10/10/2017

Chenoa 2nd behind an FHA 1st soft or amortized 2nd Issued in conjunction with a FHA 1st TD loan CONFORMING OR HIGH BALANCE 1 or 2 Units allowed – FHA loan limits apply 3.5% Soft Second, or Amortized Second No Borrower Investment Required (with Seller or 3rd party paid Closing Costs) Borrower Paid Comp – max Broker charge is 2.25%; must meet 3% points and fees test. We will advise at submission, as this could change based on loan amount, and fees charged if your loan meets the 3% point and fee test. 10/10/2017

Advantages No borrower investment required Conforming or High Balance No FTHB restriction -No Sale Price Limits- No Homebuyer Class Required FICO Scores down to 620 – see FICO hits on rate sheet. Non-occupant co-borrowers OK on 1 unit only – income not used toward AMI % Income on 2nd unit not counted toward AMI limits; can be used to qualify at 75% Income >115% AMI OK - requires amortized 2nd Income up to or = 115% AMI – soft 2nd with no payments Only Qualifying Income used for AMI calculations DTI per AUS – required DU approval. Add an MCC and increase your buying power (CA only) MCC can only be used toward increasing income for debt ratios (not used in the AMI calculation) 10/10/2017

PROGRAM LOCKING & Program fees borrower paid only PROGRAM LOCKING & Program fees borrower paid only These fees affect the 3% point and fees test. Loan must be locked by 1:00 PM, PST All PTD’s must be cleared before locking. $1095 to Essex Up to 2.25% Broker fee - (unless loan does not meet 3% points and fees test. Program hits, i.e. FICO score and loan amount hits also go toward points and fees. Can have a Contract Processing Fee max $1125 must be approved with Essex, ask how 10/10/2017

Program codes FHA 1ST: 2ND Program Codes Code 3030CH Soft 2nd : 4030CHZ Fully Amortized 30 year 5% rate: 4030CHFR Full amortized 10 year 0% rate: 403CHZR 10/10/2017

Chenoa Fund FHA Overlays Lends in CA, Nevada, Utah, Idaho, Florida, Texas (all states where Essex is lending) 1-2 unit property only (no 3-4 units) (FHA loan limits for the 2nd unit okay.) SFR, PUD, Townhome, Condo, Attached, Detached No Manufactured Homes FICO Score 620 or higher – see price hits on rate sheet 10/10/2017

Chenoa Fund Soft Second Qualifying Income <=115% AMI - see calculation 0% Interest Rate and 30-year Term No Payment Forgiven after 36 consecutive on-time payments on FHA 1st Mortgage. If 1st is paid off in less than 36 payments, the 2nd will require to be repaid Section H of Declarations on 1003 must indicate down payment borrowed, show subordinate 2nd on 1003 10/10/2017

Chenoa Fund amortized Second Qualifying Income > 115% AMI (meaning no income limit ) 10-Year term 0% interest rate; or 30-Year term 5% interest rate Requires monthly payment if you chose Payment must be included in housing ratio Section H of Declarations of 1003 must indicate down payment borrowed, show subordinate 2nd on 1003 10/10/2017

Secondary Financing on 1003 10/10/2017

Declarations page of 1003 10/10/2017

Secondary Financing –DO/DU Page 2-Types, Terms, & Property Page 7-Transaction Details 10/10/2017

Secondary Financing LP 10/10/2017

Calculating Area Median Income Go to the HUD Area Median Income Site. This can be found online at: https://www.huduser.gov/portal/datasets/il.html Select the MOST RECENT fiscal year 10/10/2017

Select the state, select the county, click the button “View County Calculations” 10/10/2017

Always use 4 persons FOR 1-4 Family, over 4 see next page, Always use 4 persons FOR 1-4 Family, over 4 see next page,. this is to get the SOFT 2nd The generic median income number is located on the left-hand side of the results screen under the column heading ‘Median Income’. This result multiplied by 115% is what should be used in most cases. 66,200 X 115% = 76,130 IMPORTANT! 1 to 4 people once over 4 see next page FAMILY SIZE TAKEN FROM 1003. The minimum starts at 4 persons family, ie., family of 2 can use 4 family income. 10/10/2017

Always begin at 1-4 people living in the house,  2 people always use 4, 3 people always use 4.. you get the idea, that’s why 4 is in bold as you begin there J   LOS ANGELES COUNTY here are sample income limits, LA County at min the income limit is 103,615 for 1 to 4 people in household The 1-4 person household very low income is $45,050 x 2= $90,100 and if you multiply that number by 115% the result is $103,615 for a household of 1-4 persons. The 6 person household very low income is $52,300 x 2 = $104,600 and if you multiply that number by 115% the result is $120,290 for a household of 6 persons. The 8 person household very low income is $59,500 x 2 = $119,000 and if you multiply that number by 115% the result is $136,850 for a household of 8 persons 10/10/2017

Next Steps… Process your loan file as usual (upload 1st& 2nd – 2 loan numbers) 1st: FHA guidelines (okay to use FHA submission sheet); submit complete file. 2nd : Submit 1003 with loan amount of 2nd – and submission sheet (nothing else) Advise submission@essexmortgage.com of both loan numbers when uploaded. We approve – We fund! 10/10/2017

Underwriting… FHA Guidelines TRID compliance Industry Standards (example 4506-T (W-2 only ok) LOE for Employment Gaps 30 Days or More 10/10/2017

CD disclosing must follow TRID Closing Disclosure CD disclosing must follow TRID Initial CD must be issued 3 days prior to funding just like the first mortgage and is sent with the final CD and closing documents 10/10/2017