1. FHA Training Hope For Homeowners December 2008

2. Housing and Economic Recovery Act of 2008 Hope for Homeowners Overview  A temporary program to assist struggling homeowners remain in their homes by refinancing to a safe and affordable FHA insured mortgage  Program oversight  Secretaries of Treasury and HUD  Chairpersons of Board of Governor’s for Federal Reserve and Board of Directors of the FDIC

3. Hope for Homeowners Overview (Cont.)  Built on five principles Long term affordability – ability to repay No investor/lender bailout No windfall for borrower’s new equity shared with FHA Voluntary participation by lenders Restore confidence and liquidity to mortgage market

4. Hope for Homeowners Overview (Cont.)  Participation by lenders in program is voluntary  Existing lien-holder(s) must accept proceeds of new FHA loan as satisfaction of all existing liens  All penalties and fees related to default or delinquency must be waived or forgiven On existing loans By existing lenders

5. Hope for Homeowners Program Guidelines  Implementation date October 1, 2008  Expiration date September 30, 2011 Maximum loan-to-value  96.5% if debt ratios </= 31%/43%  90% if debt ratios > 31%/43%  Includes Up-Front MIP  Includes closing costs

6. 6 Hope for Homeowners Program Guidelines (Cont.)  Existing mortgage must have originated on or before January 1, 2008  Owner-occupant only  Borrower may not own or have interest in any other property Second homes Rental property Co-borrower or co-signer on other property

7. Hope for Homeowners Program Guidelines (Cont.)  Current housing debt must be > 31% as of 3/1/08  New FHA-insured mortgage may not exceed $550,400 (132% of 2007 conforming loan limit)  New FHA-insured mortgage must be a fixed rate  New FHA-insured mortgage may be 30 or 40 year term based on affordability 7

8. 8 Hope for Homeowners Program Guidelines (Cont.)  Debt ratios may not exceed 96.5% Loan To Value  31% Housing (PITI & Monthly Mortgage Insurance)  43% All Debt (PITI, MMI, and consumer debt)

9. Hope for Homeowners Program Guidelines (Cont.)  Debt ratios may not exceed 90% Loan-To-Value  38% Housing (PITI & Monthly Mortgage Insurance  50% All Debt (PITI, MMI, and consumer debt) 9

10. Hope for Homeowners Program Guidelines (Cont.)  Compensating factors not applicable 96.5 or 90% Loan-to-Value  Board has option to amend Already amended once  90% maximum to 96.5  Based on debt ratios Board may amend again in future 10

11. 11 Hope for Homeowners Program Guidelines (Continued)  Borrower(s) must certify They did not intentionally default on the existing mortgage(s) They did not knowingly provide false information for the existing mortgage(s)  To be signed twice (at time of application and at closing)

12. Hope for Homeowners Program Guidelines (Continued)  Income must be documented Most recent two years tax returns Mortgage may not exceed reasonable ability of borrower to make payments Underwriter will review income to determine if borrower qualified for current loan based on actual income 12

13. 13 Hope for Homeowners Mortgage Insurance Premiums  Upfront mortgage insurance premium 3%  Annual mortgage insurance premium 1.5% of outstanding loan balance

14. 14 Hope for Homeowners Shared Equity with FHA  FHA shares initial equity 10% initial equity is 100% to FHA  Decreases 10% per year throught the 5 th year  FHA then holds 50% of initial 10% equity until paid off  Borrower may be able to buy out this initial equity at some time in the future, but no sooner than 12 months  FHA will not subordinate to any future subordinate financing

15. Hope for Homeowners Shared Appreciation With FHA  As a condition of the H4H loan FHA shares in all future appreciation Share is 50/50 between FHA and borrower  Does not change over time  No amount caps  Shared appreciation cannot be paid off except  Sale or disposition of property 15

16. Hope for Homeowners Shared Appreciation With FHA Borrower may be able to borrower 50% of their 50% appreciation plus a percentage of any capital improvements  No earlier than five years from the date of the H4H mortgage FHA will not subordinate to any future subordinate financing 16

17. Hope for Homeowners Shared Appreciation With FHA  Current junior lienholders only may also be able to share in future appreciation Board established standards for sharing future appreciation Induce subordinate liens to exit the property now so borrower can retain home Ranges from 9% to 12% on the dollar Paid to junior lienholder in future  At time of sale or disposition of property  Board may amend 17

18. Final Notes on Hope for Homeowners  This is a loss mitigation tool only  Originators can only earn a maximum of 1% origination fee No miscellaneous fees allowed  Administration, YSP, underwriting, processing, etc.  Borrower may be subject to tax liability Debt forgiveness 18

19. Final Notes on Hope for Homeowners  Lender must evidence borrower made first payment from own funds before FHA will insure Cannot be funded at time of close and held by escrow  FHA will not pay claim in the event of first payment default  Ginnie Mae pool to sell loan to recently established Rates expected to be 8.5% - 9% 19