CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS OVERVIEW

CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE Lenders Eligibility guidelines are structured to guide its staff towards making common sense CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE lenders on loans to CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE applicants who may have limited access to credit. These borrower’s situations generally require the lender to consider alternative forms of documenting income and/or compensating factors which offset risk indicated by a recent credit event or elevated debt-to-income ratio. The borrower’s ability to repay must be proven in all instances

CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS LOAN AMOUNTS

CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE ADVANTAGE

Minimum: $100,000

Maximum: $5,000,000 (2 appraisals required, and LTV reductions apply for loan amounts above$1.5MM)

CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS ADVANTAGE ELITE

Minimum: $150,000

Maximum: $5,000,000 (2 appraisals required, and LTV reductions apply for loan amounts above

$1.5MM)

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CALIFORNIA BAD CREDIT TRANSACTION TYPES

PURCHASE CASH-OUT MORTGAGE CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS

Proceeds from the transaction are used to finance the acquisition of the subject property

LTV/CLTV based upon the lessor of the sales price or appraised value

RATE / TERM REFINANCE CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS

Proceeds from the transaction are used to pay off an existing first CASH-OUT MORTGAGE loan and any subordinate loan used to acquire the property.

Any subordinate loan not used in the acquisition of the subject property provided one of the following apply:

Closed end loan, at least 12 months of seasoning has occurred;

HELOC, at least 12 months of seasoning has occurred and total draws over the past

12 months are less than $2,000.

Buying out a co-owner pursuant to an agreement.

Paying off an installment land contract executed more than 12 months from the loan application date.

Cash back in an amount not to exceed the lesser of 2% of the new loan amount or $5,000 can be included in the transaction.

LTV/CLTV based upon the appraised value.

CASH OUT- CALIFORNIA BAD CREDIT CASH OUT CASH-OUT MORTGAGE LENDERS

A refinance that does not meet the definition of a rate/term transaction.

A CASH-OUT MORTGAGE secured by a property currently owned free and clear is considered cash out.

The payoff of delinquent real estate taxes (60-days or more past due) is considered cash out.

A letter explaining the use of loan proceeds required when the cash out exceeds $250,000.

Loans not eligible for cash-out:

o Properties listed for sale in the past 6-months.

See Bad Credit Mortgage Lenders Matrices for cash-out limits.

Cash-Out Seasoning is defined as the difference between application date of the new loan and prior financing note date or date of purchase.

For properties owned 12-months or longer, the LTV/CLV is based upon the appraised value.

If Cash-Out Seasoning is less than (12) months but greater than (6) months the transaction property value is limited to the lower of the current appraised value or the property’s purchase price + documented improvements.

Cash out Seasoning of less than (6) months is not allowed when the prior transaction was also a cash out.

Cash-Out Seasoning of six (6) months or less is allowed with the following restrictions:

o The new loan amount can be no more than the actual documented amount of the borrower’s initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new CASH-OUT MORTGAGE loan subject to the maximum LTV, CLTV, and HCLTV ratios for the cash-out transaction based on the current appraised value.

o The sources of funds for the purchase transaction are documented (such as bank statements, personal loan documents, or a HELOC on another property).

o At least one of the following must exist…

No CASH-OUT MORTGAGE financing was used to obtain the property.

The original purchase transaction is documented by a settlement statement, which confirms that no CASH-OUT MORTGAGE financing was used to obtain the subject property. (A recorded trustee’s deed or similar alternative confirming the amount paid by the grantee to trustee may be substituted for a settlement statement if a settlement statement was not provided to the purchaser at time of sale.).

The preliminary title search or report must confirm that there are no existing liens on the subject property or the existing lien being refinanced was taken out after the property was obtained as evidenced by a copy of the note.

The CASH-OUT MORTGAGE being refinanced was used to purchase the property and has an original term of 24 months or less as evidenced by a copy of the settlement statement and original note.

If the source of funds used to acquire the property was an unsecured loan or a loan secured by an asset other than the subject property (such as a HELOC secured by another property), the settlement statement for the refinance transaction must reflect that all cash-out proceeds be used to pay off or pay down, as applicable, the loan used to purchase the property. Any payments on the balance remaining from the original loan must be included in the debt-to-income ratio calculation for the refinance transaction.

The lender has documented that the borrower acquired the property through an inheritance or was legally awarded the property through divorce, separation, or dissolution of a domestic partnership

DEBT CONSOLIDATION- CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS

Cash out transactions meeting the following additional requirements may be eligible for enhanced LTV’s or pricing, see Product At-A-Glance for specific criteria;

o CASH-OUT MORTGAGE and non-CASH-OUT MORTGAGE debts are paid off and total monthly debt payments are lowered by at least 10%

o Closing costs are recouped within 60-months

o Cash in hand may not exceed $5,000 or 2% of the loan balance

o The closing documents must reflect the paid off debts

ABILITY TO REPAY CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE QUALIFIED CASH-OUT MORTGAGE RULE

CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE lenders will only close loans under the CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE lenders Elite/CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE lenders Advantage Programs that meet the CFPB’s requirements under its Ability-to-Repay (ATR) / Qualified CASH-OUT MORTGAGE Rule, including loans that meet the general ATR requirements and certain higher-priced qualified CASH-OUT MORTGAGE loans with rebuttable presumption liability protection, as prescribed by the applicable regulation.

PREPAYMENT PENALTY= None

CASH OUT REFINANCE FOR CALIFORNIA BAD CREDIT – LISTING SEASONING

For all cash-out refinances, properties previously listed for sale should be seasoned at least 6 months from the listing contract expiration date.

ASSUMABILITY- CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS

Fixed Rate Notes – Are not assumable.

MINIMUM SQUARE FOOTAGE – CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS

SFR: 700 sq. ft.

Condo: 500 sq. ft.

2-4 units: 400 sq. ft. per individual unit

Adjustable Rate Notes – May be assumable based upon the note, in general Fannie Mae Notes contain an assumable clause. In any case, the verbiage in the Note and Closing Disclosure must match.

PROPERTY INSURANCE REQUIRED ON ALL CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LOANS

⦁ COVERAGE REQUIREMENTS

Property insurance for loans must protect against loss or damage from fire and other hazards covered by the standard extended coverage endorsement. The coverage must provide for claims to be settled on a replacement cost basis. Extended coverage must include, at a minimum, wind, civil commotion (including riots), smoke, hail, and

damages caused by aircraft, vehicle, or explosion.

Policies that limit or exclude from coverage (in whole or in part) windstorm, hurricane, hail damages, or any other perils that normally are included under an extended coverage endorsement are not acceptable.

CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE applicants may not obtain property insurance policies that include such limitations or exclusions, unless they are able to obtain a separate policy or endorsement from another commercial insurer that provides adequate coverage for the limited or excluded peril or from an insurance pool that the state has established to cover the limitations or exclusions. Additional requirements apply to properties with solar panels that are leased from or owned by a third party under a power purchase agreement or other similar arrangement.

The insurance coverage should reflect one of the following:

100% of the insurable value of the improvements, as established by the property insurer; or the unpaid principal balance of the CASH-OUT MORTGAGE, if it at least equals the minimum amount—80% of

the insurable value of the improvements—required to compensate for damage or loss on a replacement cost basis. If it does not, then coverage that does provide the minimum required amount must be obtained.

CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS LOAN PRODUCTS

The following loan products are eligible for closing by CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE Lenders

Fully Amortizing

Rate or Note Rate.

o 15 Year Fixed

o 30 Year Fixed

o Qualifying Ratios are based on PITIA payment with the principal and interest payments amortized over the loan term

o 5/1 LIBOR: (2/2/5 Cap Structure)

Qualifying Rate (All Doc Types): Qualify borrower(s) at the greater of the Fully-Indexed

Rate or Note Rate.

o 7/1 LIBOR: (5/2/5 Cap Structure)

Qualifying rate (All Doc Types): qualify borrower(s) at the greater of the Fully-Indexed

CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS UNDERWRITING

CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE Lenders will perform a manual underwrite of the credit file and document the file based upon the criteria contained in this manual. Unless otherwise stated, Fannie Mae definitions, documentation and underwriting guidelines prevail and should be followed. These CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE Lenders Eligibility Guidelines offer guidance regarding the products CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE Lenders will close

ESCROWS -CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS IMPOUND ACCOUNTS

Escrow funds/impound accounts are required to be established for all loans closed by CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE Lenders. Escrows may be established for funds collected by the CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE Lenders, originator or servicer as required to be paid under the security instrument. Escrow funds include, but are not limited to, taxes, insurance (hazard, flood, and CASH-OUT MORTGAGE) premiums, special assessments, ground rents, water, sewer, etc.

SECONDARY CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS FINANCING

Secondary financing must be institutional. CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE lenders must employ reasonable underwriting policies and procedures designed to determine whether the borrower has applied for another credit transaction secured by the same dwelling. Existing secondary financing must be subordinated and recorded or refinanced. HELOC CLTV must be calculated at the maximum available line amount unless the borrower can provide documentation the line of credit is past its draw period.

SEASONING CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS (LOAN AND DOCUMENT)

Underwriting and borrower credit documents may not be more than 90 days seasoned at the Note Date. The Appraisal should be dated no more than 180 days prior to the Note Date.

CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS STATEMENT OF OCCUPANCY

Borrower must acknowledge the intended purpose of the subject property (“Primary Residence” or “Second Home”) by completing and signing the appropriate sections of the “Occupancy Certification” found in Exhibit A of this guide

CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS AUTOMATIC PAYMENT AUTHORIZATION

It is recommended that the borrower execute an assignable Automatic Debit Payment Agreement (ACH) Form. The ACH form should include the bank routing number, account number, and type of account, similar to Exhibit B. An executed Automatic Debit Payment Agreement (ACH), from a U.S. Bank, is required for transactions involving a Foreign National.

CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE APPLICANT CONTACT CONSENT FORM

To assist the loan servicer in contacting the borrower in a timely manner, the originating company is required to obtain a valid phone number for the borrower(s). The phone number can be collected on the 1003 loan application or by using the Borrower Contact Consent Form (Exhibit H) in the Exhibit section of the Guide.

NON WARRANTABLE CONDOMINIUMS CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS

Fannie Mae eligible projects and Non-Warrantable projects allowed.

o The client may review and approve Fannie warrantable projects, a Condo Project Warranty

Certification, similar to Exhibit I must be provided with the loan package.

o Non-warrantable projects must be reviewed by an Bad Credit Mortgage Lenders Due Diligence Partner.

o Site Condos meeting the Fannie definition are eligible for single-family dwelling LTV/CLTV

Bad Credit Mortgage Lenders project exposure maximum shall be $5,000,000 or 15% of project whichever is lower;

Borrower project/unit concentration limit: two (2) units

See Bad Credit Mortgage Lenders Product Matrix for additional LTV/CLTV and Non-Warrantable project limits and guidelines.

NON-WARRANTABLE CONDOMINIUM CASH-OUT MORTGAGE LENDERS APPROVED PROJECTS

Maximum LTV/CLTV: See Product At-A-Glance

Maximum Loan Amount: $1,500,000

Not Available for loans graded C

Require Project Approval by Bad Credit Mortgage Lenders Diligence Partner

NOTE: Stacking of risk is not allowed (Only 1 Non-Warrantable factor per project)

SINGLE OWNER/ INVESTOR ENTITY CONCENTRATION:

Maximum of 25% of project owned by any Single Owner / Investor Entity.

Maximum of 2 units owned by any Single Owner / Investor Entity if the project has fewer than 10 units

ABILITY TO REPAY CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE QUALIFIED CASH-OUT MORTGAGE RULE

Each loan closed must include a completed ATR Borrower Confirmation form, available in the forms section of the system. See EXHIBIT C: Ability-To-Repay Borrower Confirmation for an example in the exhibits section

of this guide.

APPRAISAL CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS REQUIREMENTS

Full Interior / Exterior appraisal required. Fannie Mae/Freddie Mac Forms 1004/70, 1025/72, 1073/465 or 2090 must be used. Correspondents must order appraisals using one of two processes. The appraisal must either be ordered through an Appraisal Management Company that complies with Appraiser Independence Requirements

(AIR), or via the correspondent’s own AIR compliant process. The licensed appraiser is required to perform an interior inspection when completing the appraisal report.

The Appraisal should be dated no more than 120 days prior to the Note Date. After a 120-day period, a CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE lenders re-certification of value is acceptable up to 180-days. After 180-days, a new CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE lenders appraisal report is required.

Not eligible for CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE lenders closing: Properties for which the appraisal indicates condition ratings of C5 or C6 or a quality rating of Q6, each as determined under the Uniform Appraisal Dataset (UAD) guidelines. CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE lenders will consider closing if issue has been corrected prior to loan funding with proper documentation.

CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS SECOND APPRAISAL

A Second Appraisal from a CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE lenders approved AMC is required when any of the following conditions exist. When a second appraisal is provided, the transactions “Appraised Value” will be the lower of the two appraisals. The second appraisal must be from a different company and appraiser than the first appraisal.

Loan Amount exceeds $1,500,000

INELIGIBLE CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS PROPERTY TYPES:

Mixed Use properties;b

Vacant land or land development properties;

Properties not readily accessible by roads that meet local standards;

Properties not suitable for year-round occupancy regardless of location;

Agricultural properties including: farms, ranches, orchards;

Manufactured, Mobile or Modular Homes;

Condo-hotels or co-op/timeshare hotels;

A project that includes registration services and offer rentals of units on a daily, weekly or monthly basis;

Cooperative share loans;

Boarding houses or bed/breakfast properties;

Properties with zoning violations;

Dome or geodesic homes;

Assisted living facilities;

Homes on Indian reservations;

Log homes;

Hawaii properties located in lava zones 1 and/or 2;

Houseboats.

ACREAGE LIMITATIONS – CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS

Maximum 10 acres;

No truncating allowed.

PROPERTY FLIPPING POLICY FOR CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS

For properties purchased by the seller of the property within 6 months of application date where the contract price

exceeds the sellers acquisition price by the following:

⦁ More than a 10% price increase if the seller acquired the property in the past 90 days

⦁ More than a 20% price increase if the seller acquired in the property in the past 91-180 days

Second appraisal required from a CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE lenders Approved AMC, (The second appraisal must be provided to the borrower in accordance with either the ECOA or HPML requirements, whichever applies)

Second appraisal must be dated prior to the acquisition date;

Property seller on the purchase contract must be the owner of record;

Increases in value should be documented with commentary from the appraiser and recent comparable sales.

Sufficient documentation to validate actual cost to construct or renovate (e.g., purchase contracts, plans and specifications, receipts, invoices, lien waivers, etc.)

TITLE VESTING AND OWNERSHIP- CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS

Ownership must be fee simple.

Title must be in the Borrower’s name at time of application for refinance transactions and on closing date for all

transactions.

Acceptable forms of vesting are:

Individuals
Joint tenants
Tenants in common
Inter Vivos Revocable Trust

Land trusts and IRA’s are not eligible for Bad Credit Mortgage Lenders closings.

FULL INCOME CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS
Full Income Documentation is available to CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE applicants who meet the requirements listed below. This documentation option is available to CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE applicants who have experienced recent credit events and allows for higher LTVs for CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE applicants with clean payment histories. This option allows for DTIs that exceed 43% (up to 55%) with appropriate residual income and reserves as compensating factors. Loans exceeding a 43% DTI will be considered Non-QM. Loans with DTIs less than or equal to 43% will be QM with Rebuttable Presumption if all required conditions are met.

FULL INCOME DOCUMENTATION (24 MONTHS) BAD CREDIT MORTGAGE

When tax returns are required, as in the case of investment property ownership, the most recent two years should be provided. The definition of most recent is the last return scheduled to have been filed with the IRS. Any Borrower that applied for a tax return extension must provide a copy of the extension in the credit file along with the prior two years of tax returns.

Wage or Salaried CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE applicants:

o A completed Request for Verification of Employment (Form 1005 or Form 1005(S)), or the borrower’s recent paystub (reflecting 30 days of pay and YTD earnings) and IRS W-2 forms covering the most recent two-year period

o A verbal VOE from each employer within 10-days of the note date

o A completed, signed, and dated IRS Form 4506-T is required for each borrower. The form should be executed and the W-2 transcript for the most recent two-years included in the credit file. Any discrepancies between the two documents should be explained and if necessary additional documentation obtained to satisfactorily address. If tax returns present in the credit file, transcripts for the return will be required.

SELF EMPLOYED CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE DOCUMENATION:

o Most recent two years of tax returns, personal and business if applicable (including all schedules), signed and dated by each borrower.

o A YTD P&L and balance sheet (Borrower prepared acceptable, borrower required to sign both the P&L and Balance Sheet) if a gap exists between the tax return ending date and start of the YTD P&L, a gap year P&L is required,

o A complete, signed, and dated IRS Form 4506-T is required for each borrower and any business entity filing a separate return, the forms should be executed, and the transcripts included in the credit file. The tax returns and transcripts should be compared; any discrepancies should be

explained and if necessary additional documentation obtained to satisfactorily address.

o Verify the existence of the business within 30-days of the note date and ensure the business is active with the following; a letter from either the businesses tax professional certifying 2 years of self-employment in same business, or regulatory agency or licensing Bureau; along with either a phone listing and/or business address using directory assistance or internet search

o The underwriter must consider the financial strength of a self-employed borrower’s business.

FULL INCOME DOCUMENTATION (12 MONTHS) CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS

When tax returns are required, as in the case of investment property ownership, the most recent year should be provided. The definition of most recent is the last return scheduled to have been filed with the IRS. Any Borrower that applied for a tax return extension must provide a copy of the extension in the credit file

along with the prior year tax return.

Wage or Salaried CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE applicants:

o A completed Request for Verification of Employment (Form 1005 or Form 1005(S)), or the borrower’s recent paystub (reflecting 30 days of pay and YTD earnings) and IRS W-2 form for the most recent tax year.

o A verbal VOE from each employer within 10-days of the note date

o A completed, signed, and dated IRS Form 4506-T is required for each borrower. The form should be executed and the W-2 transcript for the most recent year included in the credit file. Any discrepancies between the two documents should be explained and if necessary additional documentation obtained to satisfactorily address. If tax returns present in the credit file, transcripts for the return will be required.

SELF EMPLOYED CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE APPLICANTS:

o Most recent year of tax returns, personal and business if applicable (including all schedules), signed and dated by each borrower.

o A YTD P&L and balance sheet (Borrower required to sign both the P&L and Balance Sheet) if a gap exists between the tax return ending date and start of the YTD P&L, a gap year P&L is required, (Qualifying income is determined from the tax returns, the P&L is used to determine that income is stable)

o Underwriter must consider the financial strength of a self-employed borrower’s business.

OTHER SOURCES OF INCOME FOR CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS

The following sources of income must be verified using Fannie Mae requirements. In addition, Bonus, Commission, and

Overtime only permitted with Full Income (24 Months) documentation.

Bonus
Commission
Overtime
Part-time/Variable (uninterrupted and stable for past two years*)
Retirement
Social security
Investment and Trust
Military or government assistance
Child support and alimony

Rental Income: should be documented through Schedule E of the borrower’s tax returns. If property has not previously been rented, then income will be calculated based on the lower of the lease agreement or 1007 times 75% for single unit property or 70% for 2-4-unit property.

A period of two years must be used in calculating the average overtime, bonus, and commission income. If either type of income shows a continual decline, written justification on the income worksheet must be provided, or income should not be used. For Part-time employment, a minimum two (2) year history is required however a shorter period, of no less than twelve (12) months, may be considered case-by-case if positive factors are present to offset shorter history.

WRITTEN VERIFICATION OF EMPLOYMENT REQUIREMENTS FOR CALIFORNIA BAD CREDIT CASH-OUT MORTGAGE LENDERS

A written Verification of Employment may be utilized when the only source of earnings is wages/salary.

⦁ Two year history with the same employer is required

⦁ Completed FNMA Form 1005

⦁ Minimum credit

⦁ Bad Credit Mortgage Lenders Elite – 660

⦁ Bad Credit Mortgage Lenders Advantage – 620 (Minimum credit grade “A”)

⦁ 24 month 0x30 housing history required.

⦁ Paystubs, Tax Returns, 4506-T, or W-2’s not required.

⦁ Max LTV 80% for purchase/R&T of owner occupied home only. Max LTV for C/O is 70%.

⦁ Must be completed by Human Resource, Payroll Department or Officer of the Company

⦁ 2 months Personal Bank Statements required to support the WVOE. Monthly deposits must support at least 65% of reported income is deposited into borrower’s account after accounting for tax and insurance withholdings

⦁ FTHB maximum LTV 70%, No gift funds allowed

⦁ An internet search of the business is required with documentation to be included in the credit file to support the existence of the business

FHA mortgage lenders requirements regarding 30,60,90,120 days late payments?
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