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Summary of Changes

VIEWS: 22 PAGES: 44

									Summary of Changes                                                                                         Effective April 1, 2011 

  Release 2011‐3 dated March 31, 2011 



  Section of the Guide         Clarification/Reminder 
  201.15B                      Clarified that RMIC does not permit the seller or builder of the subject property to pay or credit 
  Seller/Interested Party      the borrower for the amount of equity in the borrower’s current residence that has not yet 
  Contributions                sold.  
           
  Change is highlighted in yellow in the complete guidelines. 




  Republic Mortgage Insurance Company (4.11.11)
Underwriting Guidelines                                                                                                                                    Effective April 1, 2011
  Clarifications effective 04/01/11 are highlighted in yellow.

  Table of Contents

  Introduction ........................................................................................................................................................................ 3

  101 Eligible Mortgages ........................................................................................................................................................ 3
  101.1 Maximum LTV / Loan Amounts ......................................................................................................................................... 3
  101.2 Maximum Combined LTV (CLTV) ....................................................................................................................................... 5
  101.3 Agency Automated Underwriting ...................................................................................................................................... 5
  101.4 Refinance Transactions ...................................................................................................................................................... 6
           101.4A Rate and Term Refinance .................................................................................................................................. 6
           101.4B Cash Out Refinance ........................................................................................................................................... 8
  101.5 Construction-Permanent Loans ......................................................................................................................................... 8
  101.6 Fixed Rate / Fixed Payment Mortgage ............................................................................................................................... 9
  101.7 Fixed Rate Mortgage with Temporary Buydown ............................................................................................................... 9
  101.8 Adjustable Rate Mortgage (ARM) ...................................................................................................................................... 9
           101.8A Normal Amortization ......................................................................................................................................... 9
           101.8B Potential Negative Amortization ..................................................................................................................... 10
           101.8C Scheduled Negative Amortization ................................................................................................................... 10
  101.9 Adjustable Rate Mortgage (ARM) with Temporary Buydown ......................................................................................... 10
  101.10 Interest Only Mortgage.................................................................................................................................................. 10
  101.11 Balloon Mortgage .......................................................................................................................................................... 10
  101.12 Non-Arm’s Length Transactions ..................................................................................................................................... 10
  101.13 Property Flips ................................................................................................................................................................. 11

  201 Borrower Qualification ............................................................................................................................................... 12
  201.1 Maximum Number of Insured Loans per Borrower ......................................................................................................... 12
  201.2 Ineligible Borrowers / Loans ............................................................................................................................................ 12
  201.3 Resident Aliens ................................................................................................................................................................ 12
  201.4 Inter Vivos Revocable Trusts ............................................................................................................................................ 12
  201.5 Credit History ................................................................................................................................................................... 13
           201.5A Acceptable Credit Sources .............................................................................................................................. 13
           201.5B Adverse Credit ................................................................................................................................................. 13
           201.5C Re-Established Credit ...................................................................................................................................... 14
           201.5D Erroneous Credit ............................................................................................................................................. 14
           201.5E Non-Traditional Credit ..................................................................................................................................... 14
  201.6 Credit Scores .................................................................................................................................................................... 14
           201.6A Valid Credit Score ............................................................................................................................................ 14
           201.6B Minimum Credit Score Requirements ............................................................................................................. 15
  201.7 Required Documentation ................................................................................................................................................ 15
  201.8 Age of Documentation ..................................................................................................................................................... 15
  201.9 RMIC Mortgage Insurance Application ............................................................................................................................ 15
  201.10 Residential Loan Application.......................................................................................................................................... 15
  201.11 Appraisal ........................................................................................................................................................................ 15
  201.12 Credit Report ................................................................................................................................................................. 16
           201.12A Debts ............................................................................................................................................................. 16
           201.12B Contingent Debts........................................................................................................................................... 16
           201.12C All Other Types of Debts ................................................................................................................................ 16
           201.12D Ratios ............................................................................................................................................................ 17
  201.13 Employment ................................................................................................................................................................... 17


  Republic Mortgage Insurance Company (4.11.11)                                                                                                                                         1
201.14 Acceptable Income Sources ........................................................................................................................................... 18
201.15 Assets, Funds, Equity, and Reserves .............................................................................................................................. 20
        201.15A Minimum Down Payment Requirements ...................................................................................................... 20
        201.15B Seller/Interested Party Contributions ........................................................................................................... 21
        201.15C Reserves ........................................................................................................................................................ 21
201.16 Acceptable Sources for Borrower’s Funds ..................................................................................................................... 22
201.17 Unacceptable Sources for Borrower’s Funds ................................................................................................................. 24
201.18 Additional Documentation ............................................................................................................................................ 24
201.19 Documentation Types .................................................................................................................................................... 24
201.20 Relocation Guidelines .................................................................................................................................................... 25

301 Property Eligibility ...................................................................................................................................................... 27
301.1 Market Classification ....................................................................................................................................................... 27
301.2 Appraisal Requirements ................................................................................................................................................... 27
         301.2A Streamlined Appraisal / Alternatives to URAR ................................................................................................ 29
301.3 Occupancy........................................................................................................................................................................ 29
         301.3A Owner-Occupied Primary Residence............................................................................................................... 29
         301.3B Second Homes ................................................................................................................................................. 30
         301.3C Investment Properties ..................................................................................................................................... 30
301.4 First Lien ........................................................................................................................................................................... 30
301.5 Property Rights ................................................................................................................................................................ 30
         301.5A Title Requirements .......................................................................................................................................... 31
301.6 Property Locations ........................................................................................................................................................... 31
301.7 Acceptable Property Types .............................................................................................................................................. 31
         301.7A Two Unit Properties ........................................................................................................................................ 31
         301.7B Three to Four Unit Properties ......................................................................................................................... 31
         301.7C PUDs, Condominiums, and Cooperatives ....................................................................................................... 32
         301.7D Factory-Built Housing ...................................................................................................................................... 35
         301.7E Mixed-Use Properties ...................................................................................................................................... 35
301.8 Unacceptable Projects and Property Types ..................................................................................................................... 35
301.9 Geographic Restrictions ................................................................................................................................................... 37

401 Alternative Programs .................................................................................................................................................. 38
401.1 A-Minus Program ............................................................................................................................................................. 38
         401.1A Submission Methods ....................................................................................................................................... 38
         401.1B Maximum LTV / Maximum Loan Amount ....................................................................................................... 38
401.2 Reduced Documentation Program .................................................................................................................................. 38
401.3 Affordable Housing Programs .......................................................................................................................................... 38
         401.3A Submission Methods ....................................................................................................................................... 39
         401.3B Minimum Credit Score / Maximum LTV / Maximum Loan Amount ................................................................ 39
         401.3C General Guidelines .......................................................................................................................................... 40
         401.3D Affordable Housing 95% Loan-to-Value .......................................................................................................... 40
         401.3E Affordable Housing 95% Loan-to-Value with 3/2 Option ................................................................................ 40
         401.3F Affordable Housing 97% Loan-to-Value........................................................................................................... 40
         401.3G Funds / Equity / Reserves ................................................................................................................................ 41
         401.3H Eligible Loan Programs / Property Types / Borrowers .................................................................................... 41
         401.3I Ineligible Loan Programs / Property Types / Borrowers .................................................................................. 41
         401.3J Debt to Income Ratios ...................................................................................................................................... 41
         401.3K Credit Score Requirements .............................................................................................................................. 41
         401.3L Appraisal Requirements ................................................................................................................................... 41

501 Assumptions ............................................................................................................................................................... 42
501.1 Assumption with Release of Liability ............................................................................................................................... 42
501.2 Assumption without Release of Liability .......................................................................................................................... 42




Republic Mortgage Insurance Company (4.11.11)                                                                                                                                            2
Introduction
RMIC is strongly committed to promoting home ownership for qualified borrowers. These underwriting guidelines were
written with you, our customer, in mind to explain and clarify our underwriting criteria for approving mortgage insurance
loans. Loans that do not meet RMIC’s standard underwriting guidelines (as referenced in Sections 101, 201 and 301) may
still be insurable by RMIC if the loans meet underwriting criteria set forth in one of the RMIC Alternative Programs
referenced in Section 401.
The RMIC underwriting guidelines referenced in this manual apply to all loan delivery methods, manual or electronic. Use
of online systems for electronic delivery does not relieve the lender of representations and warranties associated with
RMIC’s underwriting guidelines.
RMIC reserves the right to require additional information on all loans regardless of submission method (Delegated or full
package).

101 Eligible Mortgages
RMIC will insure mortgages on primary residences and second homes with maximum terms of 40 years. Please refer to
Section 301 - Property Eligibility, for specific underwriting guidelines relative to the subject property.

101.1 Maximum LTV / Loan Amounts
To be eligible for RMIC mortgage insurance, the following LTV/CLTV and loan amount limits cannot be exceeded. In addition
to the limits outlined below, further restrictions may apply based on individual loan characteristics or property type.
Primary Owner-Occupied: Purchases or Rate and Term Refinances
                                                                                     1
                                                                      Retail Loans
                                                                                          Market Classifications6
                                                           Level 1                                Level 2                      Level 3
 Property Type       Max Loan Amount4
                                                  Max                                      Max                           Max
                                                                 Credit Score                           Credit Score                 Credit Score
                                                LTV/CLTV                                 LTV/CLTV                      LTV/CLTV
                                                  97% 2                 720                95%               700         95%             720
                        $417,000
              5, 8                                 95%                  680                85%               680         85%             700
   SFD, SFA
                        $417,001 to
                                                  90%                   720                 85%                720             Ineligible
                        $625,5003
                                                                                            95%                720       90%                740
                        $417,000                  95%                   680
             7                                                                              90%                700       85%                720
     Condo
                        $417,001 to
                                                  90%                   720                 85%                720             Ineligible
                        $625,5003
                                                                                                                         90%                740
                        $417,000                  90%                   680                 90%                700
                                                                                                                         85%                720
      Co-op
                        $417,001 to
                                                  90%                   720                 85%                720             Ineligible
                         $625,5003
              9
    2 units             $533,850                  90%                   700                       Ineligible                   Ineligible
    3-4 units                                                        Ineligible

                                                                 Non-Retail Loans
                                                                                           Market Classifications6
                                                           Level 1                                Level 2                         Level 3
 Property Type       Max Loan Amount4
                                                  Max                                      Max                           Max
                                                                Credit Score                            Credit Score                   Credit Score
                                                LTV/CLTV                                 LTV/CLTV                      LTV/CLTV
                                                  95%                  700                 95%               720         95%                740
                        $417,000
              5, 8                                90%                  680                 85%               700         85%                720
   SFD, SFA
                        $417,001 to
                                                  90%                  720                 85%                 720             Ineligible
                        $625,5003
                                                  95%                  700                 95%                 740       90%                760
                        $417,000
           7                                      85%                  680                 90%                 720       85%                740
     Condo
                        $417,001 to
                                                  90%                  720                 85%                 720             Ineligible
                        $625,5003
                                                  90%                  700                                               90%                760
                        $417,000                                                           90%                 720
                                                  85%                  680                                               85%                740
     Co-op
                        $417,001 to
                                                  90%                  720                 85%                 720             Ineligible
                         $625,5003
    2-4 units                                                        Ineligible



Republic Mortgage Insurance Company (4.11.11)                                                                                                     3
The LTV ratio for purchase of existing properties is determined by the lesser of the sales price or appraised value.

1.   In order for a loan to qualify as Retail, the same entity, with their own personnel, must perform all of the following
     functions:
          Originate and process; and
          Underwrite (contract underwriting or having the loan underwritten by the investor is permissible); and
          Fund and close in their own name; and
          Order mortgage insurance coverage under their own RMIC Master Policy
     Loans must be funded from a warehouse line in the lender’s name or by using the lender’s own funds. “Table-Funded”
     loans are considered Non-Retail loans. The originating lender may sell or assign the closed loan to an aggregator or
     investor and still be considered Retail. A correspondent who performs all of the above functions is considered Retail.
2.   For loans with LTVs greater than 95%, the following guidelines apply, regardless of AUS recommendation:
          RMIC only allows a maximum 97% base LTV. The maximum gross LTV is 103%. The loan amount in excess of 97%
          can only include financed MI premium
          Loans require an initial fixed payment term of at least 5 years
          Purchase transactions only
          Retail loans only
3.   The following guidelines apply to loan amounts > $417,000 up to $625,500 on 1 unit properties, regardless of AUS
     recommendation:
         Full or Alternative Documentation, or LP and DU documentation as described in the bullet below
         May follow documentation requirements permitted by LP and DU as described in Section 101.3 – Agency
         Automated Underwriting, subject to the following:
              − LP Accept/Eligible or DU Approve/Eligible required
              − Income:
                       o Salaried borrowers: Minimum of one paystub dated no more than 30 days prior to the loan
                           application and covering at least 30 days of year-to-date income, a verbal VOE and the most
                           recent year of IRS tax transcripts are required
                       o Not permitted for self-employed borrowers. Loans to self-employed borrowers must be
                           documented according to the requirements in Section 201.14 – Acceptable Income Sources
         No 30-day late payments on mortgages during the lesser of the last 12 months or the life of the loan
         Eligible loan products:
              − Fixed Rate
              − ARMS – Fully amortizing with an initial fixed period of at least 5 years
         Maximum 3% seller or other interested party contributions regardless of LTV
         Ineligible in Level 3 Markets
         Loans must be manually underwritten or have a DU Approve or an LP Accept recommendation
         Ineligible features: Temporary Buydowns and Balloon Loans
         Ineligible property: 2-4 units (2 unit properties are limited to $533,850), second homes and unacceptable
         properties listed in Section 301.8 - Unacceptable Property Types.
4.   Alaska and Hawaii – Loan amounts must meet RMIC’s guidelines regardless of AUS recommendation.
5.   Attached properties in the state of Florida are ineligible for coverage by RMIC.
6.   Refer to Section 301 – Property Eligibility for complete Market Classification guidelines.
7.   Refer to Section 301.7C – PUDs, Condominiums and Cooperatives for complete Condominium guidelines. Loans
     secured by attached properties in Florida are ineligible.
8.   Attached properties that are not condominiums or co-ops are eligible at the same maximum LTV/CLTV as detached
     properties (except in FL).
9.   Refer to Section 301.7A for requirements on 2 unit properties.




Republic Mortgage Insurance Company (4.11.11)                                                                                 4
Second Home Loans: Purchases or Rate and Term Refinances
Please refer to Section 301.3B - Second Homes for specific underwriting guidelines relative to second homes.

                                                             Retail Loans1
                                                                                                    2
                                                                           Market Classifications
     Property                                          Level 1                    Level 2                       Level 3
                    Max Loan Amount
       Type                                       Max            Credit     Max            Credit         Max           Credit
                                                LTV/CLTV         Score    LTV/CLTV         Score        LTV/CLTV        Score
                3
     SFD, SFA           $417,000                  90%             720           Ineligible                    Ineligible

1.    See footnote #1 under Primary Owner-Occupied: Purchases and/or Rate and Term Refinances on the previous page for
      definition of Retail loans. Non-Retail loan originations are not permitted on second home transactions.
2.    Refer to Section 301.1 - Market Classifications for complete Market Classification guidelines.
3.    Attached properties that are not condominiums or co-ops are eligible at the same maximum LTV/CLTV as detached
      properties (except in FL).

Investment Property Loans:
Ineligible

101.2 Maximum Combined LTV (CLTV)
RMIC’s maximum CLTV, including HCLTV and TLTV are the same as the maximum LTV.

101.3 Agency Automated Underwriting
RMIC will insure loans evaluated by Fannie Mae’s Desktop Underwriter® and Freddie Mac’s Loan Prospector® that receive
the following risk class or recommendations, provided the loans also meet RMIC’s underwriting guidelines. These loans
must be processed, submitted and approved in accordance with RMIC, Fannie Mae and Freddie Mac requirements. NOTE:
DU Approve/Eligible and LP Accept/Eligible loans may qualify for RMIC’s streamlined underwriting program, AUplus2. Refer
to the AUplus2 Reference Guide located at www.rmic.com for details.

Desktop Underwriter
Eligible Loans:
          Approve/Eligible
          EA-I/Eligible – Desktop Underwriter EA-I must be Retail loans
Ineligible Loans:
          DU Refer and Refer with Caution loans
          EA-II and EA-III loans (except for DU Refi Plus loans that meet RMIC’s guidelines for HARP Same Servicer or HARP
          New Servicer)

Loan Prospector
Eligible Loans:
          Accept/Eligible
Ineligible Loans:
          LP Caution loans including Caution A-Minus loans

Documentation Requirements for Agency AUS Loans
All loans must meet RMIC underwriting guidelines regardless of AUS recommendation; however, RMIC does allow the use
of the documentation permitted by LP or DU when one of the eligible recommendation types shown above is received for
the following:
          Income - Income may be documented using the documentation permitted by LP or DU. All income documentation
          must also be validated using IRS tax transcripts. Refer to Section 201.13 - Employment for requirements for using
          IRS tax transcripts
          Assets - Down payment, closing costs and reserves must meet RMIC’s requirements; however, they may be
          documented using the documentation permitted by DU or LP (e.g., if DU permits one bank statement to document



Republic Mortgage Insurance Company (4.11.11)                                                                                    5
          assets and waives reserves, RMIC will also accept one bank statement; however, the bank statement must indicate
          the borrower has the reserves required by RMIC)
          Rental history - Verification of rental history must meet RMIC’s requirement of 12 months unless the rental
          verification is not required by LP or DU
          Appraised value of the property may be verified according to DU or LP requirements (except for HARP New
          Servicer Loans which require a full URAR); however, it should be noted that the lender is ultimately responsible
          for the accuracy of the value of the subject property

101.4 Refinance Transactions
Properties Listed for Sale
        RMIC will not insure a refinance of a property currently listed for sale
        If the property was listed for sale within the past six (6) months, evidence that the property was taken off the
        market must be provided. The borrower must provide an acceptable explanation and confirm his/her intent to
        retain/occupy the property as the primary residence

101.4A Rate and Term Refinance
Rate and Term Refinance Requirements
        Pay off of existing first mortgage
        Related closing costs and prepaids may be included
        Disbursement of cash to borrower or any other payee not to exceed the lesser of $2,000 or 2% of new loan
        amount
        Pay off of junior liens is permitted under the following circumstances only:
             − Subordinate lien was originated as a purchase money second mortgage (seller or institutional financing)
                  and recorded simultaneously with the first lien, OR
             − Subordinate lien is a Home Equity Line of Credit (HELOC) and the only draw was for the acquisition of the
                  subject property (must be supported by HUD-1 and loan history)
             Both liens must meet RMIC’s requirements for allowable late payments on housing debt in Section 201.5 –
             Credit History
        LTV ratio is based on appraised value
        The refinance transaction must improve the borrower’s ability to repay the loan
        RMIC will not insure a property currently listed for sale. If the property was listed for sale in the past 6 months,
        evidence that the property was taken off the market must be provided. The borrower must provide an acceptable
        explanation and confirm intent to retain/occupy the property
        If the sales history on the appraisal indicates the subject property recently sold for significantly less than the
        current appraised value, the appraiser must document the reason for the higher value. See Section 301.2 –
        Appraisal Requirements – Analysis/Explanation of Prior Sales of Subject and Comparables for more details
        At least one borrower obligated on the new loan must be obligated on the loan being refinanced
        Pay off of an installment land contract or contract for deed may be treated as a Rate and Term Refinance if the
        contract was executed more than 12 months preceding the mortgage application date

The following are ineligible for Rate and Term Refinance transactions:
         Pay off of a first mortgage that was obtained in the past six months to consolidate a first mortgage and non-
         purchase money subordinate lien is not eligible
         Refinance of properties that are lien free
         Spousal buyouts
         Inherited properties

Refer to tables in Section 101.1 – Maximum LTV/Loan Amounts for maximum LTV and loan amounts, occupancy, number of
units and credit score requirements.

Pay off of interim construction financing must meet our Construction-Permanent guidelines located in Section 101.5.




Republic Mortgage Insurance Company (4.11.11)                                                                              6
Recovery Assistance Program: HARP New Servicer Option and HARP Same Servicer Option

   Eligibility Parameters that apply to both HARP New Servicer Option and HARP Same Servicer Option
         RMIC must be the insurer of the existing loan
         The borrower(s) and property are the same as those on the existing loan with the following exception:
          − RMIC will permit the removal of a borrower from the loan being refinanced provided the loan meets the
                following parameters:
                 o The borrower being removed from the loan is also being removed from the deed. If the removal is due to
                      the death of a borrower, evidence of death must be provided
                 o The loan must contain evidence that the remaining borrower has been making the mortgage payments,
                      including the payments for any subordinate financing, for the most recent 12-month period. Evidence of
                      payment must be 12 months of canceled checks or 12 months of bank statements from an account
                      owned individually by the remaining borrower. A 12-month history of payment from the remaining
                      borrower’s own funds is not required if a borrower is removed due to death
                 o The loan must meet all other guidelines for RMIC’s HARP program
         The mortgage insurance coverage percentage on the new or modified loan cannot exceed the coverage percentage
         of the existing first lien loan
         The new loan must improve the borrower’s ability to repay the loan and have sustainable terms:
          − The new loan must be fixed rate or an ARM with a minimum of 5 years before the first adjustment
          − The new loan must be fully amortizing or Interest Only with a minimum 10 year initial interest only period
         In addition to reasonable and customary closing costs, disbursement of cash to the borrower or any other payee
         cannot exceed $250. Any additional cash back as identified on the HUD-1 must be applied as principal curtailment
         Existing subordinate liens may be rolled into the new loan, regardless of whether or not they were used to purchase
         the subject property, provided all other guidelines are met
          − The new or modified loan amount may exceed the loan amount on the existing RMIC certificate only when the
                increase is caused by the pay off of the junior lien and/or allowable closing costs
         RMIC’s Market Classification Policy does not apply
         All occupancy, property, and original documentation types are eligible
          − 1-4 units, second homes, investment property, attached properties, condominiums, jumbo loans and
                manufactured homes are eligible
         There is no minimum credit score
         Loans must also comply with the appropriate guidelines detailed below for either HARP New Servicer or HARP Same
         Servicer

   Additional Eligibility Parameters for HARP New Servicer Option:
        The new loan servicer must be different from the current servicer. For same servicer transactions (where the
        existing servicer or an affiliate directly or indirectly refinances the loan), RMIC offers a certificate modification
        program detailed below in the HARP Same Servicer Option
        The new loan must be fully documented and underwritten with new or updated documents (regardless of any AUS
        recommendation) per Section 201 of RMIC’s Underwriting Guidelines. Additionally, a full Uniform Residential
        Appraisal Report with an interior and exterior inspection is required. In summary, this includes:
         − Credit Report
         − Verifications of acceptable income, employment, assets and funds for closing
         − Full URAR appraisal including interior and exterior inspections
        Borrowers that originally used reduced documentation (i.e., SIVA, No Ratio, SISA, NINA, No Doc, etc.) and can now
        fully document their income, assets and employment are eligible
        0 x 30 late mortgage payments for the last 12 months (or life of loan if seasoned less than 12 months)
        Maximum DTI of 55% if the borrower’s monthly mortgage payment is being reduced. Otherwise, the maximum DTI
        is 41%, unless the LTV/CLTV and representative credit score meets the requirements for a DTI of 45% as referenced
        in Section 201.12D - Ratios
        Maximum LTV of 105% (maximum LTV is lower in some states as required by state insurance departments)
        The maximum LTV is based on the new appraised value

   If a loan does not meet all of the above criteria for the HARP New Servicer Option, it may still be eligible for RMIC’s HARP
   Same Servicer Option.



Republic Mortgage Insurance Company (4.11.11)                                                                              7
   Additional Eligibility Parameters for HARP Same Servicer Option:
        The new loan servicer must be the same as the original servicer on the loan (the existing servicer or an affiliate
        directly or indirectly refinances the loan)
        The mortgage insurance certificate will be modified. A new commitment will not be issued
        The existing loan does not have to be current
        The MI premium (in basis points) will remain the same as on the existing loan
        The maximum LTV is based on the original value of the property
        The borrower need not be re-qualified for the new loan; if borrower is not re-qualified, the income and credit
        information/credit score associated with the original loan must be provided to RMIC at the time of the insurance
        request
        Higher Priced Mortgage Loans (HPML) are ineligible

101.4B Cash Out Refinance
Ineligible

101.5 Construction-Permanent Loans
Home Improvement / Rehabilitation / Renovation Loans:
       Home Improvement / Rehabilitation / Renovation Loans must comply with the construction-permanent
       requirements below
       LTV is based on the lesser of the “as completed” appraised value or the cost of the property plus the cost of
       improvements

A construction-permanent loan is one that provides:
        Interim construction financing, allowing loan proceeds to be disbursed over time to pay home builders,
        contractors, subcontractors, suppliers or other providers of material or services; and
        Long-term permanent financing, known as a “permanent” or “end loan,” to replace the interim financing upon
        completion of the proposed home’s construction

     Note: If the borrower does not already hold title to the lot, a one-time disbursement to a builder for the purchase of a
     new home is considered a purchase transaction and not a construction-permanent loan.

Construction-permanent loans may be structured in one of two ways:
        A “Two-Time Close” involves a construction loan that closes at the beginning of construction and a second loan
        that pays off the construction loan and provides for the permanent financing; or
        A “One-Time Close” involves a single loan that provides both a construction loan and a permanent loan; a
        modification to the original security instrument may be needed when construction is completed

Construction-permanent loans may be treated as either Purchase transactions or Rate and Term Refinance transactions.
Regardless of whether the loan is structured as a Purchase or a Rate and Term Refinance, the LTV/CLTV is based on the
lesser of sales price (acquisition cost*) or the current appraised value.

Construction-permanent requirements:
        Primary residence 1 unit only
        Purchase or Rate and Term Refinance only
        Max LTV/CLTV 90%
        Minimum credit score 720
        Properties in a Level 2 or Level 3 Market are not eligible

*Note: Acquisition cost is the cost of the land plus the cost of construction as documented by an executed contract with the
builder. The appraised value of the land may be used if the land was purchased at least 1 year ago, or if the land was
inherited or gifted to the borrower.

Construction-permanent and permanent (end loans) are eligible for insurance (up to 12-month commitment terms) under
the following conditions:



Republic Mortgage Insurance Company (4.11.11)                                                                             8
          Both loans must be in the borrower’s name and the borrower must sign both notes, and there is no cash back to
          the borrower
          The borrower is the owner of the lot on which the residence is to be constructed
          Short-term financing is not allowed
          Mortgage insurance coverage is ineligible during the construction phase. Coverage may be activated once the
          permanent financing has been closed or perfected
          Property must be completed according to plans and specifications prior to submitting a claim

After 12 months, the loan must be submitted as a new loan. Please refer to Section 201.8 - Age of Documentation for
required age of documentation.

101.6 Fixed Rate / Fixed Payment Mortgage
A Fixed Rate / Fixed Payment Mortgage is defined as a mortgage that has a fixed period for at least the first five years. For
Maximum LTV requirements, refer to Section 101.1 - Maximum LTV / Loan Amount tables.

101.7 Fixed Rate Mortgage with Temporary Buydown
A temporary buydown mortgage allows the lender, borrower, or a third party to provide funds for the purpose of reducing
the borrower’s monthly payments.
         Maximum LTV: 95%
         Qualifying Rate: Note Rate
         Maximum Change: 1% annually – maximum 3 year buydown period
         Loans with temporary buydowns must meet RMIC’s seller contribution limits
         Ineligible for buydowns: Affordable Housing products

101.8 Adjustable Rate Mortgage (ARM)
Adjustable Rate Mortgages (ARMs) must have an index that is published nationally or regionally, easily verifiable and not
controlled by the lender (e.g., LIBOR, Treasury Bill, and COFI Indexes).
         Maximum LTV: Section 101.1 - Maximum LTV / Loan Amount tables
         Qualifying Rate:
             − ARM loans with fixed periods of five (5) years or less, the borrowers are qualified at the greater of the (i)
                  Note Rate or (ii) the Fully Indexed Accrual Rate (“FIAR”)
             − ARM loans with fixed periods of greater than five (5) years, the borrowers are qualified at the Note Rate

Maximum Caps
Maximum annual interest rate adjustment
      Adjustment period of 1 year or less: 2%
      Adjustment period greater than 1 year: Generally, 1% for every year of the adjustment period

          For example:
                           Rate Adjustment Based on ARM Products
                                           st
            ARM Product         Maximum 1 Adjustment Subsequent Adjustments
            1/1 ARM                       2%                     2%
            2/1 ARM                       2%                     2%
            3/1 ARM                       3%                     2%
            4/1 ARM                       4%                     2%
            5/1 ARM or greater            5%                     2%

          Life Cap: 6%, over the initial interest rate

101.8A Normal Amortization
Normal Amortization – Loans having simultaneous rate and payment adjustments.
        The initial interest rate discount cannot be more than:
            − 2% below the FIAR for ARM loans with initial fixed terms less than 5 years
            − 3% below the FIAR for ARM loans with initial fixed terms of 5 or more years



Republic Mortgage Insurance Company (4.11.11)                                                                              9
          All other standard underwriting guidelines apply

101.8B Potential Negative Amortization
Ineligible

101.8C Scheduled Negative Amortization
Ineligible

101.9 Adjustable Rate Mortgage (ARM) with Temporary Buydown
ARMs with temporary buydowns are eligible for RMIC Mortgage Insurance subject to the criteria in Section 101.8 –
Adjustable Rate Mortgage (ARM) with the following modifications:
        Ineligible for buydowns: Affordable Housing products
        No temporary buydowns on ARMs with initial adjustment periods less than 3 years
Qualifying Rate: The greater of the (i) Note Rate or the (ii) FIAR
Maximum Annual Change: 1%

                                                                           1
  ARM Product        Maximum Annual Schedule         Maximum LTV/CLTV
                                 2-1-0                         90%
      3-year
                                 1-1-0                         95%
                                 3-2-1                         95%
      5-year
                                 2-1-0                         95%
1
  Please refer to Section 101.1 for minimum credit scores, loan limits and maximum LTV/CLTV in a Level 2 or Level 3 Market.

Loans with temporary buydowns must meet RMIC’s seller contribution limits.

101.10 Interest Only Mortgage
Ineligible

101.11 Balloon Mortgage
Mortgages with balloon features are insurable by RMIC based on the following:
       Maximum LTV – refer to Section 101.1 and 101.2 – Maximum LTV / Loan Amount tables
       Minimum balloon term: 5 years
       Qualifying rate: Note Rate

At the end of the balloon term, the lender must offer the borrower new financing at current market rates for an amount
not less than the outstanding balance, as well as meet the following additional requirements:
          No decrease in the amortization period
          Decision will be based upon the original credit package
          All other standard RMIC guidelines will apply

101.12 Non-Arm’s Length Transactions
A non-arm’s length transaction is one in which the parties involved in the transaction are not independent of each other.
Examples of non-arm’s length transactions include family sales between parent and child, property in an estate, employer
and employee, friends, renter and landlord, and a mortgage lender who directly or indirectly is the seller of REO. Non-arm’s
length transactions require close scrutiny and must meet the following requirements:
         The relationship between the parties to the transaction must be disclosed to RMIC; and
         The underwriter must ensure that the borrower has adequate equity in the property, occupancy is correctly
         represented, seller contributions are acceptable and within guideline limitations, and the sales price and appraised
         value are accurate; and
         The appraiser must be informed that the transaction is not arm’s length and must comment on the buyer’s and/or
         seller’s relationship to the interested party to the transaction and its effect on the marketability of the property;
         and
         If the lender is the property seller, the loan must be a full file submitted to an RMIC underwriter




Republic Mortgage Insurance Company (4.11.11)                                                                             10
101.13 Property Flips
A property flip occurs when a recently acquired property is being resold by the current property seller. The following
underwriting requirements apply to property flips:
         Loans on properties that are being resold within 90 days of purchase are ineligible for mortgage insurance
         Loans on properties that are being resold within 91 to 180 days of purchase must be full files submitted to an
         RMIC underwriter. If the new sales price is higher than the price the seller paid to acquire the property, the
         increase must be fully documented and explained

The seller’s date of purchase is defined as the date of settlement on the seller’s purchase of the property. The resale date is
the date of execution of the new sales contract by the buyer.

The following types of re-sale transactions are not considered property flips and are not required to meet the above policy:
         Property being sold by a spouse who acquired the property through a divorce settlement
         Property being sold by an administrator or executor of an estate
         Property acquired by an employer through a relocation program
         Property being resold by a lender, servicer or mortgage insurance company that was acquired through a
         foreclosure or deed-in-lieu of foreclosure. If the loan is a non-arm’s length transaction, the loan must meet the
         requirements of RMIC’s Non-Arm’s Length Transaction guidelines in Section 101.12 above

As a reminder, RMIC’s Master Policy holds the lender responsible for providing an accurate, independent and adequately
supported value of the property.




Republic Mortgage Insurance Company (4.11.11)                                                                              11
201 Borrower Qualification
Only loans to natural persons and certain trusts are eligible for RMIC Mortgage Insurance. Ownership must be in the name
of the individual borrower. The borrower must meet the state minimum age requirements governing ownership of real
estate and have the legal capacity to contract for a mortgage.

201.1 Maximum Number of Insured Loans per Borrower
RMIC will insure no more than two loans per borrower including the borrower’s primary residence and one second home. If
a borrower already has an investment property insured by RMIC under previous underwriting guidelines, RMIC will only
insure a primary residence for that borrower.

201.2 Ineligible Borrowers / Loans
The following borrowers/loan types are not eligible for RMIC Mortgage Insurance:
         Borrowers for whom we have paid claims within the past 7 years
         Borrowers with diplomatic immunity
         Foreign nationals
         Partnerships, limited partnerships and corporations
         Irrevocable trusts
         Borrowers without valid social security numbers

201.3 Resident Aliens
Permanent resident alien and non-permanent resident alien – RMIC will insure loans made to both permanent resident
aliens and non-permanent resident aliens based on our standard underwriting guidelines. As with all borrowers, permanent
or non-permanent resident aliens must have established the following within the United States:
         A satisfactory 2 year work history
         A satisfactory 2 year credit history
         A satisfactory pattern of savings
         Sufficient and accessible liquidity and reserves
         All documentation must be provided in English or an English translation must be provided

     Note: The lender must have acceptable documentation in the file to verify the lawful status of the alien (permanent or
     non-permanent) in the United States.

201.4 Inter Vivos Revocable Trusts
RMIC will insure loans where the borrower is an inter vivos revocable trust. To be eligible for RMIC Mortgage Insurance, the
following criteria must be met.

The borrower must be:
        The individual or the person who created the trust, and
        The beneficiary or the person who is designated to benefit from the trust, and
        The trustee or the person who will administer the trust for the benefit of the beneficiary

The property:
        The security property must be a one unit primary residence

The documentation:
        The trust must be established by written document and revocable by the individual(s) who established the trust
        Income and/or assets of at least one of the individuals establishing the trust must be used to qualify for the
        mortgage and that individual must occupy the property and sign the mortgage instruments
        A first lien on the property must be created by the trust
        The borrower and the property will be underwritten as if title were in the name of the individual borrower




Republic Mortgage Insurance Company (4.11.11)                                                                           12
201.5 Credit History
RMIC requires each borrower to have a minimum of at least 12 months established credit history in order to properly
evaluate creditworthiness. The review of the borrower’s credit history is a strong indicator of the likelihood of debt
repayment. The basis for any credit analysis should be to review each borrower’s complete credit history, length of time
accounts have been open, types of credit used, balance-to-credit limit comparison, number of recent inquiries and public
records information. RMIC evaluates the entire loan with emphasis placed on overall quality of the loan to determine
insurability.

Minimum Credit History
      Minimum of three trade lines with a 12 month payment history required, regardless of AUS recommendation
      Trade lines are defined as revolving or installment payment accounts reported on a traditional credit report
      − Mortgage/rental history for at least 12 months may be considered one of the minimum trade lines if reported
          as a trade line on the credit report
      Mortgage or rental history for at least 12 months is required. (Rental history is not required if it is not required by
      DU or LP)

Number of Allowable Late Payments:
 Debts                                          Last 12 Months   Last 24 Months
 Housing (mortgage or rent)                     None             1x30 / 0x60 or beyond
                                                1x30             2x30 or 1x60
 Installment (auto, student loan, etc.)
                                                0x60 or beyond   0x90 or beyond
                                                2x30             2x30 or 1x60
 Revolving credit (MasterCard, Visa, etc.)
                                                0x60 or beyond   0x90 or beyond

201.5A Acceptable Credit Sources
Any of the following three major credit repositories are considered to be acceptable credit sources:
         Equifax
         Experian
         TransUnion

Acceptable credit reports
        “In-file” or “merged” reports from at least two credit repositories or
        Full Residential Mortgage Credit Report

201.5B Adverse Credit
Adverse Credit Issues:
        Bankruptcies:
            − Chapter 13 bankruptcies must be discharged for 2 years prior to loan application date
            − Chapter 13 bankruptcies must be dismissed for 4 years prior to loan application date. Two years is
                  permitted with documented extenuating circumstances
            − Chapter 7 bankruptcies must be discharged or dismissed for 4 years prior to loan application date. Two
                  years is permitted with documented extenuating circumstances
            − Borrowers who have filed multiple bankruptcies within the past 7 years are ineligible for coverage
        Foreclosures, deeds-in-lieu and short sales:
            − Foreclosures must be discharged at least 7 years prior to loan application date. Three years is permitted
                  with documented extenuating circumstances. Loans to borrowers with a foreclosure in less than 7 years
                  (as a result of extenuating circumstances only) require a maximum CLTV of 90% and a minimum credit
                  score of 720
            − Deeds-in-lieu and short sales must be completed at least 4 years prior to the loan application date. Two
                  years is permitted with documented extenuating circumstances. Loans to borrowers with a deed-in-lieu or
                  short sale in less than 7 years (as a result of extenuating circumstances only) require a maximum CLTV of
                  90%




Republic Mortgage Insurance Company (4.11.11)                                                                             13
               −   Loans secured by second homes are ineligible if the borrower has had a prior foreclosure, regardless of
                   the time elapsed since the foreclosure (except loans that meet RMIC’s guidelines for HARP Same Servicer
                   or HARP New Servicer)
          Judgments, tax liens, and repossessions must be paid in full prior to or at loan closing
          Collections and charge offs may remain unpaid provided individual accounts do not exceed $250 and total
          accounts do not exceed $1000
          After completion of credit counseling, 12 months of re-established credit is required prior to loan application

Previously Paid Claim
RMIC will not insure loans with borrowers on whom RMIC has paid a claim within the past 7 years.

201.5C Re-Established Credit
Borrowers must provide satisfactory written explanations for adverse credit issues. Extenuating circumstances beyond the
borrower’s control must be documented with timeframes, reasons, etc.

RMIC considers the borrower to have re-established credit based on the following:
       Minimum of four accounts with at least a 12 month history established after the adverse credit incident; and
       No late payments during this period; and
       Must be documented by a traditional credit report

201.5D Erroneous Credit
Erroneous credit is credit reflected on a credit report that does not belong to the borrower. When independent third party
documentation is provided that supports the fact that the erroneous credit is not the borrower’s, the erroneous credit
should not be considered when underwriting the file. The borrower’s remaining credit should be compared to the criteria
referenced under the “Number of Allowable Late Payments” table in Section 201.5 - Credit History for determining
insurability. If the borrower’s remaining credit meets or exceeds the criteria in the table, the loan meets RMIC’s standard
underwriting guidelines. If the borrower’s remaining credit does not meet or exceed the criteria in the table the loan is not
eligible for insurance.

Note: RMIC considers credit scores reflected on credit reports with erroneous credit not valid for underwriting purposes.

201.5E Non-Traditional Credit
Ineligible

A loan is considered to have non-traditional credit (and is therefore ineligible) if any borrower on the loan does not have a
minimum of three trade lines in existence for at least 12 months or if a valid credit score cannot be derived.

201.6 Credit Scores
Credit scores evaluate all aspects of the borrower’s credit history and statistically quantify the credit risk. Credit scores are
generally used as an additional tool in the underwriting process to:
         Determine a borrower’s qualifications for certain products and/or programs
         Provide a snapshot of a borrower’s general credit history within a given timeframe

RMIC requires that at least two credit scores be obtained.

If the lender provides only one credit score, it must be the loan case “representative” score. Determine the loan case
“representative” score based on the following:
          Use the lower score if two scores are obtained and use the middle score if three scores are obtained
          If there are multiple borrowers associated with the loan file, the lower of all the individual scores must be used as
          the loan case “representative” score

201.6A Valid Credit Score
For a credit score to be accepted by RMIC in the underwriting process, the borrower must have an established credit history
verified through traditional credit repositories. The score must be based on sufficient, accurate information. Too little
information or information that is significantly inaccurate makes the credit score unusable. Although a credit score can be


Republic Mortgage Insurance Company (4.11.11)                                                                                 14
generated with one trade line, RMIC does not consider the credit score valid unless at least three trade lines are evaluated
for at least 12 months.

201.6B Minimum Credit Score Requirements
Minimum credit score requirements for specific loan types are reflected in the Maximum LTV / Loan Amount Section
101.1 (Please refer to Section 101.1 – Maximum LTV / Loan Amounts.)

201.7 Required Documentation
Each full package submitted for mortgage insurance must contain sufficient documentation to make a prudent underwriting
decision. If documents necessary to the credit decision are missing, RMIC will request those prior to making a final decision.
RMIC’s Master Policy holders are responsible for correctly representing the information in the Application, as defined in the
RMIC Master Policy. If new documents are obtained after a loan has been submitted to RMIC, the lender must determine if
any information submitted in the original Application has changed, and if so, provide this new information to RMIC.

201.8 Age of Documentation
RMIC’s documentation requirements:

 Maximum Age of Credit Report and All Other Credit Documentation
 Existing property                  90 days from the date of the note
 New construction                   120 days from the date of the note
 Construction/permanent             120 days from the date of modification to a permanent loan

 Maximum Age of Appraisal Documentation
                                        Appraisal Update Required *                        New Appraisal Required
 Existing property and If appraisal will be greater than 120 days old and        If appraisal will be greater than 12 months
 new construction          up to 12 months old at the date of the note           old at the date of the note
                           If appraisal will be greater than 120 days old and    If appraisal will be greater than 12 months
 Construction /
                           up to 12 months old at the date of modification to a old at the date of modification to a
 permanent
                           permanent loan                                        permanent loan
 * An appraisal update requires the appraiser to perform the following:
           Exterior inspection of the property; and
           Review of current market data to determine if property has declined in value since the original appraisal date
 If the appraiser indicates the property value has not declined, the update can be reported on the Appraisal Update and/or
 Completion Report (1004D) or in letter format. If the appraiser indicates the property value has declined, a new appraisal
 must be obtained.

 RMIC’s Maximum Commitment Periods
 Existing property            4 months
 Construction/permanent loans 12 months

201.9 RMIC Mortgage Insurance Application
A fully completed Mortgage Insurance Application is required with accurate loan information and signed by an authorized
representative of the Master Policy Holder.

201.10 Residential Loan Application
A completed Fannie Mae 1003/Freddie Mac 65 Form Residential Loan Application is required. If other approved equivalent
forms are submitted, they must contain sufficient detail for RMIC to make a prudent underwriting decision.

201.11 Appraisal
A URAR - Uniform Residential Appraisal Report (1004, 1025, 1073, etc.) with photographs or a Streamlined Appraisal (2055,
2070, etc.), as required by Desktop Underwriter or Loan Prospector, is required. (Please refer to Section 301 – Property
Eligibility for additional underwriting guidelines).




Republic Mortgage Insurance Company (4.11.11)                                                                             15
201.12 Credit Report
A Residential Mortgage Credit Report (RMCR) or a minimum two-repository merged in-file report is required. The report
should include:
         At least three trade lines with a 12 month payment history;
         All supplements, including public records examination;
         All open credit accounts listed on the application; and
         Borrower’s 12 month mortgage history for any property owned or rental payment history
         for the most recent 12 months. (A rental history is not required if it is not required by LP or DU)

201.12A Debts
Measuring a borrower’s debt pattern is a reliable guide for determining whether or not the borrower can afford the
monthly payments on the proposed mortgage.

201.12B Contingent Debts
A contingent debt is one that may not have to be paid by the borrower. Not all contingent debts have to be counted in a
borrower’s total debt-to-income ratio. The following is a list of various types of debts and when they should be included in a
borrower’s ratios.

Borrowed funds secured by financial assets (life Insurance policies, 401(k) accounts, CDs, stocks, bonds, etc.) are not
included in the monthly debts if the asset is documented as collateral for the loan.

Bridge loans – Mortgage payments on the borrower’s prior residence plus the monthly bridge loan payment will be
included in the monthly debts when the borrower is using a bridge loan for down payment and closing costs unless:
         Documentation is provided to verify the borrower’s employer is providing payment or reimbursement to the
         borrower for the bridge loan; or
         The file contains a copy of an executed buyout agreement for the property that is security for the bridge loan. The
         buyout agreement must be from a recognized relocation company. The borrower must have required reserves for
         the new loan as well as sufficient liquid assets to meet all obligations until the buyout occurs

The bridge loan cannot be placed as a lien against the new property.

Co-signed debts – A debt co-signed by the borrower will be included in the monthly debts unless documentation is
provided verifying that payments have been made as agreed by the primary debtor for the past 12 months.

Mortgage assumptions – Mortgage loans in which a borrower sells a property and the purchaser assumes the outstanding
mortgage debt will continue to be counted as a monthly obligation for the original borrower unless:
       Transfer of ownership and executed assumption agreements are documented in the loan file; and
       The purchaser has at least a 12-month history of making the mortgage payment in a timely manner

201.12C All Other Types of Debts
Revolving debts / Credit lines – All revolving debts, (i.e., bank card, store credit cards, home equity lines) must be included
in the total monthly debt. If the monthly payment is not verified on the credit report, use 5% of the outstanding balance as
the payment amount. If a revolving account will be paid off or paid down but not closed, a monthly payment on the current
outstanding balance must be included in the total monthly debt.

Installment debt – All installment debts (i.e., auto, home equity loans, student loans) with a remaining term of over 10
months must be included in the total monthly debts.

Deferred credit – Debts that are deferred (i.e., student loans, furniture payments, etc.) will be counted in the monthly
debts.

Lease payments – Leases (even those with less than 10 months remaining) that have a material effect on the borrower’s
ability to pay must be included in the borrower’s monthly debt. All car lease payments must be included in the borrower’s
total monthly debt.




Republic Mortgage Insurance Company (4.11.11)                                                                              16
Payments on real estate mortgages (non-investment properties) – The full mortgage payment (principal, interest, taxes,
insurance, ground rents, cooperative fees, homeowners’ dues and any special assessments) is to be included in the total
monthly debt.

Non-reimbursed employee business expenses – These expenses must be subtracted from the borrower’s monthly income
based on a 24-month average. If a 24-month history is not available, a 12-month average should be used.

Alimony, child support, or maintenance payments – Both alimony and child support are counted as monthly debt when
there are remaining payments for more than 10 months per a divorce decree, separation agreement or court order.

Business debt in borrower’s name – The payment should be included in the borrower’s total monthly debts unless:
        Sufficient evidence is provided that supports the obligations are paid out of company funds (i.e., cancelled checks)
        and there is no history of delinquency; and
        Business cash flow analysis reflects debt is reasonably related to business expenses associated with the obligation;
        and
        Business debt is documented as being independent of the borrower’s personal obligations

201.12D Ratios
Qualification ratios used to measure borrower’s ability to repay the loan are based on the following:
         Total gross monthly income
         Total monthly debt (monthly housing expense* plus all other monthly debt payments)

Total debt-to-income ratio calculation:
Total monthly debt divided by total gross monthly income = total debt-to-income ratio

Maximum ratios:
Maximum total debt-to-income ratios, regardless of any AUS recommendation.
      45% for loans that meet the following criteria:
           o Minimum 740 representative credit score
           o Maximum $417,000 loan amount
           o Retail or Non-Retail originated
           o 1 unit primary residences other than condominiums or co-ops: maximum 95% CLTV in a Level 1 or
                Level 2 market
           o Primary residence condominium (purchase only): maximum 95% CLTV in a Level 1 market
           o Primary residence co-op: maximum 90% CLTV in a Level 1 market
           o Construction-to-Perm loans: maximum 90% CLTV in a Level 1 market
           o Second home: maximum 90% CLTV in a Level 1 market (retail loans only)
          41% for all other loans
* “ Housing expense” includes principal, interest, taxes, insurance, ground rents, cooperative fees, homeowners’ dues and
    any special assessments.

201.13 Employment
Verification of Employment and Income
All borrowers must have income which is adequately verified, stable, likely to continue and sufficient to repay the mortgage
debt. The following documentation is required to verify a borrower’s employment:

Full Documentation:
         A Verification of Employment form must be completed and executed by borrower’s current employer, and
         previous employers if necessary, covering the past 2 years with year-to-date and last year’s earnings

Alternative Documentation:
         Current pay stub(s) dated no more than 30 days prior to the loan application and covering at least 30 days of year-
         to-date income; and
         IRS W-2s for the previous 2 years; and



Republic Mortgage Insurance Company (4.11.11)                                                                           17
          Employment must be verified verbally

IRS 4506-T Documentation Required for All Loans:
        A completed and signed IRS Form 4506-T, 4506 or 8821 covering the most recent year of tax returns is required to
        be obtained from all borrowers (where income is used for qualifying)
        Prior to closing, the IRS tax transcripts from the most recent year of tax returns must be obtained from the IRS or
        designee and used to validate the income documentation provided by the borrowers
        Where indicated in Section 201.14 - Acceptable Income Sources, RMIC will accept the most recent two years of
        personal and business tax transcripts from the IRS as acceptable income documentation, thereby eliminating the
        need to obtain tax returns from the borrowers; however, RMIC may require tax returns in instances where the tax
        transcripts do not provide sufficient detail to document the borrower’s qualifying income
        If a loan with a mortgage insurance application dated on or after September 1, 2009, is sent to RMIC for
        underwriting or auditing purposes, the file submission must include the 4506-T and the transcripts from the IRS
        Any discrepancies between the transcripts and the loan file income documentation must be appropriately
        explained and documented
        If the transcripts do not support the income documentation provided and the discrepancies cannot be adequately
        explained and documented, the loan is ineligible for mortgage insurance
        The completed and signed 4506-T, the tax return transcripts received back from the IRS, and any subsequent
        explanation or documentation of discrepancies must be permanently retained in the loan file

All sources of income used for qualifying for the mortgage must be expected to continue for at least 3 years.
All employment gaps over 30 days that occurred within the past 12 months should be explained in writing by the borrower.
Tax-exempt income may be adjusted upward for qualifying purposes by adding an amount equal to 25% of the tax exempt
income or by adding the appropriate amount from the current federal and state income tax withholding tables.
Projected/future employment and income are ineligible. The lender must be able to document that the borrower is
receiving the income used to qualify the borrower prior to loan closing.
Secondary stated income is ineligible.

201.14 Acceptable Income Sources
All income used for qualifying must be stable, consistent, and likely to continue for at least 3 years.

Wages/Salary from Employer – See Section 201.13 - Employment

Self-Employed Borrowers – Any borrower who has 25% or greater ownership interest in a business is considered self-
employed.
The following is required:
         2 years personal and business tax returns, if applicable, completed and signed with all appropriate schedules,
         depending on the business structure (sole proprietorships, partnerships, corporations and S-Corps). The most
         recent two years of IRS tax transcripts may be substituted for the most recent two years of tax returns
         Borrowers must be self-employed for a minimum of 2 years
         Use a 2 year average of income from tax returns for qualification
         Current year-to-date profit and loss if the loan application is dated more than 120 days after the end of the
         business tax year
         Income used for qualifying must be supported by both year-to-date and the most recent 2 years of earnings
         If the borrower or co-borrower has income from self-employment that is not used to qualify, the individual tax
         return or complete IRS tax transcript for the most recent year must be obtained to determine any business loss
         that has an impact on stable monthly income. The loss must be considered in calculating the qualifying income for
         the loan

Alimony or Child Support
        Separation/divorce decree or other binding court document specifying the amount of the monthly award and the
        period of time it will be received




Republic Mortgage Insurance Company (4.11.11)                                                                           18
          Alimony or child support should be received for at least 12 months in a timely manner to be considered stable.
          Otherwise it should only be used as a compensating factor in qualifying to offset high ratios
          The award must continue for at least 3 years

Capital Gains – Income from capital gains can only be used if documentation supports that the gain is not a one-time
transaction.
Requirements:
        Tax returns or IRS tax transcripts for the last 2 years with the applicable schedules
        Use a 2 year average for qualifying
        Verify that the property or assets generating the income have not been sold

Car Allowance / Expense Account – A car allowance may be used as an offset to a borrower’s monthly auto payment if the
following is provided:
         2 years signed tax returns with applicable schedules. IRS tax transcripts may be substituted for tax returns
         Allowance must be received for at least 2 years
         Any debt amount greater than the monthly allowance should be included in the borrower’s total monthly
         obligations
         Any funds greater than the borrower’s monthly payment can be added to the borrower’s monthly income, if
         supported by tax returns

Commission, Overtime or Bonus Income - If commission, overtime or bonus income is used for qualifying purposes, use a 2
year average of the income. The following is required If the income represents 25% or more of the borrower’s total income:
         2 years signed tax returns with applicable schedules. IRS tax transcripts may be substituted for tax returns
         Any non-reimbursed business expenses must be subtracted from the gross commission income

Dividend / Interest
        2 years signed tax returns or IRS tax transcripts with applicable schedules
        Use a 2 year average for qualifying
        Assets used for income cannot be liquidated for down payment or closing

Disability, Pension, Retirement, Social Security, VA Benefits
         Must be verified by employer or applicable state, federal or government agency

Employment by Relative or Interested Party to the Transaction
       In addition to the income documentation required in Section 201.13 – Employment for full or alternative
       documentation, RMIC requires the most recent year of complete tax returns or IRS tax transcripts that support the
       income used to qualify the borrower
       An interested party to the transaction includes the seller, builder, real estate agent or an individual who will
       benefit from the sale of the property

Foster Care, Public Assistance Income, Unemployment Benefits, Seasonal Job Income, Military Income, Part-Time,
Second Job or Multiple-Job Income, Worker’s Compensation Benefits
        Must be verified by employer or applicable state, federal or governmental agency
        Must have a documented 2 year history of receiving the income (part-time, second jobs or multiple jobs require
        only a 1 year documented history)
        Must continue for at least 3 years

Mortgage Credit Certificates
       Copy of the mortgage credit certificate is required
       Debt-to-income ratios should be calculated based on the percentage of the MCC tax credit being added to the
       borrower’s income as follows:
           − Mortgage amount x note rate x MCC percentage divided by 12, can be added to the borrower’s income




Republic Mortgage Insurance Company (4.11.11)                                                                              19
Non-Occupying Co-Borrower’s Income – Income of a co-borrower who will not be occupying the subject property may be
considered as acceptable – see Section 301.3A - Owner-Occupied Primary Residence

Notes Receivable Income, Trust Income
        Copy of the note or trust agreement
        2 years signed tax returns with applicable schedules. IRS tax transcripts may be substituted for tax returns
        The trust must be irrevocable
        Must have a documented 1 year history of receiving income from notes receivable
        Must continue for at least 3 years

Rental Income from Other Property
         If the property is reflected on the borrower’s federal tax returns or IRS tax transcripts, the income reported on
         Schedule E must be used for qualifying. Interest, taxes, depreciation and insurance from Schedule E may be added
         back to the cash flow. The housing expense (as defined in Section 201.12D - Ratios) is deducted from the income.
         Any resulting monthly net income may be added to the borrower’s income
         If the property was acquired subsequent to filing the most recent tax return, 75% of the gross rental income from a
         fully executed lease may be used, minus the housing expense on the rental property
         Net rental loss (negative cash flow) will be added to the borrower’s obligations
         Conversion of a primary residence to investment property – see Section 301.3A - Owner-Occupied Primary
         Residence

Rental Income from Subject Property (2 unit primary residence)
         If the loan is a refinance and the property is reflected on the borrower’s federal tax returns or IRS tax transcripts,
         the income reported on Schedule E must be used for qualifying. Interest, taxes, depreciation and insurance from
         Schedule E may be added back to the cash flow. Any resulting monthly net income may be added to the
         borrower’s income. Any net loss must be included in the borrower’s total monthly debts
         If the loan is a purchase transaction, rental income must be documented with a current lease. The net rental
         income that may be added to the borrower’s income is the lesser of 75% of the opinion of the market rent
         established by the appraiser or 75% of the rent indicated on the lease
         The full housing expense on the property must be included in the borrower’s debt ratio

Royalty Payments
        2 years signed tax returns with applicable schedules. IRS tax transcripts may be substituted for tax returns
        Documented 1 year history of receiving income from royalties
        Must continue for at least 3 years

Trailing Co-Borrower
          Income from a trailing co-borrower is ineligible

201.15 Assets, Funds, Equity, and Reserves
          Sources of funds for down payment, closing costs and reserves must be liquid (easily accessible to the borrower)
          All funds must be verified for 2 months either by a Verification of Deposit form, which indicates an average balance
          for 2 months that is consistent with the current balance, or by the two most recent bank statements
          Any large deposit not consistent with the 2 month average balance or any recently opened accounts (if used for
          down payment, closing costs and reserves) must be explained and documented by the borrower to be from an
          acceptable source

201.15A Minimum Down Payment Requirements
Primary Residence
Minimum of 3% must come from borrower’s own funds. Refer to Section 101.1 Maximum LTV / Loan Amounts for RMIC’s
maximum loan amounts and LTVs.

If the borrower has had a foreclosure within the past 7 years, the maximum CLTV permitted is 90%. See Section 201.5B -
Adverse Credit for additional requirements.



Republic Mortgage Insurance Company (4.11.11)                                                                                20
Second Home
Minimum of 10% must come from borrower’s own funds. Refer to Section 101.1 Maximum LTV / Loan Amounts for RMIC’s
maximum loan amounts and LTVs.

Note: Loans in which a party to the transaction contributes funds for the down payment are not acceptable to RMIC. This
includes down payment funds contributed by private non-profit agencies that are funded by property sellers and builders
(Nehemiah, Ameridream, Hart, etc.)

201.15B Seller/Interested Party Contributions
Seller/Interested Party Contributions – Interested party contributions are costs that are normally paid by the property
purchaser, but are instead paid directly or indirectly by another party with a financial interest in or influence over the sale
of the subject property. Contributions are evaluated for their effect on the marketability of the property; they are
permitted for closing costs and prepaids only. The following are the maximums allowed:

Primary Residence
        Level 1 Market –
            − 90.01 - 97% LTV = 3%
            − 90% or less LTV on loan amounts < $417,000 = 6%
            − 90% or less LTV on loan amounts > $417,000 = 3%
        Level 2 Market –
            − 90.01 - 95% LTV = 3%
            − 90% or less LTV on loan amounts < $417,000 = 6%
            − 85% or less LTV on loan amounts > $417,000 = 3%
        Level 3 Market –
            − All LTVs = 3%

Second Homes
        6%

Below market interest rates offered to borrowers by lenders to facilitate the sale of real estate owned (REO) must meet
RMIC’s interested party contribution limits. Each 0.25% reduction in interest rate is equivalent to one discount point (i.e., a
reduction of 0.75% in rate equals a 3% interested party contribution).
Payment (PITIA) Abatement – loans with payment abatements are ineligible. Payment abatements are funds provided by
the home builder, seller, or other interested party to pay the borrower’s monthly principal, interest, taxes, and/or
insurance payments for a specified period of time, typically 6 months to 1 year.

Sales Concessions – Sales concessions are interested party contributions that take the form of non-realty items, such as
cash, furniture, automobiles, decorator allowances, moving costs, advances of equity in the borrower’s current residence
that has not yet sold, and other giveaways, as well as financing concessions that exceed RMIC’s interested party
contribution limits as described above. The dollar value of these contributions must be subtracted from the lower of the
purchase price or the appraised value to determine the LTV/CLTV ratio.

201.15C Reserves
          Only 70% of the current value of the borrower’s stocks, bonds, and mutual funds may be used to satisfy reserve
          requirements
          Only 60% of the vested amount of retirement funds may be counted as reserves

Two months of PITIA (housing expense) in cash reserves are required as follows:
      Regardless of AUS recommendation
      PITIA (housing expense) includes principal, interest, taxes, insurance, ground rents, cooperative fees, homeowners’
      dues and any special assessments

Six months of PITIA (as defined above) in cash reserves are required for:
        Loans secured by 2 unit properties



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          Conversion of previous primary residence to second home or investment property (must have 6 months reserves
          for previous property and subject property), unless the borrower has 30% equity in the former primary residence.
          See Section 301.3A – Owner-Occupied Primary Residence for additional requirements

The borrower must have sufficient assets verified from his own funds equal to the minimum required reserves and the
minimum required down payment. Refer to Section 201.15A for Minimum Down Payment Requirements.

201.16 Acceptable Sources for Borrower’s Funds
Deposit on Sales Contract/Earnest Money Deposit
        The source of funds for the earnest money deposit listed on the sales contract must be verified unless the two
        month average balance on the Verification of Deposit or bank statements indicate the borrower has sufficient
        funds for closing, payment of the earnest money deposit and required reserves. If the Verification of Deposit or
        bank statements do not reflect sufficient funds for all of the requirements listed above, it will be necessary to
        obtain the following:
            − Documentation of the acceptable source of funds used for the earnest money deposit; and
            − Borrower’s canceled check, or a written statement from the holder of the deposit if the borrower’s check
                 has not cleared his/her bank account; and
            − Acceptable verification of sufficient funds remaining to pay closing costs, the down payment and have
                 adequate reserves

Checking and Savings Accounts
        Verification of Deposit (Form 1006) completed by a depository or investment firm with 2 month average balance; or
        The most recent 2 month’s bank statements
        Any large deposits that are not within the borrower’s normal deposit pattern must be appropriately explained and
        documented to be from an acceptable source, as described below

Stocks, Bonds and Mutual Funds
         Actual value must be verified (purchase or redemption) by requesting copies of stock certificates, government
         bonds or most recent depository or investment firm statements, whichever is applicable
         Only 70% of the current value of the borrower’s stocks, bonds, and mutual funds may be used to satisfy reserve
         requirements

Trust Accounts
         Verify borrower has immediate access to the trust account funds
         Value of the trust must be documented by the trust manager or trustee
         If any trust income is used in qualifying the borrower, the effect on the borrower’s income from withdrawing funds
         from the trust for down payment and/or closing costs must be taken into consideration

Retirement Accounts
        Net withdrawals (after tax and minus withdrawal penalties) may be used
        There must be verification that the borrower has access to the funds and the required vesting period has been met
        Only 60% of the vested amount of retirement funds may be counted as reserves

Personal Gifts
        May not be used to meet the borrower’s minimum contribution requirement or minimum required reserves
        The borrower provides a gift letter from the donor stating that no repayment is required
        The gift is from a family member and not a party to the transaction
        Gift funds from a relative, domestic partner, or fiancé(e) who has resided with borrower for at least the last 12
        months and who intends to continue to do so, may be considered the same as borrower funds
     Note: Please refer to Section 201.15A for requirements regarding down payments.

Donations / Gifts / Grants from Entities
        May not be used to meet the borrower’s minimum contribution requirement




Republic Mortgage Insurance Company (4.11.11)                                                                               22
          Donations, gifts or grants from non-profit organizations, churches, municipalities, public agencies or
          employers are acceptable as long as these entities are not party to the transaction

Anticipated or Actual Proceeds from the Sale of a Currently Owned Home
         If the house has sold, a copy of a HUD-1 is acceptable documentation
         If the house has not sold, anticipated proceeds should be calculated as follows: 90% of listing price - all liens =
         estimated proceeds. A copy of the HUD-1 from the sale must be obtained at closing which reflects sufficient funds
         from the sale to cover the required funds for closing plus required reserves

Bridge / Swing Loans
         Bridge/swing loan must be secured by the borrower’s current home
         The borrower must qualify with the payments on the new home, current home, other debts and bridge loan, if the
         current home does not sell prior to the close of the subject loan

Trade Equity
        Borrowers must have 5% cash down payment from their own funds
        The value of the traded property must be verified by a current appraisal
        If the property is real estate, evidence of ownership and verification of any existing liens must be received

Lot / Land Equity
         If the borrower purchased the lot on which the property is being built at least 12 months prior to applying for
         construction financing, or if the lot was a gift or inheritance, RMIC will allow the appraised value of the lot to be
         used in the acquisition cost calculation for determining the LTV/CLTV. If the borrower purchased the lot less than
         12 months ago, RMIC requires that the lesser of the appraised value or actual cost of the lot be used to determine
         the acquisition cost

Rental Credit for Option to Purchase – RMIC will allow the portion of the rental payment that exceeds the Fair Market Rent
to be applied to the down payment if the following documentation is provided:
        Copy of the lease/purchase contract
        An appraiser documents the Fair Market Rent
        Only the portion of the lease amount in excess of the Fair Market Rent can be used for down payment
        12 months canceled checks or bank statements to verify rent payments
        Borrowers must make an initial down payment of 5% from their own liquid assets before the rental credit can be
        applied as equity

Borrower’s Funds Secured by Real Estate, Car or any Other Marketable Asset
       The value of the assets must be measurable and consistent with the borrower’s equity in the asset
       Monthly payments must be calculated in the ratios
     Note: Funds secured by financial assets are generally not included as a debt for qualifying.

Cash Value of Life Insurance
        Insurance company verifies the specific terms of the loan
        Verification of receipt of funds to the borrower from the insurance company
        If the maximum penalty for non-repayment is limited to the surrender value of the policy, no payment has to be
        included in the ratios; however, any additional obligations other than the surrender value of the policy must be
        included in the ratios or subtracted from the borrower’s reserves

Sale of Personal Assets
         Investment assets (i.e., real estate, stocks, coins, art or antiques) are acceptable assets to sell for the purpose of
         providing funds for down payment and closing costs
         Evidence of ownership, current appraisals of the item, a bill of sale and proof of receipt of funds are required
         documentation
         The sale of non-investment assets such as household furniture in which proof of ownership, value and the transfer
         of ownership cannot be documented are not acceptable for down payment and closing cost funds



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          The sale of a borrower’s only automobile is not acceptable

Individual Development Accounts
        Funds matched by a non-profit agency that is not a party to the transaction are acceptable
        Documentation must be provided that describes the non-profit agency’s program
        Documentation must be provided showing the borrower’s and non-profit agency’s regular contributions into the
        account in accordance with the non-profit agency program

Pooled Savings Arrangements
        Evidence of the borrower’s participation in the pool must be documented by the person managing the pool
        Documentation must also include specific criteria regarding the pool (i.e., number of participants, dollar
        contribution of each participant, etc.)
        Ongoing contributions by the borrower to pooled savings arrangements should be considered as a debt and
        calculated in the qualifying ratios

Secondary Financing
       Borrower must meet minimum down payment requirements (see Section 201.15A)
       Loan must meet LTV/CLTV requirements (see Section 101.2)
       Monthly payments associated with secondary financing must be included in the borrower’s qualifying ratios

Gift Funds from Bridal Registry
         Borrowers must contribute at least 5% of their own funds
         Copy of the marriage certificate must be submitted in lieu of a gift letter
         Verification of a 90-day bridal registry that allows only a one-time distribution for the purchase of a home
         Large deposits must be explained in writing

Funds from a Borrower’s Business
        If any borrower on the loan is using business funds for down payment or closing costs, documentation must
        include a letter from the borrower’s CPA indicating that the borrower has access to these funds and that
        withdrawal of the funds will not adversely affect the business. The CPA must be an independent third party

201.17 Unacceptable Sources for Borrower’s Funds
The funds listed below are not acceptable unless they are pre-approved by RMIC:
        Credit card financing/unsecured loans
        Personal unsecured loans
        Cash on hand
        Sweat equity
        Mortgage revenue bond premium proceeds
        Funds from non-profit agencies that are funded by a party to the transaction

201.18 Additional Documentation
Lender must provide the following when applicable:
        Executed sales contract for a purchase transaction
        Any additional information pertinent to the underwriting decision

201.19 Documentation Types
Loans with the following types of documentation are acceptable to RMIC.

Documenting Employment
Full Documentation
         Verification of Employment (VOE) – must be completed by the borrower’s current employer, and previous
         employer when necessary, covering the past 2 years with year-to-date and last year’s earnings. A two-year
         earnings history may be required to calculate a two-year average




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Alternative Documentation
         Current pay stub(s) dated no more than 30 days prior to the loan application with year-to-date earnings covering
         at least 30 days; and
         IRS W-2s from the previous 2 years; and
         Verbal verification of employment
A completed and signed IRS 4506-T, 4506, or 8821 and the borrower’s tax transcripts for the most recent year of tax returns
are required on all loans.

Documenting Funds
Full Documentation
         Verification of Deposit (VOD) – must be completed by the depository institution and should verify the average
         balance in the borrower’s depository account(s) for the last 2 months prior to the date of the loan application
Alternative Documentation
         Two most recent consecutive bank statements prior to the date of the loan application

Documenting Mortgage / Rental History
Full Documentation
         Verification of Mortgage (VOM) or Verification of Rental (VOR) – should be referenced on a traditional credit
         report or on a standard verification form from the mortgage servicer or landlord. The verification should document
         the payment history for borrower(s) covering the last 12 months
              − Rental history is required unless it is not required by LP or DU
Alternative Documentation
         A copy of all canceled checks for the most recent 12 months

201.20 Relocation Guidelines
To qualify for RMIC’s Relocation Program:
         Primary residence 1 unit only
         Purchase transactions only
         Retail loans only
         All other standard underwriting guidelines apply

     Note: Written pre-approval by RMIC is required for relocation rates.

Relocation Loan Definition:
A relocation mortgage is defined as a mortgage with all of the following elements:
         The mortgage loan is made to a transferred employee or a newly hired employee of a corporation to finance the
         purchase of a primary residence at a new job location
         The mortgage is made pursuant to a corporate employee relocation program administered by the corporate
         employer or its agent
         The mortgage involves a significant employer contribution (defined below) to the mortgage financing
         The mortgage loan is made by the lender pursuant to a contract or agreement with the employer or its agent

Significant Employer Contribution:
A “significant employer contribution to mortgage financing” means any financial contribution or combination of financial
contributions that together constitute at least 3% of the original principal amount of the mortgage. Employer contributions
to mortgage financing must be used for one or more of the following:
          A buydown or subsidy of the mortgage interest rate (may not exceed 3% of principal balance); or
          Payment of the borrower’s closing costs (including loan discount points, mortgage insurance premium, and
          origination fees) on the new primary residence and/or the previous residence; or
          Funding a bridge loan at a below market interest rate; or
          Payment of the difference between the property tax and/or mortgage interest rate on the employee’s previous
          residence and the employee’s new residence




Republic Mortgage Insurance Company (4.11.11)                                                                              25
Bridge Loans:
Bridge loans are not counted in the qualifying ratios if a buyout agreement is present from a recognized relocation
company.

Trailing Spouse Income:
Ineligible




Republic Mortgage Insurance Company (4.11.11)                                                                         26
301 Property Eligibility
Property analysis is an integral part of RMIC’s mortgage insurance underwriting decision. A complete and accurate
appraisal, commonly known as a URAR (Uniform Residential Appraisal Report) with appropriate addenda is essential to
underwriting and evaluating collateral risk. RMIC’s Master Policy holders represent and warrant the accuracy and
completeness of all information provided in the Application for Insurance, including the value of the property.

301.1 Market Classification
Market Classification Policy
RMIC uses the following criteria to assess housing market conditions and their possible influences on loan performance:
 1.   Appraisal Data: Property appraisal indicates any of the following: property values in the subject neighborhood are
      “declining,” an over-supply exists, the marketing time exceeds 6 months, or there are other comments within the
      appraisal that indicate that values are declining; or
 2.   RMIC List of Market Classifications: RMIC places all Metropolitan Statistical Areas (MSAs) into one of three
      categories:
                   Level 1 Markets – Conditions are favorable for the performance of a wider range of high LTV loans
                   Level 2 Markets – Conditions are weakening, volatile, or in transition, which will challenge the
                   performance of loans with higher risk attributes or layered risks
                   Level 3 Markets – Conditions are weak and will challenge the performance of all but the highest quality
                   loans

RMIC has eligibility criteria specific to each of the above classifications (see below). The market classifications are updated
periodically, and the list is posted on www.rmic.com.

Eligibility Requirements for Level 2 and Level 3 Markets
           Refer to Section 101.1 Maximum LTV / Loan Amount tables for maximum loan amounts, LTV’s, and minimum
           credit scores
           RMIC’s Level 2 guidelines will apply if the appraisal data identifies a property as declining on a loan that otherwise
           would be eligible for RMIC’s Level 1 guidelines (refer to number 1 above).
           Level 3 Markets - Maximum 3% seller or interested party contribution, regardless of LTV
           The following are not eligible in a Level 2 or Level 3 Market:
               − 2 unit properties
               − Second homes
               − Construction-permanent loans
               − Attached properties, including condominiums, cooperatives and attached PUDs in the state of Florida

301.2 Appraisal Requirements
General Appraisal Requirements
A complete and accurate appraisal, with appropriate addenda, is essential to underwriting and evaluating collateral risk.
Although an accurate appraisal is always important, it is particularly critical in periods of declining property values. The
appraiser must be familiar with market conditions in the subject neighborhood and address these in the appraisal report.
The appraiser must analyze listings and contracts as needed to develop an accurate property value. Additionally, the
appraiser must address seller contributions, paying particular attention to unusual or excessive sales concessions, and the
existence of a non-arm’s length transaction. The appraiser must report on market indicators such as price changes, supply
and demand, a decline in property values, an over-supply of homes, and marketing times greater than six months. It is not
acceptable for the appraiser to ignore any adverse trends. If the appraiser has not adequately addressed these trends and
indicated the impact they have on the market value of the property, the lender must request additional information so that
the underwriter can make an informed decision on the value and marketability of the property. It is the lender’s
responsibility to ensure that the appraiser has provided an accurate, independent and adequately supported estimate of
value.




Republic Mortgage Insurance Company (4.11.11)                                                                                 27
General characteristics and factors that should be noted in the appraisal include but are not limited to the following:

          Land Value
          Should not exceed 35% of total property value.

          Selection of Comparables
              − The appraiser must select comparables that best represent the current value of the property. The
                   comparables should be the most similar recently closed sales. They should be in close proximity to the
                   subject property, contain similar physical characteristics and reflect the same market trends (including
                   any adverse factors in the neighborhood). It may be necessary for the appraiser to expand his analysis to
                   more than three comparables to capture all of the relevant components of the subject property’s value.
                   For example, if the subject property is a foreclosure sale and there are other foreclosure sales in the
                   neighborhood, the appraiser should use these other foreclosure sales as comparables. If these sales are
                   not physically similar to the subject property, it may be necessary for the appraiser to provide more than
                   three comparables
              − If the property is new construction or is located in a new project, the appraiser must use one comparable
                   from within the subdivision or project and one from outside of the subdivision or project

          Analysis / Explanation of Prior Sales of Subject and Comparables
          If the appraisal indicates that the prior sales price of the subject or comparables was higher than the most recent
          sale, this is a strong indicator that the market is declining. If prices are declining but the appraiser does not indicate
          that property values are declining, the appraiser must thoroughly explain the market trends and provide support
          for the fact that values are not declining. Conversely, if the sales history on the appraisal indicates the subject
          property recently sold for significantly less than the current sales price (or current appraised value if the loan is a
          refinance), the appraiser must document the reason for the higher value. If the increase is the result of substantial
          improvements or renovations, these must be listed in the appraisal along with the dollar amount of the
          improvements. The appraiser must comment on the effect of the improvements/renovations on the marketability
          of the property, including any over-improvement for the neighborhood. It is unlikely that
          improvements/renovations will produce a dollar for dollar increase in the value of the property.

          Adjustments for Comparables
          Should not exceed 15% for net adjustments and 25% for gross adjustments.

          Market Acceptability
          Properties should be acceptable to typical purchasers and typical for the area, as supported by comparables.

          Appraiser Qualifications
             − The name of the appraiser and appraisal firm, with the appraiser’s state license or certification number,
                  must appear legibly on the appraisal
             − RMIC reserves the right to declare an appraiser’s work as unacceptable, and may request a new appraisal
                  from another appraiser

          Sales and Financing Concessions
          Please refer to Section 201.15B - Seller/Interested Party Contributions for maximum contributions allowed.

          Other Factors
          Property rights, property location, supply and demand, marketing time, predominant occupancy and value, land
          use, neighborhood comments, market conditions, zoning, utilities, offsite improvements, drainage, site comments,
          improvements, condition of improvements, energy efficiency (if applicable), adverse environmental conditions,
          cost approach, sales comparison approach, income approach and final reconciliation of value must be included and
          addressed in the appraisal.

          Additional documentation to be included
          Descriptions of comparable sales, photos of subject property and comparable sales, location maps and sketch of
          the floor plan must be included in the appraisal.



Republic Mortgage Insurance Company (4.11.11)                                                                                   28
          Age of Appraisal
          Please refer to Section 201.8 - Age of Documentation.

301.2A Streamlined Appraisal / Alternatives to URAR
The following streamlined appraisals, as conditioned for by Desktop Underwriter and Loan Prospector, are acceptable to
RMIC:
         2055 - Desktop Underwriter Quantitative Analysis
         2070 - Freddie Mac Loan Prospector Condition Marketability Report
         2075 - Desktop Underwriter Property Inspection Report

Note: Use of Automated Valuation Models (AVMs), including but not limited to the Property Inspection Waiver (PIW)
offered by Desktop Underwriter and the Property Inspection Alternative (PIA) offered by Loan Prospector, as an alternative
appraisal method, does not waive or change the terms and conditions of the Master Policy. The lender is responsible for
submitting an accurate and current property value to RMIC regardless of the valuation method used.

301.3 Occupancy
RMIC will only insure loans for primary residences and second homes. Investment properties are ineligible.

301.3A Owner-Occupied Primary Residence
An owner-occupied primary residence is defined as a one or two unit property that is the borrower’s principal residence.
Please refer to Sections 101.1 and 101.2 for maximum LTVs, loan amounts, number of units, and credit score requirements.

The borrower must meet the following criteria:
        At least one of the borrowers must occupy the property within 90 days of closing (refer to the grid below for non-
        occupying co-borrower guidelines)
        The loan application must reflect the borrower’s intention to occupy the property as a primary residence
        The borrower must occupy the subject property for the majority of each year
        The subject property location must be convenient to the borrower’s principal place of employment
        All other standard underwriting guidelines apply

 Non-Occupying Co-Borrowers
 LTV > 90%                                  Not allowed
 LTV 90%                                    Non–occupying co-borrower:
                                                      Is not required to occupy the property
                                                      Cannot be an interested party to the transaction such as a builder, seller
                                                      or broker
                                                      Must be a relative of the owner-occupant
 Borrower’s funds                           Occupant borrower must have 5% contribution from own funds
 Ratios                                     Occupant borrower’s ratios must not exceed 45%
 Student housing (“kiddie condos”)          Not allowed
 Credit                                     The loan should be underwritten based on the strength of the owner-occupant’s
                                            credit history. If the owner-occupant’s credit is unacceptable, the signature of the
                                            non-occupant co-borrower is not a sufficient compensating factor to insure the
                                            loan

Conversions of previous primary residence to a second home or investment property
        Six months reserves are required for both the new primary residence and the old primary residence, unless the
        borrower has documented at least 30% equity in the former primary residence, then 2 months reserves are
        acceptable. Acceptable documentation of equity includes an appraisal, AVM or BPO
        The borrower must qualify with both payments
        Rental income cannot be used to offset the payment of a primary residence converted to an investment property
        unless the borrower has 30% equity in the old property. Rental income must be documented with (i) copy of the
        fully executed lease agreement and (ii) evidence the security deposit was received from the tenant and deposited
        into the borrower’s account



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Current primary residence pending sale
If the borrower’s current primary residence is pending sale and the sale will not be completed by the time the subject loan
closes, the following requirements apply:
          Both the current and new housing expense (PITIA) must be used to qualify the borrower unless an executed non-
          contingent sales contract on the current residence is obtained.
          In addition, the borrower must have either:
               o 6 months of housing expense (PITIA) on both properties in documented reserves; or
               o At least 30% documented equity in the residence that is pending sale and 2 months housing expense
                    (PITIA) in reserves on both properties. Acceptable documentation of equity includes an appraisal, AVM or
                    BPO

301.3B Second Homes
A second home is defined as a property that is used for recreation/vacation purposes. Please refer to Sections 101.1 and
101.2 for maximum LTVs, loan amounts, and credit score requirements. Second homes must meet the following criteria:
         One unit only
         Co-ops and attached condos are ineligible
         Property must be located in a resort or vacation area (beach, mountains, lake)
         Must be suitable for year-round occupancy
         Borrower may not own any other property of this kind and cannot own additional properties in the housing market
         where the subject property is located
         The property cannot be subject to rental pools or agreements that require the borrower to rent the property, or
         an agreement to give a management firm control of the occupancy of the property
         10% down payment is required from borrower’s own funds
         2 months reserves required
         Not eligible in Level 2 or Level 3 Markets
         Retail originations only
         Borrowers with a previous foreclosure are ineligible (except loans that meet RMIC’s guidelines for HARP Same
         Servicer or HARP New Servicer)
         All other standard underwriting guidelines apply

301.3C Investment Properties
Investment Properties are not eligible for mortgage insurance coverage unless the loan meets RMIC’s Recovery Assistance
Program requirements in Section 101.4A – Rate and Term Refinance.

301.4 First Lien
The insured loan must be a first lien on an improved one or two unit residential property.

301.5 Property Rights
The appraiser must identify how the property rights are held. RMIC will insure properties with the following property rights:

Fee Simple: The borrower has unqualified ownership and power of disposition over the property.

Leasehold Estates: Borrower does not own the land on which the real property is located and the mortgage is subject to a
payment of “ground rent.” This is acceptable based on the following:
        The leasehold term must exceed the mortgage term by at least 5 years
        Leaseholds must be located in an area of the country where leaseholds are a common form of ownership, and the
        terms must be typical and customary for the market
        Potential payment increases in the land lease must be reasonable and they must be clearly defined or based upon
        an acceptable index that is beyond the control of the lessor
        Terms and conditions of the leasehold must not prevent free and absolute marketability of the subject property
        The lender must have the right to cure defaults on the ground lease

Condominium: The borrower’s ownership is limited to interior space only. (Please refer to Section 301.7C – PUDS,
Condominiums, and Cooperatives).



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Cooperative: The borrower has no ownership. The land and dwelling units are owned by a corporation that sells shares of
stock to the borrower. (Please refer to Section 301.7C – PUDs, Condominiums, and Cooperatives for specific underwriting
criteria).

301.5A Title Requirements
Title Exceptions
         If RMIC elects to acquire the property in settlement of a claim, the RMIC Master Policy requires the insured to
         tender RMIC good and merchantable title to the property before claim payment. This Master Policy condition
         permits customary easements, such as sewer and utilities, which do not affect merchantable title

Easements or Joint Party Agreements
       The marketability of a property may be limited by an easement or a joint party agreement covering the adjoining
       property (i.e., a common driveway or well)
       Such situations should be identified in the appraisal or other information submitted to RMIC and its impact on
       subject property marketability must be addressed

301.6 Property Locations
RMIC will insure properties located in the following locations:
        Urban – refers to locations within the city
        Suburban – refers to locations adjacent to the city
        Rural – refers to locations in the country or anything beyond the suburban area. Rural properties may require
        additional analysis due to the possible lack of available comparables and limited utilities and services. Rural
        properties should:
             − Have adequate sewage, water and utilities
             − Be easily accessible from public highways or private roads with recorded easements or maintenance
                  agreements, if applicable, and have a high degree of marketability
             − All other standard underwriting guidelines will apply

301.7 Acceptable Property Types
RMIC will insure the following property types:
        Single family detached
        Single family attached, including: townhomes, row homes, twin homes, planned unit developments (PUDs),
        condominiums and cooperatives
        2 unit properties
        Factory built housing that is modular, prefabricated or panelized

301.7A Two Unit Properties
2 unit properties must meet the guidelines in Sections 101.1 and 101.2 for maximum LTVs, loan amounts, and credit score
requirements. Additional requirements include:
         Retail loans only
         Level 1 markets only
         Ineligible in FL
         Borrower must have six (6) months housing expense payments in reserves after loan closing
         Ineligible property: Second homes, condos/co-ops, and unacceptable properties listed in Section 301.8
         Unacceptable Projects and Property Types
         Ineligible loans: Construction-permanent and A-minus (including DU Expanded Approvals, LP Caution and LP
         Caution A-minus recommendations), Housing Finance Agency loans and Affordable Housing loans
         The borrower must occupy one unit as a primary residence
         All other standard underwriting guidelines apply

301.7B Three to Four Unit Properties
Ineligible




Republic Mortgage Insurance Company (4.11.11)                                                                              31
301.7C PUDs, Condominiums, and Cooperatives
See Section 101.1 – Maximum LTV/Loan Amounts for LTV, Loan Amount and Credit Score requirements.
RMIC limits its maximum exposure in a project to the lesser of 10 units or 1/3 of the units. RMIC will insure one loan in a
project of less than 10 units.
If requested, RMIC will review and consider projects that are outside of the guidelines listed below.

 Planned Unit Development (PUD) Requirements
 Project      Property        Homeowners’                  Ownership
                                                                                         RMIC Requirements
 Type         Type            Association           HOA            Unit Owner
 PUD          Attached        Mandatory HOA     HOA owns and Unit owner holds             Attached – Use underwriting
              or                                maintains    title to the lot and         guidelines for detached properties
              Detached                          common area  improvements                 (except ineligible in FL). Use
                                                                                          Eligibility Requirements for
                                                                                          attached PUDs listed below
                                                                                          Detached - Use underwriting
                                                                                          guidelines for detached properties.
                                                                                          Must not be an unacceptable
                                                                                          property or project as identified in
                                                                                          Section 301.8

Attached PUD Eligibility Requirements
        The project must not be an unacceptable property or project as defined in Section 301.8
        The project must have been reviewed within the three months prior to the closing of the subject loan and
        determined to be eligible. The lender is not aware of any changes in circumstances since the project was reviewed
        that would result in the project being ineligible
        The property is covered by insurance that meets the requirements in the Fannie Mae Selling Guide Subpart B7,
        Insurance (dated 12/1/10)

 Condominium Requirements
 Project      Property       Homeowners’                         Ownership
                                                                                                RMIC Requirements
 Type         Type           Association                HOA                 Unit Owner
 Condo        Attached       Mandatory HOA      HOA owns and          Unit owner owns             Use Eligibility Requirements
                                                maintains land,       interior space              for attached condos listed
                                                building and other                                below
                                                common areas                                      The project must not be an
                                                                                                  unacceptable property or
                                                                                                  project as defined in
                                                                                                  Section 301.8
              Detached       Mandatory HOA      HOA owns and          Unit owner owns             Use underwriting guidelines
                                                maintains land,       interior space only;        for detached properties
                                                building and                     or,              Must also meet the meet
                                                common areas;         Unit owner holds title      the Eligibility Requirements
                                                          or,         to the lot and              listed below
                                                HOA owns and          improvements                The project must not be an
                                                maintains common                                  unacceptable property or
                                                areas only                                        project as defined in
                                                                                                  Section 301.8



Detached Condominium Eligibility Requirements
    The appraiser must comment on any effect that buyer resistance to the condo form of ownership has on the market
    value of the property



Republic Mortgage Insurance Company (4.11.11)                                                                                 32
     If the project is new, at least one comparable must be a detached condo from either within or outside of the project,
     as long as the comparable was not offered by the builder of the subject property
     The property is covered by insurance that meets the requirements in the Fannie Mae Selling Guide Subpart B7,
     Insurance (dated 12/1/10)
     The lender has not targeted the project with specific marketing efforts and is not named as the preferred lender by
     either the developer or HOA. If the lender has targeted the project with specific marketing efforts or is the preferred
     lender, the project must meet the eligibility requirements below for attached condominiums

Attached Condominium Eligibility Requirements
All projects
         The project has been reviewed within the three months prior to the closing of the subject loan and determined to
         be eligible. The lender is not aware of any changes in circumstances since the project was reviewed that would
         result in the project being ineligible
         The property is covered by insurance that meets the requirements in the Fannie Mae Selling Guide Subpart B7,
         Insurance (dated 12/1/10)
         The condo project must meet the following eligibility requirements which are published in the Fannie Mae Selling
         Guide Section B4-2.2 (dated 4/1/2009, 10/30/09, 12/30/09 and 12/1/10) regardless of the type of Fannie
         Mae/Freddie Mac approval process. Projects approved using the guidelines for Fannie Mae/Freddie Mac Limited
         Reviews, Streamlined Reviews, Condo Project Manager, etc., are not eligible unless the project meets the specific
         requirements in this document as follows:
             o The units in the project must be owned fee simple or leasehold
             o Investor concentration may not exceed 30%
             o No more than 15% of the units may be 30 or more days past due on HOA dues
             o No single entity (other than the developer during the initial marketing period) may own more than 10% of
                   the total units
             o HOA budget must be adequate, including funding for replacement reserves and deferred maintenance of
                   at least 10%, and adequate funding for insurance deductible amounts
             o The unit owners must be the sole owners of the common areas and facilities and have rights to use those
                   areas
             o The project must be on one contiguous parcel of land, but may be divided by a public street
             o Structures in the project must be within a reasonable distance of each other
             o Common areas and facilities must be consistent with the nature of the project and competitive in the
                   market
             o Units must be separately metered or the file must document that a single meter is common for the area
                   and the lender must verify that the budget is adequate to cover utilities

Additional requirements for new projects (fewer than 90% of total units have been conveyed to unit purchasers)
             o The project or legal phase must be substantially complete with a certificate of occupancy issued for the
                  project or subject phase
             o All of the units are complete with the exception of buyer preference items
             o At least 70% of the units must be conveyed or under contract to purchasers who will occupy their unit as
                  a primary residence or second home
             o There must be assurance arrangements made to ensure the completion of construction and quality of
                  construction, including protection against construction and structural defects for at least one year from
                  the date of closing
             o Units must be available for occupancy at the time of loan closing
             o If the project is part of a larger development requiring a monthly assessment of more than $50 to a
                  separated association, the lender must ensure the development is acceptable

Additional requirements for established projects (at least 90% of the total units have been conveyed to purchasers)
             o Must be 100% complete, including all units and common areas
             o The project is not subject to additional phasing or annexation
             o At least 90% of units must be conveyed to purchasers
             o HOA control must be turned over to unit owners




Republic Mortgage Insurance Company (4.11.11)                                                                             33
               o    The project must be demonstrably well managed. If professionally managed, the management contract
                    must have a reasonable term and not require a penalty for termination or advance notice of more than 90
                    days

Additional requirements for 2-4 unit projects
             o No single entity may own more than 1 unit
             o The project must be 100% complete, including common elements and facilities
             o Investor concentration may not exceed 30%. (One unit may be rented in a 4 unit project. No units may be
                  rented in a 2-3 unit project.)
             o The units in the project must be owned in fee simple or leasehold

 Cooperative (Co-op) Housing Eligibility Requirements
 Project      Property      Homeowners’                              Ownership
                                                                                                    RMIC Requirements
 Type         Type          Association                       HOA                 Unit Owner
 Co-op        Attached      N/A                 Building is owned by and       Unit owner owns       Must meet Eligibility
                                                titled to a corporation,       shares of stock in    Requirements for
                                                which is made up of tenant     the corporation.      cooperative loans
                                                shareholders and/or                                  The project must not be
                                                members                                              an unacceptable
                                                                                                     property or project as
                                                                                                     defined in Section 301.8

Cooperative housing Master Policy endorsement – The lender must have a special cooperative endorsement to the RMIC
Master Policy.

Cooperatives are insurable by RMIC only in the following states:
   Connecticut, District of Columbia, Illinois, Pennsylvania, Maryland, Massachusetts, New Jersey, New York, Virginia and
   Washington State

Cooperative Housing Project Requirements:
   The property is covered by insurance that meets the requirements in the Fannie Mae Selling Guide Subpart B7,
   Insurance (dated 12/1/10)
   The co-op project must meet the following eligibility requirements which are published in the Fannie Mae Selling Guide
   Section B4-2.3 (dated 4/1/09, 10/30/09, 8/12/10 and 9/20/10):
            The project has been reviewed within the three months prior to the closing of the subject loan and
            determined to be eligible. The lender is not aware of any changes in circumstances since the project was
            reviewed that would result in the project being ineligible
            The project must be in compliance with section 216 of the IRS tax code (commercial revenue may not exceed
            20% of total revenue
            The pro-rata portion of the blanket mortgage applicable to the individual cooperative unit must be less than
            30% of the pro-rata share of the blanket mortgage divided by the pro-rata share of the blanket mortgage plus
            the appraised value of the individual unit (i.e., $20,000 ÷ [$20,000 + $100,000] = 17%)
            The tenant stockholder must have the right to occupy the unit until at least the maturity date of the share loan
            The co-op project, including common areas and facilities, must be 100% complete
            The project must contain a minimum of 5 units
            The project must be located in an area with demonstrated market acceptance of co-ops
            At least 80% of the total number of units in the project must have been sold and conveyed as primary
            residences (80% must be under contract as primary residences for new projects)
             The project cannot be subject to additional phasing or annexation
            Units in the project must be owned in fee simple
            The unit owners must be the sole owners of, and have rights to the use of, the project’s common areas
             No more than 15% of the owners may be more than 30 days delinquent in the payment of their financial
            obligations to the co-op corporation




Republic Mortgage Insurance Company (4.11.11)                                                                             34
               The project must be demonstrably well managed. If professionally managed, the management contract must
               have a reasonable term and not require a penalty for termination or advance notice of more than 90 days
               The budget must be adequate and include funds for replacement and operating reserves
               The blanket mortgage must not be a balloon with a remaining term of less than 3 years or an adjustable rate
               loan
               The blanket mortgage may be a market rate FHA insured or conventional mortgage
               The project must not be the recipient of subsidies that will partially or fully terminate in less than 3 years
               The project must meet Fannie Mae’s legal requirements for co-op projects in the Fannie Mae Selling Guide
               Section B4-2.3-03 (dated 4/1/90)
               Project and share loan documentation must comply with Fannie Mae and any state requirements

301.7D Factory-Built Housing
RMIC insures two types of factory-built housing*:
        Panelized or prefabricated homes consisting of packaged, factory-built components, which are assembled on site
        Modular homes that are built in two or more sections and are transported on a steel undercarriage to the home
        site. The undercarriage is not a permanent component of the structure and is removed when the home is placed
        on a permanent foundation

The two types of factory built housing referenced above are built to meet the same state and local building codes as site-
built homes. They must meet RMIC’s standard underwriting guidelines.
*Note: RMIC will not insure Manufactured Homes (singlewide, doublewide or triplewide)

301.7E Mixed-Use Properties
Mixed-Use Properties – Properties that have a business use in addition to their residential use. RMIC is willing to insure
these properties based on the following criteria:
         The property must be a one-family dwelling that the borrower occupies as a primary residence
         The mixed use of the property must represent a legal, permissible use of the property under the local zoning
         requirements
         The borrower must be both the owner and operator of the business
         The property must be primarily residential in nature
         The market value of the property must be primarily a function of its residential characteristics, rather than of the
         business use or any special business-use modifications that were made
         All other standard underwriting guidelines will apply

301.8 Unacceptable Projects and Property Types
RMIC will not insure the following types of projects and properties:
Ineligible Property types
          Investment properties
          Second home condos and co-ops
          3-4 unit properties
          Community land trusts
          Model home leasebacks
          Commercial properties
          Unimproved land
          Manufactured homes
          Earth homes, dome homes and straw bale homes
          Working farms, orchards and ranches
          Attached housing and 2 unit properties in Florida

Ineligible Projects (includes ineligible projects from Section B.4-2.1-02 of the Fannie Mae Seller / Servicer Guide)
          Apartment conversions*
          Warehouse / commercial property conversions*
          Hotel conversions*
          Non-warrantable condos


Republic Mortgage Insurance Company (4.11.11)                                                                              35
          Multi-dwelling condominium units (permits the ownership of multiple units under a single deed)
          Projects that cannot be rebuilt to current density if destroyed because of zoning regulations
          Condotel/Hotel projects (including projects with registration services, those that offer daily rentals, and those with
          the word hotel or motel in the name)
          Projects that restrict the owner’s ability to occupy the property
          Projects with mandatory rental pooling (requires rental or gives a management firm the control over the
          occupancy)
           Projects with non-incidental business operations owned or operated by the HOA
          Investment securities – units are promoted as an investment and documents are on file with the SEC
          Common interest apartments owned by several owners as tenants in common
          Timeshare or segmented ownership
          Projects affected by environmental hazards
          Houseboat projects
          Manufactured housing projects
          “Kiddie condos” (condominiums purchased for student occupancy)
          New projects with excessive or unallowed seller contributions/concessions, including those not disclosed on the
          HUD-1
          Projects with > 20% of total space used for non-residential purposes
          Projects where a single entity owns > 10% of the total units
          Projects in which the HOA, co-op corporation, or developer (if the project is not yet turned over to the HOA) is a
          party to current or pending litigation. This does not include minor matters that are non-monetary or will be
          covered by the HOA or corporation’s insurance
          Co-op projects that lease all or part of the land or building or that are subject to leasehold estates
          Limited equity co-ops
          Co-op projects with resale restrictions or that are located on land owned by community land trusts
          Co-op projects in which the developer has an ownership interest or rights in the project other than its interest in
          unsold units

*Note: Resales of units from converted apartments, warehouses, etc., are eligible for RMIC insurance only if all the units
have previously been sold to individuals other than the builder or developer, and the project has been turned over to the
HOA. Additionally, the appraiser must demonstrate market acceptance by using comparables that are resales, i.e., none of
the comparables may be builder or developer sales. At least one comparable must be from within the subject project and
one must be from outside of the subject project. These requirements apply regardless of whether the project meets Fannie
Mae’s or Freddie Mac’s definition of a Warrantable or Non-Warrantable Condo and must be complied with, in addition to
standard underwriting guidelines, to be eligible for mortgage insurance from RMIC.




Republic Mortgage Insurance Company (4.11.11)                                                                               36
301.9 Geographic Restrictions
(Note: Other restrictions may apply due to regulatory or filing requirements.)

 Geographic Restrictions by State
 State                                                            Underwriting Guidelines
 Alaska                                                           Loan amounts must meet RMIC published guidelines,
                                                                  regardless of AUS recommendations
 Cooperative housing is allowed only in the following states:     Not Eligible: Co-ops > 90% LTV
 Connecticut, District of Columbia, Illinois, Pennsylvania,
 Maryland, Massachusetts, New Jersey, New York, Virginia
 and Washington State
 Florida                                                          Not Eligible: Attached properties, including 2 unit
                                                                  properties, attached condominiums, cooperatives and
                                                                  attached PUDs
 Hawaii                                                           Loan amounts must meet RMIC published guidelines
                                                                  regardless of AUS recommendations
 New York                                                         Not Eligible: Loans with LTVs < 80%
 Pennsylvania (Pocono Area)                                       Not Eligible: Loans in the following zip codes: 15032,
                                                                  18031, 18058, 18324, 18326, 18334, 18346, 18347,
                                                                  18348, 18350, 18352, 18353, 18360, 18364, 18370,
                                                                  18372, 18424, 18433, 18436, 18466, 18610, 18301
 Canada, Guam, Mexico, Puerto Rico, US Virgin Islands             Not Eligible for Mortgage Insurance




Republic Mortgage Insurance Company (4.11.11)                                                                              37
401 Alternative Programs
RMIC’s Alternative Programs are for loans that do not meet our standard underwriting guidelines. For any guidelines not
specifically addressed in this section, default to RMIC’s standard underwriting guidelines in Sections 101, 201 and 301.

401.1 A-Minus Program
RMIC will insure the following loans under the A-Minus program provided the loans meet RMIC’s definition of Retail* loans
and meet RMIC’s standard underwriting guidelines.
        Fannie Mae Desktop Underwriter EA-I/Eligible loans (EA-II and EA-III loans are only eligible if they meet RMIC’s
        guidelines for HARP Same Servicer or HARP New Servicer)
        Properties in a Level 2 or Level 3 Market must meet RMIC’s Market Classification Policy in Section 301.1
        2 unit properties are ineligible

*In order for a loan to qualify as Retail, the same entity, with their own personnel, must perform all of the following
 functions:
         Originate and process; and
         Underwrite (contract underwriting or having the loan underwritten by the investor is permissible); and
         Fund and close in their own name; and
         Order mortgage insurance coverage under their own RMIC Master Policy

Loans must be funded from a warehouse line in the lender’s name or using the lender’s own funds. “Table-Funded” loans
are considered Non-Retail loans. The originating lender may sell or assign the closed loan to an aggregator or investor and
still be considered Retail. A correspondent who performs all of the above functions is considered Retail.

For any guidelines not specifically addressed in this section, default to RMIC’s standard underwriting guidelines in Sections
101, 201 and 301.

401.1A Submission Methods
The following submission methods are allowed for the A-Minus program:

Full Package:
         Full or Alternative Documentation
         Lenders must note A-Minus and the applicable AUS recommendation on RMIC’s Mortgage Insurance application,
         as well as any applicable lender program exception codes

Delegated:
        Allowed only if the loans meet RMIC’s A-Minus guidelines or if RMIC has issued a pre-approved exception
        Lenders must note A-Minus and the applicable DU or LP decision on RMIC’s Mortgage Insurance application
        Any applicable lender program exception codes must also be noted on RMIC’s Mortgage Insurance application
        RMIC continues to require lenders to exercise prudent underwriting judgment under their RMIC Delegated
        authority
        RMIC continues to reserve the right to request additional documentation on any loan submitted under a lender’s
        Delegated authority with RMIC

401.1B Maximum LTV / Maximum Loan Amount
See Section 101.1 for Maximum LTV / Maximum Loan Amount

401.2 Reduced Documentation Program
Ineligible

401.3 Affordable Housing Programs
RMIC’s Affordable Housing Mission Statement
RMIC’s Affordable Housing objective is to promote home ownership among qualified low-to-moderate income borrowers.
To accomplish this, RMIC provides innovative programs, products and services to its customers who facilitate Affordable



Republic Mortgage Insurance Company (4.11.11)                                                                             38
Housing programs across the nation. In addition, RMIC continually reviews its underwriting guidelines and monitors loan
performance to ensure that it is extending reasonable risk for its Affordable Housing Programs. While many of RMIC’s
Affordable Housing Programs share the same general guidelines, each product also has its own unique criteria.

For any guidelines not specifically addressed in Section 401.3 Affordable Housing Programs, default to RMIC’s standard
underwriting guidelines in Sections 101, 201 and 301.

Note: Lenders warrant that loans are part of an Affordable Housing initiative when they submit them to RMIC for mortgage
insurance.

401.3A Submission Methods
The following submission methods are allowed for Affordable Housing Programs:

Full Package:
         Full or Alternative Documentation
         Lenders must note Affordable Housing on RMIC’s Mortgage Insurance application, as well as any applicable lender
         program exception codes

Delegated:
        Allowed only if the loans meet RMIC’s Affordable Housing guidelines or if RMIC has issued a pre-approved
        exception
        Lenders must note Affordable Housing on RMIC’s Mortgage Insurance application
        Any applicable lender program exception codes must also be noted on RMIC’s Mortgage Insurance application
        RMIC requires lenders to exercise prudent underwriting judgment under their RMIC Delegated authority
        RMIC reserves the right to request additional documentation on any loan submitted under a lender’s Delegated
        authority with RMIC

401.3B Minimum Credit Score / Maximum LTV / Maximum Loan Amount

Primary Residence: Purchases and Rate/Term Refinances
                                                                               1
                                                                Retail Loans
                                                                                                           2
                                                                                    Market Classifications
    Property                                            Level 1                            Level 2                      Level 3
                    Max Loan Amount
      Type                                        Max                                Max                          Max
                                                             Credit Score                        Credit Score                Credit Score
                                                LTV/CLTV                           LTV/CLTV                     LTV/CLTV
                                                      3
             4, 5                                 97%            720                 95%              700         95%            720
   SFD, SFA              $417,000
                                                   95%           680                 85%              680         85%            700
             6                                                                       95%              720         90%            740
     Condo               $417,000                  95%            680
                                                                                     90%              700         85%            720
                                                                                                                  90%            740
     Co-op               $417,000                  90%            680                 90%            700
                                                                                                                  85%            720

                                                              Non-Retail Loans
                                                                                                           2
                                                                                    Market Classifications
   Property                                             Level 1                            Level 2                      Level 3
                    Max Loan Amount
     Type                                         Max                                Max                          Max
                                                             Credit Score                       Credit Score                 Credit Score
                                                LTV/CLTV                           LTV/CLTV                     LTV/CLTV
             4, 5                                 95%            700                 95%             720          95%            740
  SFD, SFA              $417,000
                                                  90%            680                 85%             700          85%            720
            6                                     95%            700                 95%             740          90%            760
    Condo               $417,000
                                                  85%            680                 90%             720           85%           740
                                                  90%            700                                              90%            760
     Co-op              $417,000                                                     90%            720
                                                  85%            680                                              85%            740




Republic Mortgage Insurance Company (4.11.11)                                                                                         39
1.   In order for a loan to qualify as Retail, the same entity, with their own personnel, must perform all of the following
     functions:
          Originate and process; and
          Underwrite (contract underwriting or having the loan underwritten by the investor is permissible); and
          Fund and close in their own name; and
          Order mortgage insurance coverage under their own RMIC Master Policy.
     Loans must be funded from a warehouse line in the lender’s name or using the lender’s own funds. “Table-Funded”
     loans are considered Non-Retail loans. The originating lender may sell or assign the closed loan to an aggregator or
     investor and still be considered Retail. A correspondent who performs all of the above functions is considered Retail.
2.   Refer to Section 301 – Property Eligibility for complete Market Classification guidelines.
3.   For loans with LTVs greater than 95%, the following guidelines apply, regardless of AUS recommendation:
          RMIC only allows a maximum 97% base LTV. The maximum gross LTV is 103%. The loan amount in excess of 97%
          can only include financed MI premium
          Loans require an initial fixed payment term of at least 5 years
          Purchases only
          Retail only
4.   Attached properties located in the state of Florida are ineligible for coverage by RMIC.
5.   Attached properties that are not condominiums or co-ops are eligible at the same maximum LTV/CLTV as detached
     properties (except in FL).
6.   Refer to Section 301.7C – PUDS, Condominiums, and Cooperatives for complete Condominium guidelines. Loans
     secured by attached properties in Florida are ineligible.

401.3C General Guidelines
          Target borrowers with earnings 100% or less of the area’s median income. Borrowers may also qualify for
          Affordable Housing loans when their income is greater than 100% in high cost areas that adhere to Fannie Mae
          and Freddie Mac requirements
          Borrowers cannot own any other residential properties
          Potential sources of down payment include pooled savings, sale of personal property and secured “soft” secondary
          financing
          Two years of stable income in lieu of two years employment in the same line of work are acceptable
          Nontraditional credit is ineligible

401.3D Affordable Housing 95% Loan-to-Value
          5% contribution from borrower’s own funds is required
          Gift/grant from seller and/or originating lender can be used for closing costs and prepaids/escrows only
          PITIA reserves are waived

401.3E Affordable Housing 95% Loan-to-Value with 3/2 Option
          Maximum 95% LTV
          3% contribution from borrower’s own funds is required
          2% contribution from:
              − Gifts/grants, unsecured/secured loans from employers, non-profit organizations, public agencies not a
                  party to the transaction
              − Gifts/grants from seller and/or originating lender for closing costs and prepaids/escrows only
          One month PITIA reserves required

401.3F Affordable Housing 97% Loan-to-Value
          3% contribution from the borrower’s own funds is required
          One month PITIA reserves required
          Post-purchase counseling must be provided for the home owner if the loan becomes delinquent




Republic Mortgage Insurance Company (4.11.11)                                                                                 40
401.3G Funds / Equity / Reserves
Please refer to each specific product referenced in Sections 401.3D, 401.3E, and 401.3F.

401.3H Eligible Loan Programs / Property Types / Borrowers
          Purchase or Rate and Term Refinance only
          Fixed rates and ARMs with initial adjustments of 1 year or greater
          1 unit detached and attached properties. Please refer to Section 301 for Property Eligibility
          RMIC will only insure one Affordable Housing loan per borrower

401.3I Ineligible Loan Programs / Property Types / Borrowers
          2-4 unit properties
          Loans with buydowns or short term financing
          Non-occupying co-borrowers, foreign nationals, borrowers with diplomatic immunity
          Second homes
          Loans to borrower(s) for whom RMIC has paid a claim are not insurable

401.3J Debt to Income Ratios
Maximum total debt-to-income ratios, regardless of any AUS recommendation.
      45% for loans that meet the following criteria:
           o Minimum 740 representative credit score
           o Maximum $417,000 loan amount
           o Retail or Non-Retail originated
           o 1 unit primary residences other than condominiums or co-ops: maximum 95% CLTV in a Level 1 or
               Level 2 market
           o Primary residence condominium (purchase only): maximum 95% CLTV in a Level 1 market
           o Primary residence co-op: maximum 90% CLTV in a Level 1 market
           o Construction-to-Perm loans: maximum 90% CLTV in a Level 1 market
          41% for all other loans

401.3K Credit Score Requirements
Lenders should obtain valid credit scores for all borrowers
        Valid credit score: A borrower must have at least three trade lines with a 12-month payment history
        Representative credit score: credit scores must be obtained from at least two credit repositories. If three scores
        are obtained, use the middle score. If two scores are obtained, use the lowest score. This process must be
        performed for each borrower. The lowest score among all of the borrowers is the loan case representative credit
        score

401.3L Appraisal Requirements
Appraisal Requirements
Refer to General Appraisal Requirements in Section 301.2

Market Classification Policy
Refer to Section 301.1

Acceptable Appraisal Forms
        Uniform Residential Appraisal Report




Republic Mortgage Insurance Company (4.11.11)                                                                           41
501 Assumptions
Under an assumption, a purchaser agrees to assume primary liability for payment of the seller’s existing mortgage. Loan
assumptions must be submitted to RMIC for approval.

501.1 Assumption with Release of Liability
For an assumption with release of liability of the original borrower, the assuming borrower must qualify for the loan under
the current underwriting guidelines.

If none of the borrowers on the assumption request were obligated on the former loan, the request must be submitted to
RMIC as a new loan.

Modification of a loan to remove a borrower due to divorce or separation will be considered under the terms of this section
and must comply with the guidelines in this section.

The following documentation must be submitted to RMIC’s Policy Servicing Department for approval:
         Completed RMIC Notification of Modification/Assumption (Form CF-013)
         Residential Loan Application
         Transmittal Summary
         Credit report
         Verification of income and employment
         Verification of sufficient assets for down payment, closing costs and reserves
         Sales contract
         Separation agreement or divorce decree, if applicable

Appraisal Requirements
A new appraisal is generally not required. However, RMIC reserves the right to request one at its discretion.

Upon approval of the loan assumption, RMIC will issue a Certificate of Endorsement acknowledging the change.

501.2 Assumption without Release of Liability
For the following assumption types, RMIC written approval is not required; however, the completed Notification of
Modification/Assumption (CF-0013) must be provided to RMIC’s Policy Servicing Department:
         Assumption on a loan that does not release the original borrower from liability
         Assumption on a loan in which lender cannot exercise a “due-on-sale” clause or is obligated to consent to the
         assumption under applicable law
         An assumption that is considered an “exempt transaction” as defined by the servicing provisions in FNMA Servicing
         Guide or similar provisions set forth in FHLMC Servicing Guide




Republic Mortgage Insurance Company (4.11.11)                                                                             42
Affordable Housing .........................................................38            HARP Loans ....................................................................... 7
Age of Documentation ....................................................15               Income ............................................................................ 18
Agency Automated Underwriting .....................................5                      Ineligible Borrowers / Loans ........................................... 12
Alimony ..................................................................... 17, 18      Inter Vivos Revocable Trusts .......................................... 12
A-Minus Program ............................................................38            Interest Only ................................................................... 10
Application (MI App) .......................................................15            Investment Properties .................................................... 30
Appraisal ................................................................... 15, 27      IRS 4506 .......................................................................... 18
ARM Guidelines ................................................................9          Loan Limits ........................................................................ 3
ARMs with Temporary Buydowns ..................................10                         Lot / Land Equity ............................................................. 23
Assets ..............................................................................20   LTV .................................................................................... 3
Assumptions ...................................................................42         Maximum Combined LTV (CLTV) ...................................... 5
AVMs ...............................................................................29    Maximum Number of Insured Loans per Borrower ....... 12
Balloon Mortgage ...........................................................10            Minimum Borrower Contribution ................................... 20
Bonus Income .................................................................19          Mixed-Use Properties ..................................................... 35
Bridge Loans........................................................ 16, 23, 26           Mortgage Credit Certificates .......................................... 19
Buydowns ................................................................... 9, 10        Non-Arm’s Length Transactions ..................................... 10
Capital Gains ...................................................................19       Non-Occupying Co-Borrowers ........................................ 29
Car Allowance .................................................................19         Non-Permanent Resident Aliens .................................... 12
Cash Out Refinance ...........................................................8           Nontraditional Credit ...................................................... 14
Child Support ............................................................ 17, 18         Notes Receivable ............................................................ 20
Commission Income........................................................19               Occupancy ...................................................................... 29
Condominiums .......................................................... 31, 32            Overtime ......................................................................... 19
Construction-Permanent Loans ........................................8                    Owner-Occupied Primary Residence .............................. 29
Contingent Debts ............................................................16           Potential Negative Amortization .................................... 10
Cooperative Housing ................................................ 31, 34               Properties Listed for Sale .................................................. 6
Credit History                                                                            Property Flips .................................................................. 11
   Acceptable Credit Sources ..........................................13                 Property Types ................................................................ 31
   Adverse Credit ............................................................13          PUDs/Attached Housing ................................................. 32
   Erroneous Credit .........................................................14           Rate and Term Refinance ................................................. 6
   Nontraditional Credit ..................................................14             Ratios .............................................................................. 17
   Re-Established Credit ..................................................14             Reduced Documentation ................................................ 38
Credit Score                                                                              Relocation ....................................................................... 25
   Minimum Credit Score ................................................15                Rental Income ................................................................. 20
   Representative Credit Score .......................................14                  Resident Aliens ............................................................... 12
   Valid Credit Score........................................................14           Second Homes ................................................................ 30
Debts ...............................................................................16   Self-Employed Borrowers ............................................... 18
Declining Markets Policy .................................................27              Seller/Interested Party Contributions ............................ 21
Documentation ............................................. 15, 23, 24, 25                Sources for Borrower’s Funds......................................... 22
Down Payment ...............................................................20            Tax Transcripts ................................................................ 18
Earnest Money Deposit ..................................................22                Title ................................................................................. 31
Easements .......................................................................31       Trailing Spouse/Co-Borrower ................................... 20, 26
Employment....................................................................17          Trust Income ................................................................... 20
Factory-Built Housing......................................................35             Two Unit Properties ........................................................ 31
Funds for Closing ............................................................22          Unacceptable Property Types ........................................ 35
Geographic Restrictions ..................................................37              Unacceptable Sources for Borrower’s Funds ................. 24
Gifts/Grants ....................................................................22       Un-Reimbursed Business Expenses ................................ 17




Republic Mortgage Insurance Company (4.11.11)                                                                                                                                43

								
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