge-offs < $250 per incident or $1000 cumulative are allowed and are
not required to be paid off.

660 - Ratios/Liabilities

A borrower’s monthly debt obligations in conjunction with the proposed housing expense and stable monthly
gross income are used to calculate the ratios. These are used as a benchmark when determining whether
or not the borrower will be able to meet the expenses involved in homeownership.

660.01 - Housing Ratio

When calculating the monthly housing debt-to-income ratio, the following are included in the proposed
housing expense:

        The proposed principal and interest payment on the first and second (if applicable) mortgages
         secured by the subject property.
        The monthly amount of the hazard insurance
        The monthly amount of the real estate taxes
        The monthly amount of the mortgage insurance premium (if applicable)
        The monthly amount of home owner association dues (if applicable)
        The monthly amount of the flood insurance (if applicable)
        The monthly leasehold payment (if applicable)
        Any special assessments

If the property is new construction or recently built, the taxes are based on the estimated taxes based on the
completed improvements versus the unimproved land.

If the property is a resale, and the current taxes appear below standard county assessments, the taxes will
be based on the greater of the taxes per the title commitment/tax cert or the appraisal.

For purchase transactions located in California, the taxes will be calculated at 1.25% for qualifying. Docs,
funding figures and escrow accounts will be based on the higher of 1.25% of the sales price or the current
tax base.




Icon Lending Guide – Section 600                                                             Revised 10-22-12
660.02 - Debt-to-Income Ratio

When calculating the monthly debt-to-income ratio, the following are included:
        The proposed housing expense
        Monthly payments on all revolving debt
        Monthly payments on all installment debt with more than ten months remaining
        Monthly payment for Alimony/Child support if applicable
        Monthly PITI for second homes and other investment properties that are non-income producing real
         estate
        Monthly taxes, insurance, HOA dues for real estate owned free and clear

Refer to Sections 660.03 through 660.07.9 for additional items that may be included in the debt-to-income
ratio calculation.

660.03 - Conversion of a Principal Residence

If the transaction is a purchase and the borrower is retaining his current principal residence, the following
must be met:

Current principal residence is pending sale:
        If the current principal residence is pending sale but the transaction will not be closed (with title
         transfer to a new owner) prior to the new close of the new transaction, then both the current and the
         proposed mortgage payments are used to qualify the borrower for the new transaction.
        The borrower will also need verified six (6) months PITI reserves for both properties. Two (2) months
         PITI reserves for each property are permitted provided borrower’s current primary residence has
         30% equity, minus outstanding liens, documented by a full appraisal or an AVM. The appraisal or
         AVM must be dated within sixty (60) days of the Note date. A Broker Price Opinion (BPO) is not
         allowed.
        The full PITI of the borrower’s current residence does not need to be included in the ratios if there is
         an executed sales contract and all contingencies have been released. A copy of the lender’s
         commitment letter/approval showing all no outstanding approval conditions exist for the purchaser is
         required.

Current principal residence is converting to a second home:

        If the borrower is converting his current principal residence to a second home, then both the current
         and the proposed mortgage payments and taxes and insurance must be included in the ratios.
        In addition, six (6) months PITI reserves are required for both properties. Reduced reserves of a
         minimum of two (2) months PITI for both properties may be considered if the current principal
         residence has at least 30% equity, minus any outstanding liens, documented by a full appraisal or
         an AVM. The appraisal or AVM must be dated within sixty (60) days of the Note date. A Broker
         Price Opinion (BPO) is not allowed.

Current principal residence is converting to an investment property – Agency Program:

        If the borrower is converting his current principal residence to an investment property, the borrower
         may use up to 75% of the gross rental income less outstanding liens, taxes and insurance for
         qualifying if the current principal residence has at least 30% equity, minus any outstanding liens,


Icon Lending Guide – Section 600                                                               Revised 10-22-12
         documented by a full appraisal or AVM. The appraisal or AVM must be dated within sixty (60) days
         of the Note date. A Broker Price Opinion (BPO) is not allowed. When utilizing an ARM product on
         the Agency Conforming or the Agency High Balance program only a full appraisal or 2055 may be
         used to document the equity in the current principal residence.
        The rental income must be documented with:
             A copy of the fully executed lease agreement. A family member, any individual with an
              established relationship with the borrower or an interested party to the transaction cannot sign
              the lease agreement as the tenant.
             The receipt of a security deposit from the tenant and deposit into the borrower’s account.
        If the 30% equity in the property cannot be documented, rental income may not be used to offset the
         mortgage payment. Both the current and the proposed mortgage payments must be used to qualify
         the borrower for the new transaction; and 6 months PITI reserves are required for both properties.
        If the property being retained as an investment is a multi-unit property and borrower is vacating one
         unit, rental income may be used for the other units if the income is verified by Schedule E,
         regardless of the equity position. To give rental income to the unit currently occupied by the owner,
         borrower must have 30% equity in the property.

Current principal residence is converting to an investment property – FHA Program:
        If the borrower is converting his current principal residence to and investment property, FHA does
         not allow any rental income from the property being vacated to be used to offset the mortgage
         payment on that property except as follows:
             Rental income on the property being vacated, reduced by the appropriate vacancy factor as
              determined by the FHA Homeownership Center with jurisdiction in the properties area (refer to:
              http://www.hud.gov/offices/hsg/sfh/ref/sfh2-21u.cfm for the applicable vacancy factor) may be
              considered under the following circumstances:
                  The borrower is relocating with a new employer, or being transferred by their current
                   employer to an area not within reasonable or locally recognized commuting distance. A
                   copy of the fully executed lease agreement, with a minimum one (1) year lease term, from
                   date of loan closing, is required. Evidence of the security deposit and/or first months rent
                   being paid to the borrower is also recommended.
                  The borrower has a minimum of 25% equity in the current principal residence documented
                   by a full appraisal or exterior-only appraisal (FNMA 2055). The appraisal cannot be more
                   than six (6) months old. The equity may also be documented by comparing the unpaid
                   principal balance to the original sales price of the property.

660.04 - Qualifying Ratios

The maximum qualifying ratios are noted in each program matrix.




Icon Lending Guide – Section 600                                                                Revised 10-22-12
660.05 - Liabilities

660.05.1 - Debt Payoff/Consolidation

“Pay down” of a mortgage or installment account to 10 months or less to qualify the borrower does not
require being included in the borrower’s long-term debt. However, an auto lease is excluded from this
requirement and cannot be paid down or paid off to avoid counting the monthly payment. Installment and
mortgage accounts must be paid in full. Payoff of revolving accounts to qualify the borrower is generally not
allowed. Any account paid off to qualify the borrower must be closed. A copy of the letter from the closing
agent to the creditor must be provided.

Potential credit abusers are not eligible to payoff debt to qualify. Debts that are paid off or will be paid
through the transaction are excluded from the debt ratio.

660.05.2 - Revolving Accounts

The minimum monthly payment for all revolving charge accounts with a balance is included in the monthly
debt ratio regardless of the number of payments remaining on the account. If the revolving account is paid
off and closed during the origination process or at loan closing, the payment is not required to be included
in the DTI ratio. Documentation is required confirming the account was paid and closed.

If the credit report does not indicate the minimum monthly payment, the underwriter will use the greater of
$10 or 5% of the outstanding balance.

Open 30-day charge account not reflecting a monthly payment on the credit report, or 30-day accounts
reflecting a monthly payment identical to the account balance, Underwriters must verify borrower funds to
cover the account balance. The verified funds must be in addition to all funds required for closing costs and
reserves.

NOTE: DU will include the balance of the 30-day charge accounts on the loan application in the Reserves
      Required to be Verified amount on the DU Underwriting Findings report.

If the borrower has paid off the account balance prior to closing, the Underwriter may provide proof of payoff
in lieu of verifying funds to cover the account balance.

660.05.3 - Installment Debt

Installment accounts with more than ten monthly payments remaining are included in the debt ratio.
Installment accounts with fewer than ten monthly payments remaining do not have to be included in the debt
ratio. However, the underwriter does need to evaluate if the remaining payments and outstanding balances
will have a significant impact on the borrower’s ability to meet his monthly obligations.

660.05.4 - Lease Payments

Lease payments are included in the debt ratio regardless of the number of payments remaining as the
expiration of the lease generally leads to a new loan or a new lease. Therefore, it is considered a recurring
monthly expense.




Icon Lending Guide – Section 600                                                                 Revised 10-22-12
660.05.5 - Deferred Installment Debt

Deferred installment debt (i.e.: student loans, loans in forbearance) are always included in the borrower’s
debt ratio.

If the borrower’s credit report does not indicate the monthly amount that will be payable at the end of the
deferred period, copies of the borrowers payment letters or forbearance agreements must be provided so
that a monthly payment amount can be determined and used in calculating the borrower’s total monthly
obligations.

For student loans, if the monthly payment is not indicated on the credit report, in lieu of obtaining copies of
payment letters/forbearance agreements, the minimum monthly payment can be calculated using 2% of the
original student loan balance, or the outstanding balance, whichever is higher. However, if any
documentation provided by the borrower indicates the actual monthly payment, that figure must be used in
calculating the borrower’s monthly debt.

660.05.6 - Loans Secured by Retirement Accounts

Payments of loans secured by the borrower’s 401(k) or Savings Investment Plan (SIP) are not included in
the debt ratio because they are voluntary payments. However, the underwriter will consider these payments
in terms of their possible impact on cash flow and debt ratios. The borrower should provide a debt
repayment plan if the inclusion of a 401(k) or SIP loan payment in the monthly debts results in very high total
obligations to income ratio or in a negative cash flow.

660.05.7 - Business Debt

Business debt can be excluded from the borrower’s debt ratio if the borrower can provide the most recent 12
months cancelled checks (front and back) drawn against the business account demonstrating that the debt
has been paid timely on a regular basis.

If the borrower cannot provide sufficient evidence the account was paid by the business or paid timely on a
regular basis, the liability is factored in the borrower’s debt ratio. If the account has a history of
delinquencies, the liability will be factored in the borrower’s debt ratio.

When there are Schedule C and/or Schedule E losses for a business owned solely by a non-signing spouse
and it can be documented that the borrower has no involvement in the business, the loss will not be factored
into the borrower’s debt ratio unless the underwriter determines that the loss is substantial enough to effect
the borrower’s ability to re-pay the loan.

660.05.8 – Home Equity Line Of Credit

The payment on an existing HELOC must be included in the borrower’s debt ratio calculation. If the actual
payment is not shown on the credit report the payment on a HELOC with an outstanding balance is
calculated at 1% of the outstanding balance or the payment reflected on the borrower’s statement may be
used.




Icon Lending Guide – Section 600                                                              Revised 10-22-12
660.06 - Contingent Liabilities/Co-Sign

A contingent liability may or may not be considered when determining the borrower’s monthly recurring
obligations. A contingent liability typically exists when the borrower co-signs another individual’s loan.

The payment is not counted in the borrower’s debt ratio if documentation is provided which clearly evidences
the primary obligor has made the payment consistently and timely for a minimum of 12 months. Acceptable
forms of documentation are cancelled checks (front and back), bank statements of the primary obligor’s
account showing consistent amounts disbursed, money order receipts, or a recorded settlement agreement.

If documentation cannot be provided evidencing consistent, timely payments, or the obligation has a history
of delinquencies, the liability will be factored in the borrower’s debt ratio.

660.06.1 - Court Ordered Assignments of Debt

When the borrower has an outstanding debt that was assigned to another party by court order and the
creditor does not release the borrower from the liability, the borrower has a contingent liability. This
obligation is not factored in the debt ratio as long as borrower provides a copy of the recorded court
document assigning the liability to another individual. Icon will disregard the payment history after the
assigned debt but will evaluate the borrower’s payment history prior to the assignment.

660.06.2 - Property Settlement “Buyout”

If the borrower is no longer responsible for a liability as a result of a divorce settlement but has not been
released from the obligation by the creditor, the payment will not be counted in the borrower’s ratios if the
borrower provides a copy of the recorded settlement agreement evidencing the borrower is no longer
responsible for the obligation.

If the borrower’s interest in a property is bought out by another co-owner of the property, and the creditor
does not release the borrower from the obligation, the borrower has a contingent liability. The liability will not
be counted in the borrower’s debt ratio as long as the borrower provides recorded documentation confirming
transfer of title to the property.

660.06.3 - Mortgage Assumptions

If a borrower sells a mortgaged property that he owns and the buyer assumes the outstanding mortgage
debt without a release of liability, the borrower has a contingent liability. The debt is not factored in the
borrower’s monthly recurring debt if borrower provides the all of the following documentation:
        Proof of transfer of ownership
        A copy of the executed legal assumption agreement
        A 12 month payment history for the property purchaser that assumed the mortgage showing timely
         payments have been made (12 months cancelled checks, credit report)

If the payment history cannot be verified or if there are delinquencies, the payment will be factored in the
borrower’s monthly debt ratio.




Icon Lending Guide – Section 600                                                                Revised 10-22-12
660.07 - Other Types of Liabilities

660.07.1 - Alimony/Child Support

If the borrower is required to pay alimony, child support, or maintenance payments, the monthly payment is
counted as a recurring debt and is factored in the debt ratio. A copy of the recorded divorce decree,
recorded separation agreement, or property settlement agreement is required to evidence the amount of the
monthly payment and the duration of the payment. If the payments remaining are less than ten months, the
obligation is not counted in the debt ratio.

660.07.2 - Garnishment

A garnishment is an order to attach property or income to satisfy non payment of a debt. Documentation to
indicate the type of obligation, the amount of debt, the length of time required to repay the debt in full and the
applicant’s explanation are required. The monthly payment of the garnishment should be included in the
borrower’s debt-to-income ratio unless the underwriter determines the debt should be paid in full.

660.07.3 - Bridge Loans
A bridge (or swing) loan is an acceptable source of funds provided the following requirements are met:
        The bridge loan cannot be cross-collateralized against the new property.
        The lender must document the borrower’s ability to make the payments for the new home, the
         current home, the bridge loan, and any other obligations.

660.07.4 - Demand Loans

A demand loan does not have a monthly payment as it becomes due and payable in full on a specified date.
The debt may not be secured.

If the note is due within two years of the time of application and the borrower has sufficient reserves
available to repay the obligation in full, the obligation is not counted in the monthly debt ratio.

If the borrower does not have sufficient reserves available to repay the obligation in full at the end of the two
year period, the obligation is treated as an installment loan and will be factored in the debt ratio. A minimum
payment of 5% of the unpaid balance is used for a monthly payment.

660.07.5 - Net Rental Loss/Negative Rent Income

If the investment property is owned free and clear, then only current real estate taxes, hazard insurance, and
homeowner’s association dues are included in the monthly debt ratio. Documentation is required evidencing
the property is free of any liens.

If there are outstanding liens on the investment property, the negative rental income should be calculated
using 75% of the gross rents less the monthly PITI. Refer to Section 670.3.11(k) – Rental Income for
additional details.

Any rent loss is added to the borrower’s monthly debt obligations versus a reduction to borrower’s monthly
income.




Icon Lending Guide – Section 600                                                                Revised 10-22-12
660.07.6 - Un-Reimbursed Business Expenses

Automobile loan payments and automobile lease payments that are included as un-reimbursed expenses on
the tax returns are considered recurring debts and are factored in the debt ratio. They are not deducted
from the income. Other un-reimbursed expenses may be treated as reductions to income.

660.07.7 - Overdraft Protection Account

Overdraft is considered an unsecured revolving line of credit. If there is a balance, a minimum monthly
payment is factored in the ratios (the greater of $10 or 5%).

660.07.8 - Payroll Deductions

The underwriter will determine if any payroll deductions, other than standard deductions, appearing on the
borrower’s pay stub will be included in the debt ratio. The deduction can consist of credit union, employer
loans, garnishments, child support, and 401K loan. If the payment will be included in the debt ratio,
documentation will be required to support the monthly payment of the debt and the balance.

660.07.9 - Special Assessments

If the subject property is located in a special assessment district, the locality has the right to assess
homeowners for the cost of developing the area (roads, sewers, schools). Any special assessments stated
within the appraisal and/or the title commitment must be included in the borrower’s debt ratio. If the special
assessment district is having financial difficulties, the underwriter will evaluate the borrower’s ability to repay
the mortgage should additional assessments be imposed.

All special assessments are required to be escrowed.

670 - Employment & Income

In assessing the borrower’s employment and income, Icon reviews the stability of the borrower’s income, the
adequacy and continuance of the income, and if the income is derived from an acceptable source. The
employment and income provided must be in line with the industry standards. This applies to all qualifying
borrowers whether the borrower is salaried, commissioned, self employed, or receives income from non-
salaried sources such as trust income, real estate income, notes receivables, capital gains, royalties, foster
care, or other verifiable miscellaneous earnings.

670.01 - Employment Stability

Icon will verify all qualifying borrowers’ employment for the two years preceding the date of the application.
All qualifying income should be stable, predictable, and likely to continue. It is the stability and reliability of
the income that contributes to successful homeownership. Generally, income documentation requirements
are determined by DU however, when utilizing an ARM product on the Agency Conforming or Agency High
Balance program, a paystub with YTD income and a W2 are required regardless of DU Findings.

A borrower must have at least a 2 year continuous work history with stable income and a reasonable
expectation that the income will continue for the foreseeable future, typically three years. Borrowers who
frequently change jobs are eligible for Icon financing provided the underwriter is able to determine the
borrower has been employed in the same line of work for at least 2 years, the income is stable, predictable,
and expected to continue.




Icon Lending Guide – Section 600                                                                 Revised 10-22-12
Borrowers who work in certain industries or are seasonal workers may have frequent job changes. This type
of borrower is eligible for Icon financing and will need to demonstrate the ability to maintain a steady income
despite the changes.

Gaps of employment greater than 30 days require a written letter of explanation from the borrower and may
be subject to additional documentation and/or a counter offer to the loan terms/program requested. Gaps of
employment greater than 60 days will be evaluated on a case-by-case basis.

Income from borrowers re-entering the workforce that have been unemployed a substantial amount of time
(1-year or more) may be considered if the borrower has been with their current employer for a minimum of 6
months and there is evidence of a previous 2- year employment history.

670.02 - Verbal Verification of Employment

Icon will perform a verbal verification of employment for all borrowers whose income is used to qualify for the
loan transaction. Icon will use web resources to obtain the employer’s phone number and location for
verifying employment. Verbal verifications of employment are to be completed using the phone number
obtained by Icon; employer phone numbers obtained from the broker or cell phone numbers are not
acceptable. If the borrower is in the military, a Leave and Earnings Statement (LES) or documentation from
the Defense Manpower Data Center, dated within 30 calendar days of closing, may be used to document the
borrower’s employment in lieu of a verbal VOE.

Self employed borrowers require verification of the business from a third party (CPA, regulatory agency or
applicable licensing bureau) and verification of business listing/phone number using the telephone book,
internet or directory assistance. Internet sites such as 411.com, Chamber of Commerce and Manta.com,
which allow business owners to add their own information, are not allowed to document the existence of the
business.

670.03 - Sources of Income

A borrower’s income can be derived from several sources. Income may be salaried, commissioned, or self-
employed. In addition to wage and self employed income, borrowers may receive additional income in the
form of capital gains, rents, royalties, trust income, and nontaxable income such as child support, social
security, disability, and public assistance for example. As these are eligible sources of income,
documentation is required to evidence receipt of the income, the continuance of the income, and the stability
of the income.

Eligible sources of income are defined as income received and paid tax on as evidenced by a U.S. tax
return. Income received from any source that cannot be verified is not acceptable for qualifying the borrower
and therefore is ineligible.

Employment-related assets that are ineligible to be used for qualifying income include: non-employment
related assets (e.g., stock options, non-vested restricted stock, lawsuits, lottery winnings, sale of real estate,
inheritance and divorce proceeds).

Nontaxable income must be documented with an award letter, policy agreement, account statement, or any
other document that addresses the nontaxable status of the income. If the income is nontaxable and the
income and its tax-exempt status are likely to continue for at least three years, the income may be grossed
up 125%. When utilizing an ARM product on the Agency Conforming or Agency High Balance program
nontaxable income must be grossed up.

FHA allows the income to be grossed up to a maximum of 125%.




Icon Lending Guide – Section 600                                                                Revised 10-22-12
Loans run through DU are not eligible for income documentation waivers. Icon will require income
documentation regardless of the DU Findings. At minimum, the borrower will be required to provide the
most recent 30 days paystubs with YTD earnings and the previous years W2 (salaried) or the most recent
years personal tax returns (self employed). Icon will verify the validity of all income documentation submitted
and may request additional documentation if any discrepancies appear.

670.03.1 - Wage Earner

The income received as compensation for services paid by a person, business or organization at specified
intervals is considered salaried or wage earner income. There are four classifications of wage earners.

Full Time – the borrower is a permanent employee of the company and works a standard work week,
typically 40 hours.

Part Time – the borrower is a permanent employee of the company but works fewer hours than a standard
work week, typically less than 30 hours per week.

Temporary – the borrower is not a permanent employee of the company. The borrower typically works on
an “as needed” or contracted basis. If this is the borrower’s sole source of income and the income is needed
for qualifying, the borrower is required to have a 2 year continual history of working temporary jobs in order
to use the income for qualification.

Seasonal – the borrower works for a specified period of time on a specific job or contract. Once completed,
the borrower is on standby for the next assignment. Borrowers who fit into this category are typically farm
workers, union workers, roofers, landscapers.

Wage earners are paid on a regular basis. The interval may be hourly, weekly, bi-weekly, semi-monthly, or
monthly. Unless indicated differently in the DU Findings, borrowers are required to provide a pay stub
covering the most recent 30 days with year-to-date earnings, and the most recent 2 years W2’s to verify
income. Tax returns may be required if borrower owns more than one rental property and/or borrower’s
employment involves non-reimbursed employee expenses. When tax returns are required, the borrower
must provide all schedules and forms related to the income reported including, but not limited to, W-2s,
1099s, K1, etc.

Icon will consider income from an employment offer or contract subject to the following:
        The borrower’s income and employment history can be documented for the previous two years,
        The employment contract must be provided and must include the anticipated income, and
        The borrower must begin the new position prior to loan closing, documented with a paystub.

670.03.2 - Automobile Allowance

Icon will permit automobile allowances as acceptable source of income provided the borrower has been
receiving the income for at least two years. All associated business expenditures are to be included in the
calculation of the borrower’s total debt-to-income ratio. Automobile allowances that have been received for
less than two years will not be considered in the qualifying income.

If the borrower reports the allowance on form 2106 or Schedule C of his personal tax returns, Icon will use
the actual cash flow approach to determine if the payment will be added to the borrower’s qualifying income
or added to the borrower’s total monthly obligations. If the funds exceed the borrower’s monthly expenses,
the figure will be added to the borrower’s qualifying income. If the funds are insufficient to cover the
borrower’s monthly expense, the figure will be added to the borrower’s total monthly obligations. If the



Icon Lending Guide – Section 600                                                              Revised 10-22-12
borrower files Form 2106 and recognized “actual expenses” instead of the “standard mileage rate”, Icon will
differ to the actual expenses section for the actual lease payments to calculate the funds.

If the borrower does not report the allowance on Form 2106 or Schedule C, Icon will use the income and
debt approach. The full amount of the allowance will be added to the borrower’s qualifying income. In
addition, the full amount the lease or financing expenditure will be added to the borrower’s total monthly
obligations.

670.03.3 - Bonus Income

Bonus income is an eligible source of income provided the borrower has a documented 2 year history of
receiving bonus income. Bonus income can be paid monthly, quarterly, annually, or as part of an incentive
plan. The nature of the bonus income must be consistent in order to use the bonus for qualifying. Bonus
income should be averaged over a 24 month period. If there is a decline in bonus income, Icon will evaluate
the income to determine if the income is stable and can be used for qualifying. If the income is used, the
more conservative figure will be applied. If the bonus income is ≥ 25% of the borrower’s annual income, the
most recent 2 years tax returns are required.

670.03.4 - Commission Income

As commission income can fluctuate, a two year average is required when qualifying the borrower. In
addition, there must be an established earnings trend. If the borrower does not have a two year history of
receiving income but has a 12 months history or greater, the income may be used if there are solid
compensating factors and there a future earnings trend is demonstrated. If the commission income
declines, the income is not considered stable. Icon’s underwriter will determine the stability of the income. If
the income is used, the more conservative figure will be applied. Any significant increases or decreases in
the commission income must be addressed by the borrower.

Borrowers who receive ≥ 25% of their total annual income from commissions will be considered self
employed. The most recent 2 years personal tax returns are required. In order for the commission income
to be used for qualifying, the commission income reported on the tax returns must cover at least a 12 month
period.

670.03.5 - Military Income

Military personnel often receive different types of pay in addition to their base pay. Flight or hazard pay,
rations, clothing allowance, quarters’ allowance, and proficiency pay are acceptable sources of income, as
long as the borrower can evidence that this particular source of income will continue to be received in the
future. Income paid to military reservists while they are fulfilling their reserve obligations also is acceptable if
it meets the same stability and continuity requirements applied to other types of second-job income.

670.03.6 - Overtime Income

Overtime income is an eligible source of income provided the borrower has a documented 2 year history of
overtime earnings. There must also be a likelihood of the overtime income continuing in order to use the
income for qualification. Overtime income should be average over a 24 months period; however, if the
overtime income has declined, Icon will evaluate the income to determine if the income is stable and can be
used for qualifying. If the income is used, the more conservative figure will be applied. If the overtime
income is ≥ 25% of the borrower’s annual income, the most recent 2 years tax returns are required.




Icon Lending Guide – Section 600                                                                  Revised 10-22-12
670.03.7 – Secondary Employment Income

A borrower who has a part-time or second job must have a continuous 2 year history of working two jobs as
well as a continuous 2 year history of the part-time/second job if the income will be used to qualify.
Borrowers with less than a continuous 2 year history may still be eligible if the part-time, second job, or
multiple job income has been received for a minimum of 12 months and there are positive factors to offset
the shorter income period.

670.03.8 - Seasonal Job Income

Seasonal part-time or second job income (including seasonal unemployment compensation) can be
considered as stable income if the borrower has worked the same job (or line of seasonal work) for the past
two years and the borrower’s employer indicates that there is a reasonable expectation that the borrower will
be rehired for the next season. Borrowers who have seasonal jobs include holiday workers, outdoor laborers
such as landscapers, construction workers, roofers, etc.

Seasonal unemployment compensation may be used to qualify the borrower if it is documented, clearly
associated with seasonal layoffs, expected to recur, and reported on the borrower’s federal income tax
returns.

670.03.9 - Trailing Spouse/Co-borrower Income

Trailing spouse income is ineligible.

670.03.10 - Self-employed Income

Self employed borrowers are eligible with a documented 2 year history of the existence of the business.
Borrowers who receive income from any of the following sources are considered self employed:

        A borrower who has ≥ 25% interest in a business that is a sole proprietorship (Schedule C), general
         and limited partnership (K-1 and 1065), corporation (1120) or a S-corporation (1120S).
        A borrower whose combined business interests comprise ≥ 25% of the total income.
        Borrower who receives commission income ≥ 25% of the total income.
        Borrower whose income is exclusively investments (interest income, dividends, capital gains, or real
         estate).
        Borrower who is a member of the clergy and files as self employed.
        Borrower who is a contract worker and receives 1099 income.
        Borrower who is employed by a family member (regardless of the percentage of ownership).
        Borrowers who are wage earners and also received ≥ 25% of their annual income in the form of
         bonus, commissions, and/or overtime.

Loans run through DU will defer to the DU Findings for required income documentation. When tax returns
are required to document income, all schedules and forms related to the income reported must be provided.

Self employed borrowers are required to sign a 4506-T and an 8821, if applicable.

A business license is required to document a 2 year existence of the business. If state or local agencies do
not require the business to have a license, other documentation may be provided to establish the validity
and length of operation of the business.



Icon Lending Guide – Section 600                                                            Revised 10-22-12
When there are Schedule C and/or Schedule E losses for a business owned solely by a non-signing spouse
and it can be documented that the borrower has no involvement in the business, the loss will not be factored
into the borrower’s debt ratio unless the underwriter determines that the loss is substantial enough to effect
the borrower’s ability to re-pay the loan.

670.03.11 - Non-Salaried Income, Fixed Income, & Additional Income Sources

670.03.11(a) - Alimony/Child Support

Alimony and/or child support are an eligible source of income provided it continues for a minimum of three
years after the date of the mortgage application and borrower has a minimum 6 months history of receiving
the full income on a regular and timely basis. A copy of the recorded divorce decree or the recorded legal
separation agreement is required to evidence the award of alimony and/or child support and to evidence the
payment amount of the alimony and/or child support along with the duration of the payment. When utilizing
this source of income, Icon will take into consideration the borrower’s regular receipt of the payment and any
limitations on the continuance of the payment (i.e.: the age of the children for whom the support is being
paid). If there is no legal recorded document for the award, the income cannot be used in qualifying the
borrower.

The borrower must provide evidence of receipt of payments for alimony or child support. Acceptable
documentation includes the borrower’s bank statements, personal tax returns and copies of the checks
along with deposit slips that show regular consistent payments.

Icon will consider the regularity and timeliness of the payments, as well as whether the borrower received all
or only part of the full amount that was due.

If the borrower has been receiving the full, regular, and timely payment for alimony or child support for 12
months, the income is considered stable.

If the borrower has been receiving full, regular and timely payments for alimony or child support for 6-12
months, the income can be considered stable provided it does not constitute more than 30% of the total
gross income used to qualify the borrower.

When the borrower has been receiving full, regular, and timely payments for alimony or child support for less
than 6 months, the income is not considered stable and cannot be used to qualify the borrower.

When the borrower has been receiving full or partial payments for alimony or child support on an
inconsistent or sporadic basis, the income is not considered stable and cannot be used to qualify the
borrower.

670.03.11(b) - Boarder Income

Most programs do not accept boarder income as an eligible income source.

For standard mortgages, a borrower with disabilities who receives rental income from a live-in personal
assistant may use the rental income for qualifying provided the rental income does not exceed 30% of the
total gross income used to qualify the borrower. The boarder will need to provide evidence demonstrating a
history of shared residency with the borrower (bank statement, credit card statements, etc) along with the
most recent 12 months cancelled rent checks documenting the amount of rent paid.




Icon Lending Guide – Section 600                                                              Revised 10-22-12
670.03.11(c) - Capital Gains

If the income from capital gains is used to qualify the borrower, the most recent two years personal tax
returns are required to verify the income. The income should be consistent and likely to continue. If the
income is consistent for the previous two years, the income will be averaged for 24 months. If the income
has fluctuated substantially, a three year history is required. The most conservative approach will be used if
the capital gain income is decreasing year after year.

670.03.11(d) - Disability Benefits

Disability benefit payments are considered an acceptable income source unless the terms of the disability
policy specifically limit the stability or continuity of the benefit payments. If the income falls into a category
that does not have a defined expiration date, Icon will conclude the income is stable, predictable, and likely
to continue. Additional documentation from the borrower is not required.

Benefits that have a defined expiration date must have a remaining term of at least three years from the date
of the mortgage application in order to be used for qualifying the borrower. If the benefit payment will be
decreasing to a lower amount within the next three years due to conversion to a long term benefit, Icon will
use the lower amount (long term payment) when qualifying the borrower.

The borrower is required to provide a copy of the disability policy or benefits statement to verify the amount
of disability payments and to determine whether there is a contractually established termination or
modification date. Icon will also require a statement from the benefits’ payer (insurance company, employer,
or other qualified and disinterested party) to confirm the borrower’s current eligibility for the disability
benefits.

670.03.11(e) – Education Benefits

Education benefits are not an acceptable source of income as they are offset by education expenses.

670.03.11(f) - Foster-Care Income

Income that a borrower receives from a state-sponsored or county-sponsored organization for providing
temporary care for one or more children is an acceptable income source as long as the borrower has a two-
year history of providing foster-care services and is likely, in the foreseeable future, to continue to provide
such services at a level that supports the amount of income needed for qualifying for the mortgage. If a
borrower has not been receiving this type of income for two full years, the income may still be used as long
as the borrower has at least a 12-month history of providing foster care services and this income does not
represent more than 30% of the total gross income that is used to qualify the borrower.

Acceptable documentation verifying foster-care income includes letters from the organization(s) providing
the income, the borrower’s most recent two years personal tax returns, or copies of the borrower’s deposit
slips or bank statements that confirm the regular deposit of the payments.




Icon Lending Guide – Section 600                                                                 Revised 10-22-12
670.03.11(g) - Interest and Dividend Income

Interest and dividend income may be used as acceptable stable income if it has been received for the past
two years as documented by the borrower’s most recent two years personal tax returns. For qualifying, the
income will be averaged over 24 months. If income is decreasing, the income may be averaged over less
than 24 months.

The borrower must provide evidence of ownership of the assets on which the interest and/or dividend
income was earned. Any assets used for down payment or closing costs must be subtracted from the
borrower’s total assets before calculating expected future interest or dividend income.

670.03.11(h) - Mortgage Differential Payments

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. These payments can be
considered an acceptable source of income if the borrower’s employer verifies its subsidy in writing, stating
the amount and duration of the payments. The payments must continue for at least three years from the date
of the mortgage application. The differential payments are added to the borrower’s gross income when
calculating the qualifying ratio. The payments cannot be used to offset the mortgage payment, even if the
employer pays them to the mortgage lender.

670.03.11(i) - Notes Receivable

Income derived from payments on notes receivable may be used for qualification if the borrower has
received the income for the previous 12 months and the income will continue for at least three (3) years from
the date of the mortgage application. A copy of the note is required to establish the amount and length of
payment. The following are the verification requirement.

A 12-month history of receipt is required as evidenced by one of the following:
        Personal tax returns, or
        Bank statements showing consistent deposits, or
        Cancelled checks.

Payments on a newly executed note (less than 12 months) that specifies a minimum duration of three years
from the date of application are not eligible as they are not considered stable income; however the payments
may be used to justify a higher qualifying ratio.

670.03.11(j) - Public Assistance Income

Income from public assistance may be considered as an acceptable income source if documentation is
provided to show the income has been received for the past two years, and is expected to continue to be
received for at least three years from the date of the mortgage application. Acceptable forms of
documentation are letters or exhibits from the paying agency that state the amount, frequency, and duration
of the benefit payments.

Monthly Section 8 voucher payments also are an acceptable source of qualifying income. The income does
not require a two year history of receiving payments or for the payments to continue for a specified period of
time after the date of the mortgage application. Verification from the public agency that issued the voucher
to the borrower of the monthly payment amount and that the income is non-taxable is required. If the income
is non-taxable, the income may be adjusted up 125%. Refer to Section 670.03 – Sources of Income for
additional information.




Icon Lending Guide – Section 600                                                             Revised 10-22-12
670.03.11(k) - Rental Income

Rental income can be used as a qualifying income provided the transaction meets the following
requirements.
        Subject property being financed is:
              Owner-occupied 2-4 unit primary residence, or
              SFR or 2-4 unit investment property
        If the borrower is purchasing an investment property and will have 1-4 financed properties the
         following applies:
             Subject property, reserves are per DU.
             The borrower must have a minimum of 2 months PITIA reserves for any other financed second
              home or investment properties.
        If the borrower is purchasing an investment property and will have 5-10 financed properties (eligible
         on Portfolio program only) the following applies:
             Subject property, reserves are per DU.
             The borrower must have a minimum of 6 months PITIA reserves for any other financed second
              home or investment properties.
        Rental income generated from the subject property requires the appraiser to provide the following:
             Single-Family Comparable Rent Schedule (Form 1007), or
             Small Residential Income Property Appraisal Report (Form 1025) 2-4 unit properties.
        The borrower must provide the most recent year personal tax returns and the related Schedule E to
         calculate the rental income making sure that depreciation or any interest, taxes, or insurance
         expenses are added back in the borrower’s cash flow analysis.
Rental income generated from other investment property (e.g. SFR, units, or commercial property) that the
borrower currently owns but is not the subject transaction requires the following:
        The borrower must provide the most recent year personal tax returns and the related Schedule E to
         calculate the rental income making sure that depreciation or any interest, taxes, or insurance
         expenses are added back in the borrower’s cash flow analysis.
If the borrower does not have a history of receiving rental income from a property because it was acquired
subsequent to filing the tax return, the rental income must be documented as follows:
        A copy of the fully executed lease agreement. A family member, any individual with an established
         relationship with the borrower or an interested party to the transaction cannot sign the lease
         agreement as the tenant.
        A copy of the receipt of a security deposit from the tenant and deposit into the borrower’s account.

NOTE: If using a lease agreement only 75% of the gross rents may be used as the net rental income.

         Borrowers who are purchasing an investment property, and do not currently own any other property,
         including a primary residence, must be qualified at the full PITIA payment; rental income cannot be
         used to help qualify the borrower.

Refer to Section 660.03 – Conversion of a Principal Residence if the borrower is retaining their current
residence as a rental.




Icon Lending Guide – Section 600                                                             Revised 10-22-12
670.03.11(l) - Retirement or Pension Income

Retirement or pension income is an acceptable source of income provided the borrower can evidence
regular receipt of payments. Typically, the borrower will need to provide a copy of the award letter
evidencing the terms of the income and the most recent two months bank statements evidencing receipt of
the payment. Other forms of acceptable documentation are the most recent two years filed personal tax
returns or the most recent two years SSA-1099/W2s.

When the retirement income is received in the form of a monthly annuity payment or a monthly distribution
from a 401(k), IRA, or Keogh, documentation is required to determine that the income is expected to
continue for at least three years after the date of the mortgage application. Additionally the borrower must
have unrestricted access to the accounts without penalty.

670.03.11(m) - Royalty Income

Royalty income may be used for qualifying provided the borrower has at least a 12 months history of
receiving the royalty payment. When utilizing an ARM product on the Agency Conforming or Agency High
Balance program royalty income requires a two (2) year history of receipt. This is documented with the
borrower’s most recent two years personal tax returns. The royalty income reported on the tax returns must
cover at least a 12 month period. The royalty payments must continue for a minimum of three years after
the date of the mortgage application.

670.03.11(n) - Social Security Income

Social security benefits with a definitive expiration date must have a remaining term of at least three years
from the date of the mortgage application in order for the income to be used in qualifying the borrower.
Typically, the borrower will need to provide a copy of the award letter evidencing the terms of the income
and the most recent two months bank statements evidencing receipt of the payment. Social security income
can also be verified with a copy of the award letter and the most recent two years SSA-1099. Refer to
section 670.03 - Sources of Income for gross up of social security income.

670.03.11(o) - Trust Income
Trust income may be used as income for qualifying if the borrower has a two year history of receiving trust
income and the income will continue for a minimum of three years from the date of the mortgage application.
A copy of the Trust Agreement is required to confirm the amount, frequency, and duration of the payments.
If the Trust Agreement is not available, a statement from the trustee confirming the amount, frequency and
duration of the payments is acceptable.

A copy of the borrower’s most recent two years personal tax returns are required to evidence receipt of the
trust income.

Lump-sum distributions from the trust made before the loan closes may be used for the down payment or
closing costs if they are verified by a copy of the check or the trustee’s letter that shows the distribution
amount and a copy of the receipt from escrow/title.

670.03.11(p) - Unemployment Benefits
Unemployment benefits, such as those received by seasonal workers, may be considered as an acceptable
income source if the income is documented, has been received for the previous two years, and is
predictable and likely to continue. Copies of the borrower’s most recent personal tax returns are required to
establish a two year history receiving the benefit.




Icon Lending Guide – Section 600                                                               Revised 10-22-12
670.03.11(q) - VA Benefits
Typically VA benefits are an acceptable income source provided they are documented by a letter or
distribution form from the VA and will continue for at least three years from the date of the mortgage
application. Education benefits are not an acceptable income source as they are offset by the education
expenses.

670.03.11(r) – Tip Income
Tip income may be used to qualify the borrower; a copy of the borrowers most recent 2-years personal tax
returns and all schedules are required to verify the income.

670.03.12 – 4506-T Forms
A 4506-T must be signed by all borrowers prior to loan closing.
Tax transcripts will be processed for the most recent 1-year when DU Findings require less than 2-years of
income and employment verification. Tax transcripts will be processed for the most recent 2-years when DU
Findings require 2-years of income and employment verification.
The 4506-T results must be validated against the income documentation provided is required for each
borrower signing the Note/Mortgage. Results must indicate no variances.

In the event the borrower has never filed taxes (recent college graduate with first job, etc.) and the 4506-T is
rejected, Icon will require the borrower to provide documentation from the IRS of “non-filing/no record found”
for the most recent 2-years.

NOTE:      Broker provided processed 4506-T results are not acceptable.

680 - Assets

Assets are reviewed with the borrower’s income and credit to determine the reasonableness of the
transaction. A pattern of savings and an ability to manage assets should be demonstrated as well as
confirmation that the funds are from an acceptable legal source. A borrower’s ability to accumulate assets
gives insight into the individual’s creditworthiness and financial strength.

The borrower must verify sufficient assets to cover any down payment and closing costs associated with the
mortgage transaction as well as retain enough assets to meet any reserve requirement.

Acceptable types of asset verification include the borrower’s current bank statements or financial statements
(all pages), a Verification of Deposit with minimum two month average balance completed by the financial
institution, or an internet printout. The internet printout must contain the same information as the traditional
documentation. All asset verification must be legible and cannot contain any alterations, erasures, or similar
indications that changes have been made. Asset verification documents must be dated within 30 days at
underwriting and 60 days at funding.

Deposits greater than one month’s gross income are required to be explained by the borrower and will be
verified, regardless of whether the funds are required to close the transaction.

DU determines the reserve requirements based on the overall risk assessment of the loan and the minimum
reserve requirement that may be required for the transaction. DU calculates the reserve requirement for the
subject property. However, when a borrower has a multiple financed properties and is financing, or
refinancing, a second home or investment property. DU does not able to determine the exact number of
financed properties the borrower owns.




Icon Lending Guide – Section 600                                                              Revised 10-22-12
        The Underwriter must manually apply the applicable additional reserve requirements for the other
         financed investment property and second home transactions. DU is not able to determine if the
         borrower has not sold or has converted their principal residence to a second home or investment
         property. The Underwriter must manually apply the applicable additional reserve requirements for
         the borrower’s current principal residence.

The Excess Available Assets are not required to be verified by DU (Excess Available Assets) amount
represents the amount of assets remaining after subtracting the Total Funds to be Verified from the Total
Available Assets. Generally, Excess Available Assets does not need to be verified; however, there are some
transactions requiring verification of additional assets above and beyond the amount required by DU (e.g.,
reserves for multiple financed properties and transactions involving the conversion of a principal residence).
The Underwriter should use the amount in this field to ensure the borrower has the appropriate amount of
assets and provides the required documentation needed.

680.01 - Ineligible Sources of Assets

The following sources of assets may not be used:

        Cash on hand (except as permitted by Community Lending Programs)
        Credit card cash advance
        Gifts which must be partially or fully repaid
        Proceeds from unsecured loans or personal loans
        Salary/bonus advance for future earnings
        Sweat equity
        Unsecured borrowed funds (credit card, unsecured lines of credit, overdraft protection, etc)
        1031 tax deferred exchange on an owner occupied or second home property

680.02 - Acceptable Sources of Assets

Assets used for down payment, closings costs, and reserves are eligible from the following sources:

680.02.1 - Checking and Savings Accounts

Borrower to provide the most recent complete bank statements (all pages) or a VOD with a minimum two
month average balance of all accounts used to close the transaction and to verify reserves. Any significant
deposits may require an explanation and verification. When utilizing an ARM product on the Agency
Conforming or Agency High Balance program, if a VOD is provided for asset verification, 1-month’s bank
statement, at minimum, is required regardless of DU Findings.

When there is a non-occupant co-borrower and assets are jointly owned the assets may be included in the
5% minimum borrower contribution requirement, when applicable and those funds must be entered for one
of the borrowers not both.

        Total liquid assets for the occupying borrower and non-occupant co-borrower are included in DU’s
         calculation of total available assets.




Icon Lending Guide – Section 600                                                             Revised 10-22-12
680.02.2 - Business Funds

Business funds are acceptable provided the borrower is 100% owner of the business and the borrower can
provide documentation evidencing the use of the business funds will not adversely affect the ability of the
business to operate. Icon will require a letter from the CPA or Tax Preparer confirming the withdrawal of the
funds will not have a negative impact on the business.

NOTE: Business funds may not be used to satisfy reserve requirements on the Agency High Balance
      program.

680.02.3 - Deposit on Sale

Funds used for the earnest money deposit are required to be verified. If the deposit exceeds $2,000, a copy
of the cancelled check or evidence the deposit has cleared the borrower’s account is required (copy of the
account statement showing funds cleared and a copy of the earnest money deposit check). The account
used for the earnest money deposit must also be verified.

680.02.4 - Government Bonds

Government bonds are valued at the purchase price unless redemption value can be determined and
verified. A letter from the redeeming institution confirming the redemption amount is required. Acceptable
documentation is required to evidence the funds have been liquidated/cash in and deposited into borrower’s
account.

680.02.5 - IRA/Retirement/Keogh Accounts

Funds from an IRA/Keogh account are acceptable for down payment, closing costs and reserves provided
borrower can access the funds prior to retiring. Funds withdrawn from an IRA/Keogh account are subject to
penalties and income tax. The net withdrawal must be used as the trust asset value. Acceptable
documentation is required to evidence the liquidation of the funds and deposit to borrower’s account.

If the retirement funds are used for reserves, they do not need to be liquidated, however evidence must be
provided that withdrawals for any reason are allowed. Accounts that do not allow withdrawals are not
acceptable to use as reserve funds. Icon will use 60% of the total account value less any outstanding loans
for the available amount.

680.02.6 - Inheritance

Inheritance is an acceptable source of funds. A copy of the will or a letter from the trustee documenting the
distribution of the estate is required. Evidence of receipt of the funds by borrower is also required.
Inheritance can be used to satisfy borrower’s 5% contribution to the down payment as the funds are
considered to be the borrower’s money.

680.02.7 - Insurance Settlement

If the borrower will be using funds received from an insurance claim settlement, the borrower will need to
provide a copy of the settlement agreement or judgment evidencing the amount of the borrower’s portion of
the settlement. Borrower will also need to provide a copy of the settlement check evidencing receipt of the
funds and deposit into borrower’s account.




Icon Lending Guide – Section 600                                                             Revised 10-22-12
680.02.8 - Life Insurance

The surrender value minus any outstanding loans is an acceptable source of liquid funds. If no surrender
value is given, the available amount will be based on 60% of the current value less any outstanding loans.

680.02.9 - Pooled Funds

A borrower is allowed to pool their funds with funds from a relative who has lived with the borrower for the
previous 12 months to make up the down payment. Borrower must provide an affidavit that states the
following:
         Source of pooled funds
         The pooled funds are not borrowed
         The relationship between the borrower and the relative
         The relative as lived with the borrower for the previous 12 months
         The relative will continue to live with the borrower in the new residence for the foreseeable future.
    NOTE: Funds provided by a relative who does not live with the borrower are subject to gift fund
          requirements. Refer to Section 680.02.25 Gift Funds for requirements.

680.02.10 - Stocks, Bonds, & Other Investments

Stock, bonds, or other investments must be verified by the stockbroker or by a copy of the certificate
evidencing the ownership. The most recent three months statements from the brokerage firm confirming the
value, type of security, account activity, and current value are required. Icon will use 70% of the value of the
instruments for reserve considerations. Acceptable documentation is required to evidence the liquidation of
the funds and deposit to borrower’s account when the funds are being used for the down payment, closing
or other costs.

NOTE: Non-vested restricted stock is not an acceptable source of reserves.

680.02.11 - Trust Account

Trust account funds may be used if the borrower has access to the funds. A copy of the trust and a letter
from the trustee is necessary to evidence borrower’s access to the funds. Documentation is required to
evidence the withdrawal of the funds.

680.02.12 - Bridge or Swing Loan

A bridge or swing loan is a form of a second trust deed that is collateralized by the borrower’s current
residence, which is typically for sale. The terms of the loan are required and should include the amount,
term, rate, minimum payment, and if the loan is renewable, in the event the current residence does not sell.
The bridge or swing loan repayment must be monthly

The borrower must qualify with the payment on the current residence including the bridge or swing loan
payment.

The bridge or swing loan cannot be cross-collateralized against the proposed property. A copy of the
agreement of the sale or listing for the property being sold is required.

Bridge loans on a property located in a declining market, as determined by the underwriter, or realtor
assessment, are not eligible.


Icon Lending Guide – Section 600                                                               Revised 10-22-12
680.02.13 - Trade Equity

The seller may take the borrower’s existing property in trade as all or part of the down payment as long as
the borrower’s equity contribution is a true-value consideration.

The equity contribution is calculated by deducting the outstanding balance of all liens against the property
that is being sold or traded, plus transfer fees from the lesser of that property, the lesser of that property’s
appraised value, or the amount agreed upon by the parties.

An appraisal for the property being traded is required. A preliminary title report is required to verify the
ownership of the property and to determine if there are any existing liens on the property. Transfer of the
property must be completed prior to or simultaneous to the closing of the proposed property and evidenced
by a Final HUD-I.

680.02.14 - 1031 Exchange

The net sale proceeds from a 1031 Exchange are an acceptable source of funds provided the subject
property is a non-owner occupied purchase. Borrower will need to provide a copy of the Final HUD-I
executed by all parties from the 1031 Exchange Sale, a copy of the Exchange Escrow Instructions and/or
Exchange Agreement, and a copy of the Final HUD-I executed by all parties from the subject sale showing
the Exchange funds deposited to the transaction.

If the funds have been deposited with an accommodator prior to the purchase exchange escrow, a letter
from the accommodator is required to verify the Exchange funds are available to be deposited to the subject
transaction and the amount of funds held by the accommodator.

680.02.15 - Lease/Rent with Option to Purchase

The portion of the payment which exceeds market rents can be applied to the down payment and closing
costs. Borrower must provide a copy of the lease agreement, cancelled checks for the security deposit and
the most recent 12 months cancelled checks for the rent payments. Evidence of market rent is required.

680.02.16 - Land Equity

In a construction-to-permanent financing conversion loan, the land equity may be applied toward the down
payment. If the land was purchased within 12 months from the date of the mortgage application, the cost of
the land must be used to calculate the equity. If the land was purchased more than 12 months prior to the
date of the mortgage application, a current appraisal should be used to establish the equity value.

680.02.17 - Borrowed Secured Funds

Borrowed funds secured by an asset may be used with documentation verifying the terms of the loan and
that the loan is secured. The monthly payment for the new loan must be calculated in the debt ratio.

680.02.18 - Community Seconds and Subsidy programs

Community seconds and subsidy programs are only allowed on FHA –insured loans subject to FHA
guidelines.




Icon Lending Guide – Section 600                                                                 Revised 10-22-12
680.02.19 - Subordinate Financing

Subordinate/secondary financing is permitted as an acceptable source of funds up to the maximum CLTV
offered by the program and subject to MI guidelines. Refer to the applicable program detail for maximum
CLTV.

Rate/term refinance transactions, existing subordinate financing may be re-subordinated subject to program
CLTV restrictions and MI guidelines. New subordinate financing is ineligible.

Subordinate financing may be provided by an institutional lender, or the property seller. Subordinate
financing from any other source is ineligible. A copy of the note for the subordinate lien is required to
document the financing terms. The following restrictions apply:

   The subordinate lien must require regular payments of a minimum of interest only. For seller carry
    subordinate liens, the lien must require regular payments of principal and interest.
   Maximum term for seconds is 30 years, with no call provision within the first five (5) years. The term on
    the 2nd trust deed may not exceed the term of the 1st trust deed.
   The minimum term for a 2nd trust deed is five (5) years.
   The subordinate loan may not allow negative amortization.
   The subordinate lien must fully amortize and cannot have a maturity or balloon date less than five years
    from the date of the note.
   The interest rate on the subordinate lien must be at current market rate. This applies to both institutional
    and seller held lien. The market rate cannot be more than 2% below the posted net yield in effect at the
    time of closing the subordinate loan.
   The subordinate lien cannot include any wraparound terms that combine the amount owed on the first
    mortgage with that of the subordinate mortgage.
   The subordinate lien must permit repayment in full at any time without penalty.

680.02.19.1 Portfolio DU Refi Plus Subordinate Financing

The following applies to subordinate financing.

        New subordinate financing is permitted provided it replaces existing subordinate financing.

        Existing subordinate financing may not be satisfied with the proceeds of the new DU Refi Plus loan.

        Existing subordinate financing may be simultaneously refinanced provided the new subordinate lien
         loan amount does not exceed the existing unpaid principal balance.

        Existing subordinate financing may remain in place provided it is resubordinated to the new DU Refi
         Plus loan.

The subordinate financing on the DU Refi Plus loan must comply with the requirements detailed in section
680.02.19 Subordinate Financing.




Icon Lending Guide – Section 600                                                               Revised 10-22-12
680.02.20 - Seller Carry Back

If the seller is providing the subordinate financing, the following applies:
   The subject property must be owner occupied or second home.
   The sales contract needs to disclose the seller is providing secondary financing.
   All payments related to the secondary lien are included in the debt ratio.
   The lien must be recorded and clearly subordinate to Icon’s first mortgage.
   A copy of the note is required to determine the terms of the subordinate lien.
   Regular payments must cover principal and interest at the market rate.
   The subordinate lien cannot have a call option less than five years.
   The subordinate lien must permit repayment in full at any time without penalty.
   No non-arms length transaction in which there is a relationship between the buyer and the seller.
   No builder-carry second liens.

680.02.21 - Sale of Personal Property

The sale of personal property or a personal asset is an acceptable source of funds. Borrower will need to
provide the Bill of Sale, documentation supporting the asset’s value, and evidence of receipt and deposit of
the proceeds from the sale.

680.02.22 - IRS Refund

Refund checks from the state revenue and IRS departments are acceptable sources of funds. Satisfactory
documentation is required to evidence the refund. Copies of the refund check(s) or a copy of the
federal/state tax return and a bank statement showing the deposit is acceptable.

680.02.23 - Repayment of Debt

Funds received by the borrower for repayment of loans to family or friends is acceptable provided the
borrower can evidence the transfer of the funds to the family member/friend at the onset of the loan and that
borrower had the ability to have made the loan.

680.02.24 - Existing Home Equity

The proceeds from the sale of the borrower’s current residence are an acceptable source of down payment
and closing costs. A copy of the Final HUD-I is required.

680.02.25 - Gift Funds

Gift funds are an acceptable source of funds for closing costs and the down payment, as long as the
borrower has met the minimum down payment requirement. Gift funds are ineligible to satisfy reserve
requirements.

Gift fund requirements are as follows:
        Gift funds can be provided by any of the following




Icon Lending Guide – Section 600                                                            Revised 10-22-12
             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 or fiancée, or domestic partner.
        When the LTV is > 80% LTV gift funds are allowed only after a minimum down payment of at least
         3% has been made from the borrower’s own funds.
        If the LTV is ≤ 80% the entire down payment may be from a gift.
        The donor cannot be affiliated with the builder, developer, real estate agent, broker, or any other
         interested party to the transaction.
        Gift must be evidenced by a gift letter, signed by the donor and must include the following:
             Specify the dollar amount,
             Specify the date the funds were transferred,
             Include the donor’s statement that no repayment of funds is expected, and
             Indicate the donor’s name, address, telephone number and relationship to the borrower.
             Gift funds are allowed on owner-occupied primary residence or second homes. Gift funds are
              ineligible on investment property transactions.
Gift fund availability and transfer must be verified. The following is acceptable documentation:
        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 (must be a certified/cashier’s check), or
        A settlement statement showing receipt of the donor’s check.

680.02.26 - Gifts of Equity

Gifts of equity are an acceptable source of down payment and closing costs on the Agency Conforming
program. A gift of equity is allowed on primary residence transactions only with a maximum 80% LTV. The
LTV is based on the lower of the sales price or the appraised value.

Gift fund criteria detailed in Section 680.02.25 – Gift Funds must be met. Gift of equity transactions also
require the following:
   The gift of equity must be provided by one of the parties defined in Section 680.02.25 – Gift Funds.
    NOTE: A gift of equity from one spouse to another is ineligible.
   The borrower must be able to verify that 5% of the sales price has been saved, however these funds do
    not have to be used toward the down payment.
   The gift of equity cannot be a bail out of a relative or other individual.
   The gift of equity must be identified in the sales contract.
   The property must be sold at fair market value.
   The final equity exchange must be documented on the Final HUD-I.
A gift of equity is ineligible on second home and investment transactions.

680.02.27 Gifts from a Relative

Refer to Section 680.02.25 – Gift Funds for requirements.




Icon Lending Guide – Section 600                                                               Revised 10-22-12
680.02.28 - Gifts from a Church, Municipality, or Non-profit Organization

Gifts or grants from a church, municipality or non-profit organization are an eligible source of funds as long
as the borrower has met the minimum down payment requirement of 5%. If the LTV is 80% or less, the
entire down payment may come from a gift or grant.

A copy of the award letter or a copy of the legal agreement stating the specific terms and conditions of the
gift is required. The document must verify that no repayment is required as well as include the terms of how
the funds will be transferred.

Seller funded gifts/grants are ineligible.

680.02.29 - Contributions by Interested Third Parties

Interested Party Contributions (IPCs) are defined as financing concessions or sales concessions and consist
of funds provided by someone other than the borrower to pay costs associated with obtaining a mortgage
that are normally the responsibility of the property purchaser. They may be paid by the seller, lender, or by
any other third party who has an interest in the property sale or purchase transaction.

680.02.29 (a) - Interested Party Contributions

A contribution, monies not paid by the borrower, may be paid by the seller or by any other interested party to
the transaction, such as the builder, the developer, the real estate agent, the broker, or an affiliate of any
such party.

A relative, domestic partner, fiancée, fiancé, municipality, non-profit organization, or employer is not
considered an interested party unless he is the property seller or is affiliated with the property seller.

Interested party contributions (IPCs) are allowed for recurring and non-recurring closing cost credits but
cannot exceed the actual cost/fees or the maximum allowed per LTV/CLTV and occupancy type. Principal
reductions are not allowed.

When the transaction contains IPCs, the sales contract, Good Faith Estimate, loan application, appraisal
report, and HUD-I must include or address all financing arrangements that have been negotiated between
the buyer and the seller.

The maximum interested party contribution is based on the lower of the sales price or appraised value. The
maximum limits are as follows:

    ●    Owner-occupied and LTV/CLTV > 90% = 3%
    ●    Owner-occupied/Second Home and LTV/CLTV ≤ 90% = 6%
    ●    Owner-occupied/Second Home and LTV/CLTV ≤ 75% = 9%
    ●    Investment property, all LTV/CLTV = 2%
    ●    For Sale By Owner (FSBO), all LTV/CLTV = 2%

Costs/Fees (financing concessions) that are subject to IPC Limits

Financing concessions are fees/costs that are credit to the borrower through the transaction. The following
items are considered interested party contributions:
   Origination, discount points, commitment fees



Icon Lending Guide – Section 600                                                                 Revised 10-22-12
        Cost for interest rate shortfalls
        Appraisal costs
        Transfer taxes
        Stamps
        Attorney fees
        Survey charges
        Title insurance premiums or charges
        Real estate tax service fees
        Funds to subsidize a permanent interest rate buy down.
        Funds that are passed from an interested party to a non-profit and then to the buyer for payment of
         closing costs.
        Prepaid items – interim interest charges (limited to 30 days), real estate taxes covering any period
         after settlement (but only if taxes are being escrowed for future payments), hazard insurance
         premiums (maximum 14 months), and initial or renewal mortgage insurance premiums.
        Items paid by the seller that are the responsibility of the seller

Costs/Fees (financing concessions) not subject to IPC Limits

        Buyer/broker fees paid by the seller as part of the real estate commission, as long as the
         commission being paid is typical of the commission usually paid in that real estate market.
        Transfer related charges if they are common and customary for the seller to pay all or a portion of
         the charges. Examples are transfer tax, stamp tax, costs of title insurance policies and surveys,
         recording fees, and attorney fees.
        Gift funds from a donor that complies with gift policy.
        Gifts or grants from a non-profit organization that do not obtain funding from the seller or any other
         interested party to the transaction.
        Sales concessions.

680.02.29 (b) - Sales Concessions

Sales concessions are items and/or fees that are an incentive to the buyer. Sales concessions may consist
of furniture, automobiles, securities, decorator items, repair allowance, and other “giveaways” granted by
any interested party to the transaction. In addition, IPCs that exceed the maximum allowable are considered
sales concessions. Sales concessions are not calculated into the IPC limit but their value is deducted from
the sales price. The LTV will then be based on the lower of the adjusted sales price or the appraised value.




Icon Lending Guide – Section 600                                                               Revised 10-22-12
690 - Property Valuation

Icon will extend financing for the purpose of purchasing or refinancing one-to-four (1-4) family residential
properties. The property must constitute an acceptable form of collateral for the requested mortgage. The
security for the mortgage may be a single family dwelling (detached or attached), a townhouse, PUD or
condominium unit, or a two-to-four (2-4) family income property.

Icon requires all appraisals must comply with Fannie Mae/Freddie Mac guidelines --- and with the Appraiser
Independence Requirements (AIR) issued by Federal Housing Finance Agency --- and FHA’s Appraiser
Independence Guidelines. Appraisals must also meet the minimum standards established by FIRREA and
USPAP and the provisions set forth by the Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010. Although Icon follows standard Fannie Mae appraisal guidelines, any differences noted in this section
of the manual will supersede.

Fannie Mae Appraiser Independence Requirements

Icon follows Fannie Mae’s Appraiser Independence Requirements and requires every appraisal prepared by
its approved Appraisal Management Companies (AMCs) or transferred from another lender be AIR
compliant, which includes:

    1. Requiring the appraiser be, at a minimum, licensed or certified by the state in which the property to
       be appraised is located; and

    2. No employee, director, officer, or agent of the Seller, or any other third party acting as joint venture
       partner, independent contractor, appraisal company, appraisal management company, or partner on
       behalf of the Seller, 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.

FHA Appraiser Independence Guidelines

Icon follows FHA’s Appraiser Independence guidelines. Icon will accept appraisals ordered through one of
Icon’s approved AMCs, or an appraisal issued in the name of another direct lender. Appraisals issued in the
name of another direct lender must provide evidence that the appraisal meets FHA’s Appraiser
Independence guidelines. Appraisals cannot be ordered directly by the broker or issued in the name of the
broker. Icon will furnish the borrower with a copy of the appraisal no later than three (3) days prior to the
closing of the loan.

Refer to Icon’s website for a list of AMCs under Approved Partners link.

690.01 - Appraiser Requirements

All appraisers must be licensed in the state in which the subject property is located. When the sales price
(purchase) or appraised value (refinance) is greater than $1,000,000, a certified general appraiser must
prepare the appraisal report. The appraiser’s license and certification numbers must appear on the appraisal
report. A copy of the appraiser’s Errors and Omissions insurance is required with all appraisals. Insurance
coverage must be sufficient to cover the loan amount of the transaction, or $1,000,000, whichever is less.

Icon requires all appraisals be prepared by a licensed or certified appraiser who:
        Fully understands and complies with the Uniform Standards of Professional Appraisal Practices
         (USPAP), as published by the Appraisal Standards Board of the Appraisal Foundation.




Icon Lending Guide – Section 600                                                             Revised 10-22-12
        Is either an independent staff appraiser or independent fee appraiser as defined by Title XI of
         FIRREA (12 CFR Part 34).
        Is in good standing with the state licensing agency.
        Has no present or prospective direct or indirect financial or personal interest in the subject property,
         and has no personal bias or interest in the parties involved in the subject transaction.
        Was not assigned the appraisal subject to any required minimum or expected valuation of the
         subject property and is not compensated based upon the acceptability of the value derived in the
         appraisal.
        Demonstrates sufficient expertise and education in the appraisal of one-to-four (1-4) family
         residential properties similar to the subject property.
        Is currently an active appraiser.
        Does not appear on Icon’s list of excluded appraisers.
Unlicensed or uncertified appraisers that complete a portion or the entire appraisal report will require the
licensed or certified appraiser for whom they are working to: 1) sign the appraisal report; 2) inspect the
subject property (interior and exterior); and 3) check the box on the appraisal report that indicates he/she
has inspected the property.

690.02 - Appraisal Requirements

Standard appraisal requirements establish the value based on a thorough evaluation of both the interior and
exterior of the subject property. This includes a quantitative sales comparison analysis and requires the
assignment of a dollar value to reflect the market’s reaction to any features of a comparable sale that differs
from those of the subject property. The appraiser must perform a visual interior and exterior inspection of
the subject property, inspect the neighborhood, perform at minimum a visual inspection of all comparables
from the street, and research, verify, and analyze data from reliable public and/or private sources.

All appraisals must be written, must contain the appraiser’s license number and original signature (or
acceptable digital signature), and a copy of the appraiser’s Errors and Omissions Insurance. All subject
property photos must be legible. Interior photos are required on all transactions requiring a full appraisal.
Comparable photos may be photos provided by a multiple listing service if they are clear and sufficiently
detailed. The appraisal must be typed or computer-generated on an acceptable form without blanks,
alterations, or omissions.

The subject property address and legal description must match the loan application, sales contract,
settlement statement and title commitment. An appraisal without a complete and correct common address
or full legal description is not acceptable.

The loan amount and/or LTV can determine the type of appraisal and review required. Refer to program
details for specific appraisal requirements beyond what is listed below:

        On conforming loan amounts appraisal requirements are per DU. If a full appraisal/interior inspection
         is required it must be done by a state-licensed or state-certified appraiser, with interior and exterior
         photos. Refer to Section 690.05 – Required Appraisal Attachments for specific interior photos
         required.
        High balance loan amounts, appraisal requirements are per DU Findings. If a full appraisal/interior
         inspection is required it must be done by a state-licensed or state-certified appraiser with interior and
         exterior photos. Refer to Section 690.05 – Required Appraisal Attachments for specific interior
         photos required.




Icon Lending Guide – Section 600                                                                Revised 10-22-12
            NOTE: Properties located in Florida and Nevada will require a full appraisal, with interior/exterior
                  photos, regardless of DU findings with the exception of the Portfolio DU Refi Plus program.
                  A Portfolio DU Refi Plus loan may utilize a property inspection waiver (PIW) if allowed by DU
                  or, if a PIW is not received, is allowed to follow DU Findings regarding the appraisal
                  requirement.

                    A full second appraisal, with interior and exterior photos, is required on investment
                    properties with a sales price or appraised value under $100,000.

                    At-interest transactions, regardless of loan amount, require, at minimum, an enhanced desk
                    review or a Fannie Mae Form 2055 report (Exterior-Only inspection) by an Icon-approved
                    Appraisal Review Company.
           Purchase transactions that involve new construction and the builder is not a national company will
            require a field review regardless of DU Findings.
    ●       Loan amount > $1 million: A Fannie Mae Form 1004 appraisal with interior photos completed by a
            state-certified general or residential appraiser and a field review by an Icon-approved Appraisal
            Review Company are required. The appraisal must have at least three (3) closed sales, one (1)
            pending sale and two (2) listings, all no older than six (6) months. If a pending sale is unavailable,
            an additional listing may be substituted.

690.03 - Unacceptable Appraisal Practices

Icon will not extend financing on any transaction in which the property valuation is not supported or the
appraiser engaged in unacceptable appraisal practices.

Examples of unacceptable appraisal practices include, but are not limited to:
            Improper comp selection.
            Excessive and unsupported comp adjustments.
            Failure to properly report subject’s 12-month listing history or contracted sale.
            Failure to properly report subject’s 36-month sales history or comps’ 12-month sales history.
            Misrepresentation of subject or comparables.
            Misrepresentation of the person completing the appraisal.
            Unprofessional conduct.


Mandatory Reporting of Appraiser Misconduct
If there is a reasonable basis to believe that an appraiser has not complied with ethical or professional
requirements for appraisers under applicable federal or state law, or the Uniform Standards of Professional
Appraisal Practice (USPAP), and the resulting non-compliance has a material impact on value, Icon will
report the appraiser to the appropriate state licensing agency for further investigation.

690.04 - Acceptable Appraisal Forms

Acceptable appraisal forms generally follow Fannie Mae/Freddie Mac standards unless otherwise stated in
the Program Profiles. The appraisal report must be completed with all standard required addenda and
exhibits. Fannie Mae forms have a mandatory effective date of November 1, 2005, and Freddie Mac forms
have a mandatory effective date of January 1, 2006; both forms are acceptable to Icon.




Icon Lending Guide – Section 600                                                                 Revised 10-22-12
690.04.1 - Single Family Residences

All single-family residential appraisals, including PUD units, must be completed on Fannie Mae Form 1004,
with attachments. Site condo units may also be appraised on Form 1004 if the appraiser provides sufficient
information in the appraisal to determine project eligibility and owners association fees.

Single-family investment properties always require a Single Family Comparable Rent Schedule (Fannie Mae
Form 1007) and an Operating Income Statement (Fannie Mae Form 216), regardless of loan documentation
type.

690.04.2 - Multi-Family Residences

Two-to-four (2-4) unit income properties must be completed on Fannie Mae Form 1025, with attachments,
and an Operating Income Statement (Fannie Mae Form 216), regardless of occupancy or documentation
type.

690.04.3 - Condominium Units

Attached condominium units require an Individual Condominium Unit Appraisal Report (Fannie Mae Form
1073), with attachments. Detached units (site condos) may be appraised on Form 1073 or Form 1004 (e.g.
site condo units).

690.05 - Required Appraisal Attachments

All appraisals require a Statement of Limiting Conditions and Appraiser’s Certification (Fannie Mae Form
1004B) and the Market Conditions Addendum (1004MC), regardless of type.

The following attachments are required for all appraisals:

        A street map clearly showing the location of subject and each comparable sale and listing.
        A legible sketch of the subject dwelling including exterior dimensions (sketches of condominiums
         must indicate interior unit dimensions, not exterior building dimensions).
        Legible photographs of subject’s interior living areas (including kitchen, living room, and dining room,
         all bathrooms, and at least one bedroom), exterior front and rear elevations, and a street scene.
        Legible photographs of any special features or external influences that may have a material impact
         on subject’s value or marketability (positive or negative). Examples of amenities that have a positive
         effect on value include an extraordinary view, waterfront location, an in-ground pool, tennis court,
         and outbuildings. Negative external influences can include busy roadways, train tracks, airports, and
         commercial properties, abandoned or boarded-up homes, or environmental hazards.
        A legible photograph of each comparable sale and listing. An MLS photo may be used if new
         photographs cannot be obtained physically (e.g. due to inclement weather) or the property no longer
         resembles its appearance at the time of sale (e.g. has been torn down or added on to).
        Plat of surveys, flood maps, or plans and specifications, when applicable.
        An addendum explaining unusual items not adequately addressed on the appraisal form itself.




Icon Lending Guide – Section 600                                                               Revised 10-22-12
690.06 - Additional Appraisal Requirements
In addition to the appropriate appraisal form, the appraisal must include the following:
        The appraiser must review a copy of the sales contract on purchase transactions. The appraiser
         must acknowledge by checking the appropriate box on the appraisal that he has reviewed the sales
         contract and all addenda.
        Disclose any applicable information regarding the competency provision of the USPAP.
        Certify that the analysis is limited by the reported assumptions and conditions and is the appraiser’s
         own personal, unbiased professional opinion.
        Be based upon the market value of the property.
        Analyze and report in reasonable detail the sales history for the past 36 months for the subject
         property and the last 12 months for all comparables properties used in the report.
        Analyze any current agreement of sale, option, or listings for the subject property within the previous
         12 months.
        Provide data on current revenues, expenses and vacancies for income producing properties.
        Analyze and report on appropriate discounts and deductions.
        Analyze and report the impact of financing concessions, rent or sales concessions, contributions
         (even if such items are common market practice), and discounts for proposed construction or
         partially leased properties.
        Analyze and report a reasonable marketing period and exposure time.
        Analyze and report on current market conditions and trends that affect the value of the property.
        Include a statement that the appraisal was not based upon a requested minimum valuation, specific
         valuation, or the approval of a loan.
        Include a legal description of the subject property.
        Identify and separately value any personal property, fixtures, or intangible items.
        Set forth all material assumptions and limiting conditions that affect the opinions, analysis, and
         conclusions expressed in the appraisal.
        The appraiser must address any property additions and provide detailed commentary regarding the
         quality, safety, and conformity to the neighborhood of the addition. Additionally, the appraiser
         should address if the addition affects the marketability of the property.

690.07 - Electronic Appraisals

Appraisers and brokers who use electronic appraisals must have in place appropriate measures to ensure
the authenticity, integrity, security, and accuracy of any electronic appraisal provided to Icon (in electronic or
printed form). The Seller is responsible for ensuring that the parties to any electronic appraisal have
appropriately agreed to the use of the electronic signature in a way that will create a binding electronic
record under the federal Electronic Signatures in Global and National Commerce Act (E-SIGN) and the
Uniform Electronic Transactions Act (UETA), and any other applicable laws.

All electronic appraisals must include a comment by the appraiser describing the method used to create the
electronic signature and the intention to do so. The appraiser must also provide a statement in the report or
supporting attachments that any digital photographs used in the appraisal have not been altered in any way.




Icon Lending Guide – Section 600                                                                Revised 10-22-12
690.08 - Age of the Appraisal

The appraisal cannot be > 120 days from the Note date or a new appraisal with three new comparable sales
will be required.

An appraisal older than 90 days at underwriting, may, at the underwriter’s discretion, require a recertification
of value made by the original appraiser, indicating that the estimated value has not declined and market
conditions remain the same as described in the original appraisal. The recertification of value must be
completed on Fannie Mae Form 1004D. At the underwriter’s discretion, additional comparables may be
required. If the update does not confirm the original value and market conditions, a new appraisal may be
required.

A new appraisal will be required if the original appraisal is > 120 days old from the Note date.

690.09- Acceptable Age of Appraisal for Loans requiring a Second Appraisal

Loans requiring two appraisals, one of the two appraisals may be up to 90 days at the time of funding as
long as an appraisal update has been completed.

The second appraisal may not be older than 120 days of the Note date, with an appraisal update. After 120
days a new second appraisal will be required.

690.10 - Final Inspections/Completion Report & Appraisal Update

Whenever an appraised value is subject to completion or repairs, a final inspection is required prior to final
disbursement of loan funds. The final inspection should be performed by the original appraiser, and must be
documented by a Completion Report (Fannie Mae Form 1004D).

The Completion Report must be accompanied by photos of the completed property (and, where applicable,
the completed repairs), and must state that the improvements have been completed in accordance with the
requirements and conditions stated in the original appraisal report. The appraiser must also concur with the
original appraisal and research, verify, and analyze current market data in order to determine if the value has
declined since the effective date of the original appraisal. If the Completion Report indicates that market
conditions or the property value has declined since the original appraisal, a new appraisal is required.

690.11 - Declining Markets

Icon defines a property in a declining market as follows:

        The appraiser comments the subject is in a declining market, values are declining in subject’s area
         and/or the appraiser marks “declining” in the Property Values Section of the appraisal.
        AUS Findings indicate subject is located or appears to be located in a declining market.
        Web resources used by underwriting indicate the subject is located in a declining market

Transactions with an LTV > 80% are subject to MI availability and, if applicable, the MI Companies’ declining
market guidelines.




Icon Lending Guide – Section 600                                                               Revised 10-22-12
690.12 - Recently Remodeled or Renovated Properties

Inflated appraisals made for cash-out refinances and purchases of flipped properties are a serious concern
in the mortgage industry. The following requirements apply to all properties for which value is given in the
appraisal to remodeling, renovation, rehabilitation, or other property improvements or repairs made in the 12
months prior to the appraisal:

        If the work was performed by a third party, the appraiser must obtain a copy of the rehabilitation or
         remodeling contract showing an itemized list of repairs or improvements.
        If the property’s seller or borrower performed his or her own repairs or remodeling, the appraiser
         must provide a list of repairs or improvements and an estimate of costs.
        Interior photos of all stated repairs or improvements must be obtained on all loans, even those
         where the appraisal has been completed “as is.”
        Comparable adjustments must reflect the market's reaction to the improvements, not necessarily
         their cost. For example, swimming pools, electronic air filters, intercom systems, elaborately finished
         basements, carpets, luxury finishes or materials and other special features generally do not
         recapture value to the extent of their cost.
        If significant additions or conversions were made to the subject property, the appraiser must provide
         detailed commentary regarding the quality, utility, and conformity to the neighborhood of the
         improved property, and must indicate if permits were obtained.

690.13 - Other Property Characteristics

690.13.1 - Accessory Apartments/Non-Permitted Addition/Granny or In-Law Units

Properties with non-permitted accessory units, also known as granny units or mother-in-law suites may be
acceptable if all of the following are met:

        One or two-unit (1-2) property.
        Subject is typical, common and readily acceptable in the subject’s market area.
        Appraisal demonstrates market acceptance of these accessory units.
        Rental income from the accessory unit may not be used to help the borrower qualify.
        Existence of the unit must not jeopardize any future hazard insurance claim.
        Properties must conform to all zoning laws and/or regulations.
        Legal non-conforming use may be acceptable provided its current use does not adversely affect its
         value and marketability.
        Accessory unit is substantially smaller than the primary unit.
        Unit must not violate applicable zoning laws and/or restrictions in such a way that the property could
         not be rebuilt in its current design.




Icon Lending Guide – Section 600                                                              Revised 10-22-12
690.13.2 - Deed Restrictions

Icon will not extend financing on properties with deed restrictions that can potentially hinder Icon’s first
mortgage position. Any deed restriction must be subordinate to Icon’s mortgage and cannot prevent the
mortgagee to claim any hazard insurance settlement condemnation awards, prohibit mortgagee’s legal right
to remedy default under the mortgage terms, or restrict a notice of default or foreclosure to be sent to any
third party. A copy of the deed restriction is required.

For condominium projects, the number of restricted units must be disclosed. The association may have the
first right of refusal to purchase the unit but should not have the first right to lease, sale, or transfer a unit in
connection with a mortgage foreclosure, acceptance of a deed in lieu of foreclosure, etc.

The condominium documents cannot restrict the unit owner’s right to sell, transfer or convey the unit.
Limitations/restrictions to unit owners for occupancy or specified age groups are permissible provided the
limitations are legally valid and necessary to maintain the character of the project.

Properties with deed restrictions are limited to one-to-two (1-2) units, purchase or rate and term refinance
only.

690.13.3 - Deferred Maintenance

Property must be in average or better condition. Deferred maintenance may be permissible provided the
neglected item(s) is not structural in nature or has a negative effect on marketability. Deferred item(s) may
be left in “as is” condition if cosmetic in nature only and the cost to cure does not exceed $2,000.

690.13.4 - Electrical Systems

An electrical certification from a licensed electrician will be required whenever the appraisal states a fair or
poor rating concerning the adequacy or condition of the system. Any inadequacies must be corrected prior
to close.

690.13.5 - Environmental Hazards

The appraisal report should note the existence of known environmental hazards and its affect on value and
marketability of the property. Properties located adjacent to or containing environmental hazards are
ineligible for financing. Environmental hazards include, but are not limited to:

        Evidence of radon above EPA safety levels which is left untreated.
        Properties built on or near toxic waste dumps, clean-up sites, etc.
        Evidence of toxic molds or other contagions.

Properties must conform to Fannie Mae/Freddie Mac hazardous substance guidelines when issued.

690.13.6 - Excess Land/Acreage

Icon requires a property with significant land area to be appraised in its entirety. Icon will lend on properties
with a maximum lot size of 10 acres. The appraisal must show subject’s lot is typical for the neighborhood
by analyzing comparable sales which bracket subject’s lot size.




Icon Lending Guide – Section 600                                                                   Revised 10-22-12
690.13.7 - Foundation Settlement

If the appraisal report notes evidence of excessive settlement, the appraiser must clearly define the effect on
value and marketability of the subject property. Settlement problems which denote the structural
deficiencies and/or significant negative impact on the value and marketability must be corrected prior to
closing. Generally, a structural engineer’s report will be required prior to making a loan decision.

690.13.8 - Functional Kitchen

All properties require a functioning kitchen consisting of a working sink and stove/oven. Properties with only
a microwave or a hot plate are not acceptable.

690.13.9 - Heating Systems

A central heat source with ductwork or baseboard in all rooms is required on all properties. A heating
certification from a licensed heating contractor may be required whenever the property has a gravity heating
furnace or when the appraisal states a fair or poor rating on the adequacy of the system. Any inadequacies
must be corrected prior to closing. A solar or wood-burning heating system must contain a central backup
system to be acceptable.

NOTE: Properties located in Hawaii without a permanent heat source are eligible if appraiser reports it is
      normal and customary for the property location.

690.13.10 - Legal Non-Conforming Use

Icon will extend financing on certain legal non-conforming properties provided the appraiser confirms
through the local municipal building department that subject’s improvements can be 100% rebuilt to their
current use in the event of partial or full destruction.

An accessory unit is allowed provided: the subject property is one-to-two (1-2) units; and the illegal unit
conforms to the subject neighborhood, is residential in nature, and meets the test of “common and
customary for the market.” The property must be appraised in conformity with its legal use (e.g. single family
residence) and the borrower must qualify without any rental income from the illegal unit. Icon also requires a
statement from the appraiser that subject can be rebuilt to its current use in the event of partial or full
destruction.

The appraiser must provide at least two (2) comparable sales of similar properties with an illegal accessory
unit.

690.13.11 - Leaseholds

When a mortgage is secured by a Leasehold Estate, or is subject to the payment of “ground rent,” the
borrower has the right to “use and occupy” for a stated term under certain conditions contained within the
lease. Also, note that the leasehold agreement must last at least 10 years longer than the term of the loan.

The valuation of a property that is subject to a leasehold interest may require a complex analysis, so the
appraiser must develop a thorough, clear, and detailed narrative to be included in the appraisal report that
identifies:

        Terms of the lease
        Remaining term of the lease as of the effective date of the appraisal



Icon Lending Guide – Section 600                                                             Revised 10-22-12
        Any restrictions and conditions of the lease agreement or ground lease and discuss what effect, if
         any, they have on the value and marketability of the subject property.

In developing the sales comparison approach to value, the appraiser must use as comparable sales
properties that have similar leasehold interests.

When there are sufficient numbers of closed comparable sales or properties with similar leasehold interests
available, the appraiser should use them in the analysis of the market value of the leasehold estate for the
subject property and report them in the sales comparison analysis grid on the applicable appraisal report
form. However, if the market does not have enough adequate comparable sales available with similar
leasehold interests, the appraiser may use sales of similar properties with different lease terms or, if
necessary, sales of similar properties that are fee simple estate ownership may be used, as long as the
appraiser explains why they had to be used. When using fee simple estate ownership comparable sales,
the appraiser must make the appropriate adjustments for the difference in ownership and support these
adjustments with documentation in the appraisal. At a minimum, the appraisal must contain at least two (2)
sales that are similar leasehold estate interest comparable sales, which can be either closed, or pending
sales.

690.13.12 - Multiple Dwellings

Multiple dwellings on one lot must comply with local zoning requirements and be typical and common for the
area. The Appraiser must provide comparables to support the value of the additional units. Properties with
more than two additional dwellings are ineligible for financing by Icon. Examples of this type of property
would be two single-family homes on one lot, or a single family home and a two family dwelling on one lot.

Multiple dwelling PUDs on one lot to be encumbered by one lien are not eligible for Icon financing.

690.13.13 - Plumbing

A plumbing certification from a licensed plumber will be required whenever the appraisal states a fair or poor
rating concerning the adequacy or condition of the system. Any inadequacies must be corrected prior to
close.

690.13.14 - Private Roads

Private roads providing access to the subject property may be eligible for Icon financing provided the Title
Company insures the accessibility to the property from a public street and any maintenance costs are
included in the qualifying ratios. A copy of the road maintenance agreement may be required if significant
upkeep of the road will be required (e.g. frequent snow removal, etc.). Private road agreements will not be
required in California. Private roads must provide year-round access.

690.13.15 - Private Water Supply

Private water supply for properties whose water sources are derived from a well, shared well, community
well, or other private source must meet the following guidelines:

        Be a single family residence.
        Water supply provides a year-round source of water.
        Mechanical systems utilized to provide water to the subject property are in good working order.




Icon Lending Guide – Section 600                                                             Revised 10-22-12
        A water certification is required if the appraiser or purchase contract indicates the necessity. The
         report should be provided by a city, county, state (or governing body) official or a qualified entity
         stating:
             The water supply system is in proper working order and pumping an adequate supply of water
              for the property; and
             The water supply is potable and complies with local and/or state health authority standards. (In
              absence of a local health authority, a reputable chemical testing agency must certify that the
              water is fit for human consumption).
        The water certification(s) must be dated no more than 120 days prior to the Note date.


690.13.16 - Repair Requirements

At its discretion, underwriting may require any repairs considered necessary to ensure good and marketable
property. Repairs may be ordered regardless of whether the property is appraised “as is” or “subject to
repairs.”

690.13.17 - Rural Properties

Icon will extend financing on rural properties with a maximum 10 acres. A rural property is defined as a
property located in an area that is less than 25% built up or an area that is designated by the appraiser as
rural. In addition, Icon categorizes a property as rural when the comparable sales are greater than five (5)
miles and older than six (6) months.

The following applies to all rural properties:

        The property must be residential in nature.
        The property must conform to existing zoning requirements.
        Lot size must be common and customary for the market and supported by comparable sales.
        The property must be accessible year-round by all-weather roads that meet local standards.
        The property must have adequate working utilities that are typical for the market.
        The property should not have many outbuildings.
        Maximum 80% LTV.

Rural properties with multiple outbuildings may indicate a commercial use. Agricultural properties, income-
producing properties, farms, etc. are ineligible for financing. Refer to Section 690.14 - Ineligible Properties
for more information.

690.13.18 - Security Bars

Properties with security bars must comply with local fire codes and must have quick releases or safety
releases on at least one window in each bedroom. In addition, bedrooms must have adequate egress to the
exterior of the home – occupants must be able to get outside of the home if there is a fire.

690.13.19 - Sewage Disposal System




Icon Lending Guide – Section 600                                                               Revised 10-22-12
Sewage disposal systems may require certification if the appraiser or purchase contract indicates the
necessity. The report should be provided by a county, state, (or governing body) official or qualified entity
stating:

        The sewage disposal system complies with applicable local and/or state health standards, is in
         proper working order, and can be expected to function satisfactorily; or
        Local and/or state health standards do not apply for the sewage disposal system; however it is
         found to be in proper working order and adequate for the property.
        For systems one year old or less, the certification may be no more than one year old on the date of
         closing. For systems more than one year old, the certification may be dated no more than 120 days
         prior to the Note date.

690.13.20 - Survey

A survey is required where typical in the market area, or where the title commitment indicates an exception
to survey matters.

In areas where surveys are not customary, the title insurance policy must insure against loss or damage by
any violation, variation, encroachment or adverse circumstance which would have been disclosed by an
accurate survey.

A copy of the survey must be obtained if the estimated HUD-1 shows a charge for the survey.

690.13.21 - Termite Report and Clearance

A pest inspection report and clearance is required if the appraisal reports evidence of termites or other
insect infestation, or the terms of the sales contract call for a pest inspection report, or if the Estimated/Final
HUD I reflect a charge for a termite inspection. All Section I items must be cleared prior to closing. Any
significant structural damage due to pest infestation must be corrected prior to closing.

690.13.22 - Roof Inspection

Water stains noted within the appraisal report will result in a roof inspection by a licensed roofer with a
minimum 3-5 year remaining life expectancy.

690.14 - Ineligible Properties

Icon will not extend financing on the following:
        Properties listed for sale at the time of loan application are ineligible for a refinance transaction.
        Non-warrantable condos and non-warrantable PUDs
        Condos purchased at auction
        Kiddie condos
        Condotels
        Co-operative Units
        Time share projects
        Manufactured housing/modular homes
        Properties located on Indian Reservation and/or Tribal Land


Icon Lending Guide – Section 600                                                                  Revised 10-22-12
        Properties on leased land in which the lease does not meet Fannie Mae requirements
        Properties with less than 600 square feet, including two-to-four (2-4) unit dwellings in which any unit
         is less than 600 square feet
        Income producing properties (e.g. farms, ranches, orchards, wineries, Bed & Breakfast, school,
         adult care facilities, etc.)
        Unique properties (e.g. berm, earth, geodesic, etc.)
        Units without a functional kitchen or a working heat source
        Properties in fair or average minus condition
        Commercially or industrially zoned properties
        Mixed-use properties
        Properties greater than 10 acres
        Properties zoned agricultural and the highest and best use is other than residential
        Properties utilized as a place of worship
        Multi-family dwellings containing more than four (4) units
        Properties subject to hazardous conditions
        Properties that do not have full utilities meeting all standard and local code
        Unimproved land
        Properties in Hawaii located in Lava Zones 1 & 2
        Properties with deferred maintenance exceeding $2,000
        Properties with an escrow withhold to bring the condition to average or complete construction after
         the close of escrow.
        Land Trusts in Illinois.
        Property with problem drywall (such as “Chinese drywall”)
        Properties located in Massachusetts using an ARM product

690.15 - Analysis of the Appraisal

Icon utilizes CoreLogic, Fannie Mae AVMs, its Appraisal Department, and approved Appraisal Review
Companies to aid with the analysis of the collateral. Any appraisal red flags detected by an underwriter will
escalate the report to their manager and/or Icon’s Appraisal Department to determine if a desk review or
field review is warranted.

Underwriters evaluate all facets of the appraisal including but not limited to the marketing time, housing
trends, neighborhood characteristics, listing history, comparable selection, adjustments, across the board
adjustments, recent sales and/or transfers of the subject property and comparables, condition, and photos.

Comparable Sales
        Icon requires a minimum of three (3) comparable sales closed within six (6) months of the date of
         the appraisal and located within one (1) mile of the subject property; in essence, comparables must
         be located within subject’s neighborhood and not require excessive adjustments.
        Comparable sales located outside of subject’s neighborhood must be fully addressed by the
         appraiser. If the appraiser selects comparables outside of subject’s neighborhood in lieu of


Icon Lending Guide – Section 600                                                                Revised 10-22-12
         available closer comparables, the appraiser must explain in detail why the more distant comparables
         were selected.
        Comparables that fall outside the above parameters may require an appraisal review.

Adjustments
        Line, net and gross adjustments should not exceed 10%, 15% and 25% of the selling price for each
         comparable sale or listing.
        If adjustments are made to the appraisal for effective age, the appraiser must provide an explanation
         for the adjustments and the condition of the property.
        Comparable sales are to be adjusted to the subject property with an exception for sales and
         financing concessions which are adjusted to the market at the time of sale.
        Time adjustments must reflect the difference in market conditions between the date of sale of the
         comparable and the effective date of the appraisal for the subject property.
        Adjustments outside of the above parameters may require an appraisal review.

In addition to analyzing the above requirements, Underwriters implement the procedures outlined below to
evaluate the adequacy and reliability of appraisal documentation:
       Underwriters review CoreLogic’s LoanSafe report on each loan. This report provides a RDS Score,
        T-Ratio, Mean/Median, History Pro, and other information that the underwriter will consider as part of
        their analysis of subject’s current market conditions.
       If the T-Ratio is moderate to low but the Mean/Median is more than 10% below the appraised value,
        and the LTV/CLTV is below maximum financing, the underwriter will request a Fannie Mae AVM.
       Findings with a T-Ratio of 95 or greater are not eligible for Icon financing.
       Findings with a T-Ratio ≥ 80 or ≤ 95 require a second review by Senior Management.
       If the LoanSafe does not support the value or reflects a high T-Ratio, or low Mean/Median, the
        underwriter will upgrade the review to a Desk Review. This may be waived if the LTV is 50% or
        below and the risk category is Low or Moderate, and the file has been reviewed with Senior
        Management.
       Underwriters will upgrade the AVM to a desk or field review, as dictated by the characteristics of the
        property and appraisal, if any of the following circumstances apply:
                  The AVM does not support value or reflects a confidence score other than Low Risk
                   Category.
                  The LTV/CLTV is > 70% and the loan is cash-out;
                  Financing from Icon on the subject property exceeds $650,000;
                  The underwriter determines additional support for value is required based on the
                   characteristics of the subject property, quality of the appraisal or the comparables selected.
                   For example:
                           Subject property is classified as “rural”;
                           Appraiser has used comparables aged > six (6) months;
                           Distance of comparables appears to be excessive based on location of property;
                           Appraiser uses time adjustments not adequately supported by paired sales analysis;
                           Appraiser failed to bracket adjustments;
                           Value of subject exceeds predominant value by more than 125%.




Icon Lending Guide – Section 600                                                                Revised 10-22-12
At the underwriter’s discretion, a field review may be required in lieu of an AVM or a desk review.




Icon Lending Guide – Section 600                                                             Revised 10-22-12
690.16 - Appraisal Reviews
When a field review is required, the broker must order the review from an Icon Approved Review Company.
The same AMC or appraiser that completed the original appraisal cannot perform the appraisal review.

Approved appraisal review companies and AMC’s are assigned by region:
Appraisal Review Company                  Appraisal Management Companies (AMC)
 ResDirect/RELS Valuations                AMC Settlement Services
                                           Axis
                                           Coester Appraisal Group
                                           Streetlinks


Refer to Icon’s website at www.iconwholesale.com under “Approved Partners” for detailed information.

690.16.1 – Appraisal Reviews for High Balance Conforming Loans

A field review (Fannie Mae Form 2000) is required on the High Balance Conforming Loan product if:
        The property is valued at $1,000,000 or more and the LTV/CLTV is greater than 75%.

If the field review findings are different than the original appraisal, the lowest of the original appraised value,
the field review value or the sales price (for purchases) must be used to calculate the LTV ratios.

This requirement is in addition to the standard DU appraisal requirements.




Icon Lending Guide – Section 600                                                                 Revised 10-22-12
690.17 - Condominiums & PUDs

Icon follows Fannie Mae guidelines regarding the eligibility of attached/detached condominiums, and
attached/detached PUDs.

This section of the manual outlines Icon’s requirements for condo eligibility. Guidelines under this topic that
differ from Fannie Mae published guidelines will supersede.

Icon will not grant exceptions to the condominium eligibility requirements.

A condominium is a form of ownership characterized by holding title to a single unit together with a
proportionate undivided ownership interest in the common elements. The common elements typically
include land, roofs, floor, walls, lobbies, and community spaces and facilities. The common elements are
generally maintained, but not owned, by a non-profit homeowner’s association.

Each condominium project requires approval by Icon Residential Lenders. Icon maintains a list of
condominiums that have either been approved or declined. It is recommended that an originator check with
their Icon Account Executive or Account Manager to see the status of a project prior to submitting a loan for
underwriting.

Condominium projects are classified as either a new project or an established project.

Fannie Mae allows the greater of six months of regular common expense assessments, or the maximum
amount permitted under applicable state law, to have limited priority over Fannie Mae’s mortgage lien if the
condo or PUD project is located in a jurisdiction that has enacted:

        The Uniform Condo Act;

        The Uniform Common Interest Ownership Act; or

        Other similar statutes that provide for regular common expense assessments, as reflected by the
         project’s operating budget, to have such priority over first mortgage liens.

690.17.1 - New Projects
New projects are defined as follows:
        Less than 90% of the total units have been conveyed to the unit purchasers,
        The project is not fully complete (proposed construction, new construction or the proposed or
         incomplete conversion of an existing building to a condo.),
        The project is newly converted,
        The project is subject to additional phasing or annexation, and
        The developer is still in control of the homeowner’s association.

New projects require the following:
        A Lender Full Review and a Condo Project Manager (CPM) approval, or
        An existing, valid FNMA PERS approval, or
        An FHA approval, if applicable, and
        A 70% presale ratio.




Icon Lending Guide – Section 600                                                              Revised 10-22-12
    NOTE: Condominium projects and condo conversions located in the state of Florida and in the city of
          Las Vegas, Nevada require an existing PERS approval. No other type of project review will be
          accepted for new projects/conversions in these areas.
              FHA loans secured by a condominium require the condominium project to currently be FHA
              approved; “spot approvals” are not allowed. FHA project approvals are eligible on FHA loans
              only; conventional loans secured by a condominium may not use an FHA project approval.
              Conventional loans require a Lender Full Review or a PERS approval.

All standard condo documentation and the Condominium Questionnaire, if applicable, is required.

New Condo conversions require the following:
        A Lender Full Review and a CPM approval or
        An existing, valid FNMA PERS approval, or
        An FHA approval, if applicable, and
        A 70% presale ratio, and
        The project is 100% complete.


    NOTE: Condominium projects and condo conversions located in the state of Florida and in the city of
          Las Vegas, Nevada require an existing PERS approval. No other type of project review will be
          accepted for new projects/conversions in these areas.
          Newly converted non-gut rehab condo conversions require a PERS approval.
              FHA loans secured by a condominium require the condominium project to currently be FHA
              approved; “spot approvals” are not allowed. FHA project approvals are eligible on FHA loans
              only; conventional loans secured by a condominium may not use an FHA project approval.
              Conventional loans require a Lender Full Review with a CPM approval or a PERS approval.

All standard condo documentation and the Condominium Questionnaire, if applicable, is required.

690.17.2 - Established Projects

Established projects are defined as follows:

   Projects in which at least 90% of the units have been purchased and conveyed to the unit purchasers,
   The project is 100% complete,
   The project is not subject to additional phasing or annexation, and
   Control of the Homeowners Association has been turned over to the unit owners.

690.17.3 - Ineligible Projects

Icon will not lend on the following types of projects:

        Condotels – a project that is managed and operated as a hotel or motel is considered a condotels or
         condominium hotel. If any of the following are present, the project is considered a condotel:
             The project includes registration services/rental desk and offers unit rentals on a daily
              basis
             The name of the project includes “hotel” or “motel”
             The project limits or restricts the owner ability to occupy the unit


Icon Lending Guide – Section 600                                                                Revised 10-22-12
             The project has a mandatory rental pool that requires the unit owners to either rent their unit or
              to give a management firm control over the occupancy of the unit.
             The project offers cleaning services
             The project offers services such as a commercial hotel even though the units are individually
              owned.
        Cooperative projects
        Projects with non-incidental business operations owned or operated by the homeowners
         association. Examples are a restaurant, spa, health club, beauty parlor, etc.
        Projects which have more than 20% commercial space.
        Projects that are classified as investment securities. If the project has documents on file with the
         Securities and Exchange Commission or if the project is promoted or characterized as an
         investment opportunity.
        Any project or building that is owned by several owners as tenants-in-common, or by a homeowners
         association in which individuals have an undivided interest in a residential apartment building and
         land, and have the right to exclusive occupancy of a specific apartment in the building.
        Timeshare or segmented ownership projects
        Houseboat projects
        Multi-dwelling unit condominiums which permit an owner to hold title to more than one unit with
         ownership evidenced by one single deed and financed by a single mortgage.
        Condominium projects that represent a legal non-conforming use of the land, if zoning regulations
         prohibit rebuilding the improvements to current density should there be partial or full destruction.
        Projects on leased land that do not meet Fannie Mae’s requirements.
        Projects in which the recreational facilities are leased.
        Any project in which the homeowners association or developer is named as a party to current
         litigation. Projects in which the homeowners association or developer is named as the plaintiff in a
         foreclosure action or as a plaintiff in an action for past due homeowners’ association dues are
         eligible.
        Any project in which 15% or more of the total units are greater than 30 days delinquent on the dues
         and/or the total number of delinquent units is greater than 15%.
        Projects with inadequate reserves.
        Projects with deed restrictions (i.e. first right of refusal).
        Units that are appraised as a condo, but there is no recorded Master Declaration.
        Projects which are unable to supply the necessary condominium documents for a full review or
         projects that do not meet the eligibility requirements.
        Projects that do not meet the owner occupied/second home occupancy ratio.
        Condo projects with excessive sales/financing structures.
        Any project in which Icon has met its maximum exposure ratio of 10%.
        Condominiums located in mountainous ski resorts – examples Aspen, Lake Tahoe, Mammoth, Park
         City, Sun Valley, etc.
        A new project or new condo conversion located in the state of Florida or in Las Vegas, Nevada that
         does not have a PERS approval.




Icon Lending Guide – Section 600                                                                Revised 10-22-12
        Condominium property that is a construction-to-permanent transaction.
        A 2-4 unit condo conversion that does not receive a project “Eligible” determination from Condo
         Project Manager (CPM).
        A new condo conversion project that was a non-gut rehab without a PERS approval.

690.17.4 - Types of Project Review

Icon requires that all condominium projects meet Fannie Mae’s project requirements in addition to meeting
the requirements of this manual. Requirements that differ from Fannie Mae will supersede.

The project requirements depend on the project classification. There are five types of condo
classifications/review for a condominium project - Limited Review, Condo Project Manager (CPM) Expedited
Review, Lender Full Review, FHA-Approved Projects, and Fannie Mae Review.
Project Classification Codes & Definitions

The project code must be reflected on the final 1008.
        P – Limited Review – New Detached Project
        Q – Limited Review – Established Project or Established Two-Unit to Four-Unit Project
        R – CPM Expedited Review or Lender Full Review - New Project and new Two-Unit to
             Four-Unit Project
        S – CPM Expedited Review or Lender full Review – Established Project or Established
             Two-Unit to Four-Unit Project
        T – Fannie Mae Review – Project Eligibility Review Service (PERS)
        U – FHA-Approved Projects and any FHA approval required conditions

690.17.5 - Limited Review

A Limited Review allows the underwriter to evaluate and approve a condominium project with limited
documentation.

Icon allows a Limited Review when the DU Findings indicate a Limited Review is acceptable and the
condominium project meets all of the requirements detailed in Section 690.17.5(a) – Attached Units and
Section 690.17.5 (b) – Detached/Site Condominiums of this Lending Guide.

NOTE: A Limited Review is only eligible on the Agency Conforming program. All other programs require a
      Lender Full Review.

New condominiums and newly converted condominiums in Florida are not eligible for Limited Review.

690.17.5(a) - Attached Units

In order for a condominium project with attached units to be eligible for a Limited Review, all of the following
must be meet:
        The project is not an ineligible project as defined in Section 690.17.
        The project is an established project and all of the following exist:
             90% of the units are conveyed to unit owners
             All units, common areas and facilities are 100% complete



Icon Lending Guide – Section 600                                                               Revised 10-22-12
             The project has been turned over to the unit owners
        The subject property is not a manufactured home.
        The project has the proper insurance coverage as described in Section 900 – Funding/Closing of the
         Lending Guide.
        The project is not a new attached project.


The documentation required to perform a Limited Review is a completed Icon Condominium Questionnaire,
a copy of the current master insurance policy with hazard and liability for the project. Maximum LTV/CLTV
for a limited review on an attached unit with DU Approve/Eligible are as follows:


                            Occupancy            Maximum LTV/CLTV*
                            Primary Residence    ≤ 80%/80%
                            Second Home          ≤ 75%/75%
                            Investment           Not Allowed

NOTE: LTVs > 80% are subject to MI availability.

690.17.5(b) - Detached/Site Condominiums

Detached or Site condominiums are units that resemble a detached single-family dwelling. The project can
either be established or newly constructed. A Limited Review on a detached/site condo is eligible if all of the
following apply:

             The subject property is a single detached unit in a condominium project and is not a
              manufactured home.
             The project is not an ineligible project as defined in Section 690.17.3
             The appraiser has commented in the appraisal on the effect of the condo form of ownership on
              the marketability of the individual unit.
             All comparable sales must be similar detached/site condominiums. One comparable must be
              from a competing project and one must be from the subject’s project. If the project is new
              construction and the comparable sale is within the subject’s project, the comparable cannot be
              from the same builder.
             The mortgage title insurance policy satisfies the special title insurance requirements for units in
              a condominium project.
             If the project is new, the completion requirements may be waived if the items are minor and do
              not have a major impact on marketability.
             The unit may be covered by individual hazard and flood insurance and is required to carry
              coverage the same as a detached single dwelling or the unit may be covered by a master policy.
              If the unit consists only of air space and the dwelling and site are considered common areas, a
              master insurance policy is required.
             If the condo project is new, the appraiser has used at least one comparable that is a detached
              condo unit, from either a competing project or the subject project, which was built by a builder
              who did not build the subject property.




Icon Lending Guide – Section 600                                                                Revised 10-22-12
690.17.6 – Condo Project Manager (CPM) Expedited Project Review

CPM Expedited Project Review is available for all projects that do not meet the Limited Review requirements
or the project is not on the FHA Approved Project List or Fannie Mae Accepted Condominium Development
List. These lists can be found at www.efanniemae.com.

Even though the CPM Expedited Project Review may be more flexible with certain requirements, (i.e. allow
for lower presale ratios on newer projects), the CPM Expedited Project Review still requires the Lender to
review the budget and represent and warrant that the project meets the legal requirements discussed in the
Lender Full Review section of this chapter.
The documentation required for CPM Expedited Project Review is a Condominium Questionnaire completed
on Icon’s form, a copy of the current annual budget, master insurance policy for hazard and liability, fidelity
bond (if applicable), recorded CC&Rs, By-Laws, and Articles of Incorporation.

CPM Expedited Project Review is not available for new condominiums or newly converted condominiums
located in Florida. New condominiums or newly converted condominiums located in Florida require Fannie
Mae PERS approval. PERS approved projects can be located on Fannie Mae’s website at
www.eFannieMae.com.

690.17.6(a) - New Projects (excluding 2-4 unit projects)

When using CPM Expedited Project Review, in addition to meeting the legal requirements stated in the
Lender Full Review Section, the project must adhere to the following:

        The project is not an ineligible project per Section 690.17.3.
        The project has a Lender Full Review and CPM approval
        If the project is new, the project should meet 70% presale ratio. However, CPM may allow a lower
         presale ratio based on the project characteristics.

690.17.6(b) - Established Projects (including 2-4 unit projects)

Established projects and 2-4 unit projects with Expedited Project Review must adhere to the following:

        The project is not an ineligible project per Section 690.17.3.
        No single entity (the same individual, investor group, partnership, etc) may own more than 10% of
         the total units in the project. If there are less than 10 units in the project, no single entity may own
         more than 1 unit. For 2-4 unit projects, only one unit may be an investment; the other remaining
         units must be a primary residence or second home.
        Amenities may be incomplete provided the items are minor and do not have a major affect on
         marketability.
        Control of the homeowners association must have been turned over to the unit owners.
        The units in the project may be owned fee simple or leasehold and unit owners must be the sole
         owners of the recreational facilities and have rights to the use of the project facilities, common
         areas. Leasehold properties must meet Fannie Mae lease requirements.




Icon Lending Guide – Section 600                                                                 Revised 10-22-12
690.17.7 - FHA Approved Projects

Condominium projects that are FHA Approved do not require a full lender review. The project must be listed
on the FHA Approved Project List and must have met all approval conditions (presale, occupancy status,
and completion). There cannot be any further approval requirements. A copy of the printout showing the
FHA Project Approval is required for the file. Icon will only accept FHA Project Approvals that are dated on
or after January 1, 2000.
The FHA Approved Project List is located at https://entp.hud.gov/idapp/html/condlook.cfm.

New condominiums and newly converted condominiums located in Florida are not eligible under the FHA
Approved Project Review.

The project cannot be an ineligible project per Icon’s guidelines. A current Condominium Questionnaire
completed on Icon’s form and a copy of the master insurance policy for hazard and liability, flood, HO-6 and
fidelity bond, if applicable, are required.

690.17.8 - Fannie Mae Review – Project Eligibility Review Service (PERS)

Projects with a current Fannie Mae PERS approval do not require a full lender review. Icon does require a
copy of the PERS approval, current completed Condominium Questionnaire on Icon’s form, a copy of the
master insurance policy for hazard and liability, HO-6 and flood and fidelity bond if applicable.

A PERS approval is required for new and newly converted condominium projects in the state of Florida and
in the city of Las Vegas, Nevada. No other type of project review is eligible. Projects with an existing, valid
PERS approval are eligible; projects without an existing PERS approval are not eligible. Projects with a
current PERS approval can be found at www.efanniemae.com

The project cannot be an ineligible project per Icon’s guidelines and the project must meet Icon’s condo
eligibility requirements for presale, investor concentration, number of units owned by one entity, and
reserves.

690.17.9 - Lender Full Review

Projects that do not qualify under the Limited Review or CPM Expedited Review process will be evaluated
under the Lender Full Review process. Projects evaluated on the Lender Full Review process will also
require a CPM approval. All project classifications are eligible for the Lender Full Review process with the
exception of new condominiums or newly converted condominiums located in the state of Florida or in Las
Vegas, Nevada which require a PERS review.

All projects evaluated under the full review process must meet the eligibility criteria described below:

        The project must meet all eligibility requirements set forth in this section
        The project cannot be an ineligible project as defined in Section 690.17.3 of this chapter.
        The project cannot consist of manufactured housing.
        The project must meet the insurance requirements as set forth in this section.
        The project cannot have any unacceptable environmental problems.
        For conversions, all rehabilitation work must be 100% complete and have been done in a workman
         like manner.




Icon Lending Guide – Section 600                                                               Revised 10-22-12
          If the project is a conversion that does not entail gut rehabilitation, an engineer’s report is required to
           verify that all necessary repairs are complete, replacement reserves are identified for all capital
           improvements and are determined to be adequate by Icon.
          If the conversion was legally created during the previous three years, a Lender Full Review and a
           CPM approval is required. A copy of the architect’s or engineer’s report that was originally obtained
           for the conversion of the project is required to ensure the report commented favorably on the
           structural integrity of the project as well as the condition and remaining useful life of the major
           components in the project. This includes but is not limited to the roof, heating and cooling systems,
           plumbing, electrical systems, elevators, boilers, etc.
          All reviews are valid for three months.

690.17.9(a) - Additional Requirements for Lender Full Review for Established Projects (excludes 2-4
              unit projects)

          All units, common elements, and facilities must have been completed. This includes the units,
           common elements and facilities of any master association.
          At least 90% of the total units have been conveyed to unit purchasers.
          Control of the homeowner’s association has been turned over to the unit owners.
          At least 51% of the total units in the project have been conveyed to owner occupied or second home
           purchasers.
          No single entity (the same individual, investor group, partnership, etc) may own more than 10% of
           the total units in the project. If there are less than 10 units in the project, no single entity may own
           more than 1 unit.
          The units in the project must be owned in fee simple and the unit owners must have the sole
           ownership interest in, and rights to the use of the project’s facilities, common elements, and limited
           common elements.
          The project must be covered by hazard, flood, HO-6, liability, and fidelity insurance required for
           condominium projects.
          The project must be demonstrably well managed. If the project is professionally managed, the
           management contract must be for a reasonable term. The termination provision cannot require any
           type of penalty for termination or require an advance notice of more than 90 days.
          The project’s operating budget must be consistent with the nature of the project. The budget must
           provide for adequate reserves based on the project’s age, remaining life, and on the quality and
           replacement cost of the major common element components.
          The project may not contain more than 20% commercial/non-residential usage. This is based on the
           total square footage.
          All facilities related to the project must be owned by the unit owners or the homeowners association.
           The developer cannot retain any ownership interest in any of the facilities. The amenities and
           facilities, including parking and recreational facilities cannot be subject to a lease between the unit
           owners and the homeowners association or any other party.
          The units should be individually metered. If not, the project’s plans should provide for the ready
           adoption of unit metering.
          The units in the project must be owned in fee simple or leasehold. The unit owners must be the sole
           owners of and have rights to the use of the project’s facilities, common elements, and limited
           common elements. If the project is leasehold, the terms of the lease must meet Fannie Mae
           requirements.




Icon Lending Guide – Section 600                                                                    Revised 10-22-12
690.17.9(b) - Additional Requirements for New Projects (excludes 2-4 unit projects)

        The project must have a Lender Full Review and CPM approval, a PERS approval, or an FHA
         approval if an FHA loan, to be eligible for Icon financing.
        The project, or the subject’s legal phase, must be “substantially complete.” This means that a
         certificate of occupancy (or other substantially similar document) has been issued by the applicable
         government agency for the project or subject phase and that all the units in the building in which the
         unit securing the mortgage is located are complete, subject to the installation of “buyer selection
         items” such as appliances.
        At least 70% of the total units in the project or subject’s legal phase must have been conveyed or be
         under a bona fide contract for purchase to owner occupied principal residence or second home
         purchasers. For a specific legal phase (or phases) in a new project, at least 70% of the total units in
         the subject’s legal phase(s), considered together with all prior legal phases, must have been
         conveyed (or be under contract to be sold) to owner occupant principal residence or second home
         purchasers. For the purposes of the review process, a project consisting of one building cannot
         have more than one legal phase.
        The project must provide most recent audited financials and/or projected budget for Icon’s review.
         The budget must include allocation for line items pertinent to the type of condo, provide for the
         funding of replacement reserves for capital expenditures and deferred maintenance (at least 10% of
         the budget). The budget must also provide adequate funding for insurance deductible amounts.
        No more than 15% of the HOA fee payments and/or 15% of the total units may be one or more
         months delinquent.
        No single entity (the same individual, investor group, partnership, etc) may own more than 10% of
         the total units in the project.
        The project may not contain more than 20% commercial/non-residential usage. This is based on the
         total square footage.
        The units in the project must be owned in fee simple or leasehold. The unit owners must be the sole
         owners of and have rights to the use of the project’s facilities, common elements, and limited
         common elements. If the project is leasehold, the terms of the lease must meet Fannie Mae
         requirements.

690.17.9(c) - Additional Requirements for Two – Four Unit Projects
        The project must meet all eligibility requirements
        The project cannot be an ineligible project per Section 690.17.3
        All units, common elements, and facilities must have been completed. This includes the units,
         common elements and facilities of any master association.
        No single entity (the same individual, investor group, partnership, etc) may own more than 1-unit in
         the project.
        All but one unit in the project must have been conveyed to owner occupied principal residence or
         second home purchasers.
        The units in the project must be owned in fee simple or leasehold. The unit owners must be the sole
         owners of and have rights to the use of the project’s facilities, common elements, and limited
         common elements. If the project is leasehold, the terms of the lease must meet Fannie Mae
         requirements.
        A 2-4 unit condo conversion project requires the following additional requirements:
             A project “Eligible” Determination from Condo Project Manager (CPM).



Icon Lending Guide – Section 600                                                               Revised 10-22-12
             An engineers report.
             A completed Condominium Questionnaire Full/Limited Review (2-4 Units).
             Regardless of how title is held, if the current mortgage is a wrap-around mortgage, Icon requires
              concurrent closings and copies of the Note, Deed and HUD-1 from each of the other
              transactions or the loan is ineligible.

690.17.9(d) - Evaluation of the Condominium Documents

The documentation required for project review is a copy of the Icon Condominium questionnaire, recorded
Articles of Incorporation, CC&Rs, and By-Laws, the current annual budget, liability & hazard insurance, flood
and hurricane insurance, if applicable, and the fidelity bond, if applicable.

In addition to the eligibility requirements listed above, Icon will perform a full project review. The following
are key points that will be evaluated in the review, however the review is not limited to these points.

Common Areas & Facilities: The common areas and facilities should be consistent with the nature of the
project and should be competitive within the marketplace. The common areas and facilities must be owned
by the unit owners or the homeowners association. The developer may not retain any ownership interest.
The common areas and facilities also may not be subject to a lease between the unit owners or the
homeowner’s association and another party.

Project Management: The project should be professionally managed by an independent professional
management firm. The contract with the management firm should be for a reasonable term and should not
include any equitable provisions for termination.

Articles of Incorporation: The condominium project must exist in full compliance with state law
requirements.

CC&R’s and By-Laws:

        Right of first refusal: The condominium project/association cannot have any limitations on the ability
         to sell a unit and the project cannot have any right of first refusal which would impact the
         mortgagee’s rights to foreclose or take title to the unit, accept a deed of assignment in lieu of
         foreclosure, or sell/lease a unit acquired by the mortgagee.
        Mortgagees and Guarantors rights: The condo documents must give the mortgagors and guarantors
         a timely written notice of the following:
                  Condemnation or casualty loss that affects either a material portion of the project or the unit
                   secured by mortgagor,
                  Any 60 day delinquency in assessments or charges owed by the unit owner of the unit
                   secured by mortgagor,
                  A lapse, cancellation, or modification of any insurance policy maintained by the association,
                   and
                  Any proposed action that requires the consent of a specified percentage of mortgagees.
        Mortgage protection clause: The condominium documents cannot give a unit owner or any other
         party priority over any rights of the first mortgagee of the unit pursuant to its mortgage. This applies
         to insurance proceeds, condemnation awards for losses to taking of a unit and/or common
         elements, and delinquent homeowners’ dues.
        Other Mortgagee Rights as required by FNMA (i.e.: termination of the project due to destruction or
         condemnation or for other reasons agreed to by mortgagees).


Icon Lending Guide – Section 600                                                                 Revised 10-22-12
                  Amendments of a material adverse nature to mortgagees must be agreed to by mortgagees
                   that represent at least 51% of votes of unit estates that are subject to mortgages.
                  Any action to terminate the legal status of the project after destruction or condemnation or
                   for other reasons must be agreed to by mortgagees that represent at least 51% of the votes
                   of unit estates that are subject to mortgages.
                  Implied approval is assumed when a mortgagee fails to submit a response to any written
                   proposal for an amendment within 60 days after it receives proper notice provided the notice
                   was delivered by certified or registered mail with a “return receipt” requested. Project
                   documents recorded prior to 8/23/2007 may provide for implied approval within 30 days, etc.
                  Unpaid dues: A first mortgagee who obtains title to a unit through a mortgage or through
                   foreclosure will not be liable for more than six months of the unit’s unpaid dues or charges
                   accrued before acquisition of title.
        Binding Arbitration Agreement: This is required for projects with less than 10 units for resolutions of
         disputes.

Budget: The budget should be consistent with the nature of the project. The budget must contain sufficient
funds to cover replacement reserves for capital expenditures and deferred maintenance (at least 10% of the
budget), and to cover insurance deductible amounts. An adequate reserve fund must be in place for
replacement of the common areas and facilities. The budget must be prepared, at minimum, on an annual
basis.

Insurance: The project must meet the minimum insurance requirements for all condominium projects. Both
Full and Limited Review processes will require copies of all applicable insurances (Hazard, Liability,
Fidelity, Flood, Wall-In/HO-6 and Hurricane).

A project’s legal documents may allow for the individual unit owners to obtain their own hazard insurance
and allow for a blanket insurance policy to cover the common areas and facilities. Icon will require evidence
of sufficient current insurance for both the individual unit and the project.

For other projects, a master or blanket insurance policy must be in effect. Icon requires a copy of the master
insurance policy for the project evidencing hazard, liability, flood, hurricane, and fidelity bond if applicable.

        Hazard Insurance: Icon requires a copy of the master insurance policy for the project. The
         premiums are to be paid as a common expense and the policy must cover all of the common
         elements 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
         owners’ association. The insurance should cover 100% of the insurable replacement cost of the
         project improvements including the individual units. The maximum deductible cannot be more than
         5% of the policy face amount.

        Liability Insurance: The project must maintain a commercial general liability insurance policy for the
         entire project, including all common areas and elements, and any other areas under its supervision.
         If there is commercial usage in the project, the policy should cover the commercial spaces that are
         owned by the homeowner’s association. The commercial general liability insurance policy should
         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
         $1million for bodily injury and property damage for any single occurrence.

        Flood Insurance: The project must carry flood insurance if the project is located in a flood zone.
         The policy must cover the common elements and common areas including machinery and
         equipment that are a part of the building. Contents coverage is required. The contents coverage
         should equal 100% of the insurable value of all contents that are owned in common by the


Icon Lending Guide – Section 600                                                                Revised 10-22-12
         association members. This includes machinery and equipment that are not part of the building. For
         each unit, the policy must cover 100% of the replacement cost of the insurable value of the
         improvements or the maximum coverage allowed of $250,000.

        Fidelity Bond: Projects with > 20 units require a fidelity bond. The minimum coverage on the fidelity
         bond is as follows:

            The Fidelity Bond must cover the maximum funds that are in the possession of the HOA or its
             management agency at any time while the policy is in force. This amount is, at minimum, the
             sum of 3 months HOA dues on all projects in the project (# of units x monthly HOA dues x 3 =
             minimum coverage amount).
            NOTE:      A Directors and Officers policy is not acceptable coverage.

        Hurricane Insurance: Projects requiring hurricane/windstorm coverage must have an effective policy
         covering the common elements and the individual units. If the policy is combined with the hazard
         policy, the maximum deductible is 5% of the face amount of the insurance policy. If the policy is
         separate from the hazard policy, for the common areas, the maximum deductible is the lesser of
         $10,000 or 1% of the face amount of the policy. For the individual units, the maximum amount is the
         higher of $1,000 or 1% of the replacement cost of the unit. If the policy provides for a separate
         wind-loss deductible, the maximum deductible is the higher of $2,000 or 2% of the replacement cost
         of the unit.

        A Walls-In / HO-6 Insurance: HO-6 insurance is required for all condominiums, including 2-4 unit
         properties, on all conventional and government transactions. The borrower must obtain HO-6
         insurance when the master association policy does not cover unit interior improvements and
         betterment. The HO-6 policy must provide coverage sufficient to repair the condominium unit to, at
         minimum, the condition it was in prior to the incident. The insurer will determine the amount of
         coverage required to repair the condominium to its prior condition. “Bare walls-in” coverage,
         provided by some master policies, is not sufficient coverage and is ineligible. The coverage must be
         sufficient to repair the interior of the condominium unit, including any additions, improvements or
         upgrades, to its original condition in the event of a loss. Policies that only provide coverage of the
         original specifications are also ineligible.

         NOTE: Some master policies only provide coverage for the original owner and not subsequent
               buyers. If a transaction is a re-sale transaction and the master policy only covers the
               original owner, the borrower will be required to obtain HO-6 insurance.

                   HO-6 insurance does not cover the contents of the condominium.

Condominium Questionnaire: The Condominium Questionnaire is completed by the homeowners
association or the developer.

        All units, common elements and facilities in the project must be complete and the project cannot be
         subject to any additional phasing. If the project is new construction, the subject’s legal phase must
         be complete. A certificate of occupancy is required for new construction projects.
        No single entity may own more than 10% of the units in a project, other than the developer during
         the initial sales period.
        No litigation is permitted.
        No more than 15% of the association dues can be more than one month delinquent.
        No more than 20% of the total square footage of the project can be used for commercial purposes.



Icon Lending Guide – Section 600                                                              Revised 10-22-12
        The units in the project must be owned fee simple or leasehold.
        Occupancy ratio:
             New projects & condo conversions: At least 70% of the total units in the project or the subject
              legal phase must be conveyed or be under contract for purchase to owner-occupant principal
              residence or second home purchasers.
             Established projects: Projects with 3 or more units the owner occupied/second home ratio is
              51%. The investor ratio is limited to 49%, unless stated differently in the program guidelines.
              Projects with only two units, one unit must be owner-occupied primary residence or second
              home
        Multi-family dwellings are not permitted.

690.18 - PUDs
PUDs are classified as either detached or attached. Attached PUDs are one of the following types:
        Type E: Established attached projects, and
        Type F: New attached projects.

Detached PUDs
Detached PUDs, both established projects and new projects do not require a review provided all units in the
project are detached.

Two units or multi-units detached PUDs encumbered by one lien are ineligible. Condo Project Regimes
(CPR) in Hawaii are eligible provided the title report indicates the property is a CPR and the appraiser
provides three comparables from other CPRs. A master insurance policy is not required.

Attached PUDs
Attached PUDs, both established projects and new projects must meet the following:

        The project meets Icons eligible project requirements.
        The project is not ineligible as defined in the ineligible projects topic of this chapter (i.e. the project is
         not a conversion).
        The project does not consist of any manufactured housing.
        The subject unit meets the insurance requirements.
        The subject unit is 100% complete.
        The unit owners are in control (established projects only).
        The marketability of an attached PUD is established.

A master insurance policy is required.




Icon Lending Guide – Section 600                                                                    Revised 10-22-12
                           Section 700 – Mortgage Insurance
                                   Table of Contents


700 – Introduction
701 – LTV/CLTV Determination
702 – Certificate Requirements
703 – Effective Date of Mortgage Insurance
704 – Escrows
705 – Types of MI Coverage
705.01 - Eligible Types of Coverage
705.02 – Ineligible Types of Coverage
706 – Amount of Coverage
707 – Markets
707.01 Declining Markets
707.02 Non-Declining Market




Icon Lending Guide – Section 700                              Revised 10-30-12
700 - Introduction

Mortgage Insurance (MI) is required on all first trust deed transactions in which the LTV is greater
than 80% unless prohibited by state law. The mortgage insurance must be provided by one of
the following MI Companies:

        Genworth: http://www.mortgageinsurance.genworth.com/
        MGIC: http://www.mgic.com/
        Radian: http://www.radian.biz/

Each MI Company has its own proprietary guidelines and may have Declining Market List. All
loans with an LTV greater than 80% are subject to MI availability and the MI guidelines, including
DTI limitations, minimum credit score requirements, and declining market reductions. If MI
cannot be obtained from one of the above listed companies, the loan is ineligible for Icon
financing.

701 - LTV/CLTV Determination

The LTV used to determine if MI is required on a transaction is based on the lower of the sales
price or the current appraised value.

702 - Certificate Requirements

The mortgage insurance certificate must be executed and include the borrower’s name, property
address, and loan amount as stated on the note. The certificate cannot be subject to any
conditions.

703 - Effective Date of Mortgage Insurance

The MI Company must be notified immediately of a loan closing to activate the MI Certificate.
Borrower paid monthly MI becomes effective the day of loan closing. Refer to section 705.01
Eligible Types of MI Coverage Borrower Paid Monthly MI for specifics.


I will delete the following:
Premiums are to be remitted to the MI Company immediately. Each subsequent payment is due
on the same day of the month as the loan closing date.

704 - Escrows

Mortgage insurance must be escrowed. A waiver of the mortgage insurance is not permitted.

705 - Types of Mortgage Insurance Coverage




Icon Lending Guide – Section 700                                                     Revised 10-30-12
705.01 – Eligible Types of MI Coverage

Icon accepts the following types of MI:

        Borrower Paid Monthly MI – The monthly MI has coverage for one month. The
         premiums are remitted throughout the life of the loan and collected on a monthly basis as
         a portion of the borrower’s loan payment.

                  The monthly borrower paid MI premium is required to be deferred until the first
                   payment date, which is collected by the servicer at the time the borrower remits
                   the first and subsequent monthly payments.

                  The servicer remits the monthly premium to the mortgage insurer.

                  All other types of borrower paid monthly MI premiums are ineligible.

        Borrower Paid Single Premium – The borrower elects to pay the life of the loan
         mortgage insurance at the time of closing. The single premium is paid from borrower’s
         own funds and cannot be financed into the loan.
        Borrower Paid Split Premium – The borrower pays an upfront premium which allows
         the borrower to pay a smaller monthly premium. The upfront cost cannot be financed into
         the loan.

        Lender Paid Single Premium MI – The lender pays the life of loan mortgage insurance
         at the time of closing. The borrower pays a slightly higher interest rate and the lender
         pays the MI allowing the borrower a lower down payment.

705.02 – Ineligible Types of MI Coverage

The following types of MI coverage are ineligible:
        Lower Cost or Reduced coverage
        Custom
        Financed
        Declining
        Lender paid with monthly or annual premiums

706 – Amount of Coverage

Icon requires standard MI coverage on all transactions with an LTV greater than 80%.

                                   Standard MI Coverage

                       LTV            Term > 20 years      Terms ≤ 20 years
                      > 95%                 35%                   N/A
                  90.01 – 95%               30%                  25%
                  85.01 – 90%               25%                  12%
                  80.01 – 85%               12%                   6%




Icon Lending Guide – Section 700                                                      Revised 10-30-12
707 – Markets

707.01 - Declining Markets

Individual MI Companies have their own guidelines which detail LTV reductions, minimum credit
score requirements, eligible transaction types and possibly a Declining Markets List. Clients are
encouraged to check individual MI Company underwriting guidelines to determine if the subject
property is required to comply with specific MI company overlays to Icon’s guidelines.

The following are some of the ineligible transactions in a declining market:

        Cash out refinance
        2-4 units
        Investment property
        Reduced documentation
        AZ, CA, FL, NV – may be ineligible. Refer to individual MI company guidelines for states
         subject to declining market guidelines and credit score restrictions.
        ARMs with a fixed rate period less than 5 years

707.02 - Non-Declining Market

Standard MI guidelines apply in non-declining markets. The following are some of the ineligible
transaction types in a non-declining market:

        LTV greater than 97%
        Investment property
        2-4 units
        Cash out with an LTV > 85%
        DTI > 45% on cash-out transactions
        ARMs with a fixed rate period less than 5 years




Icon Lending Guide – Section 700                                                    Revised 10-30-12
                                     Section 800 – Lock Policy
Disclaimer

Rate sheets give indications only, as market conditions may cause intra-day changes to pricing. It is the
Client’s responsibility to keep abreast of price changes. The Company reserves the right not to honor the
rate sheet price regardless of prior published indications provided the Client is contacted in a timely
manner. Intraday price changes may occur, due to fluctuating market conditions, and all lock requests
received by Lock Desk after the re-price notice will be subject to the new pricing.

Lock-in Agreement

A lock is an agreement between the Client and the Company. It specifies the number of days for which a
loan's interest rate is guaranteed. Should interest rates rise during that period, the Company is obligated
to honor the committed rate. Should interest rates fall during that period, the Client must honor the lock.
Locking in a rate and price does not guarantee eligibility or approval of the subject loan. Locks are not
transferable.

Lock Periods

Locks are available on a 15, 30, 45 or 60-day basis. The loan package must be submitted and approved
by the Company in order to secure a 15-day lock. A 30, 45 or 60-day lock is available for loans that do not
have an approval.


Lock Requests

Pre-locks are not accepted. The loan must be submitted with an assigned loan number in order to be
locked. Locks can be emailed directly to lockdesk@iconresidential.com M-F 8:00 am to 3:00pm, or locked
online through IconIQ M-F 8:00am to 4:00pm. Lock Desk does not accept fax requests. The Company
requests a complete Lock Request Form with specific information concerning the loan transaction to
secure a lock. An incomplete Lock Request Form will be returned to the Client and is subject to current
market pricing. The loan will not be locked until the Lock Desk receives a complete and correct Lock
Request.

Rate Lock Confirmation

The Client is responsible for printing their Confirmation as evidence of the agreement entered into by the
Company and the Client. It is the Client’s responsibility to report any inconsistencies with the Client’s
understanding of the loan to the Company within 24 hours of the Confirmation Date. If the Company
agrees with the Client’s report of inconsistencies given within that period, the Company will forward the
Broker an amended Confirmation detailing the changes.

Changes in Critical Information

The Client is responsible for tracking any changes to the structure of the loan that affect pricing, and
providing proper notification to the Company. Any changes to the structure of the loan that affect pricing
will be validated by the Lock Desk; however, we are unable to send revised confirmations for all changes.
The Company must be notified immediately if the Client makes any changes to the mortgage loan that
differ from the confirmed pricing structure. Mortgage loans delivered for closing must meet the terms of
the latest Confirmation. The Company and the Client are bound by the lowest price when multiple
confirmations are issued on the same loan. Changes in critical information (including product/program
changes) will be priced off the original lock day.




Icon Lending Guide – Section 800                                                       Revised 8-7-12
Invalid Locks

Once a loan is locked, any changes made to the loan that may affect pricing (e.g. LTV, property address,
debt ratio, etc.) will invalidate the lock. Please email the Lock Desk to validate the lock to reflect the new
terms of the loan.

Lock Cancellation Policy

A full submission package must be received within 10 calendar days of the lock date on 30 day locks, 15
days on 45 day locks and 20 days on 60 day locks. For any locked loan in which a full submission
package is not received within the respective time period following the lock date, the lock will be
automatically cancelled. The loan is eligible to be re-locked at worse case pricing within 30 days of the
lock cancellation date. Re-lock fees apply. Subsequent to 30 days after the lock cancellation date, the
loan may be re-locked at market with no additional cost. Rate-lock cancellations will be accepted from the
Client within the same day the rate is locked. Cancellation of a rate-lock must be submitted before a new
rate sheet has been issued. Any requests to cancel a rate lock that occurs after a new rate sheet has
been issued will be subject to worse case pricing.

For any locked loan that receives a declined decision in underwriting, the lock will automatically be
cancelled. If the decision is reversed, the loan will need to be locked at current market, and is not subject
to the Re-Lock Policy.

Worse Case Pricing

Worse case pricing is calculated by comparing the original base price to the current market base price,
applying the lower price of the two.

Duplicate Lock/Submission

The original lock will be honored if there is a duplicate lock. If the original lock is expired or cancelled, and
the duplicate lock is submitted within 30 days of the original lock expiration date, the loan will be subject
to the re-lock policy.

Max Rebates

Max YSP, after all adjustments are applied, for all products is <5.00>.

Rate Lock Extensions

The Company will allow a max of 15 days in extensions, with the applicable cost structure applied. All
extension requests must be made before 3pm PST on the lock expiration date. If the loan does not close
prior to the revised expiration date, the loan is subject to the re-lock policy detailed below. Extension
periods are calculated starting from the current lock expiration date.


Locks Expiring on Weekends/Holidays

All Lock Periods are based on calendar days. If the expiration date falls on a weekend or holiday, the
lock will be extended to the next business day at no additional cost.




Icon Lending Guide – Section 800                                                           Revised 8-7-12
Re-lock Policy

A re-lock is a request to lock a loan for a second time. A loan that does not fund by its Lock Expiration
Date and is not extended may be subject to a re-Lock Fee:

        Loan must be approved and all PTD conditions have been signed off in order to re-lock.
        The re-lock will be good for a 15 day lock period only. If the re-lock expires, it must be re-locked
         and will be subject to worst case pricing using previous lock structure. Max 2 re-locks per loan.
        If a loan is re-locked within 30 days of the lock expiration or lock cancellation date, the loan may
         be re-locked at worse case pricing, at the term of the original lock. For example (a) Current
         Market Pricing or (b) initial Lock Pricing plus 0.25% re-lock fee.
               o EXAMPLE: Loan was locked for 30 days at 5.0% paying 101.25.
                        Current market is worse, 5.0% is paying 101.00 (30-day). Loan is re-locked at
                            current market for 15 days 5.0% paying 101.00.
                        Current market is better. Loan is re-locked at original terms less 0.25 fee, 5.0%
                            @ 101.00 for 15 days.
        If the loan is re-locked more than 30 days after the lock expiration or lock cancellation date, it may
         be re-locked at current market.

Renegotiation/Float down Policy

When the market improves significantly, The Company will allow the broker a one-time renegotiation
under the following policy guidelines:

        Renegotiations must lower the rate to the borrower.
        Loan must be clear to close.
        Negotiated all in price cannot be better than original all in lock price by more than 25bps.
        Any Client improvement to income is limited at .250% over original price. YSP cannot improve by
         more than .250 over current YSP.
        The Company will honor a ONE-TIME renegotiation at current market less 50 bps.
        Lock term will be extended 15 days from the date of the renegotiation.
        Previous cost structure of the loan applies (e.g. original lock for 30 days priced at 30 days),
         including any extension fees.
        Renegotiated terms are not eligible for extensions. If the lock expires or the loan does not fund
         within the 15 days included with the renegotiation, the loan will be re-locked at worse case pricing
         of the original lock price and current market.
        Loans with docs out will be charged a re-draw fee.
        ARMS are not eligible for renegotiation.

Broker Compensation Selection Changes

Changes to broker compensation selection type (lender paid vs. borrower paid) may change at any time
prior to locking. Changes after the loan has been locked will only be allowed after an original, signed
letter from the borrower has been received requesting the change and detailing the reason for the
change.




Icon Lending Guide – Section 800                                                          Revised 8-7-12
Lock Action Cost Structure

        Action                        Cost
        5 day extension               .15
        10 day extension              .30
        15 day extension              .45
        Re-Lock                       .25
        Renegotiation                 .50


Loan/Commitment Fees:

Loan Fees                                     Commitment Fees
Flood Cert                       $10          Conventional               $895
Tax Service                      $78          FHA/VA                     $895
Re-Draw                         $150          Streamline                 $299
Partial Re-Draw                  $75          VA/VA IRRLS                $299
CA Funding Fee*                 $199
* funding fee not applicable for govt loans




Icon Lending Guide – Section 800                        Revised 8-7-12
                                   Section 900 – Closing

                                      Table of Contents

900 - Documentation Review
900.01 - Alterations to Documents
900.02 - Appraisal Update
900.03 - HUD-I Settlement Statement
900.04 – Document Preparation
900.05 – Loan Document Notarization
900.06 – Power of Attorney
900.07 – Age of Documents

910 - Insurance
910.01 - Flood Insurance
910.02 - Hazard Insurance
910.02.1 Policy Requirements
910.02.2 Coverage Amount
910.02.3 Maximum Deductible
910.03 - Mortgage Insurance
910.04 - Rent Loss Insurance

920 - Title
920.01 - Title Policy/Commitment
920.02 - Closing Protection Letter

930 - Final Docs

940 - Escrows
940.01 - Escrow Waiver
940.02 - Escrow Account Reserves
940.03 - Escrows Reflected on HUD-I

950 – Compliance




Icon Lending Guide - Section 900                           Revised 4/2/12
900 - Documentation Review

Icon will perform a review of the executed closing documents, including but not limited to the
note, deed, all applicable riders, initial disclosures, final disclosures, Lenders Instructions,
signatures, etc.

900.01 - Alterations to Closing Documents

Settlement agents are not to alter or add additional language to documents generated by Icon
without Icon’s prior consent.

Changes/strikeovers must be initialed by the borrower(s). Name corrections only need to be
initialed by the affected signer.

900.02 - Appraisal Update

If the appraisal was completed more than 90 days prior to the date of closing, there must be an
Appraisal Update/Completion Report. A new appraisal is required if the original appraisal is 120
calendar days old from the time of funding.

900.03 - HUD-1 Settlement Statement

A copy of the completed Final HUD-1 is required on all transactions. For purchase transactions,
Icon requires the Final HUD-I executed by both buyer and seller. Any changes to the Final HUD-
1 must be approved by Icon. For purchase transactions, all payoffs greater than $5000
appearing on the seller’s side must be documented if there is no corresponding lien on title.

Each Final HUD-1 will have a “tape” run to determine the total amount of Pre-paid Finance
Charges (PFC) listed verses the PFC’s indicated on the Itemization of Amount Finance. Icon will
not accept any tolerance for under disclosed fees. Icon will allow an over disclosure of $200.00
for all loans over $160,000 and adhere strictly to the one-eighth (0.125%) of one (1.0%) percent
tolerance for loans below this amount.

Purchase transactions will have the seller’s portion reviewed to insure that the cumulative fees
paid by the seller are limited to 8% of the sales price. The cumulative fees are composed of the
real estate sales commission, plus any non-lien related disbursements such as marketing
expenses, finder fees, referral fees, auction fees, consulting fees or assignment of sale fees.

900.04 - Document Preparation

The Itemization of Amount Financed Document will indicate all Settlement/Closing Agent Fees as
individual entries and not allow these fees to be lumped together. The total Pre-paid Finance
Charge (PFC) has an over disclosure tolerance of one-eighth (0.125%) of one (1.0%) percent.
Icon will use a $200.00 pad on all loan amounts over $160,000 and adhere strictly to the 0.125%
tolerance for loans at or below this amount.

The under disclosure of fees at the time of doc preparation will not be allowed. Broker and Title
fees must be confirmed and acknowledged by the submitting party prior to documents being
drawn. After docs have been prepared, any fee changes will require the compliance test to be re-



Icon Lending Guide - Section 900                                                         Revised 4/2/12
run prior to authorizing wire/disbursement. If the loan fails compliance, the fees must be lowered
to insure the loan is compliant. In addition, fee changes after docs have been prepared will result
in a partial redraw. For refinance transactions, the rescission will be re-opened and the funding
will be postponed until the rescission period has ended.

900.05 – Loan Document Notarization

Icon requires that the loan documents be notarized by a disinterested third party. The documents
cannot be notarized by anyone in the broker’s office or by the processor of record.

900.06 – Power of Attorney

Icon allows a Specific Power of Attorney (POA) appointed by the borrower for purchase and
rate/term refinance transactions. A POA is ineligible on cash-out refinance transactions, loans
closing in the name of a trust, and on investment property transactions.

A signed letter of explanation is required from the borrower as to why the borrower cannot sign
the final documents and is appointing a POA for the transaction

Requirements are as follows:
         The POA cannot be a party to the transaction
         The POA is preferably a family member of the borrower.
         The POA must be specific to the transaction and indicate the property address.
         The POA must be signed and dated on or before the date of the Note.

The POA must be approved by Icon Management prior to docs. The signed initial 1003, purchase
contract (if applicable), and Letter of Explanation for the use of the POA, signed by the borrower,
is required.

900.07 – Age of Documents

Icon’s requirements for the age of credit and appraisal documents are as follows.

Document                                           Age from Funding Date (Disbursement)
Asset documentation                                ≤ 60 days
Closing Protection Letter (CPL)                    ≤ 60 days
Credit report                                      ≤ 60 days
Payroll check stubs                                Most recent 30 day period
Title commitment                                   ≤ 120 days
Verbal Verification of Employment (VVOE)           ≤ 3 days
Verification of Mortgage/Rents (VOM/VOR)           ≤ 60 days

Document                                           Age
Appraisal                                          ≤ 120 days from the Note date




Icon Lending Guide - Section 900                                                       Revised 4/2/12
910 - Insurance

910.01 - Flood Insurance

For properties located in flood zones “A” or “V” as determined by Icon’s Flood Determination
report, flood insurance is required. The one year policy must be in effect prior to close. A copy of
the paid receipt is required.

If flood insurance is required, but not available because the community does not participate in the
National Flood Insurance Program (NFIP), the loan is ineligible.

For 1-4 unit properties, the flood insurance limits must equal the greater of:

         If the aggregate amount of all loans secured by the property is greater than the full
         replacement cost, then the maximum amount of coverage is $250,000. This is the
         maximum amount of insurance currently sold under National Flood Insurance Program
         (NFIP).
         If the aggregate amount of all loans secured by the property is less than 100% of the
         replacement cost, then use the greater of 80% of the full replacement cost or the
         aggregate amount of all loans secured by the property.

Maximum deductible for 1-4 unit properties:

         The deductible may not exceed the maximum amount allowed under the NFIP, currently
         $5,000.

PUD Projects and Units

         The amount of required flood insurance coverage for a PUD project must be at least
         equal to the lesser of 100% of the insurable value of the facilities or the maximum
         coverage available under the applicable NFIP and must cover any common buildings
         and/or property located in an SFHA.
         The deductible may not exceed the maximum amount under the NFIP, which is $25,000.
         The master insurance policy must include a provision that the premiums are to be paid as
         a common expense.
         Individual PUD units are subject to the same flood insurance requirements as 1-4 unit
         properties.

Condominium Projects

         If a condominium project or any part of the improvements is located in a Special Flood
         Hazard Area, the association must have a master or blanket flood insurance policy in
         place and the policy must cover all common buildings, elements and/or property.
         The amount of coverage must be 100% of the insurable value of each insured building,
         including all common elements.
         The maximum deductible for condominium projects is $25,000. The master policy must
         include a provision that the premiums are to be paid as a common expense.
         If the Condo Project does not have a master policy the condo is ineligible.



Icon Lending Guide - Section 900                                                       Revised 4/2/12
High Rise Condominium Projects (5+ units)

The required coverage is subject to the following:
         The building coverage should equal 100% of the insurable value of the common
         elements and property (including machinery and equipment that are part of the building),
         The contents coverage should equal 100% of the insurable value of all contents
         (including machinery and equipment that are not part of the building) that are owned in
         common by the HOA members, and
         The coverage for each unit should be the lesser of $250,000 or the amount of its
         replacement cost. If this required coverage exceeds the maximum coverage under NFIP,
         coverage equal to the maximum amount available will be acceptable.

910.02 - Hazard Insurance

All loans required evidence of insurance. For loans with escrows, evidence of insurance is
required prior to preparing documents. Applications for insurance are not acceptable
documentation.

The insurance carrier must have an S & P rating of at least BBB+ or a Best rating of B++.

The insurance must protect against loss or damage from fire and other hazards covered by the
standard extended coverage endorsement. The policy must provide coverage equal to or
broader than the coverage extended under an Insurance Services Office homeowner’s form HO-3
for primary residences and DP-3 for second homes or investment properties.

The coverage should allow for claims to be settled on a replacement cost basis. Policies that limit
or exclude coverage that are normally included under extended coverage endorsements (i.e.
windstorm, hurricane, hail damages, etc) are not acceptable unless the borrower is able to obtain
a separate policy or endorsement from another commercial insurer that provides adequate
coverage for the limited or excluded peril.


910.02.1 - Policy Requirements

In addition to the name, address, phone number of the insurance carrier and the agent’s name,
the following is required on the policy:

         The insurance policy must list the borrower(s) as the insured. If the insurance policy is a
         master policy of a condominium project, the association must be listed as the insured
         with the borrower also listed on the policy.
         The property address must match that of the appraisal and title, including the unit
         number, if applicable.
         Icon’s loan number and mortgagee clause must be reflected on the policy.

                                              Grand Bank N.A.
                                   Its Successors and/or Assigns (ISAOA)
                                         2301 Campus Drive, Ste 100
                                              Irvine, CA 92612

         The premium amount and balance due must reflect on the policy.


Icon Lending Guide - Section 900                                                        Revised 4/2/12
         The deductible cannot exceed 5% of the dwelling coverage.
         The effective and expiration date. For purchase transactions, the expiration date should
         be one year from the effective date. On refinance transactions, the policy must have a
         minimum of 90 days from the date of funding remaining. All policies with an outstanding
         balance must be paid in full and will require a copy of the paid receipt.

All policies renewed or purchased for the subject transaction require a copy of the paid receipt.

910.02.2 - Coverage Amount

The minimum amount of required coverage must be equal to the loan amount, or the replacement
value of the subject property, as established by the insurance provider, whichever is less.

For condominium projects, if the master policy does not provide coverage of the interior of the
unit, the borrower is required to obtain “walls in” coverage, also known as HO-6 policy. The HO-6
policy must provide a minimum coverage of 20% of the unit’s appraised value with a 5%
deductible.

910.02.3 - Maximum Deductible

The maximum deductible for hazard insurance on all property types may not exceed 5% of the
dwelling coverage. The deductible requirement applies to all types of loss (theft, fire, wind, etc.).

Refer to Section 910.01 Flood Insurance for the maximum deductibles on flood insurance

910.03 - Mortgage Insurance

Refer to Section 700 – Mortgage Insurance of the Lending Guide.

910.04 - Rent Loss Insurance

Rent loss insurance covers the borrower for rental income losses when the property is not
rentable due to a direct physical loss (i.e. fire).

Rent loss insurance is required as follows:

         2-4 unit primary properties if rental income is used to qualify the borrower.
         1-4 investment properties if rental income is used to qualify the borrower.
The coverage must be a minimum of six months gross monthly rents and must be in effect as
long as the mortgage is outstanding.

920 - Title

920.01 - Title Policy/Commitment

A full title policy is required on all loans. The policy must be written by a title insurer who has an
acceptable rating from at least one of the national independent rating agencies. If the title insurer
does not have an acceptable rating, the insurer must be fully covered by reinsurance with a
company that does have an acceptable rating.




Icon Lending Guide - Section 900                                                         Revised 4/2/12
The title commitment is valid for 90 days prior to docs. Commitments older than 90 days require
a supplement or gap letter verifying no changes. Commitments older than 120 days require a
new policy. Title commitments for construction-to-permanent transactions are valid for 180 days.

The policy is required to contain the following:

         The amount of coverage must be equal to a minimum of the original principal amount of
         the mortgage.
         Proposed Insured to reflect Carnegie Mortgage, LLC.
         Title must be held in fee simple or leasehold.
         Schedule A stating the legal description.
         Schedule B stating the easements, restrictions, and exceptions to the coverage. Any
         encroachments or restriction violations must have insuring language.
         All applicable endorsements including an environmental protection lien endorsement,
         ALTA Endorsement 8.1 or ALTA 8.
         The appropriate survey endorsement. Survey exceptions are not permitted. Areas that
         do not require a survey will require an ALTA 9 Endorsement or CLTA Endorsement 116.
         If the fee sheet or the HUD-1 reflects a charge for a survey, a copy of the survey must be
         included in the loan file.
         Real Estate taxes must be current. Future taxes must reflect as not yet due and payable.
         A 24 months chain of title.
         Any subordinate liens must be included in the policy and state they are subordinate to
         Icon’s first mortgage lien.
         1992 ALTA loan title insurance policy with the creditor’s rights exclusions.

920.02- Closing Protection Letter

Each loan requires a Closing Protection Letter issued by the insuring title company. The Closing
Protection Letter must reference the borrower’s name, address, and loan number; contain Icon’s
mortgagee clause, the location of the closing, the closing agent’s name, phone number, fax
number, and e-mail address.

The Closing Protection Letter cannot be more than 90 days old at the time of drawing documents.

Icon’s mortgagee clause:
                                          Grand Bank N.A.
                                   Its Successors and/or Assigns
                                     2301 Campus Dr, Ste. 100
                                          Irvine, CA 92612
930 - Final Docs
All final documents/trailing documents are to be sent to:
                                  Icon Residential Lenders, LLC
                                  Attn: Post Closing Department
                                  2301 Campus Drive, Ste #100
                                         Irvine, CA 92612




Icon Lending Guide - Section 900                                                        Revised 4/2/12
940 - Escrows

Icon requires each mortgage loan to have an established escrow account for the payment of
taxes, hazard, flood, private mortgage insurance and special assessments if applicable.


940.01 - Escrow Waiver

Escrow waivers are available for loans with the following parameters:

         The loan must be a conventional loan.
         The LTV must be ≤ 80% unless state law dictates escrows are not required for
         mortgages with an LTV > 80%. CA does not require escrows unless the LTV is ≥ 90%.
         The borrower must sign the Escrow Waiver.
         A pricing adjustment will apply to waive the escrows.
         There can be no mortgage payments greater than 30 days past due in the previous 12
         months on the current mortgage.
         No portion of the loan proceeds may be used to pay delinquent property taxes when
         escrows are waived.
         If the loan requires mortgage insurance, the MI will be escrowed and cannot be waived.
         If the subject property is located in a Special Flood Hazard Area, the flood insurance
         premium must be escrowed if there are other impounds (e.g. taxes, hazard insurance,
         etc.) If the loan does not have other impounds, and meets the above requirements, the
         flood insurance is not required to be impounded.

NOTE: Escrow waivers are not allowed on FHA loans.

940.02 – Escrow Reserve Account/Cushion

A two month cushion is required for the escrow account with the exception of the following states:

         Nevada – no cushion allowed
         North Dakota – no cushion allowed
         Vermont – 1 month cushion allowed


940.03 - Escrows on the HUD-I

The HUD-I must reflect the actual amount collected from the borrowers that will be deposited into
the escrow account. The figures listed on the HUD-I should match the figures listed on the Initial
Escrow Account Disclosure.

950 - Compliance

Refer to Section 1000 – Compliance of the Lending Guide for specifics.




Icon Lending Guide - Section 900                                                      Revised 4/2/12
Section 1000 – Compliance

Icon Residential Lenders complies with federal, state, and local regulations on all loan files.
Clients are expected to comply with all state and federal laws and regulations that apply to the
mortgage industry. This includes knowledge of customary fees charged for services rendered,
knowledge of the state prohibitive fees, and knowledge of the required state and federal
disclosures.

Upon loan submission, Icon will re-disclose to the borrower based on the fees presented in the
Good Faith Estimate and the Mortgage Broker Fee Agreement (in some states this is referred to
as Mortgage Loan Origination Agreement). Only usual and customary fees are permitted.

Icon does not permit a broker to charge a discount fee. Any discount fee is payable to Icon and
not the broker.

Fees disclosed on the final loan documents will be based on the initial Good Faith Estimate and
Mortgage Broker Disclosure Agreement provided to Icon upon loan submission. All disclosures
must be executed and dated by the borrower within compliance.

1000.01 - Mortgage Disclosure Improvement Act (MDIA)

1000.01.1 - Early Disclosures

Good Faith Estimate (GFE) disclosures must be mailed or given to the borrower no later than 3
business days after receipt of a written application for any consumer-purpose mortgage
transaction subject to the Real Estate Settlement Procedures Act (RESPA) that is secured by the
consumer’s dwelling (including a consumer’s second or vacation home.)

The early disclosures must contain the following statement: “You are not required to complete
this agreement merely because you have received these disclosures or signed a loan
application.” This verbiage is incorporated into the Truth-In-Lending (TIL) document.

1000.01.2 - Restrictions on Fees

MDIA imposes restrictions on the collection of fees associated with taking an application for a
covered loan. These restrictions are:

Neither a creditor (lender) nor any other person may impose a fee on a consumer before the
consumer has received the early disclosures, other than a bona fide, reasonable fee for obtaining
the consumer’s credit history.

If the disclosures are mailed to the consumer, the consumer is considered to have received the
disclosures 3 business days after they are mailed. Receipt of the early disclosures can be
confirmed by Icon by having the borrower sign and fax or email a copy of the early Truth-In-
Lending (TIL) statement. This process will only be accepted if the initial loan application (1003)
has been signed by the borrower – there will be no exceptions to this requirement.

Fees incurred prior to the loan application being submitted to Icon will be acceptable as long as
the submitting lender has canceled or denied the borrower’s application. Assigned appraisals are
ineligible.


Icon Lending Guide Section 1000                                                       Revised 11/19/10
In order to maintain compliance with the MDIA Icon will allow Brokers to order an appraisal report
prior to the borrower’s receipt of the initial Early Disclosures as follows:

         The appraisal must be ordered through one of Icon’s approved Appraisal Management
         Companies (AMC) or through FHA Connection, and
         The Broker must use their own funds to pay for the appraisal, and
         A certification, signed by the Broker or person authorized to contractually bind the
         brokerage, on the Broker’s company letterhead must be provided. The certification must
         read as follows:

         The appraisal ordered for the property located at (insert subject property address)
         is being ordered prior to the borrower’s receipt of the initial Good Faith Estimate
         and TIL Disclosure provided by Carnegie Mortgage LLC. (Insert name of
         brokerage) attests that the borrower’s credit card is not being used to order this
         appraisal nor have funds to pay for this appraisal been collected from the
         borrower.

1000.01.3 - Waiting Periods

Early disclosures must be delivered or placed in the mail not later than the seventh business day
prior to consummation. This allows for a three (3) day mailing period and a three (3) day review
by the borrower. Icon will not waive this 7 business day requirement – no exceptions. Note: A
“business day” means all calendar days except Sunday and legal public holidays.

                                             th
Up front fees can not be collected until the 4 business day following the mailing of the early
disclosures

The appraisal report is required to be delivered to the borrower 3 business days prior to
consummation. If mailed, the waiting period is 6 business days – 3 for mailing and 3 for review.

1000.01.4 - Corrected Disclosures

If the annual percentage rate (APR) at the time of consummation varies from the APR disclosed
                                         th
in the early disclosures by more than 1/8 (.125%) of one (1.00%) percentage point in a regular
                             th
transaction, or more than 1/4 (.25%) of one (1.00%) percentage point in an irregular transaction,
then corrected early disclosures must be re-issued.

NOTE: Corrected disclosures must contain the statement: “You are not required to complete this
      agreement merely because you have received these disclosures or signed a loan
      application.”

Re-issuing of the early disclosures will require an additional three (3) business day mailing period
and an additional three (3) business day review period prior to consummation,




Icon Lending Guide Section 1000                                                       Revised 11/19/10
1000.02 - Compliance Test

Prior to releasing closing documents, Icon will run a compliance test on each loan. If the loan
fails compliance, the broker will be notified and the fees will need to be reduced.

Prior to funding, Icon will review the HUD-I to ensure no additional fees have been added. If
there are additional fees and/or increased fees that Icon was unaware of, the fees will be required
to be removed and not charged. Any increase or fee addition that affects the APR requires a
partial redraw with a charge to the borrower.




Icon Lending Guide Section 1000                                                      Revised 11/19/10
                              Section 1100 – Quality Control

                                    Table of Contents

1100 - General
1101 - Quality Control Reviews
1102 – Discretionary Audits




Icon Lending Guide - Section 1100                              Revised 12/21/09
Section 1100 - Quality Control

1100 - General
Icon Residential Lenders takes a proactive approach to quality control to ensure the integrity of
the loan files.

Icon has a zero tolerance for loan fraud. Icon is continually re-evaluating its procedures to
identify fraud as well as implementing new procedures to prevent fraud as it changes and evolves
within the industry. Icon continues to monitor mortgage fraud within the industry through
mortgagefraud.com, Interthinx, fraud training from Icon’s selected partners, and web research.

Examples of loan fraud are:

     •    Submission or knowledge of inaccurate information including false statements on loan
          applications
     •    Falsification of credit, employment, deposit, and asset documentation.
     •    Incorrect statements regarding current occupancy or intent to maintain minimum
          continuing occupancy as stated in the security instrument.
     •    Knowledge and/or willful omission of pertinent information that is not disclosed.
     •    Inaccurate information by the appraiser, inappropriate omission of information, alteration
          of information on the original appraisal report by a third party.
     •    Simultaneous or consecutive processing of a multiple owner-occupied loans from one
          applicant and supplying different information on each application.
     •    Identity theft
     •    Straw borrowers

1101 – Quality Control Reviews

Icon’s quality control reviews are performed pre-funding as well as post closing.

The pre-funding review is completed at the time of underwriting. Icon performs a thorough quality
control audit on every loan. The internal audit includes but is not limited to re-verification of the
borrower’s identity, income, assets, the validity of the employer(s) and the banking institution(s),
validation of the appraisal and appraised value, OFAC and exclusionary list searches for all
parties interested in the transaction, searches for undisclosed real estate, and searches for non-
arms length transactions.

Icon utilizes several tools to perform the QC Audit on each loan.

    •    CoreLogic is utilized to verify the borrower’s identity (Identity Pro) as well as provide the
         underwriter with a neighborhood analysis of the subject property (History Pro).
    •    MERS is utilized to verify the borrower does not have any undisclosed properties.
    •    Internet research is performed to verify the validity of employers and licensing.
    •    4506-Ts are processed to verify income documentation.
    •    Depository institutions are contacted to re-verify assets.



Icon Lending Guide - Section 1100                                                        Revised 12/21/09
Icon does not tolerate mortgage fraud. Discrepancies found in loan files can result in the file
being declined and the broker terminated from Icon.

The post-closing review, investigation, analysis and reporting is performed monthly by an outside
audit firm and our company’s internal management. This process is supervised by senior
management and remains totally independent of loan processing and underwriting functions.

A random selection will be made monthly of no less than 15% of all loans closed by retail
branches, third party originators and correspondents. Regardless of the percentage of loans
being reviewed, selections of FHA loans will be structured to comply with all requirements stated
in FHA 4060.1 Chapter 7 section 7-6 and will include all FHA loan programs.

Rejected loans will have a random selection of no less than 10% of all denied loans performed by
an outside audit firm. The reasons for rejection will be reviewed, validated and ensure the
requirements of the Equal Credit Opportunity Act (ECOA) have been met.

1102 – Discretionary Audits

Discretionary selections will be used to assure that the following areas are given additional
review:

    •    Loans that have exhibited Early Payment Default (EPD)

    •    FHA Loans – (Third party originations will be reviewed at 100%)

    •    Loans closed on properties located in the states of Florida and Nevada – 25% selection

    •    Newly approved Third Party Originators will have 100% of the first 5 loans reviewed




Icon Lending Guide - Section 1100                                                     Revised 12/21/09

				
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