Lender Training Presentation February 8, 2013

1. TO ALL: THIS SLIDE PRESENTATION IS NOT INTENDED TO REPLACE ANY LENDER TRAINING THAT IS DONE VIA WEBINAR for our lenders. Please note that everyone who touches the loan must take the training. This training is not just for a single representative of your company. HOC will keep a record of persons who have entered the power point and will be used to verify with eHousingPlus for your credentials. You will not be able to access the eHP reservation system if you have not had training. If you are not a U.S. Bank approved MRBP Lender and HOC approved lender you cannot originate any loans. Contact U.S. Bank to check whether as a corresponding lender you are approved under the U.S. Bank MRBP program. Help Desk Line:1-800-562-5165 E-Mail the Help Desk mrbp.helpdesk@usbank.com Any questions or concerns, please email Paulette Dudley, paulette.dudley@hocmc.org HOC LENDER TRAINING

2. Mortgage Purchase Program (MPP) MORTGAGE BACKED SECURITIES Housing Opportunities Commission Montgomery County, Maryland Lender Training PresentationFebruary 8, 2013 HOC LENDER TRAINING

3. Agenda • Welcome & Introductions • Change to MBS Format • General Information • Eligibility & Compliance • Property (General & MPDU) • Loan Products (Mortgage Options & Closing Cost Programs) • Origination & Documentation • Loan Closing Requirements • Post Closing/Loan Purchase • eHousingPlus Online Reservations HOC LENDER TRAINING

4. Updates by email through HOC NOTICES and/or eHousingPlus Bulletin Board and emails Mortgage Purchase ProgramWeb Pagewww.hocmc.org(Click on Mortgage & Financing Programs) HOC LENDER TRAINING

5. The HOC Mortgage Purchase Program converted from a whole loan program to a Mortgage Backed Securities Program as of August 31, 2012. • Prior to August 31, 2012, HOC purchased and retained the loans originated in the MPP. After August 31, HOC loans are purchased by a Master Servicer for pooling. • U.S. Bank is Master Servicer. • HOC began using an online reservation system through eHousingPlus, Inc. on August 31, 2012. HOC CHANGES TO MBS FORMAT HOC LENDER TRAINING

6. Lender takes application • Reserves first mortgage (and HOC Purchase Assistance) with eHousingPlus • Reserves county closing cost with HOC (if applicable) • Lender submits pre-closing compliance file to HOC • Lender approves for credit • HOC approves for program compliance • Lender closes loan • Lender submits post-closing file to HOC • Lender submits closing file to U.S. Bank • U.S. Bank buys loan Basic Process HOC LENDER TRAINING

7. HOC underwrites MBS loans for program compliance ONLY • Lender underwrites for credit that conforms to FHA guidelines for purchase by U.S. Bank. • Loans cannot close without HOC approval General Information HOC LENDER TRAINING

8. First Mortgage Program Requirements • US citizenship is not required • No requirement for current Montgomery County residency for MPP first mortgage • No requirement for working in Montgomery County for MPPfirst mortgage • Property must be owner occupied General Information HOC LENDER TRAINING

9. First Mortgage Program Requirements • No non-occupant co-signers • Rent back more than 30 days after settlement is not allowed • No more than 15% of property can be used for a business purpose • FHA Loans may be assumable only to another • eligible borrower General Information HOC LENDER TRAINING

10. General Information • Loan Types • All HOC loans have Thirty (30) Year Terms • FHA Loans Only • No VA Financing NOW (2-8-13) • No Conventional Financing Available HOC LENDER TRAINING

11. General Information Power of Attorney • OK for Seller- does not require HOC Approval • POA for Borrowers requires HOC approval prior to settlement • Specific for Transaction • HOC requires at least one borrower at settlement • Use of borrower POA should be due to circumstances beyond borrower’s control HOC LENDER TRAINING

12. At least one borrower in the household must attend first time homebuyer class/training • Homebuyer Education required prior to reservation of funds • Any certified housing counseling course accepted – free classes offered by Housing and Community Initiatives www.hcii.org General Information Homebuyers Education Class HOC LENDER TRAINING

13. General InformationHome Inspections • HOC requires a Home Inspection for All Existing Properties, Except Condo conversions with renovation (including foreclosure sale • HOC does not require a copy of the full inspection report • HOC Home Inspection Certification form completed and signed (by borrower and LO) and a copy of the invoice billing as evidence the inspection was completed HOC LENDER TRAINING

14. HOC has no separate fees for the first mortgage • U.S. Bank/Master Servicer Fees – Loan Funding Fee - $150.00 – Tax Service Fee - $85.00 • eHousingPlus charges $225 reservation fee per loan application that closes • County Closing Cost Assistance loan “5 for 5” - HOC charges $100 application fee General InformationFees and Charges HOC LENDER TRAINING

15. Fees And ChargesLender Payment Schedule • Lender is paid upon loan purchase by U.S. Bank according • to the following schedule • TIMELINE AND PURCHASE SCHEDULE/LENDER COMPENSATION • Lender compensation applies from the ORIGINAL • loan reservation confirmation date • Compensation# of days from reservation date • 2% Loan Purchased within 60 days of the reservation date • 1.5% Loan Purchased within 61 - 90 days of the reservation date • 1% Loan Purchased within 91-120 days of the reservation date • 0% Loan Purchased within 121-150 days of the reservation date • After 150 days The loan will not be purchased HOC LENDER TRAINING

16. FHA GUIDELINES PREVAIL • LOANS MUST HAVE FHA AND HOC APPROVAL • HOC sets income limits and sales price limits • HOC can offer closing cost/down payment assistance as governmental entity • Borrower Contribution – 3.5% Can be a gift, Revolving Closing Cost Assistance Loan if Borrower works in Montgomery County, or HOC Purchase Assistance Loan • Seller Closing Cost Contribution – follow FHA guidelines FHA and the HOC Loan Product HOC LENDER TRAINING

17. Lenders will underwrite for credit according to FHA guidelines and U.S. Bank required guidelines. • HOC will underwrite for compliance/eligibility prior to closing. HOC is not underwriting for credit in the MBS program. Underwriting MBS Loans HOC LENDER TRAINING

18. Will be covered by U.S. Bank • FICO SCORE • Automated underwriting • Ratio Limits Credit Underwriting HOC LENDER TRAINING

19. Eligibility/Program Compliance HOC LENDER TRAINING

20. First Time Homeownership All adult occupants must be a first time homeowner. - Prior ownership = having an ownership interest in a primary residence anywhere during the last three years. - Last 3 years’ federal tax return and IRS transcript for all borrowers used to verify. - If an applicant currently owns real estate which has not been used as primary residence during the past three years, the applicant may still be eligible. The Commission will review each case INDIVIDUALLY. This needs to be determined at the start of your application. Eligibility/Program Compliance HOC LENDER TRAINING

21. Citizenship Borrowers do not have to be a U.S. citizen. If other than U.S. citizen, it will be necessary to document status. HOC will not extend financing to borrowers with Diplomatic Immunity • Sales Price (Acquisition Cost) Cannot exceed the limits set by the Commission - $429,619. HOC’s definition is different from FHA’s definition Eligibility/Program Compliance HOC LENDER TRAINING

22. Income: Household income is total gross annual rate of income for all adult members of the household, whether used for qualifying or not. HH income cannot exceed the limits in effect at time of loan application. NOTE: HOC and MPDU income limits are not the same. MPDU buyer must not exceed MPDU income limits as of settlement. (If a borrower appears to be over-income during the application phase or verification process, call HOC’s underwriter so a decision can be made before the entire file is submitted for pre-closing compliance underwriting) Eligibility/Program Compliance HOC LENDER TRAINING

23. INCOME LIMITS AND SALES PRICE LIMITS are set by HOC – Income Limits Effective 1/23/12 1 Person $ 89,160 2 Person $ 127,320 3+ Person $ 148,540 MAXIMUM SALES PRICE: $ 429,619 Eligibility/Program Compliance HOC LENDER TRAINING

24. Mortgage Purchase Program – MPP • Borrowers do not have to be a County Resident prior to purchase for the MPP • Borrowers do not have to be working in Montgomery County to use the MPP • HOWEVER, a borrower must be working in Montgomery County to be eligible for the • “5 for 5” Closing Cost Assistance (RCCAP) • There is no asset test for the MPP or County Closing Cost Program. Eligibility/Program Compliance HOC LENDER TRAINING

25. PRE-CLOSING COMPLIANCE HOC LENDER TRAINING

26. The appropriate party must sign the documents after information has been filled in. • These forms are statements of the mortgagors or sellers, not the lender (except for the Participant’s Affidavit) and are necessary in order to comply with bond requirements. • Application and Origination Documents • Mortgage Purchase Program Disclosure of Information • Mortgagor’s Affidavit • Certificate of Mortgagor • FHA Notice to Buyers • Notice of Potential Recapture Tax (one page document) • Seller’s Affidavit Pre-Closing Compliance Package SubmissionRefer to MBS Pre-Closing Compliance Checklist Stacking Submission Order HOC LENDER TRAINING

27. Files should be submitted to HOC’s Single Family Underwriting Department, located at: Housing Opportunities Commission Mortgage Finance Division Single Family Office 10400 Detrick Avenue Kensington MD 20895 Attention: SF Underwriter Pre-Closing Compliance Package Submission HOC LENDER TRAINING

28. Pre-Closing Compliance package is sent to HOC for compliance/eligibility approval. Refer to the HOC Pre-Closing Compliance Checklist on the eHP website or the HOC website. - Turn-around time in Underwriting 1-2 business days (depending on volume) - Loans are underwritten on a “First in First Out”basis • HOC underwrites for compliance/eligibility prior to closing. HOC is not underwriting for credit in the MBS program. • Loan not considered approved untilHOC has approved AND cannot close without HOC approval • Approval letter, pending and / or rejection notice are faxed or emailed to the lender by HOC once the file has been reviewed. - HOC also posts approval to eHP system under UW certification HOC Pre-Closing Compliance/ Underwriting HOC LENDER TRAINING

29. HOC issues an approval letter to close with instructions, if applicable. HOC’sApproval Letter confirms the following: • Interest Rate • Points • Approved Loan Amount • Approved Purchase Assistance (if applicable) • Expiration date of your Locked Financing Terms • Terms of Any Secondary Financing • Lender closes and funds the First Trust loan • HOC funds purchase assistance loan • - Purchase Assistance Loan, specific documents are required to be sent with the pre-closing compliance package, refer to the Secondary Financing Checklist on HOC website HOC Pre-Closing Compliance/ Underwriting HOC LENDER TRAINING

30. Pre-Closing ComplianceSECONDARY FINANCING PROGRAMS Refer to HOC webpage for checklist Secondary Financing Checklist Documents Submission HOC underwrites the Secondary Financing Programs – submitted with the Pre-Closing Compliance Package - CLOSING COST DOCUMENTS – required for all SF loans - Additional documents required for specific Secondary Financing programs  COUNTY’S CLOSING COST ASSISTANCE PROGRAM “5 FOR 5” REVOLVING CLOSING COST 3% PURCHASE ASSISTANCE” LOAN – FUNDED BY HOC HOUSE KEYS FOR EMPLOYEES (HK4E) HOC LENDER TRAINING

31. Property HOC LENDER TRAINING

32. Property • HOC accepts any property, except co-ops, in Montgomery County (foreclosures are acceptable) • Sales price cannot exceed the limits established by HOC • Standard appraisal required • HOC requires that all resale properties receive an in-depth home inspection by a qualified contractor HOC LENDER TRAINING

33. Project Approval • FHA project approval is necessary for a FHA Loan • HOC relies on the lender to determine if a project has FHA approval Property HOC LENDER TRAINING

34. FHA Condominium Insurance Concentration • applies • Investor concentration – FHA has said it will not regard units owned by a public housing agency in the investor category. Each situation requires waiver from FHA • Condominium submits request for waiver Property HOC LENDER TRAINING

35. Both market units and MPDUs - (Moderately Priced Dwelling Unit) are acceptable • A MPDU is a property with a controlled sales price (sold below market value). The county controls the sales price based on a formula. When the owner is ready to sell, the county government will calculate the allowable resale price. Price control ends upon foreclosure. • MPDU has its own Income Limits. They are different from HOC Income Limits Website: www.montgomerycountymd.gov/dhca Call: (240) 777-3711 Property HOC LENDER TRAINING

36. Anyone wishing to enter the county’s MPDU program is required to get a pre-qualification letter from an HOC participating lender for a mortgage loan of at least $120,000. This letter is a prerequisite for the county’s acceptance of the applicant to the MPDU program. • The county has created a format for the pre-qual letter it wants the lender to use. The pre-qual letter does not obligate the lender to making the loan. MODERATELY PRICED DWELLING UNIT (MPDU) MPDU PRE-QUALIFICATION LETTER HOC LENDER TRAINING

37. FHA deems units subject to the Montgomery County MPDU program as eligible for FHA insurance. • FHA has stipulated:   a. This approval only applies to Montgomery County’s MPDU program  b. Each lender should keep a copy of the FHA approval letter in each loan underwriting file. FHA APPROVAL OF MPDU FINANCINGMONTGOMERY COUNTY ONLY HOC LENDER TRAINING

38. HOC LENDER TRAINING

39. HOC LENDER TRAINING

40. HOC LOAN PRODUCT HOC LENDER TRAINING

41. HOC SETS ITS OWN INTEREST RATES • LENDER CANNOT CHARGE MORE POINTS THAN HOC QUOTE • HOC DOES NOT SET SETTLEMENT COSTS HOC LOAN PRODUCTS HOC LENDER TRAINING

42. HOC Loan ProductsFirst Mortgage Interest Rate Option 1 30 Year Fixed Ratewith 0 Points Without Purchase Assistance • Lender Cannotcharge points in excess of HOC’s quoted rate Interest rates and points are subject to change HOC LENDER TRAINING

43. HOC Loan ProductsFirst Mortgage Interest RateOption 2 30 Year Fixed Ratewith0 Points WITH 3% Purchase Assistance HOC LENDER TRAINING

44. HOC Loan ProductsOption 2Refer to HOC website, www.hocmc.orgclick on Mortgage & Financing Programs, HOC First Mortgage With 3% Purchase Assistance • Purchase Assistance is secured, secondary financing which maybe used to cover points, down payment, closing costs, escrows, or other prepaid expenses – no cash back. • HOC will directly fund the Purchase Assistance loan to comply with FHA. (revised 1-24-13) HOC LENDER TRAINING

45. HOC Loan ProductsOption 2 • HOC Purchase Assistance Terms • LOAN AMOUNT: 3% of the sales price. (No maximum, a flat 3% of sales price) • INTEREST RATE:Zero percent (0%) per annum • TERMS: Secured Five (5) year deferred loan effective from the settlement date. No interest shall accrue on the Loan and no monthly installments shall be due. Pro rata due upon sale or refinance during first five years. The loan will be forgiven after five (5) years. HOC LENDER TRAINING

46. HOC Loan ProductsOption 2 • REPAYMENT: If first mortgage loan prepays within five years of its origination, borrower is required to repay the unamortized balance of the Purchase Assistance loan. CANNOT BE SUBORDINATED • Purchase Assistance loan is not included in the principal balance of the first Mortgage Loan; however, the Mortgagor pays a higher rate of interest on the Mortgage Loan than is paid by Mortgagors not receiving such assistance • HOC sets the first mortgage rate specifically to be used with the Purchase Assistance. All terms and conditions of the HOC First Trust Mortgage Program apply HOC LENDER TRAINING

47. HOC Loan ProductsOption 2 • Borrower does not have to work in Montgomery County to qualify for the First Mortgage loan with the Purchase Assistance • Can be combined with the Revolving County Closing Cost Assistance Loan “5 for 5”. BUT….the borrower must work in Montgomery County to combine both • MAY be used with other HUD approved closing cost and/or downpayment programs (i.e. FHLBB) HOC LENDER TRAINING

48. HOC Loan ProductsOption 2 • General Requirements • Not intended to pay off debts • NO CASH OUT– excess funds will be used as a principal curtailment to the first loan • Seller contributions within FHA acceptable guidelines • Total debt ratio not to exceed 45% • Maximum CLTV is 104.5% • No asset test is required  All terms and conditions of the HOC First Trust Mortgage Program apply HOC LENDER TRAINING

49. USE FOR “5 for 5” Revolving County Closing Cost Assistance Loan and Purchase Assistance Loan The Housing Opportunities Commission Of Montgomery County, Its Successors And Assigns As Their Interest May Appear Housing Opportunities Commission Mortgagee Clause HOC LENDER TRAINING

50. Closing Cost Assistance HOC LENDER TRAINING