Texas Section 50(a)(6) Home Equity

1. Texas Section 50(a)(6) Home Equity Product Development Revised 3/29/10

2. Agenda • Overall Goal • To explain and apply the Texas Section 50(a)(6) program to their daily interaction with clients. Agenda • Product Insight • Classifications • Restrictions • Not Allowed • Special Requirements • Pricing • Post Self-Assessment!

3. Product Insight • 15 & 30 year fixed rate amortization terms • Full Doc • Primary Residence • Cash Out transaction • 640 FICO • Conforming Loan Limit

4. Product Insight (continued) • DU Approval • 1 unit, Condo, PUD, or Modular Home • 80% maximum LTV • Qualify at note rate • Ratios evaluated by DU • CA6F15 & CA6F30

5. Product Classification • Any Texas Section 50(a)(6) loan is always restricted to the provisions of Texas Section 50(a)(6) for all subsequent refinances of the loan regardless of whether the borrower receives any of the cash out proceeds • Title Policy will reference Texas Section 50(a)(6) • 12 month seasoning • Caliber Funding will not permit new subordinate financing from outside lender; • re-subordination allowed

6. Property Restriction • There can be only one outstanding Texas Section 50(a)(6) loan on a property at a given time • If borrower has existing Texas Section 50(a)(6) second lien and is getting cash out from first mortgage, second lien must be paid off

7. Property Restriction (continued) • The mortgage must be secured by a one family property that is the borrower’s homestead (primary residence) • Texas law limits the size of the homestead to • 10 acres for an Urban homestead • 20 acres for an individual’s or family’s rural homestead

8. “Cooling Off” • A Texas Section 50 (a)(6) mortgage cannot be closed until after a 12 day “cooling off” period in which the borrower is allowed to change his or her mind about obtaining the mortgage • The “cooling off” period runs from the later of the date of the loan application or the date that the borrower signs the required notice about the extension of credit • The borrower must be allowed to rescind the loan without penalty or charge within the 3 days after the extension of credit

9. Cash Out Scenarios • Paying off first and/or second mortgage that is not a Texas Section 50(a)(6) loan and getting cash back from the refinance • Paying off a first mortgage that was a Texas Section 50(a)(6) loan, not receiving cash out from the first lien, but paying off a second lien which was not used in whole to acquire the subject property

10. Cash Out Scenarios (continued) • Paying off a first non Texas Section 50(a)(6) loan and paying off a Texas Section 50(a)(6) second lien mortgage and: • Borrower is getting cash out from the refinance transaction or • Borrower is not getting cash out, but is paying off a second mortgage that was not used in whole to acquire the subject property

11. Cash Out Scenarios (continued) • Loan proceeds can be used to pay off secured or unsecured debt excluding, investor restrictions may apply. • All borrowers must have held title to the subject property for a minimum of 6 months

12. Financed Costs • Financed closing and other costs (excluding prepaids) cannot exceed 3% of the principal amount of the loan • Discount points used to reduce the interest rate do not need to be included • Discount points used for closing costs must be included in the limitation

13. Not Allowed • Expanded Approval Levels • DU Refi Plus findings • Rate/Term Refinances • Trust Agreements • Non-Occupant co-borrower • Property Inspection Waiver • Mortgage/Rental delinquency of 60, 90, 120, or 150 days or greater reported within 12 months of the date of the credit report • More than 4 financed properties (including subject property) or exceeding $2MM with 4 financed properties

14. Not Allowed (continued) • More than 20% concentration in any one project or subdivision • Properties currently listed for sale • Third Liens or HELOC secondary financing • Manufactured Homes, Co-ops, or agricultural zoned properties • Properties not located in Texas • Power of Attorney • Closings by mail or phone • Recently listed properties if listed in the previous 6 months preceding the date on the note

15. Special Requirements • The borrower must be provided with a complete and accurate copy of the Final HUD-1 or HUD-1A settlement statement no later than one business day prior to loan closing • Borrower must sign Borrower’s Certification of Receipt of Settlement Statement at closing • Both spouses must execute the mortgage • Both spouses not required to be parties to the promissory note • All individuals on title and their spouses must sign all Texas Cash Out documents

16. Special Requirements (continued) • Borrowers must be provided a copy of all documents signed at closing and sign the Texas Home Equity Receipt of Copies • No blank spaces allowed within documents • All loans must contain a Texas Home Equity Loan Closing Instructions Addendum

17. Final Funding Package • The following forms must be executed and included in final funding package: • Texas Home Equity Affidavit Agreement (3185) • Texas Home Equity Discount Point Acknowledgement (if applicable) • Federal Notice of Right to Rescind • Borrower and Lender must sign Acknowledgement of Fair Market Value of Homestead property with an appraisal attached to acknowledgement • Rural Homestead Affidavit (if property more than 10 acres) • Borrower and Lender must sign Notice of Oral Agreements

18. Forms Used at Closing • The following forms must be used at closing: • Texas Home Equity Security Instrument (3044.1) • Texas Home Equity Note (3244.1) • Texas Home Equity Condo Rider, if applicable (3140.44) • Texas Home Equity PUD Rider, if applicable (3150.44) • Title Policy must include T42 and T42.1

19. Pricing a Texas A6 • To price a Texas Section 50(a)(6) loan: • Use CF30 or CF15 for base price • Apply applicable CF30 and CF15 loan scenario adjustments • LoanAdvisor has been updated with Texas Section 50(a)(6) product • Product Guide has been updated with Texas Section 50(a)(6) addendum and Summary & Matrix.