Perf Prem Underwriting Guide

UNDERWRITING REQUIREMENTS GUIDE

May 14, 2012

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Summary of Guide Updates United Guaranty’s Performance PremiumSM Underwriting Requirements Guide (the Guide) has been updated to reflect previously announced changes. The sections of the Guide that have been updated are indicated with the new effective date to the right of the section heading.

Underwriting Requirements:

Section 2.02.01 was renamed “Unacceptable DU or LP recommendations” vs. “Ineligible DU or LP recommendations.” This was done to prevent confusion that the section was referring to loan which received an “ineligible” AUS decision. Also, additional information was added to clarify what is unacceptable.

Documentation Requirements:

Section 4.03, Documentation Requirements for All Loans, was updated to clarify appraisal requirements.

Section 4.04, Additional Documentation Requirements for Agency AUS Underwritten Loans, was updated to clarify that for Jumbo Loans $417,001 to $625,500, at least one month’s bank statement is required only when funds are required for reserves or funds to close.

Section 4.04, Additional Documentation Requirements for Agency AUS Underwritten Loans, was updated to clarify that for DU Refi Plus Loans, at least one month’s bank statement is required only when funds are required for closing.

Products and Programs:

Section 6.01.01, Loan Amounts $417,001-$625,500, was updated to clarify that at least one month’s bank statement is required only when funds are required for reserves or funds to close.

Transaction Type:

Section 8.04, Corporate Relocation Loans, was updated to allow any expense paid by the employer related to the move to be used to satisfy the minimum 3% employer contribution.

Income and Employment:

Section 10.01, Income, was updated to clarify that United Guaranty defers to the Agency requirements for income for all but rental income from the subject property.

Equity & Assets:

Section 11.02.01, Reserves, was updated to include the reserves requirements for loan amounts higher than $625,500.

Credit and Liabilities:

Section 12.01, Credit Score Requirements, was rearranged to clarify Credit Score requirements and to introduce the terms “Borrower’s Representative Credit Score” and “Loan Representative Credit Score”.

Property:

Section 14.03, Condominiums, was updated by removing the requirement that “No more than 15% of the total units in the condominium project can be 30 days or more past due on the payment of condo/association fee payments”. United Guaranty now defers to the agency requirement for past due condo/association fee payments.

Section 14.04, Cooperatives, was updated by removing the requirement that “No more than 15% of the total units in the cooperative can be 30 days or more past due on the payment of co-op/association fee payments”. United Guaranty now defers to the agency requirement for past due co-op/association fee payments.

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Table of Contents

1. Introduction and Risk Philosophy ......................................................................................................................................................... 1

1.01 Introduction (rev. June 27, 2011) ..................................................................................................................................................... 1

1.02 Risk and Underwriting Philosophy (rev. February 13, 2012)............................................................................................................ 1

1.03 Fair Housing and Equal Opportunity Acts (rev. June 27, 2011) ....................................................................................................... 2

2. Underwriting Requirements ................................................................................................................................................................... 3

2.01 General Underwriting Requirements (rev. November 14, 2011) ...................................................................................................... 3

2.02 Agency AUS Additional Underwriting Requirements (rev. April 24, 2012) ....................................................................................... 3

3. Ineligibility Matrix .................................................................................................................................................................................... 4

4. Documentation Requirements ............................................................................................................................................................... 5

4.01 Age of Documentation (rev. June 27, 2011) .................................................................................................................................... 5

4.02 Required Documentation (rev. June 27, 2011) ................................................................................................................................ 5

4.03 Documentation Requirements for All Loans (Manually or Agency AUS Underwritten Loans) (rev. May 14, 2012) ........................ 5

4.04 Additional Documentation Requirements for Agency AUS Underwritten Loans (rev. May 14, 2012) .............................................. 7

4.05 Affordable Housing File Identification (rev. June 27, 2011) ............................................................................................................. 7

5. LTV/Loan Amount/Credit Score/DTI Requirements ............................................................................................................................. 8

5.01 All Loans (rev. February. 13, 2012) ................................................................................................................................................. 8

5.02 Financed MI (rev. February 13, 2012) ............................................................................................................................................. 9

5.03 Subordinate Financing – Maximum CLTV (rev. February 13, 2012) ............................................................................................. 10

6. Products and Programs ....................................................................................................................................................................... 11

6.01 Jumbo Loans ($417,001–$850,000) (rev. May 14, 2012) .............................................................................................................. 11

6.02 Housing Finance Agency Program (HFA) (rev. September 1, 2011) ............................................................................................. 12

7. Loan Instruments .................................................................................................................................................................................. 13

7.01 Adjustable-Rate Mortgages (ARMs) (rev. June 27, 2011) ............................................................................................................ 13

7.02 Temporary Interest-Rate Buydowns (rev. February 13, 2012) ...................................................................................................... 13

7.03 Balloon Mortgages (rev. Februray 13, 2012) ................................................................................................................................. 14

8. Transaction Type .................................................................................................................................................................................. 15

8.01 Refinance Transactions (rev. November 14, 2011) ....................................................................................................................... 15

8.02 Renovation Mortgages (rev. June 27, 2011) .................................................................................................................................. 16

8.03 Construction-to-Permanent Loans (rev. September 1, 2011) ........................................................................................................ 17

8.04 Corporate Relocation Loans (rev. March 19, 2012) ....................................................................................................................... 18

8.05 Third-Party Originations (TPO) (rev. November 14, 2011) ............................................................................................................ 18

8.06 Seasoned Loans (rev. June 27, 2011) ........................................................................................................................................... 18

9. Borrower ................................................................................................................................................................................................ 19

9.01 Underwriting the Borrower (rev. June 27, 2011) ............................................................................................................................ 19

9.02 Non-occupant Co-borrower/Co-signer (rev. June 27, 2011) .......................................................................................................... 19

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10. Income and Employment ..................................................................................................................................................................... 20

10.01 Income (rev. June 27, 2011) ........................................................................................................................................................ 20

10.02 Employment (rev. June 27, 2011) ................................................................................................................................................ 20

11. Equity and Assets ................................................................................................................................................................................. 21

11.01 Equity (rev. June 27, 2011) .......................................................................................................................................................... 21

11.02 Reserves (rev. May 14, 2012) ...................................................................................................................................................... 22

11.03 Asset Types (rev. September 1, 2011) ........................................................................................................................................ 23

12. Credit and Liabilities ............................................................................................................................................................................. 25

12.01 Credit Score Requirements (rev. May 14, 2012) ......................................................................................................................... 25

12.02 Types of Credit (rev. June 27, 2011) ........................................................................................................................................... 25

12.03 Credit Report (rev. June 27, 2011) .............................................................................................................................................. 25

12.04 Derogatory Credit (rev. June 27, 2011) ....................................................................................................................................... 26

12.05 Liabilities (rev. June 27, 2011) ..................................................................................................................................................... 27

13. Geographic Requirements ................................................................................................................................................................... 28

13.01 Eligible Geographic Areas (rev. June 27, 2011) .......................................................................................................................... 28

13.02 Geographic Quality Index (GQX) (rev. June 27, 2011) ................................................................................................................ 28

14. Property ................................................................................................................................................................................................. 29

14.01 Ineligible Property Types (rev. June 27, 2011) ............................................................................................................................ 29

14.02 Two- to Four-Unit Properties (rev. February 13, 2012) ................................................................................................................ 29

14.03 Condominiums (rev. March 19, 2012) .......................................................................................................................................... 29

14.04 Cooperatives (rev. March 19, 2012) ............................................................................................................................................ 30

14.05 Rural Properties (rev. November 14, 2011) ................................................................................................................................. 30

14.06 Mixed-Use Properties (rev. June 27, 2011) ................................................................................................................................. 30

14.07 Properties with Deed Restrictions (rev. June 27, 2011) ............................................................................................................... 30

14.08 Property Flips (rev. June 27, 2011) .............................................................................................................................................. 30

15. Occupancy ............................................................................................................................................................................................. 31

15.01 Primary Residence (rev. June 27, 2011) ..................................................................................................................................... 31

15.02 Second Homes (rev. February 13, 2012) ..................................................................................................................................... 31

15.03 Investment (rev. February 13, 2012) ............................................................................................................................................ 31

15.04 Shared Equity Plans (rev. June 27, 2011) ................................................................................................................................... 31

16. Appraisal ................................................................................................................................................................................................ 32

16.01 Analyzing the Appraisal Report (rev. November 14, 2011) .......................................................................................................... 32

17. Commitments/Certificates ................................................................................................................................................................... 33

17.01 Final Commitments (rev. June 27, 2011) ..................................................................................................................................... 33

17.02 Conditional Commitments (rev. June 27, 2011) ........................................................................................................................... 34

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1. Introduction and Risk Philosophy 1.01 Introduction (rev. June 27, 2011)

Thank you for choosing United Guaranty as your mortgage insurance provider. By providing mortgage insurance and sharing the risk of default for mortgage lending, United Guaranty helps lenders and investors expand their lending opportunities. United Guaranty promotes the expansion of viable homeownership opportunities through the fair and reasonable use of underwriting requirements that support our objective of making home ownership affordable and sustainable.

United Guaranty’s Performance Premium Underwriting Requirements Guide (the Guide) applies to loans that receive Performance Premium pricing, United Guaranty’s comprehensive risk-based pricing. The Guide addresses the types of loans we are most likely to insure.

1.02 Risk and Underwriting Philosophy (rev. February 13, 2012)

United Guaranty’s goal is to ensure that sound underwriting decisions are made on mortgage insurance applications. Specifically, (1) the loan transaction must represent an insurable risk, (2) the loan transaction and collateral must be accurately represented, (3) reasonable judgment must be used and reasonable due diligence applied, and (4) the risk associated with the loan transaction can be adequately priced.

Our underwriting requirements are designed to facilitate the assessment of mortgage default and foreclosure risk. The requirements in this Guide establish the boundaries of acceptable risk. The Guide provides a set of comprehensive underwriting requirements to ensure the likelihood that the borrower will be able to repay the loan. These requirements consider the following:

Credit: The borrower’s willingness and ability to repay obligations (credit history).

Capacity (Income): The stability and amount of the borrower’s income in relationship to the borrower’s obligations.

Capital (Assets and Equity): The borrower’s total assets, savings history, reserves, and investment into the property.

Collateral (Property): The condition, marketability, and value of the property.

Economic and housing conditions present in the property’s market area.

Loan transaction: Term, amortization type, adjustable versus fixed, documentation type, etc.

When underwriting a loan, the overall risk of the loan should be considered. An individual risk factor within a loan file may not necessarily create an uninsurable risk, especially when compensating factors are present. However, a layering of risk factors within the loan file without offsetting compensating factors will generally increase the likelihood of foreclosure and create an uninsurable risk. United Guaranty is committed to insuring quality loans that make sense for everyone involved. We recognize that certain loans may fall outside United Guaranty’s underwriting requirements. When this happens, the lender should submit the loan as a full-file application. United Guaranty will review the loan carefully to identify any compensating factors that may warrant an exception (see General Underwriting Requirements for details).

The lender is responsible for ensuring that the loan information provided within the insurance application is true and accurate. Misrepresentation or fraud presents a serious risk to the likelihood of loan repayment. The lender should have robust procedures in place to prevent misrepresentation and fraud from any party involved with the loan transaction.

United Guaranty reserves the right to request additional information concerning the loan transaction for all insurance applications, regardless of the submission method.

If you have any questions pertaining to the interpretation of the requirements within this Guide, please contact your United Guaranty Regional Underwriting Team.

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1.03 Fair Housing and Equal Opportunity Acts (rev. June 27, 2011)

United Guaranty believes in fair treatment of all borrowers regardless of race, color, religion, national origin, or sex. We operate in accordance with the provisions of the Fair Housing Act and Equal Credit Opportunity Act. The Fair Housing Act makes it unlawful to discriminate in housing-related activities against any person because of race, color, religion, national origin, sex, handicap, or familial status. The Equal Credit Opportunity Act prohibits discrimination with respect to any aspect of a credit transaction on the basis of sex, race, color, religion, national origin, marital status, age (provided the applicant has the capacity to enter into a binding contract), receipt of public assistance, or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act.

United Guaranty fully supports the letter and the spirit of both of these laws and will not condone discrimination in any mortgage guaranty insurance transaction. It is our objective to help make home ownership affordable and attainable.

Our commitment to you and the housing finance industry is a responsibility we take seriously, as we work to encourage fair lending, open new markets, and expand our insurance services.

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2. Underwriting Requirements 2.01 General Underwriting Requirements (rev. November 14, 2011)

United Guaranty uses a combination of its own specific underwriting requirements and the underwriting requirements of Fannie Mae and Freddie Mac (the Agencies). The information below describes how United Guaranty’s underwriting requirements work in combination with the Agencies’ requirements.

All United Guaranty underwriting requirements listed in this Underwriting Requirements Guide apply, regardless of the Agency requirements for manually or DU/LP–underwritten loans.

When an item is not specifically addressed within the Guide, it means that United Guaranty agrees with and defers to the Agencies’ published1 underwriting requirements for that item (see www.efanniemae.com/sf/Guide/ssg/index.jsp and/or http://www.freddiemac.com/sell/guide/):

United Guaranty defers to the applicable Agency AUS underwriting requirements when the loan is underwritten by DU or LP.

United Guaranty defers to the applicable Agency’s manual underwriting requirements when the loan is a manual underwrite (not underwritten by DU or LP).

If the loan is a manual underwrite and is not being sold to Fannie Mae or Freddie Mac, either of the Agency underwriting requirements may be used. The Agency requirements used must be consistent throughout the loan. The requirements for Fannie Mae and Freddie Mac may not be co-mingled on a single loan.

If the loan does not meet United Guaranty requirements or the deferred-to Agency requirements, or includes items not addressed by either United Guaranty or the Agencies, a full-file submission to United Guaranty is required for consideration.

Lender programs containing underwriting requirements that do not meet United Guaranty’s requirements or the deferred-to Agency requirements require approval by United Guaranty prior to submitting loans for mortgage insurance. This includes underwriting requirements received through an Agency variance.

2.02 Agency AUS Additional Underwriting Requirements (rev. April 24, 2012)

2.02.01 Unacceptable DU and LP Recommendations (rev. April 24, 2012)

Loans receiving the following DU or LP recommendations are ineligible for insurance.

DU Refer with Caution/IV

DU Expanded Approval (EA)

LP Caution 500 A-minus Eligible

LP Caution For loans that have been underwritten by both DU and LP and receive an “unacceptable” recommendation from one and an “acceptable” recommendation from the other, United Guaranty will use the “acceptable” recommendation for underwriting.

2.02.02 DU and LP Tolerances (rev. February 13, 2012)

DU and LP allow specific data tolerances for debt-to-income (DTI) ratios, assets, reserves, etc. United Guaranty does not use these tolerances for mortgage insurance. If the loan data changes, the lender must ensure that the loan continues to meet all United Guaranty requirements.

For example, a loan has an intial AUS response based on a 45% DTI ratio; later, the loan data changes, resulting in a 48% DTI ratio. This change is within the DU or LP allowable tolerance and does not require a re-submission to DU or LP. However, United Guaranty’s DTI requirement for the loan is still 45%. The fact that the 48% DTI is within the DU or LP tolerance does not override United Guaranty’s DTI ratio requirement of 45%. Note that loans within five percentage points of United Guaranty’s maximum DTI ratio may be considered under Performance Premium, as explained in Section 5, Loan Amount/LTV/Credit Score/DTI Requirements.

1 Fannie Mae and Freddie Mac published guidelines are defined as guidelines outlined in the Agency Selling Guide available to all lenders without the need for a lender

variance or amendment to lender’s Master Agreement.

http://www.efanniemae.com/sf/guides/ssg/index.jsp

http://www.freddiemac.com/sell/guide/

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3. Ineligibility Matrix The following are ineligible for insurance with United Guaranty. Please see the individual sections of the Guide for additional information:

Category Ineligible Item

Amortization Interest-only loans.

Loans featuring negative amortization (potential or scheduled).

DU/LP Recommendation DU Refer with Caution Level IV.

DU Expanded Approval (EA).

LP Caution 500 A-minus Eligible.

LP Caution.

Documentation Limited documentation loans (loans in which income, employment, and/or assets is not verified).

Streamlined refinance transactions.

Streamlined purchase transactions.

Loan-to-Value (LTV) LTVs higher than 97%.

Loan Amount Loan amounts higher than $850,000.

Products and Programs A-minus loans.

Subprime loans.

Transaction New subordinate financing.

Short refinance – a refinance transaction that does not result in the full payoff of the existing first or

subordinate lien (due to debt forgiveness or write-off by the lender). This excludes scheduled debt

forgiveness for subordinate liens under a community home buyer program.

Seasoned loans (see the Seasoned Loans section).

Borrower Borrowers without a Social Security number (SSN).

Borrowers with an individual tax identification number (ITIN).

Borrowers that are corporations, partnerships, syndications, or irrevocable trusts.

Income Rental income from the subject investment property.

Asset Types Cash on hand.

Sweat equity.

Interested Party Contribution Payment abatements – any loan in which an interested party to the transaction agrees to pay a portion of the

borrower’s monthly housing expense (PITIA) for a certain period of time (including homeowners association

dues).

Credit Non-traditional credit.

Borrowers with no documented credit history.

Credit Report Non-traditional credit reports.

Foreign credit reports.

Property Manufactured housing (see Ineligible Property Types for definition).

Any property type ineligible for sale to the Agencies.

Occupancy Shared equity plans (see the Occupancy section).

Appraisal Fannie Mae Property Inspection Waiver (PIW).

DU Property Inspection Report Form 2075.

Freddie Mac’s Property Inspection Alternative (PIA).

LP Condition and Marketability Report Form 2070.

Any other Automated Valuation Method (AVM).

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4. Documentation Requirements

4.01 Age of Documentation (rev. June 27, 2011)

United Guaranty’s age of documentation requirements are listed below:

If the date of the appraisal exceeds 120 days from the note date, a recertification of value is required. If the value has declined, a new full Uniform Residential Appraisal Report (URAR), with interior and exterior inspections, is required.

The appraisal may not be more than 12 months from the note date.

4.02 Required Documentation (rev. June 27, 2011)

United Guaranty requires documentation to verify the following:

The loan transaction.

AUS Findings.

The borrower’s credit history.

The value of the property.

The terms of the sale (purchase transaction only).

The borrower’s employment and income.

The borrower’s assets and equity.

4.03 Documentation Requirements for All Loans (Manually or Agency AUS Underwritten Loans) (rev May 14, 2012)

United Guaranty’s documentation requirements for all loans (manually and Agency AUS underwritten loans) are listed below. (Also see Additional Requirements for AUS Agency Underwritten Loans below.)

United Guaranty Application fully completed and signed by the lender.

Appraisal.

The following valuation methods are ineligible:

Fannie Mae’s Property Inspection Waiver (PIW).

DU Property Inspection Report Form 2075.

Freddie Mac’s Property Inspection Alternative (PIA).

LP Condition and Marketability Report Form 2070.

Any other Automated Valuation Method (AVM).

A full Uniform Residential Appraisal Report (URAR), with interior and exterior inspections, is required for properties located in GQX B, C, and D Markets (see the Geographic Quality Index® section).

A full Uniform Residential Appraisal Report (URAR), with interior and exterior inspections, is required for loan amounts higher than $417,000.

Appraisals originally prepared for FHA financing will be accepted subject to the following:

The appraisal must be completed on a standard Fannie Mae or Freddie Mac appraisal form.

When the appraisal is completed subject to repairs and/or alterations, United Guaranty will require that all repairs and alterations are completed.

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Verification of employment/income.

Executed employment contracts, confirmation letters, and offer letters.

Executed employment contracts or confirmation letters may be used as verification of employment and income when the requirements below are met. Employment confirmation letters are generally used when the employer does not use a contract when hiring a new employee; they provide confirmation of the terms of employment and acceptance by the borrower.

The contract or confirmation letter must provide the employment and income information required when using the standard forms of employment/income verification (e.g., start date, position, salary).

The borrower’s start date must be prior to the loan closing date.

The lender must obtain a Verbal VOE verifying the authenticity of the contract or confirmation letter and that the borrower began employment prior to the loan closing.

The employer’s original offer letter to the employee (which generally does not confirm the acceptance of the position by the employee or the start date) is not eligible as a form of employment or income verification.

IRS transcripts.

IRS transcripts are not required; however, when a lender has acquired the IRS transcripts, a copy of the transcripts must be provided in the following circumstances:

A full file is submitted to United Guaranty for underwriting.

United Guaranty requests a copy of the loan file for quality assurance purposes.

Any discrepancy between the loan file income documentation and the transcript information must be appropriately explained and documented. If the transcripts do not support the income documentation provided, and the discrepancies cannot be adequately explained and documented, the loan is ineligible for mortgage insurance. The IRS transcript(s) and any subsequent explanation or documentation of discrepancies must be permanently retained in the lender’s loan file.

In the event tax returns are required for income documentation, United Guaranty will accept personal and/or business transcripts from the IRS as acceptable income documentation in lieu of signed tax returns from the borrower.

Sales contract/offer to purchase and addenda.

Final, signed copies of the contract/offer and addenda are required.

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4.04 Additional Documentation Requirements for Agency AUS Underwritten Loans (rev. May 14, 2012)

In addition to the documentation requirements above, the following requirements apply when DU/LP underwriting is used for the final underwriting decision.

Jumbo loans ($417,001–$625,500):

Whenever funds are required for reserves or funds to close, a minimum of one month’s bank statement and the documentation required by DU/LP is required.

For salaried borrowers, a minimum of one paystub or payroll earnings statement covering the borrower’s earnings for the most recent period and year-to-date earnings, and one year’s W-2 and the documentation required by DU/LP is required.

Whenever tax returns are required to document income and employment, two years’ complete signed federal income tax returns are required.

A full Uniform Residential Appraisal Report (URAR), with interior and exterior inspections, is required.

Jumbo loans ($625,501–$850,000):

The Fannie Mae/Freddie Mac manual underwriting documentation requirements for income and assets must be followed.

A full Uniform Residential Appraisal Report (URAR), with interior and exterior inspections, and field review is required.

DU® Refi PlusTM loans submitted for new insurance as a rate/term refinance:

When funds are required for closing, a minimum of one month’s bank statement and the documentation required by DU is required.

For salaried borrowers, a minimum of one paystub or payroll earnings statement covering the borrower’s earnings for the most recent period and year-to-date earnings, and one year’s W-2 and the documentation required by DU is required.

Whenever tax returns are required to document income and employment, two years’ complete signed federal income tax returns are required.

All Agency AUS–underwritten loans:

When United Guaranty requires reserves and DU or LP does not, a minimum one month’s bank statement is required.

4.05 Affordable Housing File Identification (rev. June 27, 2011)

United Guaranty defines the following loans as Affordable Housing loans:

Fannie Mae MyCommunityMortgage® loans.

Freddie Mac Home Possible® Mortgage loans.

Loans originated under a state or local housing finance agency program.

Other loan programs that include community assistance (grants, gifts, etc.) for first-time home buyers or low- to moderate-income borrowers.

Loans associated with affordable housing programs need to be identified using one of the following methods:

The loan is identified as an affordable housing loan on the United Guaranty application (box is checked “yes”).

The transmittal summary identifies the loan as a Fannie Mae or Freddie Mac affordable housing loan or as an affordable housing loan under a program established by the lender.

The file contains verification of home buyer counseling.

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5. LTV/Loan Amount/Credit Score/DTI Requirements The following are United Guaranty’s requirements for loan-to-value (LTV) ratio, loan amount, credit score, and debt-to-income (DTI) ratio. Loans receiving Performance Premium pricing will be given consideration by United Guaranty when the DTI ratio and/or credit score requirements indicated in the Guide are not met, provided:

The DTI does not exceed the maximum DTI by more than five percentage points.

The representative credit score for the loan is no more than 10 points below the required credit score and is not lower than 620.

All other United Guaranty underwriting requirements and the deferred-to Agency requirements are met.

In some cases, a full-file submission may be required.

5.01 All Loans (rev. February. 13, 2012)

Please see the applicable sections in the Guide, including the Geographic Quality Index (GQX®) section, for additional information.

The following underwriting requirements represent general eligibility limits, used in combination with United Guaranty’s automated risk evaluation to determine MI eligibility for each loan. Layering of risk attributes may affect the eligibility of loans meeting the general requirements below; this layering will be evaluated when you request your Performance Premium rate quote.

Fixed-Rate Mortgages and ARMs Five Years or Greater Maximum 45% DTI for All Loans

Full File Submissions (Max. 45% DTI)

RAP1 Submissions (Max. 45% DTI)

Occupancy GQX Transaction

Type Property Type

Maximum LTV/CLTV

Maximum Loan Amount

Minimum Credit Score


All Loans Retail &

Non-Broker TPO2

Broker TPO3

Primary Residence

All

Purchase &

R/T Refinance

1-Unit, SFD/SFA,

Co-ops, Non-FL Condos

97% $417,000 620 680 680

95% $625,500 620 660 660

(eligible to $417,000)

90% $625,501 – $850,000

620 680 Ineligible

2-Units 95% $625,500 660 700 Ineligible

3–4 Units 90% $625,500 660 720 Ineligible

Cash-out Refinance

1-Unit, SFD/SFA,

Co-ops, Non-FL Condos 95% $625,500 660 720 Ineligible

FL Condos

Purchase &

R/T Refinance

Condos 90% $625,500 700 740 Ineligible

Second Home

All

Purchase &

R/T Refinance

1-Unit, SFD/SFA,


Investment All

Purchase &

R/T Refinance

1-Unit, SFD/SFA,

Co-ops, Non-FL Condos 85% $417,000

680

(Ineligible – Broker TPO loans3)

720 Ineligible

1 RAP is United Guaranty’s Reporting Acceptance Program,® which allows loan data only to be provided for the mortgage insurance request in lieu of the loan documentation. Only approved lenders may use the RAP submission option.

2 Non-Broker TPO – Third-party originator that has the ability to provide funding on mortgage loans, but may or may not be for the subject loan. 3 Broker TPO – Third-party originator that does not have the ability to provide funding on any mortgage loans.

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The following underwriting requirements represent general eligibility limits, used in combination with United Guaranty’s automated risk evaluation to determine MI eligibility for each loan. Layering of risk attributes may affect the eligibility of loans meeting the general requirements below; this layering will be evaluated when you request your Performance Premium rate quote.

ARMs Less than Five Years (includes temporary interest-rate buydowns and balloons)

Maximum 45% DTI for All Loans

Full File Submissions (Max. 45% DTI)

RAP1 Submissions (Max. 45% DTI)

Occupancy GQX Transaction

Type Property Type

Maximum LTV/CLTV

Maximum Loan Amount



All Loans

Retail &

Non-Broker TPO2

Broker TPO3

Primary Residence

All

Purchase &

R/T Refinance

1-Unit, SFD/SFA,

Co-ops, Non-FL Condos 95% $625,500 640 720

720 (eligible to $417,000)

2-Units 95% $625,500 680 740 Ineligible

3–4 Units 90% $625,500 680 760 Ineligible

Cash-out Refinance

1-Unit, SFD/SFA,


Second Home

All Purchase &

R/T Refinance

1-Unit, SFD/SFA,


Investment All Purchase &

R/T Refinance

1-Unit, SFD/SFA,

Co-ops, Non-FL Condos 85% $417,000

700 (Ineligible – Broker

TPO loans3) 760 Ineligible

1 RAP is United Guaranty’s Reporting Acceptance Program,® which allows loan data only to be provided for the mortgage insurance request in lieu of the loan documentation. Only approved lenders may use the RAP submission option.

2 Non-Broker TPO – Third-party originator that has the ability to provide funding on mortgage loans, but may or may not be for the subject loan. 3 Broker TPO – Third-party originator that does not have the ability to provide funding on any mortgage loans.

5.02 Financed MI (rev. February 13, 2012)

The underwriting requirements for a loan with financed MI are determined using the base LTV and base loan amount (the LTV and loan amount before the financed MI is added to the loan amount).

Base LTV (before financed MI) cannot exceed the applicable maximum LTV for the transaction.

Total LTV (after financed MI) cannot exceed 103% for all GQX markets.

The base loan amount (before financed MI) cannot exceed the applicable maximum loan amount for the transaction.

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5.03 Subordinate Financing – Maximum CLTV (rev. February 13, 2012)

United Guaranty’s requirements for subordinate financing are listed below.

Purchase transactions with simultaneous secondary financing are ineligible for insurance.

Rate/term and cash-out refinance transactions:

Transactions with new simultaneous secondary financing are ineligible for insurance.

Existing subordinate financing may be re-subordinated. The CLTV may never exceed the maximum LTV per the transaction type.

CLTV is the equivalent of all other acronyms (i.e. HCLTV, TLTV, etc.) used to describe the ratio of the combined loan amounts for the first lien and subordinate lien(s) secured by the subject property, whether drawn or not, to the lesser of the sales price or appraised value.

Example: A property is being refinanced with an appraised value of $140,000. The borrower obtains a first-lien mortgage of $120,000, and an existing Home Equity Line of Credit with an available line of $10,000 and a balance of $5,000 is re-subordinated.

Determining the CLTV:

First lien $ 120,000

Plus total available line from Home Equity Line of Credit + 10,000

Total liens secured by the subject property $ 130,000

CLTV = ($130,000 ÷ $140,000) 92.86%

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6. Products and Programs 6.01 Jumbo Loans ($417,001–$850,000) (rev. May 14, 2012)

United Guaranty’s requirements for loan amounts $417,001–$850,000 are listed below.

6.01.01 Loan Amounts $417,001–$625,500 (rev. May 14, 2012)

The following criteria apply to 1-unit properties with loan amounts of $417,001 to $625,500 (See the Two- to Four-Unit Properties section for requirements).

Primary residences only.


When underwritten using DU/LP, the following minimum documentation requirements apply:

One month’s bank statement and the documentation required by DU/LP, whenever funds are required for reserves and/or cash to close.

For salaried borrowers, a minimum of one paystub or payroll earnings statement covering the borrower’s earnings for the most recent period and year-to-date earnings, and one year’s W-2.

Two years’ complete signed federal income tax returns, whenever tax returns are required.

6.01.02 Loan Amounts $625,501–$850,000 (rev. February 13, 2012)

The following requirements apply to 1-unit properties.

Primary residences only.

ARMs with an initial fixed-rate period less than five years are ineligible.

Temporary interest-rate buydown loans are ineligible.

Balloon mortgages are ineligible.

A full Uniform Residential Appraisal Report (URAR), with interior and exterior inspections, and a field review appraisal are required.

For Purchase transactions, six months’ reserves are required (subject property only).

For Rate/Term refinance transactions, no reserves are required.

Cash-out refinance transactions are ineligible.

The Fannie Mae/Freddie Mac manual underwriting documentation requirements for income and assets must be followed.

Maximum interested-party contribution: 3%.

Non-permanent resident aliens and foreign nationals are ineligible.

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6.02 Housing Finance Agency Program (HFA) (rev. September 1, 2011)

HFA loans that meet our general Performance Premium underwriting requirements, addressed elsewhere in this Guide, are exempt from the requirements below.

HFA loans using the subordinate financing and/or minimum borrower contribution expansions below must meet the requirements within this section. Exceptions to these requirements are not allowed, including the Performance Premium credit score and DTI ratio variances.

Subordinate Financing Funds that may require repayment under any circumstance are considered loans and must be included in the CLTV, including those that are forgivable or for which monthly payments are deferred.

Second liens must meet Fannie Mae’s Community Seconds® or Freddie Mac’s Affordable Seconds® requirements.

Financed MI is ineligible with subordinate financing.

Minimum Borrower Contribution GQX A Lesser of $1,000 or 1%.

Gifts/grants can apply toward the $1,000 or 1% when the loan meets all of the following:

Minimum 740 credit score.

Loan does not have subordinate financing. (See Subordinate Financing above).

GQX B Lesser of $1,000 or 1% from borrower’s own funds.

6.02.01 LTV/Loan Amount/Credit Score/DTI Requirements (rev. June 27, 2011)

Occupancy GQX Transaction Type

Property Type Maximum

LTV

Maximum

CLTV

Maximum Loan

Amount


DTI Ratio

Credit Score

Maximum DTI

Primary Residence

(only)

GQX A Purchase (only)

1-Unit, Detached, Attached, Condos, Co-ops

97% 100% $417,000 680

All 41% 95% 100% $417,000 660

GQX B Purchase (only)

1-Unit, Detached, Attached, Condos, Co-ops1

97% 100% $417,000 700

95% 100% $417,000 680

GQX C & D Ineligible

1 Florida condos and co-ops are ineligible.

6.02.02 Additional HFA Requirements (rev. September 1, 2011)

The following requirements apply in addition to those listed above:

The loan must be identified as an HFA loan.

All borrowers must occupy the property.


Ineligible:

Broker TPO loans.

ARMs with an initial fixed-rate period of less than five years.

Temporary interest-rate buydowns.

Balloon mortgages.

Construction-to-permanent loans.

Renovation mortgages.

All other Performance Premium underwriting requirements apply.

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7. Loan Instruments 7.01 Adjustable-Rate Mortgages (ARMs) (rev. February 13, 2012)

United Guaranty’s requirements for adjustable-rate mortgages are listed below.

7.01.01 Amortization Type (rev. June 27, 2011)

Only positively amortizing ARMs are eligible.

Loans that allow for interest-only payments or negative amortization are ineligible.

7.01.02 Maximum LTV (rev. February 13, 2012)

ARM with an initial fixed-rate period of five years or longer: 97% LTV.

ARM with an initial fixed-rate period of less than five years: 95% LTV.

7.01.03 Maximum Loan Amount (rev. June 27, 2011)

ARM with an initial fixed-rate period of five years or longer: $850,000.

ARM with an initial fixed-rate period of less than five years: $625,500.

7.01.04 Minimum Qualifying Rate (rev. June 27, 2011)

ARM with an initial fixed-rate period of five years or shorter: Note rate plus 2%.

7.01.05 Maximum Basis Point Spread (rev. June 27, 2011)

Difference between the initial interest rate of an ARM and the FIAR (Fully Indexed Accrual Rate) at time of closing:

300 basis points.

7.02 Temporary Interest-Rate Buydowns (rev. February 13, 2012)

United Guaranty’s requirements for temporary interest-rate buydowns are listed below.

7.02.01 Maximum LTV (rev. June 27, 2011)

95% LTV.

7.02.02 Maximum Loan Amount (rev. June 27, 2011)

$625,500.

7.02.03 Minimum Qualifying Rate (rev. June 27, 2011)

ARM loans: Note rate plus 2%.

7.02.04 Additional Restrictions (rev. June 27, 2011)

Maximum 2–1 buydown for ARMs with an initial fixed-rate period of less than five years.

7.02.05 Ineligible (rev. February 13, 2012)

Condominiums in the state of Florida.

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7.03 Balloon Mortgages (rev. Februray 13, 2012)

United Guaranty’s requirements for balloon mortgages are listed below.

A balloon mortgage calls for the full payment of the loan balance at a certain term, prior to the loan fully amortizing.

7.03.01 Maximum LTV (rev. June 27, 2011)

95% LTV.

7.03.02 Maximum Loan Amount (rev. February 13, 2012)

$ 625,500.

7.03.03 Ineligible (rev. February 13, 2012)


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8. Transaction Type 8.01 Refinance Transactions (rev. February 13, 2012)

8.01.01 Rate/Term Refinance2 (rev. June 27, 2011)

United Guaranty’s requirements for a rate/term refinance transaction are listed below.

The existing first-lien mortgage may not be a cash-out refinance transaction seasoned less than six months.

Existing subordinate financing may be re-subordinated, provided the CLTV requirements are met.

Rate/term refinance transactions with new subordinate financing are ineligible.

Properties currently listed for sale are ineligible.

8.01.02 “Buy-Out” Refinance (rev. June 27, 2011)

United Guaranty’s requirements for a buy-out refinance transaction are listed below.

Maximum 95% LTV.

8.01.03 Cash-Out Refinance (rev. February 13, 2012)

United Guaranty’s requirements for a cash-out refinance transaction are listed below.

A refinance transaction is considered a cash-out refinance when the proceeds are used for:

Paying off a first-lien mortgage that was a cash-out refinance transaction and is seasoned less than six months.

Additional requirements:

1-unit primary residence only.

Maximum cash-out:

Maximum LTV/CLTV

Maximum Cash-Out

90.01–95% $50,000

85.01–90% $100,000

< 85% $150,000

Existing subordinate financing may be re-subordinated, provided the CLTV requirements are met.

The following are ineligible for a cash-out refinance transaction:

Construction-to-permanent loans.

Renovation mortgages.

New subordinate financing.

Properties listed for sale in the last six months.

Second homes.

Investment properties

2–4 unit properties.


2 Loans not meeting rate/term refinance eligibility may be considered under United Guaranty’s Refinance with Certificate Modification Program (same-servicer transactions

only) when United Guaranty insures the existing loan.

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8.01.04 Fannie Mae’s DU Refi Plus and Refi Plus, and Freddie Mac’s Relief Refinance (rev.February 13, 2012)

Loans under Fannie Mae’s Refi PlusTM and DU® Refi PlusTM and Freddie Mac’s Relief RefinanceSM Mortgage may be considered under United Guaranty’s Refinance with Certificate Modification Program (www.ugcorp.com/services/harp.html) when United Guaranty insures the existing loan.

Fannie Mae’s Refi PlusTM and DU® Refi PlusTM and Freddie Mac’s Relief RefinanceSM Mortgage loans are considered streamlined refinance transactions and are ineligible for new insurance unless the following requirements are met:

Fannie Mae’s DU Refi PlusTM:

See Additional Documentation Requirements for AUS Underwritten Loans for the documentation requirements.

All other rate/term refinance underwriting requirements must be met.

Fannie Mae’s Refi PlusTM:

See Documentation Requirements for All Loans for the documentation requirements. When deferring to the Fannie Mae documentation requirements is allowed, the requirements for a manually underwritten rate/term refinance apply, not the documentation requirements for a Refi Plus loan.


Freddie Mac’s Relief RefinanceSM – Open Access Mortgage loans:

See Additional Documentation Requirements for AUS Underwritten Loans for the documentation requirements.


Freddie Mac’s Relief RefinanceSM – Same Servicer Mortgage loans:

See Documentation Requirements for All Loans for the documentation requirements. When deferring to the Freddie Mac documentation requirements is allowed, Freddie Mac’s requirements for a manually underwritten rate/term refinance apply, not the documentation requirements for a Relief Refinance – Same Servicer mortgage.


8.02 Renovation Mortgages (rev. June 27, 2011)

United Guaranty’s requirements for a renovation mortgage transaction are listed below.

Items not addressed in this section will follow the underwriting requirements for the applicable transaction type (purchase or rate/term refinance).

1-unit primary residences only.

Maximum 95% LTV.

Renovation mortgages will be considered either purchase transactions or rate/term refinance transactions.

Cash-out transactions are ineligible.

A copy of the HUD-1 from the original purchase transaction must be provided for a rate/term refinance transaction when the property has been owned less than 12 months.

A copy of the contract for cost of improvements must be provided.

All loan proceeds must be disbursed at closing (funds earmarked for renovations are usually deposited into an escrow account). It is the lender’s responsibility to ensure that all renovations are completed.

Loans in which funds are disbursed in increments and the borrower pays interest-only payments until all funds are disbursed are ineligible as a “Renovation Mortgage” and must be underwritten as a construction-to-permanent loan.

Transactions involving the complete tear-down of the existing property with the re-building of a new property are ineligible as a “Renovation Mortgage” and must be underwritten as a construction-to-permanent loan.

Renovations must be completed by a licensed contractor. The borrower may not act as the general contractor. Sweat equity is not allowed.

The insurance may be activated prior to the completion of the renovations.

http://www.ugcorp.com/services/harp.html

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8.02.01 Determining the LTV (rev. June 27, 2011)

Purchase

Rate/term Refinance

Owned less than 12 months Owned for 12 months or more

Use the lesser of:

Purchase price plus documented costs of

improvements or

Appraised value subject to completion.

Use the lesser of:

Original purchase price plus the

documented cost of improvements or

Appraised value subject to completion.

Use the appraised value subject to completion.

8.03 Construction-to-Permanent Loans (rev. September 1, 2011)

United Guaranty’s requirements for construction-to-permanent loans are listed below.

United Guaranty will provide mortgage insurance on the permanent loan for construction-to-permanent transactions under the following terms.

8.03.01 General Requirements (rev. September 1, 2011)

Documents must be current at the time the mortgage insurance commitment is issued.

Mortgage insurance coverage is ineligible during the construction phase. The property must be complete before the mortgage insurance is activated.

The borrower must have title to the lot prior to closing, or the lot may be purchased and transferred to the borrower at the initial closing prior to construction beginning.

Mortgage insurance coverage on the permanent loan is ineligible if the borrower had any delinquencies (greater than 30 days) during the construction phase.

8.03.02 Additional Requirements (rev. June 27, 2011)


Maximum 95% LTV.

Eligible as a purchase or rate/term refinance.

Cash-out refinance transactions are ineligible.

The borrower’s required contribution into the transaction must be documented. (See the Minimum Contribution from Borrower’s Own Funds section.)

8.03.03 Recertification of Value (rev. June 27, 2011)

A recertification of value is required when the effective date of mortgage insurance coverage is more than 120 days from the original commitment date.

If the recertification shows a decline in value since the original appraisal, a new full appraisal with interior and exterior inspection is required.

The recertification of value or new appraisal must be within 60 days of the effective date of mortgage insurance coverage.

8.03.04 Determining the LTV (rev. June 27, 2011)

Purchase or Rate/Term Refinance

LTV is based on the lesser of:

Current appraised value, or

Total acquisition costs (costs of improvements plus lot value).

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8.03.05 Determining the Lot Value (rev. June 27, 2011)

Owned less than 12 months Owned for 12 months or more Gift or Inherited

Use the lesser of:

Purchase price; or

Current value of the lot.

Use the current value of the lot. Use the current value of the lot.

8.04 Corporate Relocation Loans (rev. March 19, 2012)

A loan qualifies as a corporate relocation loan when it meets the following requirements:

Made to a transferred employee (new or existing) to purchase a primary residence at a new location.

Made pursuant to a relocation program administered by the corporate employer or its agent.

Involves an employer contribution of at least 3% of the loan amount.

Made by the lender pursuant to a contract or agreement with the employer or its agent. Employer contributions must consist of one or more of the following:

Payment of the borrower’s closing costs on the new primary residence and/or the previous residence.

Payment of expenses related to the borrower’s move (For example – relocation allowances, movement of household goods and automobiles, temporary housing expenses, etc.)

Payment of the difference between the property tax and/or mortgage interest rate obligation on the employee’s previous primary residence and the employee’s new primary residence.

A buydown or subsidy of the mortgage interest rate.

Funding of a below-market-rate or no-interest bridge loan.

A copy of the relocation agreement or other documentation must be provided to show the detail of the employer’s contribution toward the borrower’s loan transaction.

8.05 Third-Party Originations (TPO) (rev. November 14, 2011)

8.05.01 Third-Party Originated (TPO) Loans (rev. June 27, 2011)

A loan for which the loan origination (taking the loan application) is performed by an entity other than the insured is considered a third-party origination. Mortgage service providers are not considered third-party originators if they do not take the loan application and are paid on an arm’s-length fee basis for services performed, with payment of fees not being contingent on mortgage approval or closing.

When applying for United Guaranty mortgage insurance involving a TPO loan, the insured lender must identify the loan as a TPO loan and provide the type of TPO and the TPO’s name, city, and state.

8.05.02 Broker TPO Loans (rev. November 14, 2011)

United Guaranty defines a “Broker TPO” (for the purpose of mortgage insurance eligibility and pricing) as a non-regulated entity that facilitates mortgage financing but does not have the ability to provide loan funding from its own funds or warehouse line of credit for conventional first-lien mortgage financing. A mortgage broker typically takes the loan application, processes the loan, and then provides the loan documentation to the funding lender for underwriting and securing MI.

Lenders that have the ability to fund conventional first-lien mortgage financing but do not, due to their investor’s requirements, are not considered a Broker TPO.

8.06 Seasoned Loans (rev. June 27, 2011)

A seasoned loan is defined as a loan for which the first monthly payment has been made.

Seasoned loans are ineligible for insurance with United Guaranty. All closed loans must be submitted for insurance to United Guaranty prior to the first payment being made. The first payment may not be past due.

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One-time construction-to-perm loans that are modifying to the permanent financing for which interest-only payments have been made during the construction period are not considered seasoned loans.

9. Borrower 9.01 Underwriting the Borrower (rev. June 27, 2011)

United Guaranty’s requirements for the borrower are listed below.

9.01.01 Social Security Number (rev. June 27, 2011)

All borrowers on a loan are required to have a valid Social Security number (SSN).

Credit reports with partially displayed Social Security numbers are not considered eligible documentation due to the increased opportunity for fraud. United Guaranty requires the complete Social Security number to be displayed on the credit report.

9.01.02 Individual Tax Identification Number (ITIN) (rev. June 27, 2011)

Loans to borrowers who have been issued an ITIN in lieu of a Social Security number are ineligible.

An ITIN is set up in the same format as a Social Security number, with nine digits. The first digit is always a 9, and the second group of digits (fourth digit) will always start with a 7 or 8 (i.e., 9xx-7x-xxxx).

An ITIN is not proof of legal residency in the United States and is not valid proof of identification outside the tax system. An ITIN is a tax identification number issued by the IRS to individuals who are not eligible for a Social Security number and who have an obligation to file a tax return to the IRS. Any person who is employed in the United States is required to have a Social Security number.

9.01.03 Maximum Number of Insured Loans per Borrower (rev. June 27, 2011)

Maximum of two loans per borrower.

Maximum one second home loan per borrower.

Maximum one investment property loan per borrower.

United Guaranty will be responsible for determining the number of loans already insured for a borrower and will notify the lender when the number is exceeded.

9.01.04 Loans to Corporations, Partnerships, Syndications, or Irrevocable Trusts (rev. June 27, 2011)

Ineligible.

9.02 Non-occupant Co-borrower/Co-signer (rev. June 27, 2011)

United Guaranty’s requirements for a non-occupant co-borrower/co-signer are listed below.


Maximum 95% LTV.

The occupant borrower must meet the minimum borrower contribution requirement for the transaction.

Maximum 50% DTI for the occupant borrower.

The DTI ratio, including the non-occupant borrower’s income and debt, should meet the applicable DTI requirements for the transaction.

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10. Income and Employment 10.01 Income (rev. May 14, 2012)

United Guaranty’s requirements for income are listed below. For all other income requirements United Guaranty defers to the Agencies.

10.01.01 Rental Income (rev. June 27, 2011)

When the subject property is an investment property, rental income from the subject property may not be used to qualify the borrower.

10.02 Employment (rev. June 27, 2011)

The Agency requirements for employment must be followed.

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11. Equity and Assets

11.01 Equity (rev. June 27, 2011)

United Guaranty’s requirements for the borrower’s equity in the property are listed below.

11.01.01 Minimum Contribution from Borrower’s Own Funds (rev. June 27, 2011)

The following are United Guaranty’s requirements for a minimum contribution from the borrower’s own funds.

1-unit primary residence: 3%

2-unit primary residence: 5%

3- to 4-unit primary residence:

All contributions (with the exception of allowable seller/interested party contributions) must come from the borrower’s own funds.

Second homes: 5%

Investment property:

All contributions (with the exception of allowable seller/interested party contributions) must come from the borrower’s own funds.

11.01.02 Borrower’s Own Funds – Acceptable Sources (rev. June 27, 2011)

The following types of assets are considered the borrower’s own funds and can be used to satisfy the minimum contribution from the borrower’s own funds requirement. The asset must be properly documented and used toward the down payment.

Funds on deposit in financial institutions:

The source of funds used to establish accounts opened less than 90 days must be verified.

The source of funds for large deposits or for substantial increases in account balances must be verified.

Borrower’s deposits into an Individual Development Account.

Stocks, bonds, mutual funds, U.S. savings bonds.

Trust accounts.

Retirement accounts.

Proceeds from the sale of real estate.

Lot value (when purchased by the borrower).

Rent credits with options to purchase.

Bridge loan.

Borrowed funds secured by the borrower’s asset (financial or otherwise).

Proceeds from the sale of personal assets.

Cash value of life insurance.

Business assets.

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11.01.03 Borrower’s Own Funds – Unacceptable Sources (rev. June 27, 2011)

The following types of assets are not considered the borrower’s own funds and cannot be used to satisfy the minimum contribution from the borrower’s own funds requirement.

Lot value (when received as a gift).

Interested-party contributions.

Sales concessions.

Individual Development Account (IDA) matching funds.

Community savings plans.

Gifts or grants. (A gift from a relative or domestic partner who has lived with the borrower for the last twelve months, or from a fiancé or fiancée, is considered the borrower’s own funds and may be used to satisfy the minimum borrower contribution requirement, as long as both individuals will use the home being purchased as their principal residence.)

Disaster relief grant or loan.

Employer assistance.

Trade equity.

Borrowed funds that are not secured by an asset owned by the borrower.

Credit card or unsecured line of credit financing.

Anticipated savings.

11.02 Reserves (rev. May 14, 2012)

United Guaranty’s reserve requirements are listed below.

11.02.01 Reserves – General (rev. May 14, 2012)

Monthly reserves are calculated by using a specific number of total monthly housing expense payments for the subject property. The monthly housing expense payment (PITIA) includes principal, interest, taxes, insurance, ground rents, cooperative fees, homeowner’s association dues, and special assessments. The following are the minimum reserve requirements.

# Units Occupancy Loan Purpose Minimum Reserves Required

1-unit Primary

Rate/Term Refinance None

Purchase (Loan Amounts up to $625,500) 2 months PITIA

Purchase (Loan Amounts $625,501-$850,000) 6 months PITIA (subject property only)

Cash-out Refinance 2 months PITIA

2-4 unit Primary Purchase & Rate/Term Refinance

6 months PITIA (subject property only)

1-unit 2nd Home Purchase & Rate/Term Refinance


1-unit Investment Purchase & Rate/Term Refinance


11.02.02 Reserves – Existing Primary Residence Pending Sale (rev. June 27, 2011)

When a borrower is purchasing a new primary residence, and the existing primary residence is pending sale and will not close before the closing on the new property, the reserve requirement is as follows:

Six months’ PITIA is required for both properties, unless:

30% equity in the current property is documented with a current appraisal, broker price opinion, or automated property valuation. If so, then two months’ PITIA is required for both properties.

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11.02.03 Reserves – Conversion of Primary Residence (rev. June 27, 2011)

When a borrower is purchasing a new primary residence, and the existing primary residence is converting to a second home, or converting to an investment property, the reserve requirements are as follows:

Six months’ PITIA is required for both properties, unless:

30% equity in the current property is documented with a current appraisal, broker price opinion, or automated property valuation. If so, then two months’ PITIA is required for both properties.

11.02.04 Reserves – Acceptable Sources of Funds (rev. June 27, 2011)

United Guaranty’s requirements for acceptable sources of funds to be used for reserves are listed below:

Proceeds from a rate/term refinance or cash-out refinance may be used to satisfy the reserve requirement.

11.03 Asset Types (rev. September 1, 2011)

United Guaranty’s requirements for various asset types are listed below.

11.03.01 Seller/Interested-Party Contributions (rev. June 27, 2011)

Loans that allow interested-party contributions to be used as down payment assistance are ineligible.

Unplanned buydowns (buydowns paid by the builder/seller usually negotiated just before closing on new construction to allow the borrower to receive the interest rate stated on the sales contract when interest rates have risen) must be included as an interested-party contribution.

11.03.02 Gifts (Including Gifts of Equity and Grants) (rev. September 1, 2011)

Gift funds are ineligible for three- to four-unit primary residences and investment properties.

The minimum contribution from the borrower’s own funds requirement must be met.

11.03.03 Uniform Gift to Minor Accounts (rev. June 27, 2011)

Acceptable, provided one of the following criteria is met:

The borrower is the custodian of the account, or

The borrower is the owner of the account (the minor for whom the account was opened, and who is now of age—the funds must be treated as gift funds).

11.03.04 Community Savings Plans (rev. June 27, 2011)

Community savings plans are acceptable, provided the following:

Funds from the plan may not be counted towards the minimum contribution from the borrower’s own funds.

Funds for down payment and closing costs that were derived from the community savings plan must be deposited and verified in a financial institution prior to closing.

The fund manager signs a written statement disclosing the fund’s terms, including required contribution, distribution amount, and availability of distribution.

11.03.05 Individual Development Accounts (rev. June 27, 2011)

Matching funds may not be used towards the minimum contribution from the borrower’s own funds.

May not require that a subordinate lien be recorded against the subject property.

11.03.06 Employer Assistance (rev. June 27, 2011)

May not be used toward the minimum contribution from the borrower’s own funds.

May not be in the form of a loan that requires a subordinate lien against the subject property.

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11.03.07 Business Assets (rev. June 27, 2011)

Funds from a borrower’s business may be used when the following requirements are met:

Documentation to show that the borrower has access to the funds.

A letter from an accountant stating that the withdrawal of the funds will not have a detrimental effect on the business.

If a letter from an accountant is not available, the lender must document a cash flow analysis for the borrower’s business to show there will be no detrimental effect on the business due to the withdrawal of funds.

11.03.08 Lot Equity (rev. June 27, 2011)

See the Construction-to-Permanent section for lot equity requirements.

11.03.09 Ineligible Asset Types (rev. June 27, 2011)

The following asset types are ineligible.

Cash-on-hand.

Sweat equity.

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12. Credit and Liabilities 12.01 Credit Score Requirements (rev. May 14, 2012)

12.01.01 Valid Credit Scores (rev. May 14, 2012)

For a borrower’s credit score to be considered valid, all of the following must be met:

The score must be generated from a minimum of three traditional trade lines evaluated for at least 12 months (authorized user accounts may not be used to satisfy this requirement).

The information provided on the credit report must be accurate.

Scores deemed invalid should not be used to determine the borrower’s representative score.

12.01.02 Minimum Number of Scores Required (rev. May 14, 2012)

United Guaranty requires a minimum of two credit scores per borrower.

Borrowers that do not have at least two valid credit scores are considered “non-traditional” credit borrowers.

12.01.03 Borrower Representative Credit Score (rev. May 14, 2012)

Each borrower’s representatvie credit score is used in the determination of the loan representative credit score. A borrower’s representative credit score is determined as follows:

When two valid credit scores are obtained for the borrower, use the lower score.

When three valid credit scores are obtained for the borrower, use the middle score

When three valid scores are obtained for the borrower and two are identical, one of the identical scores is considered the middle score.

12.01.04 Loan Representative Credit Score (rev. May 14, 2012)

For loans with only one borrower, the borrower’s representative score is the loan’s representative credit score.

For loans with multiple borrowers, the lowest of all borrower representative scores is the loan’s representative credit score

12.02 Types of Credit (rev. June 27, 2011)

12.02.01 Traditional Credit (rev. June 27, 2011)

In order for United Guaranty to consider a borrower as a “traditional” credit borrower, the borrower’s credit history must be an established credit history, defined as a minimum of three traditional trade lines evaluated for at least 12 months. All trade lines must be reported on the credit report and all information must be accurate. The borrower must have a valid credit score as defined above.

12.02.02 Non-traditional Credit (rev. June 27, 2011)

Any loan for which one or more borrowers do not have a valid credit score are considered “non-traditional” credit loans. All non-traditional credit loans are ineligible.

12.02.03 No Credit History (rev. June 27, 2011)

Loans involving borrowers with undocumented credit histories (“no credit”) are ineligible.

12.03 Credit Report (rev. June 27, 2011)

United Guaranty’s requirements for credit reports are listed below.

The Agency credit report requirements and the following additional requirements apply:

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12.03.01 Ineligible Credit Reports (rev. June 27, 2011)

The following credit reports are ineligible:

Non-traditional credit reports.

Foreign credit reports.

12.03.02 Fraud Alert Messages on Credit Reports (rev. June 27, 2011)

Credit repositories have developed messages to identify potential fraudulent activities perpetrated by individuals misusing others’ identity information. The messages may pertain to the borrower’s Social Security number, address, telephone number, etc. All fraud alert messages appearing on the credit report need to be satisfactorily addressed to ensure the information presented on the loan application is true and correct.

12.03.03 Accuracy of Credit Report (rev. June 27, 2011)

It is possible for a credit report to include disputed items or erroneous information. The following requirements apply based on the individual circumstances:

When the correction or removal of the disputed/erroneous item will improve the borrower’s credit history, and the credit score as reflected on the credit report meets United Guaranty’s minimum credit score requirement for the transaction:

A corrected credit report and credit score may be provided for use; or

Documentation must be provided to substantiate the borrower’s claim for the disputed or erroneous item(s), and the original credit report and credit score must be used.

When the correction or removal of the disputed or erroneous item will improve the borrower’s credit history, but the credit score as reflected on the credit report does not meet United Guaranty’s minimum credit score requirement for the transaction:

A corrected credit report and credit score must be provided for use. No attempt should be made to adjust the credit score or assume the correction will increase the score enough to meet United Guaranty’s minimum credit score requirement.

When the correction or removal of the disputed or erroneous item will worsen the borrower’s credit history:

A corrected credit report and credit score must be provided for use. No attempt should be made to adjust the credit score.

12.04 Derogatory Credit (rev. June 27, 2011)

United Guaranty’s requirements for derogatory credit are listed below.

12.04.01 Bankruptcy (rev. June 27, 2011)

The following requirements apply to borrowers with a bankruptcy filing.

Borrowers with multiple bankruptcy filings in the past seven years are ineligible.

Borrowers with a Chapter 7 or 11 bankruptcy filing require four years’ seasoning after the discharge or dismissal date, and satisfactory re-established credit must be verified.

Borrowers with a Chapter 13 bankruptcy filing require four years’ seasoning after the dismissal date, and satisfactory re-established credit must be verified.

Borrowers with a Chapter 13 bankruptcy filing require two years’ seasoning after the discharge date, and satisfactory re-established credit must be verified.

12.04.02 Mortgage Foreclosure, Deed in Lieu of Foreclosure, Pre-Foreclosure Sale (Short Sale) (rev. June 27, 2011)

Foreclosures, deeds in lieu of foreclosure, and pre-foreclosure sales (short sales) require seven years’ seasoning after the completion date, and satisfactory re-established credit must be verified.

Regardless of the borrower’s credit score and/or payment history, the seven-year seasoning requirement applies for any reference to one of the above-mentioned events, whether via the credit report or other loan file documentation.

Manufactured housing/mobile home loans indicated as repossessions, collections, or charge-offs are considered foreclosures.

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12.04.03 Deed for Lease (rev. June 27, 2011)

Borrowers may have the opportunity to lease a property for which they have given a deed in lieu of foreclosure. When the borrower’s loan file references a deed for lease, the underwriter must determine the completion date of the deed in lieu of foreclosure to ensure the requirements are met.

12.04.04 Prior United Guaranty Claim (rev. June 27, 2011)

A borrower who was a debtor on a loan for which United Guaranty paid a claim is ineligible for insurance with United Guaranty.

12.04.05 Credit Counseling (rev. June 27, 2011)

Borrowers who have received credit counseling as a result of derogatory credit should have satisfactory re-established credit from the conclusion of the counseling.

12.04.06 Past-Due Accounts (Excluding Collections and Charge-offs) (rev. June 27, 2011)

All open past-due accounts must be brought current.

12.04.07 Re-established Credit (rev. June 27, 2011)

When a borrower needs to re-establish his or her credit history due to previous derogatory credit, the borrower will be considered as having acceptable re-established credit if there are at least three traditional credit references with activity during the most recent 24 months with no late payments.

12.05 Liabilities (rev. June 27, 2011)

United Guaranty’s requirements for liabilities (including when a liability must be included in the debt-to-income [DTI] calculation) are listed below.

12.05.01 Deferred Student Loans (rev. June 27, 2011)

When the required monthly payment for a deferred student loan is not listed on the credit report, the monthly payment may be determined by:

Requiring copies of the loan documentation; or

Using 2% of the outstanding balance of the deferred student loan.

12.05.02 Authorized User Tradelines (rev. June 27, 2011)

When the Agency requirements determine that the authorized user tradeline cannot be considered as a part of the borrower’s credit history:

The credit score will be deemed invalid and the borrower will be ineligible for insurance; or

A corrected credit report may be supplied with the authorized user accounts removed and the new credit score reflected.

When a borrower provides cancelled checks as proof of payment on the authorized user account, in order that it may be considered as part of the credit history, the required monthly payment must be used in the DTI calculation.

12.05.03 Debts Paid by Business (rev. June 27, 2011)

A debt paid by a business the borrower owns does not have to be counted as part of the borrower’s recurring monthly obligations when the following requirements are met:

The account in question does not have any history of delinquency.

The borrower supplies proof that the business has paid the obligation for the last 12 months (preferably cancelled business checks).

The payment of the obligation is reflected in the business cash flow analysis (e.g., reflected as an expense on the Schedule C).

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13. Geographic Requirements

13.01 Eligible Geographic Areas (rev. June 27, 2011)

Loans secured by properties located in the following geographic areas are eligible for insurance.

Eligible: All 50 states located in the United States and the District of Columbia.

Ineligible for insurance: All other Countries and U.S. Territories (including Puerto Rico, Guam, and the Virgin Islands).

13.02 Geographic Quality Index (GQX) (rev. June 27, 2011)

Geographic Quality Index (GQX®) is United Guaranty’s market classification system. The GQX classification defines the collateral risk resulting from changes in property values. United Guaranty’s underwriting criteria uses the GQX for the subject property to mitigate this collateral risk.

United Guaranty uses the GQX solely in determining the property value trends for the subject property, regardless of any other indications obtained through the property appraisal or lender knowledge.

The table below lists the four United Guaranty market classifications.

Geographic Quality Index

GQX A

GQX B

GQX C

GQX D

13.02.01 Additional Requirements (rev. February 13, 2012)

Appraisal for properties located in GQX B, C, and D markets:


Ineligible:

Condominiums in the state of Florida are ineligible for the following transactions:

ARMs with an initial fixed-rate period less than five years.

Temporary interest-rate buydowns.

Balloon mortgages.

Second homes.

Investment properties.

Cash-out refinance transactions.

LTV ratios greater than 90%.

Loan amounts greater than $625,500.

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14. Property

14.01 Ineligible Property Types (rev. June 27, 2011)

The following property types are ineligible:

Manufactured housing. (Manufactured housing is defined as any dwelling unit built on a permanent chassis and attached to a permanent foundation system. The manufacturing of these units is regulated by HUD as evidenced by a HUD Data Plate and HUD Certification Label.)

Modular, panelized, and prefabricated housing types are eligible and follow the same underwriting requirements as stick-built housing.

Any property type that is ineligible for sale to the Agencies.

14.02 Two- to Four-Unit Properties (rev. February 13, 2012)

United Guaranty’s requirements for two- to four-unit properties are listed below.

Primary residence, purchase and rate/term refinance transactions only.

Six months’ PITIA reserves are required (subject property only).

Gift funds are ineligible for three- to four-unit properties.

14.03 Condominiums (rev. March 19, 2012)

United Guaranty’s requirements for condominiums are listed below.

Maximum 30% investor concentration within the project or subject legal phase.

Minimum 51% of the units of the project or subject legal phase must be conveyed or under contract to purchasers who will occupy the unit as a primary residence or second home.

All units in a two- to four-unit condominium project must be conveyed to purchasers who will occupy the property as their primary residence or second home.

Non-realty limited common elements (e.g., boat dock slips, cabanas) may not be financed with the property. Assigned parking spaces may be financed as a cost of the property.

14.03.01 Ineligible Condominiums (rev. June 27, 2011)

Studio condominiums (units without a complete kitchen or separate bedroom).

Condominiums with less than 600 square feet.

Live–work condominiums – Condominium projects that accommodate both residential and commercial use within an individual unit (e.g., an art studio).

14.03.02 Site Condominiums (rev. June 27, 2011)

The term “site condominium” is used to describe a condominium development with single-family detached housing instead of two or more housing units in one structure. Site condominiums are underwritten as single-family detached properties. They do not need to meet condominium requirements.

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14.04 Cooperatives (rev. March 19, 2012)

United Guaranty’s requirements for cooperatives are listed below.

Non-realty limited common elements (e.g., boat dock slips, cabanas) may not be financed with the property.

14.04.01 Ineligible Cooperatives (rev. June 27, 2011)

Studio cooperatives (units without a complete kitchen or separate bedroom).

Cooperatives with less than 600 square feet.

14.05 Rural Properties (rev. November 14, 2011)

United Guaranty’s requirements for rural properties are listed below.

Maximum 95% LTV.

Maximum 10 acres.

Properties with more than 10 acres may be considered with a full-file submission to United Guaranty.

Comparable properties must have similar acreage and property styles (e.g., ranch, two-story, etc.).

High degree of marketability.

Adequate sewage, water, and utilities.

14.06 Mixed-Use Properties (rev. June 27, 2011)

United Guaranty’s requirements for mixed-use properties are listed below.

Maximum 95% LTV.

14.07 Properties with Deed Restrictions (rev. June 27, 2011)

United Guaranty’s requirements for properties with deed restrictions are listed below.

The LTV for purchase transactions involving properties with deed restrictions that do not survive foreclosure will be based on the lower of the purchase price or the appraised value.

When there is a requirement for a third party to be notified that the borrower is in default or foreclosure, the lender must ensure that the third party is notified.

14.08 Property Flips (rev. June 27, 2011)

The following are United Guaranty’s property flip requirements.

If the seller has owned the property less than 180 days from the date of the purchase contract, all of the following apply:

A full-file underwrite by United Guaranty is required.


If the new sales price is higher than the price paid by the seller to acquire the property, the increase must be fully documented and explained.

The following types of re-sale transactions are not considered property flips and are not required to meet the above criteria:

Property being sold by a spouse who acquired the property through a divorce settlement.

Property acquired by an employer through a relocation program.

Property being sold by an administrator or executor of an estate.

Property being sold by a lender, mortgage investor, or mortgage insurance company that was acquired through foreclosure or deed in lieu of foreclosure.

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15. Occupancy

15.01 Primary Residence (rev. June 27, 2011)

United Guaranty’s requirements for principal residences are listed below.

At least one borrower on the transaction must occupy the property for the majority of the year and take title to the property. For transactions in which not all of the borrowers will occupy the property as their primary residence see the Non-occupant Co-borrower/Co-signer section.

15.02 Second Homes (rev. February 13, 2012)

United Guaranty’s requirements for second homes are listed below.

The property must be located in a recreational area.

If not in a recreational area, the borrower must give a satisfactory explanation for the use of the property as a second home.


Rental income from the subject property may not be used for qualification.

15.03 Investment (rev. February 13, 2012)

United Guaranty’s requirements for investment properties are listed below.

Gift funds are ineligible.


Rental income from the subject property may not be used for qualification.

Broker TPO loans are ineligible.

15.04 Shared Equity Plans (rev. June 27, 2011)

Shared Equity Plan properties (a property for which there is an owner-occupant and an owner-investor) are ineligible for insurance.

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16. Appraisal 16.01 Analyzing the Appraisal Report (rev. November 14, 2011)

United Guaranty’s requirements for analyzing the appraisal report are listed below.

The appraisal should fully analyze the neighborhood, site, physical characteristics, and condition of the property.

The appraisal should indicate that the property is in average or better condition. If the property condition is rated fair or poor, the appraisal should be made subject to repairs that will bring the property to an average or better condition. Additionally, when provided, the following Condition and Quality of Construction rating codes, as defined by the FHFA Uniform Appraisal Dataset utilized by Fannie Mae and Freddie Mac, must be considered as follows:

Condition ratings of C1, C2, C3, or C4 are acceptable in an “as is” condition. Due to the risk associated with Condition ratings C5 and C6, any appraisals with a C5 or C6 rating must have the condition items causing the rating on the appraisal be “subject to completion of repairs” in order for the transaction to be eligible for mortgage insurance.

Quality of Construction ratings of Q1, Q2, Q3, Q4, or Q5 are acceptable. Due to the risk associated with Quality of Construction rating Q6, any appraisal report with this rating will be ineligible for mortgage insurance.

When the appraisal is made subject to completion, repairs, or inspection, the lender must ensure that the construction is completed, the repairs are made, or the inspection is completed. If the inspection shows that additional repairs are required, those repairs must be completed also. Repairs may be completed after closing.

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17. Commitments/Certificates 17.01 Final Commitments (rev. June 27, 2011)

17.01.01 Requirements (rev. June 27, 2011)

To issue a final commitment, United Guaranty requires that all pertinent information necessary to underwrite the mortgage loan be documented and verified:

Property address.

Sales agreement.

Appraisal.

Employment.

Income.

Assets.

Credit.

17.01.02 Terms (rev. June 27, 2011)

Existing construction (the property is complete): 120 days.

Properties “subject to completion”: 12 months.

A recertification of value will be required when the effective date of MI coverage is more than 120 days from the original commitment date. If the value has declined, a new full Uniform Residential Appraisal Report (URAR), with interior and exterior inspections, is required. The recertification of value (or new appraisal) must be within 60 days of the effective date of MI coverage.

17.01.03 Extensions (rev. June 27, 2011)

Extensions to commitments/certificates are not allowed. If the mortgage loan does not close within the term of the commitment/certificate, a new application for mortgage insurance will be required. All current underwriting requirements and pricing in effect at the time of new application will apply.

17.01.04 Changes to Commitment (rev. June 27, 2011)

Any change to the loan information must be submitted to United Guaranty. The new information will be evaluated based on the underwriting requirements in effect at the time of the change. The Performance Premium pricing will be updated based on the new loan information when applicable.

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17.02 Conditional Commitments (rev. June 27, 2011)

17.02.01 Requirements (rev. June 27, 2011)

Conditional commitments may be issued for various reasons when material information or documentation is missing. Conditional commitments are most commonly issued because of missing information or documentation relating to the collateral, sales agreement, or appraisal.

Files containing conditional commitments issued for collateral (the property is yet to be determined—otherwise known as presale/pre-qualifications) must be submitted to United Guaranty for underwriting. These loans are ineligible for submission via RAP,® RAPid Link,® or EDI connection.

For files containing conditional commitments issued for a sales agreement or appraisal, the terms for continued eligibility for mortgage insurance depend on (1) the property acceptability and (2) whether or not it is located in a GQX B, C, or D market.

If any condition received is materially different from the information presented on the original application, continued eligibility for mortgage insurance will be based on the underwriting requirements in effect at the time the condition is received.

17.02.02 Terms (rev. June 27, 2011)

30 days, regardless of the construction status of the property.

17.02.03 Extensions (rev. June 27, 2011)

Extensions to conditional commitments are not allowed.

877.642.4642 | www.ugcorp.com

United Guaranty Residential Insurance Company United Guaranty Mortgage Indemnity Company 230 North Elm Street, Greensboro, NC 27401 United Guaranty is a marketing term for United Guaranty Residential Insurance Company and United Guaranty Mortgage Indemnity Company and is a registered mark. RAP, RAPid Link, and GQX are registered marks. Performance Premium is a service mark. Coverage is available through admitted company only.

Perf Prem Underwriting Guide

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