MyCommunity Mortgage for Housing Finance Agencies Sheryl Krocek, Presenter U.S. Bank Home Mortgage – MRBP Division January 24, 2005

What is MyCommunityMortgage™ (MCM)? MCM is Fannie Mae’s affordable lending product developed to serve low and moderate-income communities and borrowers. Options include:  Community Solutions TM (for education employees)  Community HomeChoice TM  Section 8 for Homeownership Options include:  Community Solutions TM (for education employees)  Community HomeChoice TM  Section 8 for Homeownership MCM can help you: Say “yes” to more borrowers Reach a broader audience of borrowers with the standard MCM product plus options for additional flexibilities

MCM for Housing Finance Agencies An affordable, Conventional Mortgage for HFAs Offers a wide range of flexibilities Available within or outside of HFAs’ MRB programs

Conventional product for HFA programs MyCommunityMortgage flexibilities Underwriting available through DU MCM for Housing Finance Agencies Lender Benefits

Affordable, flexible product may be combined with HFA programs, such as down payment assistance LTVs up to 100% MCM for Housing Finance Agencies Consumer Benefits

MyCommunityMortgage™ makes it easier than ever to afford a home of your own. You need as little as $500 from your own funds (remaining necessary funds can come from a variety of sources including gifts; grants; loans from relatives or nonprofit groups; employer-assisted housing; or a secured loan from a lender). With MyCommunityMortgage™, your lender will work with you to consider all types of income and credit histories to help you qualify for the mortgage that you need. An Affordable, Flexible Mortgage

Is This Mortgage Right for You? If any of these situations describes you, MyCommunityMortgage might be a good fit: You have limited savings for a down payment and/or closing costs You do not have a “traditional” credit history, but can show other ways that you have handled credit well, such as paying rent You receive rent payment from boarders, or income from government benefits, or other sources

MCM: Eligibility Parameters Loan PurposePurchase Product Types 30-year fixed rate Eligible Properties One-unit owner-occupied only (condos are allowed) Home Buyer Education Home-buyer education is required for all buyers Underwriting Eligible for Manual Underwriting For DU, Approve/Eligible, EA-I/Eligible, and EA-II/Eligible  Nontraditional credit accepted, but for DU, at least one borrower must have a traditional credit history as determined by DU  Credit and income-source flexibilities available, including boarder income from non-relatives

MCM: Eligibility Borrower Income and Purchase Price Eligibility Borrowers must meet both income and purchase price limits set by the HFA LTV/CLTV and Subordinate Financing 100%/105% w/Community Seconds ® ; 100%/100% w/ subordinate financing (non–Community Seconds) if allowed by the HFA Minimum CLTV for DU underwriting: 95% No minimum CLTV for manual underwriting Financed MI permitted with LTV up to 100% including the financed MI (1-unit only) Minimum Borrower Contribution $500 from borrower’s own funds MI Coverage as of 7/24/ % %: 20% 85.01% - 90%: 12% 95.01% - 97%: 18% 80.01% - 85%: 6% 90.01% - 95%: 16% Seller Contribution3% interested party contribution allowed for closing costs and prepaid items only

Counseling Requirements Pre-Purchase Counseling is required for all home buyers, utilizing one of the following forms of pre-purchase counseling: Face-to-face home-buyer education Classroom or workshop sessions Telephone/Internet education/counseling program by an approved mortgage insurer sponsored by the lender Early Delinquency Counseling MUST BE IN PLACE!!

Enhancements Effective July 2005 Lower minimum required mortgage insurance coverage – highest rate of 20 percent Cash-on-Hand added as an acceptable source of funds for closing costs and down payment New Fannie Mae collections policy applied for loans underwritten through Desktop Underwriter (DU ® )

Example of Borrower Savings $100,000 loan, 100% LTV, 5.65% interest rate, 30-year fixed-rate 20% MI35% MI MI Standard Rate MI monthly payment*$49$80 Monthly savings: $31 Income to qualify assuming 43% housing ratio: $22,132$22,993 MI A– Rate, 619 FICO ® MI monthly payment*$114$157 Monthly savings: $43 Income to qualify assuming 43% housing ratio: $23,946$25,132 * Assumes application of commonly available Standard or A- MI rates as of May 2005; particular rate subject to MI company requirements. Example is for illustration only and reflects just one of the interest rates commonly used under HFA bond programs. Hypothetical example of borrower savings, 20% vs. 35% MI coverage:

Cash-on-Hand as Income Source Borrowers may use cash-on-hand for the down payment and closing costs, subject to specific criteria –Limited to one-unit, principal residences Cash-on-hand funds will not be used to calculate reserves (if reserves are required) DU will use the “Cash-on-Hand” amount to calculate the available funds to close

Cash-on-Hand as Income Source (continued) The lender must verify/document the following: Borrower customarily uses cash for expenses; usage is consistent with previous payment practices. Borrower's credit report indicates limited (or no) use of credit, and no depository relationship. Borrower must provide signed statement disclosing the source of funds (and that they were not borrowed). The borrower must deposit with a financial institution at the time of application, or no less than 30 days before closing, funds sufficient for the down payment and closing costs.

New Fannie Mae Collections Policy Collections: New Fannie Mae collections policy applies to MCM loans underwritten through DU. Requires payoff only if collections exceed $5,000 Must be submitted through DU – manually underwritten loans are ineligible

Sources of Additional Funds into Transaction Down payment in excess of minimum required borrower contribution (the down payment “gap”) may consist of: –Gift from a relative –HFA down payment assistance program subsidy –Unsecured or secured loan or grant from employer, city, county, nonprofit organization –Loan secured against asset owned by borrower –Proceeds from Individual Development Accounts (IDAs)

What are borrower options? Underwriting guidelines used in conjunction with the basic MCM platform to provide additional flexibility for targeted borrowers. – They are not separate products. When underwriting an MCM mortgage, how can the options be used? – To use the options, first qualify the borrower for the standard MCM, then determine eligibility for the desired option. – Some flexibilities require manual underwriting, while some can be done in DU. MCM: Borrower Options

Summary of MCM Options OptionDescription Community Solutions Borrower Option for teachers, police officers, firefighters, and health care workers Community HomeChoice Borrower Option for a borrower with a disability or a family member with a disability Section 8 for Homeownership Section 8 housing choice vouchers may be used as qualifying income Native AmericanFor any eligible properties on tribal trust or restricted lands

Using Desktop Underwriter Desktop Underwriter supports most MyCommunityMortgage loans MCM permitted for Approve-Eligible along with EA Levels I and II only, with appropriate messaging Standard Loan Level Price Adjustments (LLPAs) for EA Levels I and II do not apply for MCM in most cases Lenders must be approved/activated to offer MCM through DU, and there is an annual volume allocation for MCM* *Loans originated under MRB programs do not affect the lenders allocation. The allocation affected is that of the Master Servicer purchasing the bond loan.

Lender Access to DU 1.Access to DU, MCM, with EA I & II – full access 2.Access to DU, MCM, but does not have the MCM, EA I & II module 3.Approved Fannie Mae Seller with no access to DU Types of Desktop Underwriting Access:

Access to DU, MCM, with EA I & II – full access Lender inputs information into DU as a Community Lending Product and selects MCM – DU will report findings. Lender receives the benefit of Fannie Mae’s Reps and Warrants on the automated decision Lender Access to DU

Access to DU, MCM, but does not have the MCM, EA I & II module –Some institutions offer their services to run your loan through their DU system and report findings to the lender for a small charge

Approved Fannie Mae Seller with no access to DU or no Authorized Underwriters Lenders may sign up to become a Correspondent of a lender utilizing the DU MCM EA I & II system Lender Access to DU

For more information on MyCommunityMortgage, Visit Information Source: Fannie Mae and