UNDERWRITING GUIDELINES by ps94506

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									                 Effective June 1, 2008




UNDERWRITING GUIDELINES
Radian Guaranty Inc.                                                                  UNDERWRITING GUIDELINES




      Contents
                       Introduction ................................................................................................................ 4
                       Full Documentation Prime Credit (“Industry A”) .................................................. 4
                       Limited Documentation Prime Credit (“Alternative A” or “Alt A”) .................... 6
                       Full Documentation Non-Prime Credit (“A Minus”) ............................................. 6
                       Guideline Criteria for All Programs ........................................................................ 7
                                    Credit—Philosophy and General Handling ......................................... 7
                                    Credit—Credit Report Requirements .................................................. 7
                                    Credit—Definitions .............................................................................. 8
                                    Credit—Non-Traditional Credit (No or Invalid FICO Score) ............. 8
                       General Pricing Information .................................................................................. 10
                       General Radian Requirements ................................................................................11
                       Borrower Qualification .............................................................................................11
                                   Individual Tax Identification Number (ITIN) .................................... 11
                                   Resident Aliens .................................................................................. 11
                       Qualifying Ratios ..................................................................................................... 12
                                    Temporary Buydowns ........................................................................ 12
                       Loan Repayment Types ........................................................................................... 12
                                  Fixed Rate .......................................................................................... 12
                                  Adjustable Rate Mortgages ................................................................ 12
                                  Interest Only....................................................................................... 13
                                  Loan Term .......................................................................................... 13
                                  Temporary Buydowns ........................................................................ 14
                       Loan Features ........................................................................................................... 14
                                    Borrower Equity................................................................................. 14
                                    Financing Concessions....................................................................... 15
                                    Non-Occupant Co-Borrower .............................................................. 15
                                    Refinances .......................................................................................... 15
                                    Secondary Financing.......................................................................... 17
                       Property Qualifications/Restrictions ...................................................................... 17
                                   Cooperatives ...................................................................................... 17
                                   Condominium/Attached PUD ............................................................ 17
                                   Manufactured Housing....................................................................... 18
                                   Geographic Guidelines....................................................................... 18
                                   Declining Markets Policy .................................................................. 19
                                   Appraisal Requirements ..................................................................... 19
                       Maximum Loans to One Borrower Policy ............................................................. 20
                                 Maximum Mortgage Insurance Risk Exposure ................................. 20




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                                               Maximum Compliance Loans to One Borrower ................................ 20
                          General MI Restrictions .......................................................................................... 20
                          General Submission Requirements ........................................................................ 21
                                      Requirements for Loan Amounts Up to $650,000 ............................. 21
                                      Requirements for Loan Amounts Greater Than $650,000 ................. 21
                                      Delegated Authority ........................................................................... 21
                                      Radian’s MI Online ............................................................................ 22
                          Revision notes ........................................................................................................... 23
                                        Revisions for April 30, 2008 .............................................................. 23
                                        Revisions for June 1, 2008 ................................................................. 23




                                                                                                                                           Rev 20080521




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      Introduction
                                    These guidelines are applicable to mortgage insurance applications for 1 to
                                    4-unit properties. Borrower-paid mortgage insurance (BPMI) applications must
                                    be submitted prior to loan closing/funding date; lender-paid mortgage insurance
                                    (LPMI) must be submitted prior to the first payment due date. A 1-unit property is
                                    defined as a single-family detached dwelling, a single-family attached dwelling, a
                                    co-operative unit, or a condominium unit. Please refer to the guidelines for details on
                                    manufactured housing.

      Full Documentation Prime Credit (“Industry A”)
                                    Radian’s Full Documentation Prime program (“Industry A”) is designed for loans
                                    with full/alternative documentation verifying income, employment, and assets
                                    as defined by Fannie Mae/Freddie Mac and maintained by the lender, and have a
                                    minimum FICO score of 620.
                                    All loans must comply with Radian’s Declining Markets Policy and property/
                                    appraisal guidelines. In addition, loans with all of the following characteristics are
                                    eligible for Radian Full Documentation Prime mortgage insurance, subject to prudent
                                    underwriting, and are not required to meet the additional guidelines as stated herein:
                                    ■   DU Approve/Eligible or LP Accept/Eligible response
                                    ■   Primary residence, 1–2 units
                                    ■   Purchase or Rate/Term Refinance transaction
                                    ■   Minimum 620 FICO score (minimum 680 FICO score for 95.01–97% LTV)
                                    ■   Uniform Standards of Professional Appraisal Practice (USPAP)-compliant ap-
                                        praisal required; see the Appraisal Requirements section for guidance
                                                                                                         Eligible per AUS
                                                                      PrImAry resIDenCe
                                                                      PURchaSE & RaTE/                                     Max loan          Min FICO        Loan
                                                                      TERm REfINaNcE                            LTV        amount             score          notes
                                                                      1 Unit Single Family                      97       $ 417,000              680          ci
                                                                                                                95       $ 417,000              620          ci
                                                                      2 Units                                   97       $ 533,850              680          ci
                                                                                                                95       $ 533,850              620          ci
                                                                      Condominium                               97       $ 417,000              680               i
                                                                                                                95       $ 417,000              620               i
                                                                      Co-op                                     97       $ 417,000              680               i
                                                                                                                95       $ 417,000              620               i
                                                                      Manufactured Housing                      95       $ 417,000              620
                                                                      Key to Loan Notes: c–Eligible for Construction-to-Permanent, i–Eligible for Interest Only
                                                                      (minimum term of 60 months)

                                    All other Full Documentation Prime loans not meeting the above criteria must meet
                                    the following Radian Full Documentation Prime guidelines contained herein.




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                                                                                                   Manual and/or Not Eligible per AUS
             PrImAry resIDenCe                                                                                                   seConD Home
             PURchaSE & RaTE/                                   Max loan           Min FICO          Max         Loan            PURchaSE & RaTE/                    Max loan    Min FICO     Max    Loan
             TERm REfINaNcE                          LTV        amount              score            DTI%        notes           TERm REfINaNcE                LTV   amount       score       DTI%   notes
             1 Unit Single Family                     97       $ 450,000              680              38                        1 Unit Single Family          95    $ 650,000     700         41
                                                      95       $ 650,000              660              41        ci                                            90    $ 750,000     660         41    c
                                                               $ 550,000              620              41        ci              Condominium                   95    $ 650,000     700         41
                                                      90       $ 850,000              660              41        ci                                            90    $ 750,000     660         41
                                                               $ 650,000              620              41        ci
                                                      85       $ 900,000              660              41        ci              caSh-OUT REfINaNcE                  Max loan    Min FICO     Max    Loan
                                                                                                                                 (Maximum $150,000 cash-out)   LTV   amount       score       DTI%   notes
             2 Units                                  95       $ 650,000              660              41          i                                           90    $ 450,000     680         41
                                                                                                                                 1 Unit Single Family
                                                               $ 550,000              620              41          i                                           90    $ 450,000     680         41
                                                                                                                                 Condominium
                                                      90       $ 850,000              660              41          i
                                                               $ 650,000              620              41          i             Investment ProPerty
                                                      85       $ 900,000              660              41          i             PURchaSE & RaTE/                    Max loan    Min FICO     Max    Loan
             3–4 Units                                90       $ 850,000              660              33                        TERm REfINaNcE                LTV   amount       score       DTI%   notes
             Condominium                              97       $ 450,000              680              38                        1 Unit Single Family          90    $ 650,000     660         33
                                                      95       $ 650,000              660              41          i             2 Units                       90    $ 650,000     660         33
                                                               $ 550,000              620              41          i
                                                      90       $ 850,000              660              41          i             caSh-OUT REfINaNcE                  Max loan    Min FICO     Max    Loan
                                                                                                                                 (Maximum $150,000 cash-out)   LTV   amount       score       DTI%   notes
                                                               $ 650,000              620              41          i
                                                                                                                                 1 Unit Single Family          85    $ 450,000     720         33
                                                      85       $ 900,000              660              41          i
                                                                                                                                 2 Units                       85    $ 550,000     720         33
             Co-op                                    95       $ 650,000              660              41
             Manufactured Housing                     90       $ 450,000              660              41

             caSh-OUT REfINaNcE                                 Max loan           Min FICO          Max         Loan
             (Maximum $150,000 cash-out)             LTV        amount              score            DTI%        notes
             1 Unit Single Family                     90       $ 450,000              660              41          i
             2 Units                                  90       $ 550,000              660              41          i
             Condo                                    90       $ 450,000              660              41          i
             Co-op                                    90       $ 450,000              660              41
             Key to Loan Notes: c–Eligible for Construction-to-Permanent, i–Eligible for Interest Only (minimum term of 60 months)


                                                                                   Traditional full documentation or alternative documentation (pay-stubs, bank
                                                                                   statements) as defined by standard Fannie Mae/Freddie Mac guidelines is required.
                                                                                   A loan application receiving a DU response of Approve/Eligible or an LP response
                                                                                   of Accept/Eligible which includes the waiver of income or asset documentation, and
                                                                                   validated closed per the findings, is eligible as full documentation. Please see the
                                                                                   Radian Documentation Types guide on our Web site at www.radian.biz for details.

                                                                                   Notes
                                                                                   ■ Investment Property Guidelines and pricing apply to 3–4 units.
                                                                                   ■ Debt consolidation is priced as cash-out and this occurrence should be treated as
                                                                                     a cash-out refinance. Payoff from loan proceeds of any debt which is not secured
                                                                                     by a lien on the subject real estate is considered a cash-out transaction. Borrowers




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                                      may leave the closing table with a maximum of cash per program guidelines and
                                      including debts paid as referenced herein.
                                    ■ Generally, a lender’s delegated authority is limited to a maximum $650,000 loan
                                      amount. Please see the Delegated Authority section for details.

      Limited Documentation Prime Credit (“Alternative A” or “Alt A”)
                                    Loans which do not conform to all of the requirements of Full Documentation
                                    are deemed to be Limited Documentation loans, which are ineligible for Radian.
                                    This includes any GSE standard or negotiated program or commitment that allows
                                    reduced or limited documentation. Please see the Radian Documentation Types
                                    Guide for more details.

      Full Documentation non-Prime Credit (“A minus”)
                                    Radian’s Full Documentation Non-Prime program (“A Minus”) is designed for the
                                    borrower who has credit criteria that do not meet the Radian Full Documentation
                                    Prime guidelines, but who is identified as an insurable risk. Radian’s Full
                                    Documentation Non-Prime program requires a minimum representative FICO score
                                    of 660.
                                    Eligible loans must meet Radian’s published Full Documentation Non-Prime
                                    guidelines, regardless of any Automated Underwriting System (AUS) response.
                                    Traditional full documentation or alternative documentation (pay-stubs, bank
                                    statements) as defined by standard Fannie Mae/Freddie Mac guidelines is required.
                                    Please see the Radian Documentation Types guide on our Web site at www.radian.biz
                                    for details.

                                    Ineligible AUS responses
                                    ■ DU EA-IV
                                    ■ DU Refer
                                    ■ LP Refer
                                    ■ LP Caution/Ineligible
                                    ■ Out of Scope
                                                                                       Manual and/or Not Eligible per AUS
                                                                    PrImAry resIDenCe
                                                                    PURchaSE & RaTE/                      Max Loan    Min FICO   Max
                                                                    TERm REfINaNcE                 LTV    Amount       Score     DTI%
                                                                    1 Unit Single Family           95    $ 450,000      660      50
                                                                    2 Units                        95    $ 550,000      660      50
                                                                    Condominium                    95    $ 450,000      660      50


                                    Notes
                                    ■ Debt consolidation is considered as cash-out refinance. Payoff from loan proceeds
                                      of any debt which is not secured by a lien on the subject property is considered a




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                                         cash-out refinance. Cash-out refinance is not eligible for Radian’s Full Documen-
                                         tation Non-Prime program.

       Guideline Criteria for All Programs
                                      The following guidelines cover all Radian mortgage insurance programs, including
                                      Full Documentation Prime and Full Documentation Non-Prime. Program-specific
                                      exceptions are noted.

                                      credit—Philosophy and General handling
                                      The basis for any credit analysis should be a review of each borrower’s complete
                                      credit history, length of time accounts have been opened, types of credit used,
                                      balance to credit limit comparisons, and number of recent inquiries. At Radian, we
                                      feel that the credit score should be only a part of the total credit consideration. To
                                      evaluate the complete credit picture, Radian will apply the following credit criteria
                                      in order to determine if a borrower’s FICO score is a true representation of the
                                      borrower’s credit profile when determining insurability of a loan.
                                      ■ IF the borrower has 24+ months primary housing (mortgage or rent) history
                                        reported/documented with 0x30 late THEN a minimum of 2 additional tradelines
                                        with 12 months reported activity on each is required.
                                      ■ IF the borrower has 12–24 months primary housing (mortgage or rent) history
                                        reported/documented with 0x30 late THEN a minimum of 3 additional tradelines
                                        with 24 months reported activity on each is required.
                                      ■ IF the borrower has 0–12 months primary housing (mortgage or rent) history
                                        reported/documented and/or prior derogatory history on the current mortgage/
                                        rental history (as permitted in the Credit Definitions below) THEN a minimum of
                                        4 additional tradelines with 24 months reported activity on each is required.
                                      ■ IF the borrower’s credit only contains non-traditional credit history, THEN the
                                        borrower must provide four non-traditional verifications, each of which must indi-
                                        cate a 12-month history. One of the four verifications must be a primary housing
                                        (mortgage or rent) payment history. The other three verifications may be utilities,
                                        insurance, receipts for cash rental payments, or any other documented non-tradi-
                                        tional credit source.

                                      Note: A tradeline is defined as a revolving or installment payment account. The
                                      tradeline must not be in dispute and must clearly belong to the borrower in
                                      order to be eligible for consideration. Collections, judgments, charge-offs, repos-
                                      sessions, foreclosures, bankruptcy repayment plans, and credit counseling do
                                      not apply.

                                      credit—credit Report Requirements
                                      Radian will underwrite mortgage insurance based on the lowest representative FICO
                                      score of all borrowers. At least two national repositories must be checked for each




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                                                          borrower. The representative FICO score for each borrower will be determined as
                                                          follows:
                                                          ■ If two scores are provided, the lower score will be used.
                                                          ■ If three scores are provided, the middle score will be used.

                                                          credit—Definitions
                                                                                            Full Documentation Prime above
                                                         Full Documentation Prime           $650,000                       Full Documentation Non-Prime
                       minimum fIcO aND                  620                                660                                660
                       mortgage or rental history aND ■        No more than 1x30 (no        ■     0x30 for last 24 months      ■     No more than 2x30 or 0x60 in last 12 months.
                                                               rolling lates) in last 12    ■     All mortgages must be        ■     Rolling lates of 2x30 successively are considered 1x30 to
                                                               months                             current at time of subject         qualify.
                                                         ■     All mortgages must be              loan application and         ■     All mortgages must be current at time of subject loan
                                                               current at time of subject         closing.                           application and closing.
                                                               loan application and
                                                               closing.
                       Installment debt history aND      No more than 1x30 in last 12       No more than 2x30 or 1x60 in       ■     No more than 3x30 or 1x60 in last 12 months.
                                                         months                             last 24 months                     ■     Three successive 30-day lates may count as one event.
                                                                                                                               ■     All delinquent consumer credit must be current at loan
                                                                                                                                     closing.
                       Revolving debt history aND        No more than 2x30 in last 12       No more than 2x30 or 1x60 in       ■     No more than 3x30 or 1x60 in last 12 months.
                                                         months                             last 24 months                     ■     Three successive 30-day lates may count as one event.
                                                                                                                               ■     All delinquent consumer credit must be current at loan
                                                                                                                                     closing.
                       major derogatory credit aND       None in last 12 months             None in last 24 months             ■     Charge-off and collection accounts greater than $2,500
                                                                                                                                     (cumulative balance) must be paid at or before closing.
                                                                                                                               ■     Medical collections of any amount must show a resolution
                                                                                                                                     plan in place.
                       minimum duration of credit        12 months                          24 months                          12 months
                       history aND
                       Bankruptcy aND                    Minimum 48 months since            Ineligible                         Minimum 36 months since discharge/ dismissal date, with
                                                         discharge/dismissal date,                                             satisfactory credit re-established
                                                         with satisfactory credit re-
                                                         established
                       foreclosure, short sale, deed-    Minimum 60 months since date Ineligible                               Minimum 36 months since date of activity prior to date of
                       in-lieu of foreclosure activity   of activity and satisfactory credit                                   application and satisfactory credit re-established
                                                         re-established


                                                          credit—Non-Traditional credit (No or Invalid fIcO Score)
                                                          Radian’s non-traditional credit guidelines are acceptable only for fully documented
                                                          loan files that would align with a traditional manually underwritten “A credit”
                                                          borrower credit profile. A valid Social Security number is required for all borrowers
                                                          contributing to the qualification for the mortgage, and the lender’s file submission
                                                          to Radian must include the credit reporting agency’s response to the lender’s order
                                                          for a tri-merged traditional credit report for each borrower, including a FICO score
                                                          calculation and public records search.
                                                          Non-traditional credit is acceptable for Radian insurance when a borrower
                                                          contributing to the qualification for the mortgage does not have enough of the types




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                          of credit that would appear on a traditional tri-merged credit report to generate
                          a usable FICO score OR if all borrowers on a loan application have insufficient
                          credit references to develop a traditional credit report and usable FICO score. Under
                          no circumstances should a lender use a non-traditional credit evaluation to offset
                          derogatory information that appears in a tri-merged traditional credit report.
                          The following features define eligibility criteria:
                          ■   Full third-party verification of assets, income, employment is required
                          ■   1–2 units detached/attached or condominium
                          ■   Primary residence only
                          ■   Purchase only
                          ■   Maximum 95% LTV (Radian’s Declining Markets Policy will apply)
                          ■   Full file submission to a Radian Service Center
                          ■   Loan amounts limited to maximum of GSE conforming for the 48 contiguous
                              states

                          Ineligible for non-traditional credit
                          ■ Full Documentation Non-Prime
                          ■ Co-ops
                          ■ Manufactured housing
                          ■ Construction-to-permanent
                          Acceptable non-traditional credit references must be only those types of credit that
                          require the borrower to make periodic payments on a regular basis at intervals that
                          are no longer than every three (3) months. A minimum of four (4) such references
                          (held singly or jointly) must be verified for each borrower contributing to the
                          qualification for the mortgage.




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                                    The types of credit that can be used fall into five categories, some of which are
                                    required:
                                                                                                                           Full Documentation Prime Credit
                                                                   Credit Category                                         Acceptability
                                     Type 1 credit                 Housing payment: Required to be verified by a           ■   0x30 days delinquent in past 12
                                                                   non-interested third party for the most previous 12         months
                                                                   months minimum                                          ■   1x30 in previous 12 months, if
                                                                                                                               available; no rolling lates
                                     Type 2 credit                 Automobile financing/leasing and/or cell phone          0x30 days delinquent in past 12
                                                                   carrier(s): Required if applicable for past 12 months   months
                                     Type 3 credit                 Housing-related (over the past 12 months; at least      0x30 days delinquent in past 12
                                                                   one from this category is required), such as:           months
                                                                   ■ Utilities
                                                                   ■   Cable television
                                                                   ■   Furniture rental
                                                                   ■   Land-line telephone service
                                     Type 4 credit                 Insurance (over the past 12 months), such as:           1x30 days delinquent in past 12
                                                                   ■ Medical insurance                                     months; no rolling lates
                                                                   ■   Renter’s insurance
                                                                   ■   Automobile insurance
                                     Type 5 credit                 Other (over the past 12 months), such as:               1x30 days delinquent in past 12
                                                                   ■ Department store                                      months; no rolling lates
                                                                   ■   Furniture store
                                                                   ■   Child care
                                     Reported Traditional credit   If any on the tri-merged traditional credit report      No derogatories (since non-traditional
                                                                                                                           credit references can not be used to
                                                                                                                           offset adverse traditional credit)
                                     Public Records                Required to be checked (with findings affirmatively     ■   No collections (other than
                                                                   stated on response document to lender’s request for         explainable medical collections)
                                                                   tri-merged traditional credit report)                   ■   No repossessions
                                                                                                                           ■   No judgments, liens, or bankruptcy
                                                                                                                               foreclosure in past 5 years


                                    Full Documentation Prime
                                    If a valid FICO score is not provided or unavailable for the borrower(s), a verified
                                    credit history must comply with all of the credit criteria noted above in order to be
                                    eligible for Radian mortgage insurance at Industry A rates. Loans without a valid
                                    FICO score, or with no FICO score, must be submitted to a Radian Service Center
                                    for review. Please provide a completed Radian Mortgage Insurance Application, a
                                    completed 1008 and 1003, credit report (along with alternative credit information if
                                    credit report information does not meet Radian’s minimum criteria), and the subject
                                    property appraisal.

      General Pricing Information
                                    Please refer to the Radian rate cards posted at www.radian.biz for specific pricing
                                    criteria or contact your Radian representative for additional information. Loan
                                    amounts greater than $650,000 are subject to an additional premium surcharge as
                                    disclosed on the Radian pricing material.




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       General radian requirements
                                     Radian mortgage insurance underwriters retain the right to exercise prudent risk
                                     underwriting and modify or decline to insure a mortgage insurance request based on
                                     the overall risk profile. However, we would appreciate the opportunity to work with
                                     you on any loan which you believe is an insurable risk.
                                     ■ Guidelines not specifically addressed herein default to standard Fannie Mae/Fred-
                                       die Mac guidelines, i.e., non-Desktop Underwriter/non-Loan Prospector.
                                     ■ Loans originated by a third party must first be underwritten by the submitting
                                       lender before submission to Radian for mortgage insurance.
                                     ■ First-lien mortgages only.

       Borrower Qualification
                                     Radian does not provide mortgage insurance if borrowers are corporations,
                                     partnerships, or limited partnerships (LLCs). Corporate and business tax ID numbers
                                     are unacceptable as a substitute for Social Security numbers. Radian will only
                                     provide mortgage insurance on loans to individuals, with the exception of living/
                                     inter-vivos trusts.

                                     Individual Tax Identification Number (ITIN)
                                     Loans to borrowers having an Individual Tax Identification Number (ITIN) in lieu
                                     of a Social Security number are ineligible for Radian mortgage insurance. ITIN
                                     numbers are issued regardless of immigration status of the applicant and, as such,
                                     do not allow identification as to resident or non-resident aliens and legal or illegal
                                     immigrants.
                                     An ITIN is a tax processing number issued by the IRS. Although an ITIN is
                                     formatted like a Social Security number, all ITINs begin with the number 9 and
                                     contain a 7 or 8 as the fourth digit (9xx-7x-xxxx or 9xx-8x-xxx).

                                     Resident aliens
                                     ■ Permanent resident aliens are eligible for all Radian insurance products.
                                     ■ Non-permanent resident aliens, in the United States on a temporary permit/visa,
                                       are eligible for Full Documentation Prime insurance only with LP’s Accept/Eli-
                                       gible or DU’s Approve/Eligible response. Non-permanent resident borrowers are
                                       eligible under Full Documentation Non-Prime for 1-unit primary residence, 90%
                                       LTV, with all necessary assets in U.S. funds, and showing two years of employ-
                                       ment and credit history in the U.S.

                                     Ineligible resident aliens
                                     ■ Non-resident aliens/foreign nationals/diplomats




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      Qualifying ratios
                             A borrower’s Debt-to-Income Ratio (DTI) includes all monthly debts as defined in
                             the Fannie Mae/Freddie Mac guides, divided by the monthly qualifying income. The
                             DTI ratio must not exceed the maximum allowed per the following:

                                                                 full Documentation Prime, except as noted below          41%
                                                                         ■    95.01–97% LTV                               38%
                                                                         ■    Temporary buydowns                          38%
                                                                         ■    3–4 units and investment properties         33%

                                                                 full Documentation Non-Prime                             50%

                             ARMs with an initial adjustment period of less than 60 months must qualify using
                             the higher of the Note Rate or the fully indexed accrual rate (margin plus index
                             value), also referred to as FIAR.
                             ARMs with an initial interest rate adjustment period of 60 months or more may
                             qualify using the start rate.
                             Interest Only mortgages must be qualified with a fully amortizing principal and
                             interest payment (PITI).

                             Temporary Buydowns

                             Primary Residence and Second Home
                             ■ Fixed rate loans and ARMs with an initial adjustment period less than 60 months
                                must qualify using the higher of the Note Rate or the fully indexed accrual rate
                                (margin plus index value), also referred to as FIAR.
                             ■ ARMs with an initial interest rate adjustment period of 60 months or more may
                                qualify using the start rate.

                             Investment Property
                             ■ Qualified at the higher of the Note Rate or the fully indexed accrual rate.

      Loan repayment types
                             fixed Rate
                             Fixed Rate mortgages include positively amortizing ARMs with an initial fixed rate
                             and payment period of five years or more.

                             adjustable Rate mortgages

                             Interest rate caps
                             Radian requires that all adjustable rate mortgages include an interest rate cap. The
                             following represents Radian’s maximum interest rate caps for ARMs:




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                                                                                                                          Periodic       Lifetime
                                                                                  ARM product             Initial cap       cap             cap
                                                                  Full Documentation Prime
                                                                                  6 Month                     1%             1%             6%
                                                                                  1–2 Year                    2%             2%             6%
                                                                                  3–5 Year                    3%             2%             6%
                                                                                  > 5 Year                    5%             2%             5%
                                                                  Full Documentation Non-Prime
                                                                                  < 5-year initial interest rate adjustment period is ineligible
                                                                                  5 Year                      3%             2%             6%
                                                                                  > 5 Year                    5%             2%             5%


                          Interest Only
                          ■ Maximum IO period of 15 years, minimum IO period 5 years, except for proper-
                            ties located in the state of New York as noted in the grid below:
                                 All states other than NY                           NY interest-only terms (must be exact interest only term
                                                                                    based on loan term)
                                 Minimum/Maximum interest-only term                 Loan term/Interest-only term
                                 5 years/15 years                                   15 years/5 years
                                                                                    20 years/7 years
                                                                                    25 years/8 years
                                                                                    30 years/10 years
                                                                                    40 years/11 years


                          Ineligible for Interest Only
                          ■ Full Documentation Non-Prime loans
                          ■ 3–4 unit properties, second homes, and investment properties
                          ■ Temporary buydowns
                          ■ Co-ops and manufactured housing

                          Loan Term
                          Loans with an amortization period and/or a Note term greater than 40 years up to 50
                          years are eligible, subject to the following conditions:
                          ■ Property is limited to 1 unit, primary residence only
                          ■ Maximum 95% LTV
                          ■ Maximum Note term is 50 years

                          Ineligible for loan terms over 40 years
                          ■ Manufactured housing




Effective June 1, 2008                                                                                                                              13
Radian Guaranty Inc.                                                   UNDERWRITING GUIDELINES




                       Temporary Buydowns
                       ■ Primary Residence, Second Home, and Investment Property are eligible with a
                         maximum 3-2-1 buydown.
                       ■ Eligible up to 97% LTV (95% for Full Documentation Non-Prime loans) and must
                         meet Fannie Mae/Freddie Mac requirements.

      Loan Features
                       Borrower Equity
                       The borrower is required to have the following minimum equity or down payment
                       from their own funds:
                                                                    Primary residence   Second home   Investment property
                                    Full Documentation Prime
                                                LTV 95.01–97%        3%                 NA             NA
                                                LTV 95% and below    5%                 5%             10%
                                    Full Documentation Non-Prime     5%                 NA             NA


                       Gift funds
                       ■ For primary residence only, gifts from immediate family members are acceptable,
                          provided the borrower(s) has the minimum equity/cash down payment.
                       ■ Gifts are not an acceptable source of down payment on investment property and
                          second homes.
                       ■ Gift documentation meeting Fannie Mae/Freddie Mac requirements must be
                          obtained.

                       Reserves
                       Radian defines reserves as the number of months of principal, interest, and escrow
                       deposits for taxes and insurance that a borrower could pay by using his or her liquid
                       financial assets.
                       For full-documentation loans with an Agency Eligible response, Radian will
                       generally rely on the AUS response and the reserve requirement necessary to
                       generate that response.
                       For loan amounts greater than $650,000, six (6) months’ reserves are required for
                       each property owned by the borrower, including the subject loan. An equity position
                       of $50,000 per property is also acceptable.
                       For all other loans (i.e., Agency Ineligible or non-AUS underwriting), Radian
                       requires two (2) months’ reserves for Primary Residences and Second Homes, and
                       four (4) months’ reserves for Investment Properties.




14                                                                                                     Effective June 1, 2008
UNDERWRITING GUIDELINES                                                                                       Radian Guaranty Inc.




                          financing concessions
                          Closing costs and/or pre-paid expenses typically paid by the borrower, but paid on
                          behalf of the borrower by an interested party, are subject to the following limitations:
                                                                                                Primary    Second   Investment
                                                                                     LTV       residence    home      property
                                                                Full Documentation Prime
                                                                                    97%          3%         NA         NA
                                                                                    95%          3%         3%         NA
                                                                                    90%          6%         6%         2%
                                                                Full Documentation Non-Prime
                                                                                    95%          3%         NA         NA
                                                                                    90%          6%         NA         NA

                          Financing concessions in excess of the limitations above require a downward
                          adjustment to the sales price by the amount that the concessions exceed the limits.
                          Additionally, sales concessions, such as furniture or other inducements, require a
                          dollar-for-dollar deduction from the sales price prior to calculation of the LTV.

                          Non-Occupant co-Borrower
                          Non-occupant co-borrowers are only permitted for Full Documentation Prime loan
                          amounts up to $650,000.
                          ■ Maximum LTV is 95%.
                          ■ Primary residence only; 1-2 units.
                          ■ Non-occupant co-borrower is to be a disinterested third party to the sales trans-
                            action (e.g., cannot be the property seller, builder, real estate broker, etc.). The
                            non-occupant co-borrower does not have to take title to the property but must sign
                            the mortgage note.
                          ■ Occupying borrower’s DTI ratio should not exceed guidelines by more than 7%.
                          ■ Occupying borrower must have minimum equity/cash down payment of 5% from
                            their own funds.

                          Refinances
                          ■ Cash-out refinance requires 12 months’ seasoning.
                          ■ Debt consolidation is considered as cash-out refinance.
                          ■ Payoff from loan proceeds of any debt which is not secured by lien on subject
                            property is considered a cash-out refinance.

                          Streamline refinance
                          A Streamline Refinance is a Rate/Term (Limited Cash-Out) Refinance transaction
                          where the borrower is not subject to standard qualification and/or where the
                          documentation of the original file is used.
                          ■ Radian must be the insurer of the current mortgage.




Effective June 1, 2008                                                                                                           15
Radian Guaranty Inc.                                                                                           UNDERWRITING GUIDELINES



                                               ■ Existing Radian certificate can not currently be Radian “Alt A” or Limited Doc
                                                 (SISA, SIVA, No Doc, NINA, No Ratio), Documentation Type not provided, or
                                                 Documentation Type unknown.
                                               ■ Must meet current eligibility for “A” (Full Doc Prime) and “A Minus” (Full Doc
                                                 Non-Prime) for determination of whether the insurance is eligible for this docu-
                                                 mentation efficiency process. If the insurance request does not meet current Full
                                                 Doc Prime or Non-Prime criteria, the request may have to go to Customer Service
                                                 as an MI modification, or be considered as a Full Doc Prime/Non-Prime Rate/
                                                 Term Refinance.
                                                        Documentation Required (in
                       Current In-Force Certificate     lender’s file)                    Credit Eligibility                               Eligibility/Pricing
                       Industry “a” (full Doc Prime)    ■   1003                          Mortgage history maximum 1x30 in previous 12     Full Doc Prime/Industry “A”
                       with original fIcO score         ■   1008                          months or life, if less than 12 months

                                                        ■   Current mortgage history
                       Industry “a” (full Doc Prime),   ■   1003                          Mortgage history maximum 1x30 in previous 12     Full Doc Prime/Industry “A”
                       no original fIcO score           ■   1008                          months or life, if less than 12 months

                                                        ■   Current mortgage history
                       a minus (full Doc Non-Prime)     ■   1003                          FICO greater than or equal to 660 and mortgage   Full Doc Non-Prime/A Minus
                       with original fIcO less than     ■   1008                          history maximum 1x30 in previous 12 months or
                       660                                                                life, if less than 12 months
                                                        ■   Current mortgage history
                                                        ■   New credit report with FICO
                       a minus (full Doc Non-Prime)     ■   1003                          Mortgage history maximum 1x30 in previous 12     Full Doc Non-Prime/A Minus
                       with original fIcO greater       ■   1008                          months or life, if less than 12 months
                       than or equal to 660
                                                        ■   Current mortgage history
                       a minus (full Doc Non-Prime), ■      1003                          FICO greater than or equal to 660 and mortgage   Full Doc Non-Prime/A Minus
                       no original fIcO score        ■      1008                          history maximum 1x30 in previous 12 months or
                                                                                          life, if less than 12 months
                                                        ■   Current mortgage history
                                                        ■   New credit report with FICO

                                               ■ Delegated submission to a Radian Service Center is required (1008 and MI ap-
                                                 plication which includes rep and warrant of original appraisal value); MI applica-
                                                 tions must be fully completed by the lender.
                                               ■ Loan can not be currently delinquent.
                                               ■ New loan amount can not exceed original UPB plus $2,500 for closing costs.
                                               ■ All occupancy and property types (as eligible in Radian’s published guidelines)
                                                 are eligible.
                                               ■ Maximum 97% LTV for Full Doc Prime, maximum 95% LTV for Full Doc Non-
                                                 Prime (Radian’s Declining Markets Policy does not apply to streamline refinance
                                                 transactions).
                                               ■ New loan must be fully amortizing: Fixed Rate or ARM (minimum 5 years to first
                                                 adjustment); Interest Only ineligible; temporary buydown ineligible.
                                               ■ Radian’s current MI rates apply.




16                                                                                                                                                         Effective June 1, 2008
UNDERWRITING GUIDELINES                                                                                      Radian Guaranty Inc.




                                     cLTV/Secondary financing

                                     Purchase transactions
                                     Radian does not insure purchase transactions with simultaneous secondary financing
                                     from any source.

                                     Rate/Term Refinance Transactions
                                     Existing subordinate mortgage liens may be re-subordinated, but the maximum
                                     aggregate mortgage lien encumbrance to the subject property—first mortgage plus
                                     any secondary financing (whether a fixed mortgage, line of credit, or other recorded
                                     mortgage liens)—may never exceed the maximum LTV per the transaction type per
                                     Radian’s published guidelines.
                                     New subordinate mortgage liens/secondary financing simultaneous with the closing
                                     of the first mortgage refinance transaction are not permitted.

                                     Cash-Out Refinance Transactions
                                     Radian does not insure cash-out refinance transactions with simultaneous secondary
                                     financing from any source. Existing subordinate mortgage liens must be paid off
                                     from loan proceeds or borrower’s own funds; re-subordination of mortgage liens is
                                     not permitted.

       Property Qualifications/restrictions
                                     Ineligible Property categories
                                     The following property categories are ineligible for Radian mortgage insurance:
                                     ■   Condotels
                                     ■   Single-wide manufactured homes
                                     ■   Mobile homes
                                     ■   Time share properties
                                     ■   Lot loans
                                     cooperatives
                                     ■ Must be located in markets where co-ops are typical.
                                     ■ Property must conform to Fannie Mae standard co-op property guidelines.

                                     condominium/attached PUD
                                     ■ Investor concentration generally limited to 40% of project
                                     ■ Generally, minimum 1,000 sq. ft. per unit; variations for local markets must be
                                       supported by three comparables in the appraisal report with similar square footage
                                     ■ Must be warrantable to Freddie Mac or Fannie Mae




Effective June 1, 2008                                                                                                        17
Radian Guaranty Inc.                                               UNDERWRITING GUIDELINES




                       manufactured housing
                       ■   Multi-width, one-family dwellings
                       ■   Permanently affixed to the lot; legally classified and taxed as real estate
                       ■   Minimum 1,000 square feet of living area
                       ■   Must assume the characteristics and functional utility of site-built housing
                       Please contact a Radian Service Center for additional details regarding eligibility of
                       manufactured housing.

                       Geographic Guidelines
                       This section references geographic guidelines that are applicable to all Radian
                       mortgage insurance programs, unless otherwise noted.

                       Alaska
                       Loan amounts greater than $417,000 are eligible per Radian’s Manual and/or Not
                       Eligible per AUS loan guidelines.

                       Florida
                       Condominiums and co-ops are not eligible for mortgage insurance in Miami-Dade
                       and Broward counties.

                       Guam
                       Only the following are eligible for Radian mortgage insurance:
                       ■   Full Documentation Prime only
                       ■   Maximum $650,000 loan amount
                       ■   1-unit only
                       ■   Owner-occupied property only
                       ■   90% LTV maximum
                       ■   Purchase and rate/term refinance only
                       Applications must be submitted to a Radian Service Center as non-delegated.
                       Submission to include: 1003, 1008, appraisal, credit report, AUS findings (if
                       applicable), and MI Application.

                       Ineligible for Radian mortgage insurance in Guam
                       ■ Condominiums

                       Hawaii
                       Loan amounts greater than $417,000 are eligible per Radian’s Manual and/or Not
                       Eligible per AUS loan guidelines.

                       Nevada
                       Condominiums and co-ops are not eligible for mortgage insurance in Nevada.




18                                                                                               Effective June 1, 2008
UNDERWRITING GUIDELINES                                                                          Radian Guaranty Inc.




                          New York
                          Specific Interest Only terms apply for New York. See the Interest Only section.

                          Puerto Rico
                          ■ Not eligible for Radian mortgage insurance

                          U.S. Virgin Islands
                          ■ Not eligible for Radian mortgage insurance

                          Declining markets Policy
                          The maximum eligible LTV is reduced by 5% in declining markets for all products,
                          except for loans above 95% LTV, which are reduced to 95%. Radian defines a
                          declining market as one for which any of the following conditions are met:
                          ■ An AUS reports the market as declining.
                          ■ The appraisal indicates declining property values.
                          ■ If a quarter-over-quarter decline in the Office of Federal Housing Enterprise Over-
                            sight (OFHEO) MSA-level index occurs in the MSA for the property.
                          If the appraisal contains one or more of the above characteristics, the appraiser
                          should adequately explain the trend and specific factors contributing to the current
                          conditions. The maximum LTV category allowed under these conditions would then
                          be lowered to the next category (i.e., generally 5% lower), except that maximum
                          financing for condominiums and cooperatives is reduced to 90% LTV. Please see also
                          the Radian Guideline Quick Reference Guide for Declining Markets on our Web site
                          at www.radian.biz.

                          appraisal Requirements
                          Radian’s appraisal requirements are determined by the amount of the loan to be
                          insured. Radian does not accept AVMs, PVMMs, Property Inspection Waivers
                          (PIWs), or Property Inspection Alternatives (PIAs) in lieu of appraisals.
                          The Uniform Standards of Professional Appraisal Practice (USPAP) are the generally
                          accepted standards for professional appraisal practice in North America. To be
                          accepted by Radian, a property appraisal must be USPAP-compliant.
                          For loan amounts up to $650,000, a USPAP-compliant appraisal (URAR, or property
                          type-specific equivalent, with a minimum exterior inspection) is required.
                          For loan amounts greater than $650,000, two independently prepared USPAP-
                          compliant appraisals (URAR, or property type-specific equivalent, with interior and
                          exterior inspection) are required.




Effective June 1, 2008                                                                                            19
Radian Guaranty Inc.                                                         UNDERWRITING GUIDELINES




      maximum Loans to one Borrower Policy
                                  maximum mortgage Insurance Risk Exposure
                                  Radian’s maximum risk exposure policy for mortgage insurance is the lesser of
                                  $300,000 insured risk exposure or four (4) insured properties to one borrower.
                                  The property-type mix may only consist of a primary residence, one (1) second
                                  home, and a maximum of two (2) investor loans. All Radian investor guideline and
                                  requirements still apply.

                                  Note: Mortgage insurance insured risk exposure is calculated by using the origi-
                                  nal loan amount times the percentage of MI coverage. For example, a $100,000
                                  mortgage with 25% coverage equals $25,000 mortgage insurance risk exposure.

                                  ■ Full Documentation Non-Prime programs are limited to two (2) insured proper-
                                    ties to one borrower. Although we will insure up to two (2) properties under Full
                                    Documentation Non-Prime programs, in cases where a borrower has a loan under
                                    a Limited Documentation Prime program, the maximum Full Documentation
                                    Non-Prime exposure is limited to one (1) loan.

                                  maximum compliance Loans to One Borrower
                                  Radian’s policy for maximum compliance loans to one borrower is the lesser of five
                                  (5) loans or $1,000,000 aggregate loan amount, not to exceed the investor’s own
                                  guideline for maximum exposure to one borrower. The aggregated loan amount is
                                  determined by totaling the entire loan amounts for all active loans. Within the above
                                  restriction, loans submitted under less than full documentation or no documentation
                                  programs are limited to four (4) properties per borrower. This includes the loan file(s)
                                  currently under consideration as well as any and all Radian compliance-underwritten
                                  loans for that borrower in the past two years and not currently in declined status.

      General mI restrictions
                                  Ineligible Loan categories
                                  The following types of loans are ineligible for Radian mortgage insurance:
                                  ■   Government loans (FHA/VA/Rural Housing Service)
                                  ■   Second mortgages
                                  ■   Credit upgrades
                                  ■   Wraparound mortgages
                                  ■   Blanket mortgages
                                  ■   Interim construction loans
                                  ■   Negative amortization, potential or scheduled
                                  ■   Graduated payment mortgages
                                  ■   Reverse mortgages




20                                                                                                         Effective June 1, 2008
UNDERWRITING GUIDELINES                                                                                   Radian Guaranty Inc.




       General submission requirements
                                  Radian will not accept BPMI loans after the loan closing/funding date and LPMI
                                  loans after the first payment due date.

                                  Requirements for Loan amounts Up to $650,000
                                  Delegated: Submission to Radian requires a minimum of the completed 1008 and
                                  a completed Radian Mortgage Insurance Application. The investor, program name,
                                  automated underwriting system and response (if applicable), and the FICO score
                                  must be clearly noted in the appropriate section of either the 1008 or MI Application.
                                  The appropriate product type must be clearly noted in the Radian product section of
                                  the MI Application.

                                  Please note: Non-delegated lenders are permitted to submit under this proce-
                                  dure when a loan has been underwritten via either Fannie Mae’s Desktop Un-
                                  derwriter with a response of Approve/Eligible or Freddie Mac’s Loan Prospec-
                                  tor with a response of Accept/Eligible.

                                  Non Delegated: Submission to Radian requires a minimum of the completed 1008,
                                  1003, credit report, appraisal, and a Radian MI Application. The investor, program
                                  name, automated underwriting system and response (if applicable), and the FICO
                                  score must be clearly noted in the appropriate section of either the 1008 or the MI
                                  Application.
                                  The appropriate product type must be clearly noted in the Radian product section of
                                  the MI Application.

                                  Requirements for Loan amounts Greater Than $650,000
                                  Loan amounts greater than $650,000 must be submitted as a full documentation file
                                  to Radian with a 1008, 1003, credit report, FICO score, all appraisals, and all asset
                                  and income documentation. Submission must include a Radian Mortgage Insurance
                                  Application with the investor name/program marked as well as Super Jumbo A noted
                                  in the same section. All other loan amounts may be submitted per Radian’s normal
                                  submission process as previously outlined, plus the MI Application marked as noted
                                  above.

                                  Delegated authority
                                  Radian-delegated lenders may use their Radian delegated mortgage insurance
                                  authority to underwrite in compliance with the terms of their delegated underwriting
                                  agreement.
                                  Radian continues to expect our valued lending partners to exercise prudent
                                  underwriting judgment under their Radian delegated authority. Radian program
                                  underwriting guidelines apply for all submission types (manual, EDI, MI Online).




Effective June 1, 2008                                                                                                     21
Radian Guaranty Inc.                                              UNDERWRITING GUIDELINES



                       Radian acknowledges that exceptions may be made by Radian underwriters and/or
                       delegated lenders when submitting mortgage insurance applications on a delegated
                       basis, however prudent manual underwriting is expected and compensating factors
                       must exist. Generally, slight exceptions to criteria such as DTI are considered
                       reasonable where compensating factors are present, such as the following: significant
                       cash reserves; a rate/term refinance with a significant reduction in the current
                       housing expense; or a rate/term refinance from adjustable rate to fixed rate, purchase
                       transaction reflecting minimal payment difference, below-maximum LTV, etc., or a
                       below-maximum LTV and/or high FICO. However, exceptions to occupancy/LTV/
                       FICO combinations are considered more significant. Delegated lenders retain the
                       option of submitting marginal, high-risk, and/or exception loans to a Radian Service
                       Center for non-delegated mortgage insurance underwriting.
                       Please see Radian’s submission procedures for loan amounts up to $650,000 and
                       greater than $650,000.

                       Radian underwriting staff continues to retain the option to request additional
                       documentation on any loan submitted under a lender’s delegated mortgage
                       insurance authority with Radian.

                       Radian’s mI Online
                       Radian’s MI Online system is a data entry system for convenient transmission of
                       information to Radian for the ordering of mortgage insurance. All lenders using
                       Radian’s MI Online system (delegated and non-delegated) are responsible for
                       knowing and adhering to Radian’s guidelines. Use of Radian’s MI Online system
                       does not relieve the lender of any representations/ warranties associated with their
                       Radian delegated underwriting authority.
                       Non-delegated lenders are only permitted to use Radian’s MI Online when a loan
                       has been underwritten via either Fannie Mae’s Desktop Underwriter with a response
                       of Approve/Eligible or Freddie Mac’s Loan Prospector with a response of Accept/
                       Eligible.
                       Generally, loan amounts greater than $650,000 may not be submitted via MI Online.
                       Please contract your Radian representative with any questions.




22                                                                                              Effective June 1, 2008
UNDERWRITING GUIDELINES                                                                          Radian Guaranty Inc.




       revision notes
                          Revisions for april 30, 2008
                          The following revisions have been made to the April 30, 2008 guidelines:

                          General
                          ■ References to LTV have been changed to LTV/CLTV.
                          ■ Geographic guidelines have been added for Alaska, Florida, Hawaii, and Nevada.
                          ■ Additional financing restrictions have been placed on condominiums and co-ops
                            in declining markets.
                          ■ Streamline refinance requirements have been clarified.

                          Full Documentation Prime
                          ■ Loans submitted in the Eligible per AUS category (the blue table on page 4 of this
                             document) with 95.01–97% LTV/CLTV must have a minimum 680 FICO score.

                          Limited Documentation Prime
                          ■ This program has been discontinued.

                          Full Documentation Non-Prime
                          ■ Full Documentation Non-Prime loans are no longer eligible for non-traditional
                             credit.

                          Revisions for June 1, 2008
                          The following clarifications have been made to the April 30, 2008 guidelines,
                          effective June 1, 2008:

                          General
                          ■ The maximum LTV for streamline refinances has been changed and the topic of
                            streamline refinances has been given a more thorough treatment (pages 15–16).
                          ■ The reference to geographic restrictions on condominiums and cooperatives has
                            been removed from the Declining Markets Policy section (page 18, second para-
                            graph).
                          ■ References to CLTV have been removed and a section discussing CLTV and sec-
                            ondary financing has been added (page 17).

                          Full Documentation Prime
                          ■ Loans submitted in the Eligible per AUS category are still subject to prudent
                             underwriting and to Radian’s Declining Markets Policy (page 4, second paragraph
                             in Full Documentation Prime Credit).




Effective June 1, 2008                                                                                           23

								
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