HOME EQUITY LINE OF CREDIT HELOC Home Equity Line of

HOME EQUITY LINE OF CREDIT HELOC Home Equity Line of Credit “A” Credit, Loan sizes $25,000 - $500,000. Loan amounts must be in $100 increments. Manual underwrite. Loan amounts > $250,000 require RMI Corporate Approval. Full Doc Owner-Occupied Primary Residence Purpose Pur, R/T Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Purpose Pur, R/T Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Purpose Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O 1 Credit Score 700 700 660 660 660 660 620 620 620 Credit Score 700 700 700 700 700 700 700 660 660 620 620 620 Credit Score 700 700 700 660 660 660 620 Units 1-2 1-2 1 1-2 1 1 1 1 1-2 Units 1 1 1 1 1 1 1 1 1 1 1 1 Units 1-2 1-2 1-2 1-2 1-2 1-2 1-2 Max CLTV 95 90 90 80 80 75 70 65 60 Max CLTV 95 90 80 75 70 65 60 80 75 70 65 60 Max Loan Amount $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 Max Loan Amount $250,000 $250,000 $500,000 $500,000 $500,000 $500,000 $500,000 $250,000 $250,000 $250,000 $250,000 $250,000 Max Loan Amount $250,000 $250,000 $250,000 $250,000 $250,000 $250,000 $100,000 Max Prop. Value $1,000,000 $1,500,000 $750,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $4,000,000 Unlimited Value Max Prop. Value $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $4,000,000 Unlimited Value $2,000,000 $2,500,000 $3,000,000 $4,000,000 Unlimited Value Max Prop. Value $1,500,000 $2,000,000 $2,500,000 $3,000,000 $4,000,000 Unlimited Value Unlimited Value Ratios 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% Ratios 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% Ratios 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 1 1 1 Second Home Non-Owner Occupied Max CLTV 90 80 75 70 65 60 60 See Ratio section of guides HELOC rev5 03/08/07 Page 1 of 13 HOME EQUITY LINE OF CREDIT HELOC Stated Income Verified Assets (SIVA) Owner-Occupied Primary Residence Purpose Pur, R/T Pur, R/T Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Purpose Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O Pur, R/T, C/O 1 Credit Score 740 700 700 700 700 700 700 700 680 680 680 680 680 Credit Score 700 700 700 700 700 700 680 680 680 680 680 Units 1 1 1 1 1 1 1 1 1 1 1 1 1 Units 1 1 1 1 1 1 1 1 1 1 1 Max CLTV 95 95 90 80 75 70 65 60 80 75 70 65 60 Max Loan Amount $200,000 $150,000 $200,000 $250,000 $250,000 $250,000 $250,000 $250,000 $100,000 $100,000 $100,000 $100,000 $100,000 Max Loan Amount $200,000 $250,000 $250,000 $250,000 $250,000 $250,000 $100,000 $100,000 $100,000 $100,000 $100,000 Max Prop. Value $1,000,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $4,000,000 Unlimited Value $2,000,000 $2,500,000 $3,000,000 $4,000,000 Unlimited Value Max Prop. Value $1,500,000 $2,000,000 $2,500,000 $3,000,000 $4,000,000 Unlimited Value $2,000,000 $2,500,000 $3,000,000 $4,000,000 Unlimited Value Ratios1 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% Ratios1 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% 45-55% Second-Home Max CLTV 90 80 75 70 65 60 80 75 70 65 60 See Ratio section of guides SIVA Requirements Verbal VOE at close required for all salaried borrowers. Verification of existence of business and documentation of time in business are required for S/E borrowers. Borrowers who are current or former employees of the broker are not eligible for the SIVA program. Assets/Reserves: Funds needed for closing must be verified Reserves: • Primary Residence: 6 months PITI reserves • Second Home: 6 months PITI for both the subject property and the borrower’s primary residence 4506 not required. HELOC rev5 03/08/07 Page 2 of 13 HOME EQUITY LINE OF CREDIT HELOC Age of Documents Appraisal documentation is effective for 6 months at time of closing. An appraisal update is required for all appraisals that are over 6 months old (but not more than 12 months old). Appraisal updates are not eligible for 2055 Exterior appraisals. Appraisal updates must be completed on FNMA 1004D and include the following: Re-inspection of exterior of subject property Sales comparison grid with minimum 1 new comp New photos of subject and of new comp Location may for subject and new comparable. Credit reports may be no older than 90 days at time of closing. Prelims are valid for 90 days at time of closing. Appraisal For line amounts < $250,000, a minimum 2055 Exterior is acceptable. For line amounts >$250,000, a full appraisal is required on appropriate form 1004, 1073 condo or 1025 2-unit. If line is a Piggyback with another Reunion Mortgage 1st lien program please use the most restrictive guideline. No Property Inspection Waivers (PIW) – 2065, 2075 or 2070. All 2-unit property transactions and lines in 1st lien position require a full appraisal. Appraisal documentation is effective for 6 months at time of closing. An appraisal update is required for all appraisals that are over 6 months old (but not more than 12 months old). Appraisal updates are not eligible for 2055 Exterior appraisals. Appraisal updates must be completed on FNMA 1004D and include the following: Re-inspection of exterior of subject property Sales comparison grid with minimum 1 new comp New photos of subject and of new comp Location may for subject and new comparable. Maximum financing is acceptable when property values are stable or increasing. Maximum financing is not permitted in markets experiencing declining values or experiencing an oversupply of housing. If the appraisal indicates the property is located in an area with declining values or an oversupply of housing, the LTV/CLTV should be reduced by at least 5% below the maximum LTV/CLTV permitted. AUS Underwriting DU/LP not allowed – Manual underwrite only. Assets/Reserves Funds needed for closing must be verified SIVA Reserves: • Primary Residence: 6 months PITI reserves • Second Home: 6 months PITI for both the subject property and the borrower’s primary residence Unacceptable sources for reserves include: • Gift funds • Borrowed Funds • Funds held in business accounts HELOC rev5 03/08/07 Page 3 of 13 HOME EQUITY LINE OF CREDIT HELOC • • • Proceeds from the sale of assets other than the sale of a residence Proceeds from a cash-out refinance transaction Stock in closely held corporations Closing Requirements Right of Rescission is required on all owner occupied HELOC loans, including purchase transactions whether partial or full draw. All borrowers must sign the Right of Rescission. Credit A valid/usable credit score is one that is generated based on a minimum of 5 trade lines with at least 2 trades reported within the past 6 months as current not delinquent. Minimum 3-year credit history is required. Full Doc – The score of the primary income borrower (occupant who earns greater than 50% of the qualifying income) may be used for qualifying and pricing. If no occupant borrower earns greater than 50% of the qualifying income, the lowest representative score of all borrowers must be used. Based on middle of three or lower of two. Applicants other than the primary income earning borrower that contribute income (any amount) to qualify must have a middle credit score of > 620. SIVA – The lowest representative score for all borrowers is used for qualification and pricing. Based on middle of three or lower of two. Credit scores for co-borrowers whose income is not being used to qualify do not need to be considered. Mortgage/Rental Rating – Housing history must be verified for all borrowers who rent or own. Payment history for the last 12 months must be documented with no late payments. All mortgages reflected on the borrowers credit report will be counted in the DTI (unless paid in full). This includes co-signed mortgages. Derogatory Credit – All judgments, collections paid and/or unpaid charge-offs from any source in excess of $500, or less than 24 months old, must be paid off or included in the DTI. (Use 3% of balance for payment calculation) Files with the following derogatory credit are not eligible for this program: Bankruptcy or CCC within the past 7 years from date of discharge Foreclosure or Foreclosure related action ever Repossession or Repossession action ever Any unpaid charge-off from a financial institution in excess of $200 Any paid or unpaid charge off from Wells Fargo Disclosure Information Type HELOC Caps 18% Floor N/A Margin Varies FNMA Note HELOC Line Agreement Assumable No Convertible No Prepay No Program Description 10 year draw period with a 15-year re-payment period. Minimum draw at close $25,000. After close, minimum $300 or available line balance. Allow a minimum of 60 days after close of escrow for additional draws on HELOC line. $75 annual fee waived for the first year. Teaser rates are not available. 15-day grace periods for payments. HELOC rev5 03/08/07 Page 4 of 13 HOME EQUITY LINE OF CREDIT HELOC Draw options: Check or Line advance by phone. Checks will be provided to borrowers at a minimum 60 days after close of escrow. Documentaion Our goal is to simplify both underwriting policy and processing documentation. The documentation that will be required may be a departure from traditional expectations. However, prudent underwriting policy will not be abandoned. Reduced Documentation (SIVA) programs do not eliminate the necessity to closely review and evaluate all information available in the file to determine the reasonableness of the borrower’s ability to repay the mortgage debt. Reasonableness will be based on the borrower’s employment history, income source and past credit experience which must be commensurate with the loan request. For example, information on the credit report should corroborate information on the application. Borrower’s income source must be from a source likely to generate sufficient income to repay the debt. Material inconsistencies must be investigated. Loan requests for an applicant with atypical characteristics should require full income and asset documentation. For example, presence of any of the following characteristics should indicate full documentation is required: Transactions resulting in significant payment shock (payment more than doubles); or Loan request is significantly larger relative to previous mortgage history; or Unusually high income for profession; or Excessive balances in checking, money market accounts with no stock ownership. Inconsistent borrower information between loan applications for current transaction and previous transactions. Requests for additional information or documentation will be driven by common sense, sound credit judgment and loan characteristics. Underwriter must review all information provided. If information is inconsistent, i.e., occupancy, employment, income, etc., the underwriter may decline or require full income and asset documentation. In addition, information disclosed in the file must also be taken into consideration. For example, payroll deposits shown on bank statement, disclosed in a file will be used for calculating appropriate gross income. All reduced doc files (SIVA) must include the completed initial application. When the initial application is incomplete or missing from the Submission Package, the loan may not be processed using Reduced Documentation. All income sources must be itemized on the signed 1003 when applicable. Eligible Borrowers All borrowers must have a valid Social Security Number. Owner(s) on title but not on the loan. – This is acceptable, however, owner(s) not on the loan must sign all documents required by each state for enforcement of any legal proceedings. (Example: Deed, TIL and Right to Cancel). Owner(s) on title but not on the loan may not request advances or sign checks. U.S. Citizens Permanent Resident Aliens Lawful resident aliens are eligible for the same financing as U.S. Citizens if they can provide evidence of lawful residency and they meet all of the same credit standards as U.S. Citizens. The loan file must include a copy of the front and back of the Green Card for all permanent resident aliens whose income and/or assets are used to qualify for a loan. • While the Green Card itself states “Do Not Duplicate” for the purpose of replacing the original card, U.S. Citizenship and Immigration Services (USCIS) allows photocopying of the Green Card. Making an enlarged copy or copying on colored paper may alleviate any concerns the borrower may have with photocopying. HELOC rev5 03/08/07 Page 5 of 13 HOME EQUITY LINE OF CREDIT HELOC If the borrower has not received a hard copy of the permanent Green Card at the time of loan origination, a valid foreign passport with the following stamp is acceptable: 'Processed for I-551. Temporary Evidence of Lawful Admission for Permanent Residency. Valid until mm-dd-yy. Employment Authorized.' Borrowers with diplomatic immunity are not eligible. Borrowers must be employed in the U.S. Income must be likely to continue for at least 3 years. 2-2-2 Rule (2 years Employment, Credit and Residence history in the U.S.). Non-permanent Resident Aliens Borrowers must have one of the following visa statuses: E-1; H-1A, H-1B; L-1; and TN A copy of the un-expired visa reflecting the Borrower’s name and the type of visa is required in the loan package. Borrowers with diplomatic immunity are not eligible. Borrowers must be employed in the U.S. Income must be likely to continue for at least 3 years. If the visa will expire within 6 months from the date of application, the applicant must provide a letter explaining their intention to remain in the country and a copy of their application for an extension. Employers may provide written proof stating the employment contract will continue for 3 years if the visa will be expiring prior to the end of 3 years. File must contain a copy of the front and back of the borrower’s alien registration card. Non-permanent resident aliens are eligible for the same financing as U.S. citizens and permanent resident aliens if they can provide evidence that the borrowers are lawfully permitted to reside in the U.S. and they meet all of the same credit standards as U.S. citizens. 2-2-2 Rule (2 years Employment, Credit and Residence history in the U.S.) Non-Occupying Co-Borrowers Loans with non-occupant co-borrowers will be underwritten and priced to non-owner guidelines Power of Attorney Only Specific Powers of Attorney are acceptable. When using a Power of Attorney the borrower must have signed the initial application. Title policy must insure over its use. Revocable Trust Revocable Trusts are allowed on single unit properties only (O/O,, 2nd home, N/O/O). A complete certified copy of the trust agreement must be submitted, must meet FNMA guidelines and be approved by RMI legal counsel (fee applicable). Title policy must assure full title protection and must indicate that title to the property is vested in the names of the trustee(s) of the revocable trust. The policy may not list any exceptions to the trustee(s) or trust. Each trustee of the trust must execute the Note, Deed and any necessary addendum and/or rider. If the trustee is both a grantor/trustor/settlor of the trust and an applicant (as in most cases) they must sign the required documents similar to the following: (Name of Trustee/Individual), individually and as Trustee of the (Name of Trust) Trust under trust instrument dated (Date of Trust), for the benefit of (Beneficiary of Trust) Ineligible Borrowers Builder/Developer owned properties for purchase or refinance Borrowers who are a party to a lawsuit • Employment Principal(s)/Owner(s) of the Originating Lender (or RMI approved Broker or Correspondent) are eligible for Full Doc transactions only and must provide two years complete 1040’s (and business tax returns if applicable) HELOC rev5 03/08/07 Page 6 of 13 HOME EQUITY LINE OF CREDIT HELOC Full Doc Salaried borrowers require: • A minimum 1-year time on job or time in field • Current pay stub covering a 30 day period and • W-2 from previous year • Or direct written verification from employer Self-Employed borrowers (equal to or greater than a 25% ownership interest) require: • A minimum of 2 years same business • Complete signed most recent 2 years tax returns. • Business tax returns may be required, determined by underwriter. Rental income –If property owned less than 1 year copy of lease agreement(s) and canceled checks, or receipts or bank statements. If property owned more than 1 year, copy of lease agreements and cancelled checks or 1040’s may be used. For subject property 1007 or 216 is required if income is used for qualification. For properties where it is the borrower’s intent to rent their departing residence a rental analysis or executed lease agreement must be provided to include rental income. Additional sources of income should be considered only if they are expected to continue and have been verified during the underwriting process. All other income sources must be documented per FNMA guidelines. Gaps of employment over 30 days must be provided. The stability of income must be assessed and any gaps should be factored into the u/w decision. Verbal VOE required. SIVA Salaried borrowers require: • A minimum 2-year time on job or time in field • The income disclosed must be deemed reasonable and consistent with the applicant’s occupation. Self-Employed borrowers (equal to or greater than a 25% ownership interest) require: • A minimum of 2 years same business • The income disclosed must be deemed reasonable and consistent with the applicant’s occupation. • Independent verification of existence of the business is required Gaps of employment are not allowed for SIVA If the applicant is also the Broker/Correspondent, relative to the Broker/Correspondent or employed by or formerly employed by the Broker/Correspondent for the originating lender, then the loan is not eligible for SIVA. Additional sources of income should be considered only if they are expected to continue and continuance has been verified and noted in the Loan file. Verbal VOE required. First Lien Products RMI Option ARM programs not eligible for first mortgage. Private Party First Mortgages require an ALTA or TLTA Title Policy and a copy of the 1st mortgage note in file. Reverse first mortgages are ineligible first mortgage products. Copy of 1st Mortgage Note must be in file. Negative Amortization mortgages are ineligible first mortgage products HELOC rev5 03/08/07 Page 7 of 13 HOME EQUITY LINE OF CREDIT HELOC Maximum Exposure / Multiple Loans Borrowers are allowed equity loans/lines on a maximum of four properties. Non-Arms Length Transactions Will be considered on a case-by-case basis by the underwriter on Full Doc Primary residences only and must meet the following criteria: Relationships are disclosed with initial submission. Full income and asset documentation are provided. Additional risk factors are not present. Examples of additional risk factors include distress sale, high amount of seller contributions, and selling assets for down payment. Employee Loan: If the applicant is also the Broker/Correspondent, relative to the Broker/Correspondent or employed by or formerly employed by the Broker/Correspondent for the originating lender, then the loan is considered an Employee Loan. Employee lines are eligible for Owner Occupied only. Non-owner and second homes are not eligible. Employee lines are not eligible for SIVA. Principal(s)/Owner(s) of the Originating Lender (or RMI approved Broker or Correspondent) are eligible for Full Doc only. Two years complete 1040’s (and business tax returns if applicable) are required. The borrower must own the subject property for minimum of 12 months on refinance >=80% CLTV. NOTE: If property is in Nevada, the borrower must own subject for 12 months regardless of CLTV. For a Family Sale the following criteria in addition to the above must be met: Earnest money paid to seller must be documented via cancelled checks. 5% of sales price must be verified as being saved by the borrower, funds are not required to be used toward down payment. Verification that the borrower is not now, nor previously ever been in title to the property. Payment verification of existing/sellers mortgage with no delinquency in last 12 months. The transaction must make sense and reflect that the borrower will occupy as their primary residence. For a Gift of Equity transaction the following criteria in addition to the above must be met: Donor must provide a gift letter. 5% of the sales price must be verified as being saved by the borrower, funds are not required to be used toward down payment. Verification of equity (appraised value less any outstanding mortgages or liens). Ownership History (Minimum 24 months) All files must contain a 24-month title history provided by an acceptable source, as well as all required documentation to satisfactorily verify ownership: Acceptable Sources • Preliminary Title Commitments • Copies of recorded Title-transfer Deeds • Credit report mortgage histories and HUD-1’s showing transfers of ownership in the last 24 months Unacceptable Sources • Appraisal HELOC rev5 03/08/07 Page 8 of 13 HOME EQUITY LINE OF CREDIT HELOC Scenarios: If purchased less than 24 months, and the value increase is substantial or the reason for value increase is not supported by documented improvements – the original transfer value will be used. Prepayment Penalty None Property Types Eligible Property Types Single Family Residence (Attached/Detached) PUD’s Condos Maximum 10 acres (cannot be zoned/designated for agricultural use) Modular homes (RMI Corporate approval of property is required) 2 Units Ineligible Property Types Condotels Commercial properties, or any property that is generating income as a commercial property Non-warrantable condos Leaseholds Model-home lease-backs Unique Properties or unusual architecture Manufactured Homes Property that is located in an undeveloped area Properties currently listed for sale or listed for sale in the last 6 months Property zoned Agricultural Acreage in excess of 10 acres Condos The Submission Transmittal, FNMA 1008 must identify the type of project review performed. Regardless of review type or classification, all projects must meet the following requirements: • Project must be located in an area where condominium ownership is readily acceptable. • FNMA Insurance requirements must be met. • Studio apartments that are typical and common in the subject’s market area are eligible. • Ineligible projects include, but are not limited to projects with: time shares, manufactured homes, projects with multi-unit condominiums (properties where single ownership includes more than 1 unit). • Subject unit must have at least 600 square feet of living space. • Commercial use of project may not exceed 25%. • Projects involved in litigation will be closely reviewed and may be ineligible for financing. • All projects must be in compliance with all applicable state or local laws. Homeowner’s Association must be incorporated in the state in which it is located. Limited Project Reviews: (Not eligible for investment properties, LTV/CLTV greater than 95%, new construction or recent conversions) • Piggyback Transactions: o If allowed on 1st mortgage, with the exception of the above ineligible types • Stand-alone Transactions o Primary residence or Second home o LTV/CLTV is 75% or less HELOC rev5 03/08/07 Page 9 of 13 HOME EQUITY LINE OF CREDIT HELOC o All common areas are complete o Required documentation: Complete 1008 and appraisal Streamline Project Review: (Not eligible for investment properties, LTV/CLTV greater than 95%, new construction or recent conversions) • Piggyback Transaction: o If allowed on 1st mortgage transaction with the exception of the above ineligible types • Stand-alone Transactions: o Primary residence or Second home o LTV/CLTV is 75% to 95% o All common areas are complete o At least 50% of the units in the project are sold. o At least 60% are sold for primary residence or second home occupancy. Note: May be waived if HOA has been under the control of unit owners for at least 1 year. For purchase and rate and term LTV/CLTV is not greater than 90%; for cash out LTV/CLTV is not greater than 75%. o Required documentation: Complete 1008, appraisal and completed HOA cert. Homeowners Association Review: • All loans or projects not eligible for limited or streamline review options • All investment properties • All loans with LTV/CLTV greater than 95% • At least 70% of all units must be sold or under contract for sale • At least 60% of units sold must be for primary or second home occupancy • Required documentation: Complete 1008, appraisal, complete HOA cert. Full Project Review: • Required on all new construction and converted projects • Includes an in-depth analysis of the legal, financial and other documents Site Condos • Site condominium properties that consist of single-family detached homes follow standard property guidelines as for single-family residences. No project analysis is required. Mixed-Use Projects • A property primarily used for residential but also being used for a small commercial purpose. Following are the requirements for mixed-use properties: o Residential portion must be intended for primary occupancy o Commercial portion must be leased by someone other than the borrower o Commercial portion must be less than 25% of total building sq. footage o Commercial use must be retail or professional, it may not be industrial or manufacturing o At least 75% of the property must be maintained and used for residential purposes only o Value is supported by mixed-use comparable sales Disaster Area Policy Refer to Disaster Policy Matrix for procedures and current Declared Disaster Areas. Factory-Built Housing – Modular/Prefab homes, which have been built to Council of American Building Officials (CABO), standards are eligible for financing. Must be on a permanent foundation. Must assume characteristics of site built housing. Legally classified as real property. Presence of a HUD Data Plate / Compliance Certificate located inside the home. No minimum requirements of size. Must have sufficient square footage and room count for subject market area. HELOC rev5 03/08/07 Page 10 of 13 HOME EQUITY LINE OF CREDIT HELOC Qualifying Payments for HELOC are calculated on the full commitment amount based on interest-only of margin plus index at time of u/w. All mortgages reflected on the borrowers credit report will be counted in the DTI (unless paid in full). This includes co-signed mortgages. Payoff of debt is allowed. If loan is a piggyback with another Reunion Mortgage 1st lien program please use the most restrictive guideline for qualification. Ratios Maximum ratios are calculated based on the following matrix: Lines of Credit < $200,000 Borrower’s Monthly Income Max DTI Less than or equal to $4,000 45% $4,001 – $10,000 50% Equal to or greater than $10,001 55% Lines of Credit > $200,000 Borrower’s Monthly Income Max DTI All income levels 45% Refinance Continuity of Obligation The key to accepting changing title or borrowers on a refinance is to establish continuity of obligation. If individuals hold title, continuity of obligation must be established on the part of at least one applicant. If current title is vested in a company name, continuity of obligation must be established for all applicants. The following table is intended to be a guideline regarding acceptability of proposed Borrowers. • The borrower types listed under the column title Proposed Borrowers on New Loan identifies the changing obligor status as a result of the proposed transaction. • Additional borrowers are permitted provided the proposed borrower status is acceptable. • The key question to determine on refinances is: Who is obligated on the current loan and who currently holds title? A borrower’s name on the title but not on the existing loan may indicate the recent addition of this person to the title. A borrower recently added to title but not on the existing loan will not be eligible for cash out transactions. As these situations carry the potential for high risk all will be considered on a case-by-case basis. For consideration please submit a letter of explanation and a 12-month mortgage history on the existing mortgage(s). • The comment “one year seasoning” means that the applying borrower is to have been on title and solely making the payment obligations for a minimum of 12 months. Typically, a copy of the recorded deed and 12 months of canceled checks verifies this obligation • “Acceptable” means any documentation type, without any seasoning requirements. HELOC rev5 03/08/07 Page 11 of 13 HOME EQUITY LINE OF CREDIT HELOC Borrowers on Current Loan Husband and wife / life partners Unrelated/unmarried owners or business partners Husband or wife Property owned free-and-clear by husband and wife or two unmarried owners Company or LC owned by one person Company, Partnership or LLC Company, Partnership or LLC Borrowers unrelated to applicants Proposed Borrowers on New Loan Husband or wife / one of the life partners One of the current owners The other spouse One of the current owners Owner* One of the owners* All corporate owners* New applicants – wrap, AITD, land contracts, or inherited properties Comments Acceptable Full Doc or one year seasoning Full Doc or one year seasoning Acceptable but borrower needs to show sufficient depth of credit experience Acceptable Full Doc or one year seasoning Acceptable Full Doc or one year seasoning. * Title must be taken in the borrower's name, not the company name. Section 32 ▪ Reunion Mortgage does not allow High-Cost loans. High-Cost testing will be performed on all loans to determine loan is not a High-Cost loan as defined by Section 32 and/or lender regulations and requirements. Please see points and fees matrix for % of fees allowed and fees included and excluded for calculation. State Restrictions/Requirements Home Equity Line of Credit transactions are not allowed in the states of Arizona, Arkansas, Colorado, Florida, Montana, Minnesota, Texas or Hawaii State Specific Minimum Loan Amounts: California $20,100 Illinois $25,100 Iowa $25,100 North Carolina $25,100 Oregon $50,100 Wisconsin $25,100 Refer to State Loan Matrix. If the property is located in the state of Nevada, the borrower must have owned the property for 12 months minimum to be eligible for refinance. The CLTV will be calculated using the current appraised value. Termite Report Pest report is not required unless the appraisal or purchase contract indicates termite or insect infestation. Transactions Transaction Types A Home Equity used to pay off or pay down an existing 1st or 2nd mortgage by extending a new obligation with no cash-out to the borrower is considered a Rate and Term. Texas – payoff of an existing home equity lien is not permitted. Subject to standard 3 day right of rescission. HELOC rev5 03/08/07 Page 12 of 13 HOME EQUITY LINE OF CREDIT HELOC A Home Equity where the proceeds may be used for a variety of financial needs is considered a Non-Purchase Money Cash Out. A Home Equity where the proceeds are wholly used for the purchase of the property is considered a Purchase Money Second. Purchase Transactions – If all parties have signed and dated all counter offers/addendums it is not necessary to require all signature, dates or initials on the original contract. Title Insurance requirements – If Home Equity is in 1st lien position or 1st lien position is a private party a full ALTA or TLTA policy is required for all loan amounts. For piggyback or stand alone transactions in junior position the following is the minimum requirements: Loan size < $250,000 requires Ownership and Encumbrance (O&E) including lien search, legal description and vesting. For Texas a lien search and tax search are required. Loan size > $250,000 requires full ALTA/TLTA policy regardless of lien position. An ALTA or TLTA policy including a Mechanics Lien Endorsement must be provided when there is construction in progress to ensure no mechanics liens have taken precedence. Reunion Mortgage will take only 1st or 2nd lien position. Value for LTV/CLTV calculation Purchase Use lesser of purchase price or current appraised value to calculate LTV/CLTV. Refinance (R/T or C/O) If the property was purchased within the last 6 months, the CLTV must be calculated using the lesser of the purchase price or current appraised value (except for Nevada). If the property is located in the state of Nevada, the borrower must have owned the property for 12 months. The CLTV will be calculated using the current appraised value. HELOC rev5 03/08/07 Page 13 of 13