Everything You Wanted to Know to Secure 100% and HIGHER Financing for Your Clients in a Declining Market but Were Afraid to Ask — Including 2nd Homes & Investment Properties!!!

FHA LOANS

WHAT IS FHA? Federal Housing Administration (division of HUD) Federal Housing Administration (division of HUD) Any and all changes are legislated-no major changes can be made without going through Congress Any and all changes are legislated-no major changes can be made without going through Congress Insures/endorses loans – does not purchase them Insures/endorses loans – does not purchase them Pays lender if borrower defaults Pays lender if borrower defaults

WHO CAN DO FHA LOANS? Only originators with FHA – Approved Company Only originators with FHA – Approved Company Approval is difficult Approval is difficult 1. Must have audited financial statements 2. Quality Control Plan 3. Store Front Operation

IT’S THE GOVERNMENT! They are so busy they are not even answering the phone in their lender – approval department They are so busy they are not even answering the phone in their lender – approval department 60 days behind on opening their mail 60 days behind on opening their mail Pays for itself – doesn’t use taxpayer money Pays for itself – doesn’t use taxpayer money Funded through the Mortgage Insurance Premiums Funded through the Mortgage Insurance Premiums (1.5% up front,.5% per month) (1.5% up front,.5% per month)

FHA MORTGAGE LIMITS Walton County - $362,790 Walton County - $362,790 Okaloosa County - $312,500 Okaloosa County - $312,500 Bay County - $396,250 Bay County - $396,250 Higher limits for 2-4 family residences Higher limits for 2-4 family residences (Great rates - buyer must occupy one of them!) (Great rates - buyer must occupy one of them!)

REASONS NOT TO USE FHA FOR A BUYER FHA loans are for owner-occupied, primary residences only FHA loans are for owner-occupied, primary residences only Buyer must occupy the property within 60 days of closing and use for primary home for at least a year Buyer must occupy the property within 60 days of closing and use for primary home for at least a year Highly enforced Highly enforced

MORE REASONS NOT TO USE FHA Full-doc loan – have to verify income for 2 years Full-doc loan – have to verify income for 2 years Files are much thicker due to additional documentation required Files are much thicker due to additional documentation required Always has mortgage insurance for at least 5 years even with 20% or more down Always has mortgage insurance for at least 5 years even with 20% or more down

FHA IS FILLED WITH GOVERNMENT RULES, EXCEPTIONS, AND EXCEPTIONS TO THE EXCEPTIONS

FHA IS OFTEN THE BEST FOR YOUR CLIENT Assumable loan – new borrower has to qualify Assumable loan – new borrower has to qualify Geared for borrowers with little to no money Geared for borrowers with little to no money No prepayment penalty No prepayment penalty Better rates, especially for higher LTV’s Better rates, especially for higher LTV’s Very little risk-based pricing Very little risk-based pricing Lower monthly MI for higher LTV’s Lower monthly MI for higher LTV’s No hit for declining market! No hit for declining market!

FHA APPRAISALS AND UNDERWRITING Processing has been streamlined Processing has been streamlined Automated underwriting Automated underwriting Appraisal requirements have been greatly relaxed Appraisal requirements have been greatly relaxed Some minor repairs no longer require automatic repair in order to close Some minor repairs no longer require automatic repair in order to close

FHA AND CREDIT Far more lenient than FNMA or FHLMC and MI companies Far more lenient than FNMA or FHLMC and MI companies 500 minimum score if financing above 90% 500 minimum score if financing above 90% No minimum if less than 90% (although almost impossible to find investors taking credit scores less 580!) No minimum if less than 90% (although almost impossible to find investors taking credit scores less 580!) Rate is not increased for lower credit score – Rate is not increased for lower credit score – everybody is equal everybody is equal Can use alternative credit – 3 trade lines, one of which is housing related Can use alternative credit – 3 trade lines, one of which is housing related Can do an FHA loan 2 Years after a Chapter 7 Bankruptcy Can do an FHA loan 2 Years after a Chapter 7 Bankruptcy (1 year under extenuating circumstances) (1 year under extenuating circumstances) In many cases, collections are not required to be paid off prior to closing In many cases, collections are not required to be paid off prior to closing

HOT FEATURES OF FHA 3% down payment 3% down payment Source of funds – 6% seller concessions Source of funds – 6% seller concessions All funds can be gifted All funds can be gifted No reserve requirements No reserve requirements 2 nd loan from immediate family okay 2 nd loan from immediate family okay Cookie jar or mattress money okay! Cookie jar or mattress money okay! Can use down payment assistance Can use down payment assistance (seller can help with this) to get 100% financing (seller can help with this) to get 100% financing

EVEN HOTTER FEATURES Non-occupant co-borrowers can be used Non-occupant co-borrowers can be used Neither income nor assets from the occupying borrower are required if non-occupant co-borrower used Neither income nor assets from the occupying borrower are required if non-occupant co-borrower used 95% cash-out refinance even in declining market (must be owner-occupied for the prior 12 months to do this) 95% cash-out refinance even in declining market (must be owner-occupied for the prior 12 months to do this) No income limits No income limits With lower credit scores, in some cases payment is lower than Fannie or Freddie even with over 20% down With lower credit scores, in some cases payment is lower than Fannie or Freddie even with over 20% down Seller not *required* to pay any of the closing fees anymore! Seller not *required* to pay any of the closing fees anymore!

NEW RULES – JULY 14, 2008 Risk based MI, but not rates Risk based MI, but not rates FHA Secure is expanded – will no longer have to be delinquent to qualify FHA Secure is expanded – will no longer have to be delinquent to qualify

POSSIBLE CHANGES, DEPENDING ON LEGISLATION New loan limits are set to expire on New loan limits are set to expire on December 31, 2008 December 31, 2008 Back to how it was before Back to how it was before FHA Secure expires FHA Secure expires December 31, 2008 December 31, 2008 FHA Modernization Act (HR1872) – passed the house 9/18/07 – up to 100% financing available FHA Modernization Act (HR1872) – passed the house 9/18/07 – up to 100% financing available Senate Bill – passed 98.5% max financing and increase loan limits permanently Senate Bill – passed 98.5% max financing and increase loan limits permanently

QUESTIONS?

VA LOANS

WHAT IS VA? The Department of Veterans Affairs The Department of Veterans Affairs Government regulated and endorsed Government regulated and endorsed Government guarantees portion of loan Government guarantees portion of loan

WHO CAN DO VA LOANS? Only originators with Only originators with VA –Approved Company VA –Approved Company

VA MORTGAGE LIMITS $417,000 for 2008 $417,000 for 2008 ($625,000 for Hawaii, Alaska, Guam & Virgin Islands) ($625,000 for Hawaii, Alaska, Guam & Virgin Islands) Only U.S. properties, it’s territories or possessions Only U.S. properties, it’s territories or possessions

WHO QUALIFIES FOR VA? Retired U.S. Veterans with Certificate of Eligibility Retired U.S. Veterans with Certificate of Eligibility Active Duty with proof of military service Active Duty with proof of military service Unmarried surviving spouse of veteran deceased from service- related death Unmarried surviving spouse of veteran deceased from service- related death

VA UNDERWRITING Automated Underwriting Automated Underwriting Flexible Manual Underwriting Flexible Manual Underwriting Speedy process because most information for Speedy process because most information for eligibility can be obtained online eligibility can be obtained online

VA & CREDIT Rates are typically lower Rates are typically lower No minimum score requirement for eligible veterans No minimum score requirement for eligible veterans Most lenders/investors will require a minimum 580 Most lenders/investors will require a minimum 580 Rate does not increase/decrease because of credit score Rate does not increase/decrease because of credit score Can be approved for VA 2 years after Chapter 7 Bankruptcy (1 year in extenuating circumstances) Can be approved for VA 2 years after Chapter 7 Bankruptcy (1 year in extenuating circumstances)

REASONS TO NOT USE VA VA loans are owner-occupied only VA loans are owner-occupied only Buyer must occupy the property within 60 days of closing and use for primary home Buyer must occupy the property within 60 days of closing and use for primary home Remarried spouse of deceased veteran is not eligible Remarried spouse of deceased veteran is not eligible Full-doc loan requirements Full-doc loan requirements

HOT FEATURES OF VA LOANS Negotiable interest rates Negotiable interest rates All funds can be gifted All funds can be gifted No Monthly MI No Monthly MI No down payment unless required by lender No down payment unless required by lender Reduced fees if put 5% down Reduced fees if put 5% down Able to finance funding fees into the mortgage Able to finance funding fees into the mortgage May use non-veteran 2 nd party income to help qualify (only the veteran’s portion is secured) May use non-veteran 2 nd party income to help qualify (only the veteran’s portion is secured)

QUESTIONS?

RURAL DEVELOPMENT

WHAT IS RURAL DEVELOMENT? Census-based Census-based US Department of Agriculture US Department of Agriculture Guaranteed against loss by USDA Guaranteed against loss by USDA Pays lender if borrower defaults Pays lender if borrower defaults

WHO CAN DO USDA LOANS? Approved lender with HUD, VA, Fannie Mae or Freddie Mac Approved lender with HUD, VA, Fannie Mae or Freddie Mac State Housing Agency State Housing Agency Farm Credit Service Farm Credit Service

IT’S THE GOVERNMENT, TOO! Pays for itself – doesn’t use taxpayer money Pays for itself – doesn’t use taxpayer money Funded through the 2% Funding Fee Funded through the 2% Funding Fee (which can be financed into the loan!) (which can be financed into the loan!)

LOAN PURPOSE Purchase new construction Purchase new construction Purchase existing home Purchase existing home Refinance (only if currently have a direct Rural- Development Loan) Refinance (only if currently have a direct Rural- Development Loan) Purchase Mobile Home (very limited; difficult) Purchase Mobile Home (very limited; difficult)

REASONS TO NOT USE RURAL DEVELOPMENT FOR A BUYER Geographical Limitations Geographical Limitations Maximum Income limitations Maximum Income limitations Can’t buy house with in-ground pool Can’t buy house with in-ground pool Owner-occupied only Owner-occupied only

INCOME QUALIFICATIONS Household adjusted annual income cap uses ALL occupants whether on the loan or not, that are 18 and over Household adjusted annual income cap uses ALL occupants whether on the loan or not, that are 18 and over Counts gross income, overtime, commission, bonuses, net self-employment income, Social Security, Child Support, unemployment, etc. Counts gross income, overtime, commission, bonuses, net self-employment income, Social Security, Child Support, unemployment, etc. Based on family size & county where property is located Based on family size & county where property is located

ADJUSTMENTS TO INCOME $480/Year per minor or full-time student $480/Year per minor or full-time student Verified child care expenses Verified child care expenses $400/Year if borrower or co- borrower is over 62 or disabled $400/Year if borrower or co- borrower is over 62 or disabled

Counties 1- person 2- person 3- person 4- person 5- person 6- person 7- person 8- person All Florida & Virgin Island Counties EXCEPT those listed below* 49,55056,60063,70070,75076,40082,05087,75093,400 Clay, Duval, Nassau and St. Johns 51,40058,75066,10073,45079,35085,20091,10096,950 Collier56,20064,25072,25080,30086,70093,15099,550106,000 Palm Beach 55,70063,65071,60079,95085,90092,30098,650105,000 Gadsen, Jefferson and Leon 50,00057,15064,30071,45077,15082,90088,60094,300 Okaloosa50,85058,10065,40072,65078,45084,25090,10095,900 * Broward, Pinellas and Monroe are NOT eligible

GEOGRAPHICAL QUALIFICATIONS ALL of Walton County ALL of Walton County Destin Destin Niceville Niceville Valparaiso Valparaiso Crestview Crestview West of Hurlburt in Okaloosa County West of Hurlburt in Okaloosa County ALL of Santa Rosa County ALL of Santa Rosa County

GEOGRAPHICAL LIMITATIONS FT. WALTON BEACH &SHALIMAR DO NOT QUALIFY* (But we have a program that does!)

BENEFITS TO BUYERS Can finance 102% of appraised value, without getting cash back at closing (can get EMD, but no more) Can finance 102% of appraised value, without getting cash back at closing (can get EMD, but no more) No Mortgage Insurance No Mortgage Insurance 30-Year fixed rate with very competitive rates 30-Year fixed rate with very competitive rates No loan limits (DTI/income limitations) No loan limits (DTI/income limitations) Closing costs can be financed Closing costs can be financed Unlimited gift or seller contributions Unlimited gift or seller contributions No reserves required No reserves required

Sales Price: Appraisal: Seller Paying: EMD: Closing/Prepaids 2% Funding Fee: $100,000 $110,000 $0 Closing Costs $500 $3,000/$2,000 $2,000 Can Finance: $107,000 and get $500 EMD back

Sales Price: Appraisal: Seller Paying: EMD: 2% Funding Fee: $100,000$105,000 ALL Closing/Ppds. $500$2,000 Can Finance: $102,000 and get $500 EMD back

QUALIFYING Debt to Income Ratios = 29/41 Debt to Income Ratios = 29/41 Debt to Income Ratios = 31/43 Debt to Income Ratios = 31/43 (for homes built after January, 2001) (for homes built after January, 2001) Can go higher on DTI w/compensating factors: Can go higher on DTI w/compensating factors: 660+ Credit Score 660+ Credit Score Zero or little payment shock Zero or little payment shock 2+ years continuous employment at same job 2+ years continuous employment at same job Rental/Housing history for 12 months required if credit score 619 or less (cancelled checks) Rental/Housing history for 12 months required if credit score 619 or less (cancelled checks)

OTHER CRITERIA Do not own a dwelling currently Do not own a dwelling currently Lack sufficient resources to secure conventional credit Lack sufficient resources to secure conventional credit US Citizen, Permanent Resident, Resident Alien, or Qualified Alien US Citizen, Permanent Resident, Resident Alien, or Qualified Alien Have legal capacity to enter contract Have legal capacity to enter contract Primary Residences Only Primary Residences Only

PROPERTY ELIGIBLITY Must have access from a street, road or driveway Must have access from a street, road or driveway Site value less than or equal to 30% of total value Site value less than or equal to 30% of total value Leasehold estates (where applicable) Leasehold estates (where applicable)

OTHER PROPERTY REQUIREMENTS If on a well & septic, must be tested and meet county requirements If on a well & septic, must be tested and meet county requirements Pest inspection required – deficiencies must be corrected Pest inspection required – deficiencies must be corrected Escrow for repairs under certain limited circumstances and will be 150% of cost Escrow for repairs under certain limited circumstances and will be 150% of cost New construction – must have warranty New construction – must have warranty

FUNDS AVAILABLE RD Has annual amount of funds RD Has annual amount of funds (ends Sept. of current year) (ends Sept. of current year) Funds must be reserved by the lender Funds must be reserved by the lender but can’t be until there is a contract but can’t be until there is a contract Reservation is valid for 60 days Reservation is valid for 60 days Have been known to run out before Have been known to run out before end of fiscal year (not recently) end of fiscal year (not recently)

QUESTIONS?

FLORIDA KEYS to HOME PROGRAM

WHAT IS THE KEYS TO HOME PROGRAM? Serves diverse population of low- to moderate- income borrowers and communities Serves diverse population of low- to moderate- income borrowers and communities Entire state of Florida is eligible - no geographic restrictions placed Entire state of Florida is eligible - no geographic restrictions placed Not a bond program Not a bond program No 1 st time buyer requirement No 1 st time buyer requirement No recapture tax required to be repaid No recapture tax required to be repaid Limited Forms/thinner file Limited Forms/thinner file Purchase of primary home only Purchase of primary home only

WHAT TYPE OF FINANCING IS AVAILABLE? 1 st /2 nd combo (2 loans), but only one payment is made 1 st /2 nd combo (2 loans), but only one payment is made 1 st up to 97% is combined with 2 nd up to 7% 1 st up to 97% is combined with 2 nd up to 7% for a total of 104% total financing – based on contract price, not appraised value for a total of 104% total financing – based on contract price, not appraised value Can go 105% if financing the MI Can go 105% if financing the MI 30-year or 40-year fixed or 5/1 or 7/1 ARM 30-year or 40-year fixed or 5/1 or 7/1 ARM Will have mortgage insurance on the 1 st mortgage Will have mortgage insurance on the 1 st mortgage 2 nd mortgage is 20-year fixed rate at 7% 2 nd mortgage is 20-year fixed rate at 7% Can use 2 nd to pay closing costs & pre-paids or reduce amount of the first so mortgage insurance is less monthly Can use 2 nd to pay closing costs & pre-paids or reduce amount of the first so mortgage insurance is less monthly

CREDIT/ DEBT TO INCOME RATIO 600 score required for 97% 1 st mortgage 600 score required for 97% 1 st mortgage Subject to approval by Mortgage Insurance company Subject to approval by Mortgage Insurance company 640 required for 2-unit property. (Home-buyer counseling required for 2- unit purchase) 640 required for 2-unit property. (Home-buyer counseling required for 2- unit purchase)

INCOME REQUIREMENTS Determined by county in which the property is located Determined by county in which the property is located Only counts income for person(s) on the loan, not the entire household Only counts income for person(s) on the loan, not the entire household No non-occupant co- borrowers/co-signers allowed No non-occupant co- borrowers/co-signers allowed

RESERVES/ SELLER CONTRIBUTIONS No minimum reserve requirement No minimum reserve requirement 3% seller contributions allowed 3% seller contributions allowed Buyer can get in with no cash contribution as 2 nd can be used for pre-paids & closing costs Buyer can get in with no cash contribution as 2 nd can be used for pre-paids & closing costs

QUESTIONS?

IS 100% FINANCING REALLY AVAILABLE FOR 2ND HOME & INVESTMENT PURCHASES? YES!!!

CO-COLLATERALIZED LOANS

WHAT IS A CO-COLLATERALIZED LOAN? A loan where the Lien (note) is on more than one property A loan where the Lien (note) is on more than one property

HOW DOES IT WORK? Borrower uses “lendable equity” in another property in lieu of down payment on purchase of subject property Borrower uses “lendable equity” in another property in lieu of down payment on purchase of subject property Lendable equity equals value of additional property Lendable equity equals value of additional property x 75% less total of all liens (mortgages (1 st and 2 nd ) and equity lines) x 75% less total of all liens (mortgages (1 st and 2 nd ) and equity lines) Additional property would have a “soft” 2 nd, or even 3 rd, mortgage on it Additional property would have a “soft” 2 nd, or even 3 rd, mortgage on it

EXAMPLE Purchasing 2 nd home at $200,000 Purchasing 2 nd home at $200,000 Max total LTV for both properties would be 75% Max total LTV for both properties would be 75% Lendable Equity is: Lendable Equity is: $600,000 x 75% - $350,000 = $100,000 to use in lieu of down payment $600,000 x 75% - $350,000 = $100,000 to use in lieu of down payment This would work!

HOW MUCH CAN I REALLY BORROW? The total value of all properties (value + sales price) x 75% Purchase price is $200,000 & value of additional property is $600,000. Current loan on additional property is $350,000 and want to borrow 100% ($200,000) of sales price. Purchase price is $200,000 & value of additional property is $600,000. Current loan on additional property is $350,000 and want to borrow 100% ($200,000) of sales price. Total owed on both after closing would be $550,000 with total value of $800,000 (value + purchase price) Total owed on both after closing would be $550,000 with total value of $800,000 (value + purchase price) $800,000 x 75% = $600,000 max loan amount $800,000 x 75% = $600,000 max loan amount This is more than the new loan + current lien, so it works!

HOW CAN I SELL ONE PROPERTY & NOT THE OTHER? Partial release clause – must pay mortgage down to where loan to value on remaining property is 75% must pay mortgage down to where loan to value on remaining property is 75%

QUESTIONS?

PLEDGED ASSET LOANS ( PAL )

WHAT IS A PAL & WHAT ARE THE BENEFITS? Allows up to 100% financing of the subject property Allows up to 100% financing of the subject property Pledge eligible assets and eliminate the need to liquidate assets in order to obtain cash for down payment Pledge eligible assets and eliminate the need to liquidate assets in order to obtain cash for down payment Avoid capital gains associated with a liquidation Avoid capital gains associated with a liquidation Maintain a more liquid position Maintain a more liquid position Continue to benefit from any future earned interest, appreciation or dividends Continue to benefit from any future earned interest, appreciation or dividends

WHAT ARE ELIGIBLE ASSETS? Stocks listed on NYSE, AMEX or NASDAQ Stocks listed on NYSE, AMEX or NASDAQ with share price of $5 or higher with share price of $5 or higher US Dollar– denominated mutual funds US Dollar– denominated mutual funds Interest-paying corporate debt Interest-paying corporate debt (Moody’s or S&P rated) (Moody’s or S&P rated) Municipal zero coupon debt Municipal zero coupon debt (Moody’s or S&P rated) (Moody’s or S&P rated) Bills, notes or bonds guaranteed by US Government Bills, notes or bonds guaranteed by US Government Debt securities issued by Government Sponsored Debt securities issued by Government Sponsored Enterprises or Agencies of the US Government Enterprises or Agencies of the US Government Mortgage pass-through certificates issued by Mortgage pass-through certificates issued by FNMA, FHLMC or GNMA FNMA, FHLMC or GNMA CD’s CD’s Money Market Funds Money Market Funds Cash Accounts Cash Accounts

WHAT ARE NOT CONSIDERED TO BE ELIGIBLE ASSETS? Options Options Warrants Warrants Stocks purchased on margin Stocks purchased on margin IRA or 401(k) plan IRA or 401(k) plan Shares held in an account less than 30 days Shares held in an account less than 30 days

We will now go over the handouts given to show examples on the Pledged Asset Loan

HOW DOES MY CLIENT DO THIS? Client provides proof of the asset Client provides proof of the asset Completes Pledged Asset Worksheet & agreement Completes Pledged Asset Worksheet & agreement Gives contact information for the asset (broker) Gives contact information for the asset (broker) Copy of monthly statement is sent to the investor Copy of monthly statement is sent to the investor

QUESTIONS?