Agenda • Introduction • Eligibility Guidelines • Program Guidelines – Eligible 1st Loan Program – Second Loan Products • 80/17 • 95/5 • Rate Locks, Fees and Float Downs • CalSTRS Marketing Guidelines Introduction to First Mortgage Corporation Introduction to CalSTRS Quick Facts Advantages of the Program INTRODUCTION Introduction to FMC • First Mortgage Corporation is an independent residential Mortgage Banking firm with branch offices located throughout the west. • Founded in 1975, FMC is a direct-lending mortgage banker approved as a lender and/or loan servicer by the Federal Housing Administration (FHA); the Veterans Administration (VA); the Federal National Mortgage Association (Fannie Mae); the Federal Home Loan Mortgage Corporation (Freddie Mac); the Government National Mortgage Association (Ginnie Mae); the California Housing Finance Agency (CalHFA); the Nevada Housing Division; the California Public Employees’ Retirement System (CalPERS); the California Teachers’ Retirement System (CalSTRS); and many other major secondary market institutions. • Having funded in excess of $12 billion in residential real estate loans, FMC has assisted more than sixty thousand families with their mortgage needs. FMC enables families to enjoy the American Dream of Homeownership…“it’s the only thing we do.” • FMC has a longstanding tradition of providing unparalleled customer service and a reputation built on adding value to the home loan process. That’s why FMC should be considered…“YOUR FIRST LENDING RESOURCE”. Introduction to CalSTRS CalSTRS is the California State Teachers Retirement Program providing retirement related benefits to teachers in public schools and Community Colleges in the state of California. Largest U.S. Teachers Retirement Fund 2nd Largest U.S. Public Pension Fund CalSTRS assets stands at $173.7 billion as of December 31, 2007 CalSTRS membership stands at 795,000 The CalSTRS Home Loan Program was created in 1984 as a result of legislation that provided CalSTRS with a mortgage- backed security investment opportunity, and restructured in July of 2004. It was designed as additional source of home financing for its members and retirees giving them a great choice of mortgage loans with competitive rates. – Money Works for Pension Fund • Borrowers can obtain a great loan with a competitive rate—and their money works for them, since income derived from mortgage payments goes directly into the Teachers’ Retirement Fund. CalSTRS has purchased over 32,300 loans at around $4 billion. Quick Facts Topic 06/30/06 06/30/07 Active Members 453,365 455,693 Inactive Members 133,601 141,450 Total Members 586,966 597,143 Service Retirements Disabilities 207,846 215,641 Survivor Benefits Total Members including Benefit 794,812 812,784 Recipients Advantages of the CalSTRS Program Low Cost loans with many options Buy a home Lower your existing payments Take cash out Conventional 15 & 30 year fixed loans up to $834,000 Zero Down (95/5) program with combined loan amount up to $650k requiring NO money down from the borrower. 80/17 program requiring a 3% down payment from the borrower, and comes with a 17% 2nd with deferred payments during the first 5 years. Combined loan amount up to $650k. This program allows the borrower to qualify for a larger home. We’re on your side by offering the following: Competitive interest rates set daily FREE 45-day interest rate lock upon submission to protect from rising rates If rates drop after application, there is a ONE TIME interest rate reduction (float down option) Real Estate Assistance Receive cash rebates when SMARTMOVE is used to buy or sell a home Receive Discounts CalSTRS has negotiated discounts on escrow, title fees and mortgage insurance rates Additional Teacher Mortgage Programs Extra Credit Teachers Program through CalHFA with rates as low as 5.375% or the Community Solutions program through MyCommunityMortgage Eligible Borrowers Eligible Properties ELIGIBILITY GUIDELINES CalSTRS Eligibility Guidelines Topic Description Employees of a California public school district or California Community College, and/or a member of the California State Teachers' Retirement System. As proof of eligibility, a copy of a CalSTRS benefits statement, or a pay Eligible stub or VOE from a California public school district or Community College Borrowers Borrowers must have a valid social security number Non-permanent resident aliens are eligible on the Standard Conventional Program ONLY (LTV is limited to 75%) Geographic Properties within the State of California ONLY Restrictions Eligible SFR Attached & Detached Properties PUDs Attached & Detached Condos – must be Fannie Mae approved 2-4 Unit properties Occupancy Owner Occupied Primary Residences only FTHB No First-Time Home Buyer requirement Income Limits No Income Limits Sales Price Limits No Sales Price Limits ELIGIBLE PROGRAMS Standard 1st Mortgage Products Conforming 30 & 15 Year Fixed Non Conforming 30 & 15 Year Fixed 2nd Mortgage Loan Products 80/17 Program Zero Down (95/5) Program IMPORTANT REMINDERS Factors that may reduce your LTV/CLTV on the CalSTRS programs: Properties in Declining Market Areas – Reduce LTV/CLTV by 5% Insurability of Mortgages by MI Companies: • High LTV’s • Lower credit scores • Declining Market Areas **DECLINING MARKETS AFFECTS CALTRS PROGRAMS** Conforming Product Topic Description Term 15 or 30 Year Fixed Loan Amount Up to $417,000 – Fannie Mae Loan Limit Max LTV – 1st 95% Max LTV – 2nd Standard Fannie Mae Guidelines Max CLTV 95% Loan Purpose Purchases, R&T Refinance, Cash Out Refinance Eligible Properties Owner-occupied 2- to 4-units; attached and detached SFRs; condos; and PUDs Minimum Down Payment 5% Sources of Closing Costs Follow Standard Fannie Mae Guidelines Own Other Properties Borrower can own other properties but with only 1 CalSTRS mortgage at a time Conforming Matrix Loan Type Units Max Min FICO Loan-Level Pricing LTV/CLTV Adjustment Conf Purch/Rate and Term 1 95% 620 Refi Conf Purch/Rate and Term 2 95% 640 Refi Conf Purch/Rate and Term 3-4 80% 660 Refi Conf Cash-Out Refi 1-2 70% 620 Refer to Fannie Mae guidelines. Conf Cash-Out Refi 1-2 70.01% - 80% 720 Conf Cash-Out Refi 1-2 80.01% - 90% 720 Conf Cash-Out Refi 3-4 70% 620 Conf Cash-Out Refi 3-4 70.01% - 75% 720 LTV Restriction: Max LTV allowed when there is secondary financing is 80% Conforming Loan-Level Price Adjustments Loan Amount up to $417,000 Loan Level Price Conforming Parameters Adjustment C/O Refi with LTV > 70-80% 0.500% C/O Refi with LTV > 80-90% 0.750% 2 Unit with LTV > 90-95% 0.500% LTV 65.01-80% & CLTV 90.01-95% 0.500% (i.e. 80/15/5 and 75/20/5) Note: All add-ons must be disclosed as Loan-Level Price Adjustments on the GFE or HUD-1. Loan-level price adjustments must be disclosed on line 808, NOT on line 802. They may not be disclosed as discount points. Non Conforming Product Topic Description Term 15 or 30 Year Fixed Loan Amount $417,001 to $834,000 Max LTV – 1st 95% Max LTV – 2nd Standard Fannie Mae Guidelines Max CLTV 95% Loan Purpose Purchases, R&T Refinance, Cash Out Refinance Eligible Properties Owner-occupied 2- to 4-units; attached and detached SFRs; condos; and PUDs Down Payment Min. 5% Sources of Closing Costs Follow Standard Fannie Mae Guidelines Own Other Properties Borrower can own other properties but with only 1 CalSTRS mortgage at a time Non-Conforming Matrix Attached/Detached SFRs, Attached/Detached PUDs, Low-Rise Condos, 2 Units Purchase and Rate and Term Cash Out Max Loan Max LTV/CLTV Min Credit Max LTV/CLTV Min Credit Max Cash Out Amount Score Score $650,000 95/95 620 75/75 620 $200,000 $834,000 90/90 660 75/75 620 $200,000 80/80 620 75/75 620 $200,000 High-Rise Condos and 3-4 Units Purchase and Rate and Term Cash Out Max Loan Max LTV/CLTV Min Credit Max LTV/CLTV Min Credit Max Cash Out Amount Score Score $650,000 90/90 620 75/75 720 $100,000 70/70 620 $100,000 $834,000 80/90 660 75/75 720 $100,000 70/70 620 $100,000 LTV Restriction: Max LTV allowed when there is secondary financing is 80% Non-Conforming Loan-Level Price Adjustments Loan Amount $417,001 to $834,000 Non-Conforming Parameters Loan Level Price Adjustment Loan balances > $650,000 to $834,000 & credit score < 660 0.25% Condos 0.375% 2-unit property 0.375% 3-unit property 1.00% LTV 75.01% to 80% & CLTV 80.01% to 90% with loan balance > 0.25% $650,000 LTV 75.01% to 80% & CLTV 90.01% to 95% with loan balance > 0.375% $650,000 Note: All add-ons must be disclosed as Loan-Level Price Adjustments on the GFE or HUD-1. Loan-level price adjustments must be disclosed on line 808, NOT on line 802. They may not be disclosed as discount points. Second Loan Products • 80/17 – Purchase Only – 30 Year Conforming – 30 Year Non-Conforming • Zero Down (95/5) – Purchase Only – 30 Year Conforming – 30 Year Non-Conforming Second Mortgage Loans (80/17 & 95/5) 2nd Mortgage Information Interest rates for the second mortgage loans are set by CalSTRS, and carries the same rate as the first mortgage 30-year term with a five-year deferred payment structure Simple interest calculation will be used for years 1 through 5, no principal or interest payments shall be due during the first 5 years / 60 months. Year 6 / Payment number 61: The accrued simple interest balance from the deferral period will be added to the original loan balance. The new loan amount will be amortized over the remaining 25 years / 300 months, and the borrower will then make monthly payments for the remaining life of the 2nd loan. **Down Payment Assistance Program (95/5 & 80/17) has 2 Notes & 2 Deeds of Trust*** 80/17 Program Summary Topic Description Term 30 Years 1st & 2nd Conforming Loan Amount Up to $417,000 (Up to $505,612 - 1st & 2nd combined) Non Conforming 1st Loan Amt $536,082 (Up to $650,000 – 1st & 2nd combined) Max LTV – 1st 80% Max LTV – 2nd 17% Max CLTV (Combined 1st & 2nd) 97% Loan Purpose Purchase Only Eligible Properties Owner-occupied SFRs; approved Condos; and attached and detached PUDs Down Payment 3% (1% min from borrower’s own funds) Sources of Closing Costs Borrower’s own funds, seller contributions up to 3%, gift from relative, or unsecured grant from approved government agency 2nd Mortgage Deferred payments on the 17% 2nd mortgage for the first 5 years Own Other Properties Borrower cannot own any other properties and only 1 CalSTRS mortgage at a time 80/17 Matrix Max Max st *LTV: Max Loan Max Loan Loan Type *LTV: 1 nd st nd Combined Purchase 2 Amt: 1 Amt: 2 Loan Amt Price Conforming 80% 17% $417,000 $88,612 $505,612 $521,250 Non- 80% 17% $536,082 $113,918 $650,000 $670,103 Conforming *LTVs must be exactly 80% and 17% Minimum Fico Scores: 620 for LA up to $400k 680 for LA between $401k and $650k (combined 1st & 2nd) Zero Down (95/5) Program Summary Topic Description Term 30 Years 1st & 2nd Conforming Loan Amount Up to $417,000 (Up to $438, 947 – 1st & 2nd combined) Non Conforming 1st Loan Amt Up to $617,500 (Up to $650,000 – 1st & 2nd combined) Max LTV – 1st 95% Max LTV – 2nd 5% Max CLTV (Combined 1st & 2nd) 100% Loan Purpose Purchase Only Eligible Properties Owner-occupied SFRs; approved Condos; and attached and detached PUDs Down Payment 0% Sources of Closing Costs Borrower’s own funds, seller contributions up to 3%, gift from relative, or unsecured grant from approved government agency 2nd Mortgage Deferred payments on the 5% 2nd mortgage for the first 5 years Own Other Properties Borrower cannot own any other properties and only 1 CalSTRS mortgage at a time Zero Down (95/5) Matrix Max Max Loan *LTV: *LTV: Loan Max Combined Loan Type Amount: 1st 2nd Amount: Loan Amount 1st 2nd Conforming 1st 95% 5% $417,000 $21,947 $438,947 Non-Conforming 95% 5% $617,500 $32,500 $650,000 1st *LTVs must be exactly 95% and 5% Minimum Fico Scores: 620 for LA up to $400k 680 for LA between $401k and $650k (combined 1st & 2nd) Program Underwriting Guidelines Standard Program Guidelines Specific 80/17 UW Guidelines Specific 95/5 UW Guidelines Mortgage Insurance GENERAL GUIDELINES Standard AUS Underwriting Standard Underwriting Guidelines Topic Description Manual UW Manual UW allowed – Follow Fannie/Freddie guidelines. Non Conforming loans cannot exceed DTI stated in previous table Reserves: DU: Per DU or 2 months PITI LP: Per LP or 2 months PITI Manual: 2 Months PITI • Funds from 401k, 403b and IRA/Keogh may be used for reserves if accessible prior to retirement • CalSTRS retirement accounts may not be considered cash reserves. Homebuyer Education Not Required on Standard Conventional Program only Non Occupant Co- Allowed on Standard Conventional Program only Borrowers / Co-Signers Down Payment Minimum 5% from borrower’s own funds Closing Costs May be paid by 3rd Party 80/17 Underwriting Guidelines Specific guidelines to the 80/17 program: Homebuyer Education is required for 1st Time Homebuyers. A copy of the Homebuyer Education Certificate is required in the loan file. Non-occupant co-borrowers and co-signers are not permitted Non-occupant co-borrowers allowed according to Fannie/Freddie guidelines on the Standard Conventional Program only. 3% down payment is required, a minimum of 1% must come from the borrower’s own funds. Remainder may come from: • Gift from a relative if repayment is not required • Grant from a government agency or an employer-assisted housing program, which has been approved Closing costs and prepaid items can be paid from following sources: •Borrower’s own funds •Seller contributions up to 3% •Gift from relative •Unsecured grant from a government agency or an employer–assisted housing program, needs approval by Countrywide. Ratios: 38% (may exceed w/ DU Approved/Eligible) Reserves: 2 Months (may come from retirement funds, if funds are accessible) Zero Down (95/5) Underwriting Guidelines Specific guidelines to the Zero Down (95/5) program: Homebuyer Education is required for 1st Time Homebuyers. A copy of the Homebuyer Education Certificate is required in the loan file. Non-occupant co-borrowers and co-signers are not permitted NO MINIMUM DOWN PAYMENT required from the Borrower Closing costs and prepaid items can be paid from following sources: •Borrower’s own funds •Seller contributions up to 3% •Gift from relative •Unsecured grant from a government agency or an employer–assisted housing program, needs approval by Countrywide Or •A minimum $500 contribution from borrower’s own funds Ratios: 41% (may exceed w/ DU Approved/Eligible) Reserves: 2 Months (may come from retirement funds, if funds are accessible) General Program Guidelines Topic Description Buydowns Temporary and Permanent buydowns not permitted Seller Contributions Conforming: 3% for LTV >90%; 6% for LTV 75-90%; 9% for LTV <75% Non Conf: 3% for LTV >90%; 6% for LTV <90% 80/17 & 95/5: 3% Max Assumable Loans are not assumable Prepayment Penalties Allowed but not required or recommended Title Policies Title Policies required. Title Policy for 80/17 & 95/5 must cover 1st & 2nd loan amounts including recording information on 2nd Hazard Insurance Must equal 100% of value or unpaid balance of the mortgage with replacement cost Alt Docs Permitted according to Fannie Mae & Freddie Mac guidelines. Appraisal or property inspection required according to AUS Cert unless waived by AUS cert (fee assessed) Homebuyer Education Not required on Standard Conventional Program Mortgage Insurance LTV Standard MI% Reduced MI% No Cost 80.01% to 85% 12% N/A 85.01% to 90% 25% 17% 90.01% to 95% 30% 25% Required on all loans exceeding 80% LTV If DU allows reduced coverage, it must be given to the borrower. Lower Cost MI is an option Acceptable MI Companies include MGIC, PMI, Radian, RMIC, Triad, UGI and Genworth. 95/5 Zero Down program must have standard MI of 30% 80/17 program does not require MI. Interest Rate Lock, Float Down & Commitments CalSTRS Program Fees Current CalSTRS Program Rates PRICING & COSTS CalSTRS Interest Rate Lock, Float Down & Commitments Topic Description Interest Rates Available daily on the FMC Website or individual AE websites FMC website: www.firstmtgcorp.com Available from your Account Executive Lock Periods FREE 45 day rate lock A one time FREE 15 day extension is available Float Down One-time FREE float down Opportunity The float down may occur at any time during the 45-day lock period The Float Down is NOT available after the 15-day extension period is exercised, regardless of when the extension is take Worse Case Loans that have not closed after all other extensions have been Extension exhausted: Rate will be the higher of original lock or current market rate with a .125% fee Locks for 80/17 and Zero Down(95/5)1st and 2nd mortgages must be made concurrently Property changes require new lock No fee for cancellations, all loans that will not be delivered must be cancelled CalSTRS Program Fees Topic Description Max Origination Fees Standard Conventional: Up to 1% 80/17 & 95/5: Up to 1.25% (1st Loan Only) Origination Fee retained by Broker – FMC will not keep any of it. Discount Points NOT ALLOWED Rebate/Premium None available Pricing: Other Closing Costs Normal and customary fees including an appraisal fee, credit report fee, survey fee, title insurance premium, and other closing costs as permitted by the respective agency. Must be fully disclosed on the HUD-1. See FMC website for list of our lender fees CalSTRS Current Interest Rates Conventional Loan Program (Up to 1% Origination Fee) Non Conforming Loans from Conforming Loans to $417,000 $417,001 to $834,000 Rates Price Rates Price 30 Yr: 5.875% 100.00 30 Yr: 6.375% 100.00 15 Yr: 5.125% 100.00 15 Yr: 5.875% 100.00 Zero Down 95/5 Program (Up to 1.25% Origination Fee) Non Conforming Loans from Conforming Loans to $417,000 $417,001 to $650,000 Rates Price Rates Price 30 Yr: 6.000% 100.00 30 Yr: 6.500% 100.00 80/17 Program (Up to 1.25% Origination Fee) Non Conforming Loans from Conforming Loans to $417,000 $417,001 to $650,000 Rates Price Rates Price 30 Yr: 6.125% 100.00 30 Yr: 6.625% 100.00 *Rates are for FMC Training purposes only and are current as of 02/14/08 only. Marketing Guidelines ALL marketing materials must be approved by CalSTRS. Marketing materials include hard copy advertisements (e.g., flyers, letters, ads, bulletins, etc.) as well as electronic advertising. CalSTRS-approved marketing pieces from previous mortgage loan programs are not allowed. Check out the First Mortgage Website for prior approved marketing pieces. Contact your Account Executive for more information or for your scenarios. FMC - FAQS 1. On the 80/17 where there’s a 3% minimum down payment (1% from borrower’s own funds), can the CHDAP program be used for the remaining 2%? CHDAP can only be used behind the CalSTRS Standard Conventional program and must meet all CHDAP requirements. It cannot be used on the 80/17 & 95/5 program. You can only use gift funds or a grant for the remaining 2% required for the borrower’s down payment. 2. Regarding Homebuyer Education which is required for FTHB on the 80/17 & 95/5 programs, if it’s a husband and wife, do both have to attend or can one spouse represent both borrowers? If both husband and wife are on the loan, both must attend a homebuyer education class. 3. How do we sign up borrowers for the Homebuyer Education? Please use the following website: http://www.mgichome.com/ On behalf of First Mortgage Corporation, we thank you for joining our training today on CalSTRS and we hope the information provided was informative and will help you build your business!