Mortgage Procedures and Regulation (MPAR) State Support Organizations’ Summit

1. Mortgage Procedures and Regulation(MPAR)State Support Organizations’ Summit Natosha Reid Rice Assoc. General Counsel, Real Estate & Finance Phone: 404-979-3700 nreidrice@habitat.org Sonia Lee Affiliate Financial Services, Director Phone: 404-420-6786 slee@habitat.org

2. MPAR The Mortgage Procedures and Regulations (MPAR) initiative was established by HFHI in 2010 to help strengthen Affiliates’ mortgage lending practices. MPAR offers affiliates training and resource collections that are useful in improving the origination and servicing of mortgage loans and assist Affiliates in complying with applicable lending laws and regulations. MPAR Universityon My.Habitat HFHI Confidential

3. MPAR Process Affiliate Community MPAR team Develop training / compliance materials etc. GRA & Legal analyze changes New or changing laws and regs HFHI Confidential

4. MPAR Mortgage Rules Implementation Roadmap Launch of AML online course Launch all compliance courses to affiliates Engage outside legal counsel to help us navigate the changes Sept 24 – meeting w/CFPB to clarify some rules • Communication Plan • Early Oct - US office Email from Senior Mgmt • Nov – outbound calls from ASC Dec – direct mail MPAR home page updated and launched as MPAR University New Mortgage rules become effective Ongoing MPAR training at SSO conferences; Summits; trargeted conference calls; webinars etc HFHI Confidential

5. CFPB’s Complaint Portal HFHI Confidential

6. CFPB –Final Rules New Rules – January 2014 • TILA - SAFE Act – loan originator employee criminal background checks, Character & Fitness; and training requirements • ECOA – Appraisals- disclosure and prompt delivery of property valuations to borrowers • TILA- Ability-to-Repay / Qualified Mortgages standards • TILA / RESPA - Mortgage servicing – policies and procedures, error resolution and information requests, loss mitigation & dual tracking, continuity of contact, etc. HFHI Confidential

7. CFPB – New Rule Exemptions TILA- Ability-to-Repay/Qualified Mortgages • ATR Exemption - for nonprofit organization that provides credit to only low-to-moderate income consumers and extends credit less than 200 times annually. Additionally, CHDOs, CDFIs and DAPs are also exempt. • Affiliates must follow their own written procedures to determine that consumers have a reasonable ability to repay loans. • A loan that is ATR exempt is not subject to the QM provisions. • An exempt loan remain exempt even if sold, or otherwise transferred to a creditor that does not qualify for the ATR exemption. HFHI Confidential

8. CFPB – New Rule ATR / QM cont’d TILA- Ability-to-Repay/Qualified Mortgages • No ATR Exemption - Affiliates that extend credit more than 200 times in a calendar year (including 1st mortgages and all subordinates) must fully comply with the ATR standards in order to meet the Qualified Mortgage status. Affiliates must maintain evidence of compliance with the rule for three years after the consummation of a loan. • ATR requirements - 8 underwriting factors must be considered and verified • QM – 3 types of requirements; restriction on loan features, points and fees and underwriting • Loan may not exceed 30 years • Underwritten based on highest rate of 1st 5 years • Total DTI doesn’t exceed 43% • No negative amortization, interest-only payments, or balloon payments • No “no-doc” loans • Points & fees cannot exceed 3% of total loan amount HFHI Confidential

9. CFPB – New Rule Exemptions TILA / RESPA - Mortgage servicing • Small Servicer Exemption - Servicer that services 5,000 or fewer mortgage loans and the servicer owns or originated all 5,000 loans. HFHI Confidential

10. Meeting with CFPB – Final Rules Clarification GRA and Legal met with CFPB Sept 24 to clarify and/or request: Ability-to-Repay (ATR)/ Qualified Mortgage (QM): • Request raising the extensions of credit threshold from 200 to 300.  • If they will not waiver on this point, we will try to have them count only our principal/first lien mortgages towards the extensions of credit limit. • If necessary, we will reiterate that Habitat’s model absolutely does not work if the second mortgage needs to be calculated into DTI. This jeopardizes the soft second mechanism that our model uses to protect our families and our affiliates.  • Additionally, we will get explicit confirmation that the rule refers to extensions per calendar year (and how to deal with a situation if an affiliate extends over 200 mortgages in a year- though in the servicing rules it is clear that if a servicer services over 5000 loans in a year, the following year is when they will no longer be eligible for the small servicer exemption). • We will not ask to exempt instances where Habitat does not hold the primary lien but holds a second and/or third subordinate lien. • Balloon payments in the context of our repair loans that are secured by the home.  Small Servicer exemption: • To have some sort of exemption for affiliates servicing for other affiliates, even if they charge a fee, and even if they don’t hold the mortgages. • Affiliates that service in-house that are using coupon booklets -  If the affiliate accepts partial payments, do they need to issue periodic statements to show accurate balances until the borrower catches up to the balance on the coupon books? Appraisals: • A written “exemption” for donated appraisal HFHI Confidential

11. MPAR – Updates • Training • 20 MPAR training completed and 4 scheduled for remainder of 2013 • Online courses:1400+ affiliate staff /volunteers registered for AML online training (July 15) & 3000+ total affiliate staff / volunteers are enrolled for the online lending courses (November 11) • MPAR University is user friendly – resources are organized by Origination; Servicing; Leveraging; and General /other laws, including FAQs for each • Communication plan is on track to go out as scheduled (slide 2) • Meeting to be held with affiliates who have or are on track to have more than 200 extensions of credit for the year (date TBD) • Develop affiliate lending policy and procedure templates (late November) • Update Servicing Guidelines and Family Services / Support AMO (January) HFHI Confidential