MTA Mortgage Program Guidelines

11^th District Cost of Funds ARM

MTA (Monthly Treasury Average) ARM

1. Product Description:	30 or 40 year amortization. Monthly adjusting ARM loans with negative amortization. 1 or 3 month initial period with COFI index. 1, 3, 6 or 12 month initial period with MTA index.
2. Program Codes:	1-Month - Initial Rate fixed for 1 month (Docs, COFI-A9801, MTA-A7901)
	1COFI 1COFIUI – uninsured 1COFIP – w/prepay 1COFIUIP – uninsured w/prepay	1MTA 1MTAUI – uninsured 1MTAP – w/prepay 1MTAUIP – uninsured w/prepay
	3-Month - Initial Rate fixed for 3 months (Docs, COFI-A9803, MTA-A7903)
	3COFI 3COFIUI – uninsured 3COFIP – w/prepay 3COFIUIP – uninsured w/prepay	3MTA 3MTAUI – uninsured 3MTAP – w/prepay 3MTAUIP – uninsured wprepay
	6-Month - Initial Rate fixed for 6 months (Docs, A7906)	12-Month – Initial Rate fixed for 12 months (Docs, A7912)
	6MTA 6MTAUI – uninsured 6MTAP – w/prepay 6MTAUIP – uninsured w/prepay	12MTA 12MTAUI – uninsured 12MTAP – w/prepay 12MTAUIP – uninsured w/prepay

3. Property Types:	SFR’s, FNMA approved Condo’s and PUD’s. (2-4 unit property and manufactured homes - not permitted)
4. Occupancy:	Owner occupied, Vacation/Second Home, and Investor.
5. Geographic Restrictions:	Texas – Cash out refinances not allowed on owner occupied (Borrower’s homestead property). Alaska – Not allowed.
6. Documentation Types:	Full/Alt Doc Low Doc (stated income)
7. Minimum Loan Amount:	$40,000

8. Maximum LTV and Loan Amounts:	FULL DOC
	Primary Residence	Max. LTV	Maximum LTV/CLTV		Maximum Loan Amount		# of Units
	Purchase & Rate/Term SFR & PUD’s	90% 80% 75% 65%	75% / 90% 75% / 80% 75% / 75% 65% / 65%		$400,000 $600,000 $1,000,000 $1,500,000		1 1 1 1
	Purchase & Rate/Term Condo's	90% 80% 75%	75% / 90% 75% / 80% 75% / 75%		$400,000 $500,000 $650,000		1 1 1
	Cashout* SFR & PUD’s	80% 75% 65%	75% / 80% 75% / 75% 65% / 65%		$500,000 $1,000,000 $1,500,000		1 1 1
	Cashout* Condo's	80% 75%	75% / 80% 75% / 75%		$400,000 $500,000		1 1
	* See Section 32 for maximum Cashout amount. Second Homes
	Purchase	80%	75% / 80%		$500,000		1
	Rate/Term	75%	75% / 75%		$500,000		1
	Cashout*	70%	70% / 70%		$500,000		1
	* See Section 32 for maximum Cashout amount. Non-Owner Occupied
	Purchase Rate/Term	75%	75% / 75%		$333,700		1
	Cashout*	65%	65% / 65%		$333,700		1
	STATED INCOME - (Low Doc)
	Primary Residence	Max. LTV	Maximum LTV/CLTV			Maximum Loan Amount	# of Units
	Purchase & Rate/Term SFR & PUD’s	80% 75% 65%	75% / 80% 75% / 75% 65% / 65%			$600,000 $1,000,000 $1,500,000	1 1 1
	Purchase & Rate/Term Condo's	75% 70%	75% / 75% 70% / 70%			$500,000 $650,000	1 1
	Cashout* SFR & PUD’s	75% 70% 65%	75% / 75% 70% / 70% 65% / 65%			$500,000 $1,000,000 $1,500,000	1 1 1
	Cashout* Condo's	75% 70%	75% / 75% 70% / 70%			$400,000 $500,000	1 1
	* See Section 32 for maximum Cashout amount. Second Homes
	Purchase & Rate/Term & Cashout*	70%	70% / 70%			$500,000	1
	* See Section 32 for maximum Cashout amount. Non-Owner Occupied
	Purchase	70%	70% / 70%			$333,700	1
	Rate/Term	65%	65% / 65%			$333,700	1
	Cashout*	60%	60% / 60%			$333,700	1
	* See Section 32 for maximum Cashout amount.
9. MI Coverage:	80.01-85.00 12% coverage required 85.01-90.00 25% coverage required Uninsured option – or borrower paid MI available on loans over 80% LTV up to 89.9% LTV (90% LTV requires MI) Full doc loans to $400,000 1 unit owner occupied Purchases and Rate and Term Refi’s Impound/escrow account not required for taxes Uninsured loans must be submitted to contract underwriting for approval Uninsured loans must be identified by using the proper program code. See the last page for all program codes. Special Features The mortgage interest rate may be reduced in the future when the loan balance decreases, the home value increases, or a combination of both. The borrower has the choice of receiving the benefit of lower payments by re-amortizing the loan or keeping the same payment and having the benefit of faster paydown of the loan. Amount of potential pricing reduction 60 basis point reduction in margin, thereby reducing the fully indexed rate (index plus margin) by 60 basis points. Not available until the initial fixed interest rate has expired – 1, 3, 6, 12 months, depending on product selected. Borrower must request reduction when LTV has dropped below 80%. See investor guidelines for details. Acceptable Insurers: PMI, GE, MGIC, RMIC, UGI, Triad and Radian.
10. Index:	COFI - 11 District Cost of Funds – based on the interest paid by savings and loan institutions within the Federal Loan Banks, 11^th district territory on their savings deposits and money borrowed from other sources. MTA - 12 Month Treasury Average – based on yields published in the release entitled "Selected Interest Rates-G13" which is published by the Federal Reserve Board on the first Tuesday of each month.
11. Margin:	See Rate Sheet Margin is the floor.
12. Initial/Annual Adjustment Cap:	Rate adjusts monthly after an initial fixed period. Initial Fixed Interest (Intro) Period: 1-Month Neg Am Option = 1 month 3-Month Neg Am Option = 3 month 6-Month Neg Am Option = 6 month 12-Month Neg Am Option = 12 month
13. Life Cap:	See Rate Sheet
14. Payment Cap:	7.5% Loan will be recast in the event the principal balance reaches 110% of the original principal balance or at the 5^th year (10^th year for Fixed pay 120) and every 5 years thereafter.
15. Payment Adjustment:	Payments adjust annually from the first payment date. Rate adjusts monthly after initial fixed rate period and payment adjusts annually which may result in the potential for negative amortization. Borrower may choose up to four payment options as follows: Minimum payment due (may result in deferred interest) Minimum payment plus any interest owing for the current month (interest only) Full principal and interest due to fully amortize loan. Principal and interest in an amount that would fully amortize the loan over an initial 15-year term.
16. Conversion Option:	N/A
17. Conversion Fee:	N/A
18. Assumptions:	Allowed for qualified borrowers. Subject to fee.
19. Prepayment Penalty:	Loans are available with or without a pre-payment penalty. One Year Prepay: If prepayment occurs in full in the 1^st year, a fee of 2% of the original loan amount is charged. Three Year Prepay: If prepayment occurs in full in the 1^st year, a fee of 3% of the original loan amount is charged. If prepayment occurs in full in the 2^nd year, a fee of 2% of the original loan amount is charged. If prepayment occurs in full in the 3^rd year, a fee of 1% of the original loan amount is charged. One-year prepayment penalty required for transactions where the subject property has been listed for sale within the last 12 months.
20. Subordinate Financing:	Allowed per CLTV requirement in Section 8. For determining maximum CLTV on loans involving Home equity lines, the principal balance of the first mortgage and the maximum home equity line of credit amount is used for the calculation. The monthly payment, however, is calculated based on the existing line of credit balance (not the maximum). The source of the subordinate financing may not be the builder/developer or the realtor. If the subordinate financing repayment terms provide for a variable interest rate, other than that related to home equity lines of credit, the monthly payment for such loan must remain constant for each 1-month period over the term of the mortgage. The change in the monthly payment at the end of each 12-month period cannot represent more than a one percent increase in the interest rate. Home equity lines of credit cannot be used under any circumstances on purchases of second homes or investment properties. Secondary financing may not have a balloon or call option date of less than five years after the date the first lien was closed.
21. Temporary Buydowns:	Not permitted.
22. Delegated U/W authority:	All loans must be prior approved. Approved contract underwriters are PMI, GE, MGIC, RMIC, UGI, Triad and Radian for loan amounts up to $650,000. Investor prior approval required on all loans over $650,000. Not eligible for DU/LP underwriting or delegated underwriting status. The Investor must approve all requests for exception to product parameters and lending policy.
23. Underwriting:	All loans are manually underwritten and must meet investor guidelines. An executed Form 8821 (instead of Form 4506) is required for all borrowers (salaried and self-employed) on all Low Doc transactions. On Full Doc loans, Form 8821 is required only for borrowers who use tax return income to qualify for the loan. Low Doc – At least one of the borrowers must be self-employed or have non-salaried income. The income stated on the application must be reasonable and consistent with the source of income, assets and credit profile. Additional asset or details about the borrower’s employment may be requested to support the income stated.
24. Age of Documents:	120 Days 180 Days on new construction
25. Qualifying Ratios:	Qualifying ratio’s 33/38 COFI ARMs Owner occupied: *Higher of 5.50%* or Start Rate Uninsured: *Higher of 6.00%* or Start Rate Non-owner occupied: *Higher of 5.75%* or Start Rate MTA ARMs Owner occupied: *Higher of 4.25%* or Start Rate Uninsured: *Higher of 4.75%* or Start Rate Non-owner occupied: *Higher of 4.50%* or Start Rate Underwriters may approve exceptions to ratio guidelines by 5% on front-end and back-end debt-to-income ratios on all loans with LTV’s up to 90% if there are fully documented compensating factors.
26. Credit Scores:	Minimum Credit scores Full Doc - 620 Low Doc – LTV/CLTV >75% - 700 LTV/CLTV <=75% - 680 Note: on LTV’s <=75% a credit score reduction to 650 is allowed with a 5% reduction in LTV (Low Doc only) When two credit scores are obtained, use the lower of the two, when three scores are obtained use the middle score for each borrower. Then use the lowest borrower’s score for the file. Full Doc – Alternative credit is eligible for borrowers that do not have a Credit Score. Low Doc – At least one of the borrowers must have a Credit Score, alternative credit may be used for the other borrowers. Low Doc Loans: Minimum 2 year credit history and minimum 24 months of mortgage or rental history with no 30 day or more late payments. Maximum financing is not allowed for borrowers with little or no credit experience. No open collection charge-offs, judgments, liens, or other published derogatory records filed in the last 24 months. No history of bankruptcy, foreclosure or notice of default. Bankruptcy All bankruptcies discharged within the last 7 years must be due to extenuating circumstances beyond the borrowers control and be documented as follows: A copy of the Bankruptcy, including the schedule of discharged debts and evidence of discharge date. A satisfactory written explanation from the applicant describing the cause of the bankruptcy. Credit report must demonstrate satisfactory credit has been reestablished for at least two years from the discharge date with a minimum of 4 trade lines.
27. Borrower Eligibility:	Non-permanent Resident Aliens with 2 years documented employment and credit in the U.S. are eligible for owner occupied, 1 unit properties to 70% LTV. Foreign Nationals are not eligible. Living (inter vivos) trusts are allowed subject to investor and SCME guidelines.
28. Co-Borrowers:	Non-occupant co-borrower income used to qualify on Full Doc loans only. Maximum occupying borrower ratios – 35/43. Non-occupant co-borrower income cannot be used to qualify on Low Doc loans.
29. Assets:	Full Doc, Owner Occupied - a minimum of 5% must be from the borrowers own funds on loans over 80% LTV. 80% LTV or less, the entire down payment can be from gift funds. Second Home - a minimum of 10% must be from the borrowers own funds. Investment - a minimum of 25% must be from the borrowers own funds. The sources of Nehemiah and HART program funds are donated from the seller of the subject property. Therefore, funds received by the borrower from the two nonprofit organizations are considered seller contributions and are not acceptable sources of down payment funds. Additional assets may be required, see section 23.
30. Gifts:	Gift must be from a family member. Gift letter must state the funds are an outright gift with no repayment required. The letter should include the amount of the gift, name and address of the donor, donor’s signature and relationship to borrower. If the gift has not yet been given, the funds in the donor’s account must be verified. Any transaction over 80% LTV that used gift funds as a source of down payment will require verification of transfer of funds from donor account to borrower regardless of when the gift was given. Not allowed for down payment or closing costs on Low Doc loans.
31. Reserves:	Primary Residence and Second Home Loan amounts up to $500,000 – Minimum 2 months PITI Loan amounts >$500,000 to $1,000,000 – 4-6 months total debt obligation Loan amounts > $1,000,000 – Subject to additional reserve requirements Non owner occupied Must have verified cash reserves equal to at least 6 months PITI for each non- owner occupied loan. Proceeds from a cash out transaction cannot be used as source of funds for required reserves.
32. Refinances:	No Cash-out Refi – The lesser of the original acquisition price or current appraised value must be used to calculate LTV/CLTV if the property is owned less than 12 months. Borrowers may receive 1% (on Jumbo loans) or 2% (on conforming loans), of new loan amount over the unpaid principal balance of the first lien, closing costs (including prepaid and points), payoff of junior lien over 12 months old. Payoff junior liens that are less than 12 months old where funds were used for documented home improvements. Reimburse borrower cash expenditures used for documented home improvements. Buy out another party’s interest in the property as a result of a divorce settlement. Borrower may not receive any cash out of the loan proceeds. Payoff of a Purchase Money Second that is less than one year old if the loan closed concurrently with the purchase transaction. The HUD-1 must reflect the Purchase Money Second as part of the purchase transaction. Cash-out Limitations: The lesser of the original acquisition price or current appraised value must be used to calculate LTV/CLTV if the property is owned less than 12 months. Low Doc – is limited to the lower of 25% of the new loan amount or $75,000 Full Doc – No Limit
33. Financed Properties:	If the subject property is the Borrower’s primary residence, there is no limit on the number of properties the borrower may own or be financing. If the subject property is not the Borrower’s primary residence, the borrower may not own more than four investment properties that are financed.
34. Mortgages to One Borrower:	If the aggregate dollar amount of all loans to one borrower from this investor (including companies acquired by this investor) exceeds $650,000, Investor approval is required. If the aggregate dollar amount of all loans to one applicant from SCME Mortgage (including the amount of the new loan) exceeds $650,000, the loan request requires approval by Credit Policy. If the aggregate dollar amount exceeds $1,000,000, the loan request requires approval by Credit Committee.
35. Seller Contributions:	Contributions are allowed toward recurring and non-recurring closing costs. The maximum percentage is based on the lesser of sales price or appraised value. The maximum acceptable contribution is 6%.
36. Appraiser Requirements:	Must be state licensed. Must not be on FHLMC exclusionary list.
37. Appraisals:	Standard Fannie Mae/Freddie Mac appraisal Loan amounts greater than $750,000, must obtain an Enhanced Field Review by the Investor, including two additional comparable other that the comparables used in the appraisal.
38. Documents:	Note: MTA LSSI # 4878-DC COFI LSSI # 4839-DC Rider: MTA LSSI # 4820-DC COFI LSSI # 4822-DC Disclosure: MTA LSSI # 4645-DC COFI LSSI # 4779-DC Prepay Addendum: MTA LSSI # 4837-DC COFI LSSI # 4837-DC Form 8821			The Deed is state specific. Correct doc codes per State are: CA 10-DC AZ 685-DC OR 683-DC WA 684-DC CO 619-DC NM 509-DC FL 615-DC ID 618-DC OK 537-DC TX 531-DC UT 612-DC NV 682-DC
39. Completion Escrows:	Completion escrows are allowed on single family detached and PUD’s, purchase and no cash out refinances, primary residence and second homes. Escrow holdbacks may only be for the purpose of completing exterior improvements or repairs that cannot be completed prior to closing due to seasonal weather conditions. Escrow holdbacks on new construction need not be due to seasonal weather conditions. They may only be for the completion of: Grading, seeding, sodding or landscaping Sidewalks, driveways, concrete patios or decks Installation of air conditioning units Exterior painting or staining Installation of gutter and downspouts The cost to complete the improvements or repairs may not exceed the lesser of $100,000 or 5% of the lower of sales price of the mortgage property or appraised value of the mortgage property assuming the improvements or repairs have been completed. The escrow amount held for completion must equal at least one and one-half (1.5) time the estimated repair amount. Unacceptable Holdbacks: Items affecting livability, health/safety or marketability Work required to bring the mortgage property in compliance with structural soundness/safety and health codes Heating systems Building or completion of kitchens or bathrooms, including the replacement of sinks toilets bathtubs, etc. Home improvement or interior remodeling Structural modifications or repairs The repair or replacement of septic disposal systems Pest or termite damage repair Dampness or settling
40. Construction to Permanent:	If the land is owned <12 months from application date, use the lesser of the current appraised value or cost of acquisition plus cost of construction to determine LTV/CLTV. If the land is owned >12 months from application date, use the lesser of the current appraised value or current land value plus cost of construction to determine LTV/CLTV.
41. Special Requirements / Restrictions:	Negative Amortization - under RESPA, a section 32 loan cannot have negative amortization. Therefore, section 32 loans will not be allowed with these products. Non-arms length transactions are allowed however, verification of down payment and assets to close with tracing documentation is required and the appraiser must be informed of the non-arms length transaction and must address whether or not the market value has been effected.

Cost of Funds Index Program Gidelines

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