The document provides updates to mortgage insurance and financing guidelines, including: - PMI is now eligible up to 95% LTV for purchase and rate/term loans with minimum credit scores. - Minimum credit and documentation requirements have been lowered/removed for various loan programs like FHA and conventional. - Guidelines for renovation loans through programs like HomeStyle and HomePath renovation have been updated, including renovation cost limits and timelines.

1. RECENT UPDATES: Mtg Insur. PMI Eligible up to 95%LTV : Purchase and Rate and Term with 660 FICO (fla. 680) Condo (not fla) and SFR. 2 months reserves 41% DTI (stretched to 45% with 740 FICO not fla .) PMI TO 97% LTV not fla. (must be own funds) 1 st Time homebuyers with 680 FICO Second time buyer 720 FICO 2 Months reserves, PMI to 85% Cashout: SFR only, 700 FICO, 200K max cash back PMI to 90% Second Home: SFR only, 720 FICO, resort areas only.

2. RECENT UPDATES: Conforming Credit Authorized user accounts are not credit lines.

3. RECENT UPDATES: FHA Credit Minimum Tradelines/References for Borrowers with Credit Scores Flagstar requires a minimum of three credit references per loan, regardless of Total Scorecard response Each credit reference must have at least a 12 month history Three tradelines may be a combination of traditional references and acceptable non-traditional references, however there is no rental history requirement as described in the following section for borrowers without credit scores For joint loans, the borrower’s and co-borrower’s combined tradelines must yield a total of three traditional and/or non-traditional tradelines. Borrowers on joint loans are not required to have three tradelines per borrower. Rather, the three tradeline requirement is applied to the loan and not each individual borrower. A joint tradeline reported on each borrower’s individual credit report is one tradeline and may not be counted as two separate tradelines Trade lines on which the borrower is an authorized user may not be counted as a traditional or non-traditional trade line

4. FHA Lowered to 620 FICO: No BK or Foreclosure last 3 years. No collections opened last 2 years. No 30 day lates last year. Refers max 31/43 ratios Some other minor restrictions apply. FHA Loans with Gifts allowable No reserves required 620-679 Approve/EligibleMax DTI 35/48 680 ^ Approve/EligibleMax DTI 55/55 680 ^ Refer DTI 35/45 No Credit (or minimal) Max DTI 31/43 FHA Minimum Non traditional Credit 12 Months housing and 2 x 12 non traditional meets the 3 trade minimum REVOLVING DEBT: Revolving debt being paid off at or prior-to closing on an FHA or VA loan may be excluded. No gifts for debt pay down. .

8. RECENT UPDATES: NET TANGIBLE BENEFITS, all products Flagstar’s minimum PITI payment reduction requirement is reduced from 5% to 4% except on Streamline loans. PROPERTY SEASONING/FLIPPING all products The 90-day requirement Conforming and FHA has been reduced to 30 days. Any restrictions applied by Mortgage Insurance BUSINESS FUNDS The restriction disallowing business funds to be used to close on second home and investment property transactions has been removed .

9. 1 2 3 Repair Escrow Home Path Renovation

10. Standard Conforming Products: Repair Escrow Option

13. Document #3655 To be executed by originating company and title company at closing. Filled out by closing company

15. FNMA Homestyle vs. FHA 203K Owner Occupied, 2 nd and Investments vs. Owner Occupied Max renovation 50% of future value vs. Streamline $35K Project approval and final appraisal insp. vs. FHA Consultant Higher FICO requirements vs. Lower FICO Minimum 3% of own funds vs. Gifted Down Pmt.

16. Purchase and Rate & Term

17. EA 1s on owner occupied! Restricted to 90% in declining market

19. Examples: Purchase Owner Occupied: 80,000 home + 20,000 improvements=100,000 acquisition Borrower would put 5% of 100,000 down + closing cost Borrower is responsible for closing cost and escrows, may also receive standard seller concessions limited to purchase price. Standard Owner Occ concessions at 5% to 20% down is 3%, 90% and below is 6% until 75% which allows 9% Purchase Investor: 80,000 home+20,000 improvements+10% contingency=102,000 acquisition Borrower would put 25% of 102,000 down + closing cost Standard investment concessions is 2%

20. Example RT Refinance: Post Repair Value: 200,000 lend up to 95% to cover payoff, improvements and closing cost. Owes $145,000 doing $40,000 in improvement, $5000 cost (escrow&fees) 95% of end value =190,000 FINAL LOAN Potentially no out of pocket expense BORROWER CANNOT GET ANY CASHBACK Refinance uses future value

21. Draw Fees & Project approvals Renovations over $80,000 have higher cost and require builder approval <GFE fees Remember renovation cost cannot exceed 50% of future end value

22. RENOVATIONS ARE TABLE FUNDED: Loans therefore must have GFE that discloses all charges for origination line GFE and 801 HUD to show any and all fees to be recouped by originator and credits/YSP to reflect in line 2 GFE and 802 HUD LOANS CLOSE IN FLAGSTAR’s NAME: Therefore TIL must be generated in Flagstar name 7 days minimum prior to closing per MDIA. CLOSING DOCS ORDERED VIA FLAGSTAR: Faxed to (888) 821-3419, or Email to [email_address] Heidi Losin (Construction Lending): 800-945-7700 Ext. # 5708 MAX PRICING IS 101 PRiCE ACCORDINGLY REMEMBER on RENOVATION:

23. Loan fully funds day one, Borrower pays full PITI at first payment. Escrow is established and a builder needs to submit waivers and sworn statements to title company (to update title endorsement) so draws may be approved! DRAWS

24. Create a “Referral Circle” Listing agents, REO agents, should be teamed with Builders/Contractors, to have prepared/proposed improvements to listings. For Buyer agents make clients view their target properties based on their location and potential and worry less about their current condition. Sell them on the houses future potential, lock up purchase and have “Referral Circle” Builder complete a contract bid for improvements.

25. Purchase combined with reno/repair Fixed & ARMs Owner Occupied and Investment Property must be HomePath financing eligible 97% LTV (No MI)

26. www.homepath.com

27. HomePath Properties cont… Two Distinct Options Optional renovation Mandatory Renovation

29. PRICE ACCORDINGLY

30. ELIGIBLE RENOVATIONS • Improvements that may be financed NOT limited to only FNMA requirements for home and may include anything that adds value. Renovation must be completed by a contractor. Do it yourself repairs intended to be completed by the borrowers are not eligible for financing within the loan transaction. • Funds for the renovation (contingency reserve, soft costs and payment reserves) cannot exceed twenty percent (35%) of the estimated completed value of the home or $35,000, whichever is less. • Renovations must be completed within 3 months of the loan closing date. DRAWS/FEES • $515 for one draw. • $630 for two draws. <GFE fees • $745 for three draws. • . $150 will be needed for final inspection $150 will be needed for final inspection

31. Program Overview Fannie-Mae HomeStyle Renovation Product # 5719 Any seller > 15 or 30 Year < Owner Occupied, 2nd Home, NonOOC > Up to 95% LTV < Mortgage Insurance from MGIC only < Fannie-Mae HomePath Renovation Product # 5721 Property must be HomePath financing eligible 10,15, 20, 25 or 30 Year & 3, 5 or 7/1 ARMs Owner Occupied and Investment Properties Up to 97% LTV (No MI needed) VS

32. Program Overview Cont… Homestyle Loans Any Seller or RT loans Cannot exceed 50% of finished appraised value Work must be completed within 6 months of closing Must use a third party contractor for the Renovation/Repairs Renovation/Repairs need to match the appraisal report Has PMI HomePath Loans Must be a FNMA REO home. Renovation/Repairs cannot exceed 35% of appraised value Renovation/Repairs cannot exceed $35,000.00 Must be completed within 3 months of closing Must use a third party contractor for the Renovation/Repairs Renovation/Repairs need to match the appraisal report No PMI

33. Special Notes Homestyle/Homepath Although a contract is required on renovation loans from a builder, we could accept up to a total of three contract arrangements. IE Kitchen cabinet contract, flooring contract, furnace contract …. Loan must be table funded. YSP/SRP is max 101 TIL must be generated in Flagstar name. Per MDIA no loan can close within 7 days of a Flagstar Bank TIL. Loan will table fund…GFE therefore must show borrower credits (YSP) in line 2, to recoup line 2 credits origination fees in line 1 must include YSP that you wish to retain from line 2.

34. RENOVATIONS ARE TABLE FUNDED: Loans therefore must have GFE that discloses all charges for origination line GFE and 801 HUD to show any and all fees to be recouped by originator and credits/YSP to reflect in line 2 GFE and 802 HUD YSP/SRP is max 101 LOANS CLOSE IN FLAGSTAR’s NAME: Therefore TIL must be generated in Flagstar name 7 days minimum prior to closing per MDIA. CLOSING DOCS ORDERED VIA FLAGSTAR: Faxed to (888) 821-3419, or Email to [email_address] REMEMBER on ALL RENOVATION PRODUCTS:

35. PRODUCT REGISTRATION HomePath make sure you indicate MI not Required. Both products require renovation loan requested as yes.

36. Fee Summary Page for Renovation Loans HUD line 1314 Administrative/Draw Fee will default to $1350.00 HUD line 1332 Title Updates Fee HUD Line 1333 Inspection Fee default to $150.00.

37. Placement of Construction Fees on GFE HUD Line Fee 1332 Title Updates Map to Block 4

38. Builder / Project Review For Project/Renovation Costs under $79,999.00: Project Review Builder review with Granite will be limited to a cursory review to insure the builder has proper license and insurance. State Contractors License (if applicable) Worker compensation Insurance General Liability Insurance For Project/Renovation costs over $80,000.00: Project Review Full Builder review/acceptance will be required.

39. Granite Builder Review Project Greater than $80,000 Requirements Contractors Questionnaire (Form A) Credit report will be run by Granite (looking for score greater than 660) References will be checked State Contractors License (if applicable) Worker compensation Insurance General Liability Insurance Drivers License W-9

40. Submission to Flagstar Underwriting Credit underwriting files are submitted to Flagstar underwriting as you would any other file in the Loantrac application You may upload the underwriting documents in Loantrac’s Paperless File manager

41. Submission to Granite Loan Management Refer to Construction Loan Operating Guide on (pages 6-7) for details on the builder project review process. The Builder/Project packages must be submitted to: Granite Loan Management, LLC 10770 Briarwood Ave., Suite 280 Centennial, CO 80112 Phone: (888) 673-9922 Ext # 231 Fax : (800) 919-8912 Email: [email_address] & [email_address]

42. Closing Documents All closing documents prepared by the Construction Department call or email: 800-830-2303 and ask to schedule a construction loan closing [email_address] Originator will need to provide the following: Closing cost worksheet Copy of title policy Insurance Completed draw request (Form E) if builder / borrower is requesting 10% deposit construction draw at close

43. Closing Documents Cont… Usually takes 48 hours to prepare closing package. 10% deposit allowed at closing for soft costs / permits to start project No work/construction can be started on the home prior to closing on the loan. No further draws after closing for 10 business days in order to post close and set up on servicing system.

44. Funding Renovation Loans Must wait at least 10 business days after close for next disbursement Generally takes 3-4 business days to process all new draw requests Draws are reimbursement ; work must be completed to process draw For each draw request, the following items will be needed: Draw request submitted to Granite Loan Management ( Form E ) (Needs to be signed by borrower and builder) May need invoices/lien waivers to support.

45. Funding Renovation Loans Cont… Granite will order Inspection Granite will obtain Title update / endorsement if necessary Account to be current (not over 15 days late, docs not matured) Building permit (prior to first construction draw) Flagstar will order Survey (once foundation complete, when applicable) Certificate of Occupancy – final draw (when applicable)

46. Funding Renovation Loans Cont… Funds can be disbursed as follows: Single party check to builder, borrower or title company Dual party check to builder, borrower, and/or title company Wire to builder, borrower, or title company

47. Draw Request – Form E

48. Common Questions Who is Granite Loan Management (GLM)? GLM is a funds control vendor that Flagstar has contracted with to assist in builder and project review and to oversee draw requests. What needs to be submitted to GLM? Only builder and project review information is submitted to GLM. Borrower credit package / approval will be done at Flagstar. Which package should I submit first? It does not matter what is submitted first, the Builder, Project reviews or Underwriting Which ever package you have ready should be submitted first. Before you get a “Clear to Close” you will have all three complete and approved.

49. Common Questions Cont… What is the expected “turn time” for approval ? The builder/project review done by GLM generally takes 3-4 days and can be done simultaneously if submitted at the same time. The credit approval for the borrower is done by Flagstar Underwriting Department and will be subject to current “turn times” when submitted. What are the additional fees associated with these products? There is generally only one additional fee associated with the product and should be listed as the “Draw Administration” fee on the GFE and HUD and covers inspections, draw processing fee and GLM fee. There may also be an additional fee for title updates depending on the state your loan / property is in.

50. Granite Contact Information Granite Contact Information for Builder Review Phone #866-380-9657 Fax #800-919-8912 Email: [email_address] Granite Contact Information for Project Review Phone #866-380-9657 Fax #800-919-8912 Email: [email_address] Granite Loan Management Draw / Customer Service: Phone #888-456-4888 Fax #888-456-4999 Email : [email_address]

51. Flagstar Closing Contact Information Closing / Product Questions: Construction Department : 800-830-2303 Heidi Losin (Construction Lending): 800-945-7700 Ext. # 5708 Email address: [email_address] Fax #:800-859-5476 Flagstar Construction Draw Area: Construction Department : 800-830-2303 Email Address: [email_address] Fax #: 866-334-0042

52. Questions? Lending Training 866-945-9872 option 5 [email_address] Or [email_address]