Conforming and High Balance Fixed Rate

Program Description:

A fixed rate mortgage program withconforming loan amounts for 30, 25, 20, 15 or 10 years. High Balance loan amounts are allowed for 30 and 15 years only.

Program Codes:High Balance Program Codes:

CF3030 Year Fixed RateHBF30High Balance 30 Year Fixed

CF2525 Year Fixed RateHBF15High Balance 15 Year Fixed

CF2020 Year Fixed Rate

CF1515 Year Fixed RateLender Paid MI Program Code:

CF1010 Year Fixed RateCF30LPMI30 Year Fixed Rate with LPMI

Contents: click heading below to be directed to appropriate section.

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Conforming and High Balance Fixed Rate3/11/2013

Age ofDocuments

Appraisals

Appraiser Requirements

ARM Program Information

Assets

Assumptions

Borrower Eligibility

Closing Requirements

Construction to Permanent

Credit

Departure Residence

Documentation

DownPayment

Escrow Holdback

Flood Insurance

Geographic Restrictions

Gifts

Hazard Insurance

Income/Employment

Interest Only

LoanAmount

Maximum LTV/CLTV/HCLTV

High Balance Maximum LTV/CLTV/HCLTV

MaximumLTV/CLTV/HCLTV

Mortgage Insurance

Mortgagesto one Borrower

Non-Arms Length Transaction

Non-Occupant Co-Borrowers

Numberof Properties

Occupancy

Prepayment Penalty

PropertyTypes (Eligible/Ineligible)

Property Flipping

Properties Listed for Sale

Purchases

Ratios/Qualifying Rate

Refinances

Rate/Term

Cashout

RentLoss Insurance

Reserves

Seller/Interested Party Contributions

Source of Funds

Subordinate Financing

Temporary Buydowns

TitleDocumentation

Trusts

Underwriting

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Conforming and High Balance Fixed Rate3/11/2013

Mega Capitaldoes not make any loans, which are defined, as “high-cost” under Section 32 or any State or locally governed legislation.

Mega Capitalreserves the right to amend the requirements set out in this document without providing prior notice.

All loans must meet Program Guidelines and Mega CapitalConventional Underwriting guidelines.

MaximumLTV/CLTV/HCLTV
Purchase and Rate and Term Refinance
Occupancy
/ Units / Maximum LTV4 / CLTV / HCLTV1 / Minimum FICO
Primary Residence / 1 / 97% / NA / NA
95%2 / 95% / 95% / 720
620
2 / 85% / 85% / 85% / 620
3-4 / 75% / 75% / 75% / 620
Second Home / 1 / 90%2 / 90% / 90% / 620
Investment / 1 / Purchase - 85% / 85% / 85%
RT Refi - 75%/75%/75% / 620
2-4 / 75% / 75% / 75% / 620
Cashout Refinance3
Occupancy
/ Units / Maximum LTV4 / CLTV / HCLTV1 / Minimum FICO
Primary Residence / 1 / 85%2 / 85% / 85% / 620
2-4 / 75% / 75% / 75% / 620
Second Home / 1 / 75% / 75% / 75% / 620
Investment / 1 / 75% / 75% / 75% / 620
2-4 / 70% / 70% / 70% / 620
1HCLTV is HELOC CLTV. If secondary financing is a HELOC, the loan amount plus the draw amount cannot exceed the CLTV and the loan amount plus the total line amount cannot exceed the HCLTV.
2Additional credit requirements may apply to LTV >80% due to MI restrictions.
3Cash-out not permitted if property was purchased within the prior 6 months. If property was listed for sale in the past 6 months, LTV for Cash Out Refinance may not exceed 70%.
4Maximum LTV is reduced by 5% for loans with subordinate financing.
Notes:
  • 2-unit primary residence, borrowers may not own any other residential property of equal or greater value in the same area in which the units are located. The mailing and property address must be verified as the same; if not, it must be treated as an investment property.
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High Balance Maximum LTV/CLTV/HCLTV
Purchase and Rate and Term Refinance
Occupancy
/ Units / Maximum LTV / CLTV / HCLTV1 / Minimum FICO
Primary Residence / 1 / 90%2 / N/A / N/A
80% / 90% / 90%
75% / 75% / 75% / 720
700
660
2-4 / 75% / 75% / 75% / 740
Second Home / 1 / 65% / 65% / 65% / 740
Investment / 1 / 65% / 65% / 65% / 740
2-4 / 65% / 65% / 65% / 740
Cashout Refinance3,4
Occupancy
/ Units / Maximum LTV / CLTV / HCLTV1 / Minimum FICO
Primary Residence / 1 / 60% / 60% / 60% / 740
1HCLTV is HELOC CLTV. If secondary financing is a HELOC, the loan amount plus the draw amount cannot exceed the CLTV and the loan amount plus the total line amount cannot exceed the HCLTV.
2Additional credit requirements may apply to LTV >80% due to MI restrictions.
3Cash-out not permitted if property was purchased within the prior 6 months.
Notes:
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Age of Documents / Credit documents must be no more than 90 days old on the date the note is signed. For new construction, credit documents must be no more than 120 days old on the date the note is signed. If the credit documents are old than allowed, they must be updated.
The inspection and the appraisal update must occur within the four months that precede the date of the note and mortgage.
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Appraisals / Appraisal requirements as stated on DU findings are acceptable, except as noted below:
  • Full appraisal required for:
  • Purchase of REO1, Short Sale or Foreclosure property
  • Refinance where most recent transaction was for purchase of REO1, Short Sale or Foreclosure property
1FNMA Field Review may be required.
An update, review or 2nd appraisal may be required if the appraisal is over 120 days old at time of closing.
At least 2 of the 3 comparables must be dated within 90 days of the appraisal date.
High Balance – A field review is required if the value is $1,000,000 and the LTV/CLTV/HCLTV is >75%.
Properties with a Property Condition rating of C5 or C6 are not eligible.
Properties with a Property Quality rating of Q6 are not eligible.
DU Property Inspection Waiver (PIW)
  • Must have a DU Approve/Eligible that states the PIW is acceptable.
  • PIW is not acceptable on Investment properties
  • Purchase or Rate/Term refinances with CLTV <=80%
  • Single family properties (including PUD’s)
  • Not allowed on Condos
  • If eligible, borrower must sign the "Important Notice About Property Appraisal", regardless of their decision to accept or not, at closing
  • There is a delivery fee of $75
  • Not eligible for High Balance
  • Not eligible for properties located in disaster area
  • Not eligible for new construction
Declining Markets
Standard appraisal requirements apply or as required by DU. Appraisals marked as "declining" should be given additional scrutiny to ensure the value is supported by the most recent sales and market data and that all the comments from the appraiser are taken into consideration.
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Appraiser Requirements / Must be state licensed. Must not be on FHLMC Exclusionary or any other Investors Exclusionary list.
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ARM Program Information / Index: N/A
Margin: N/A
Initial/Annual Adjustment Cap: N/A
Life Cap: N/A
Payment Cap: N/A
Payment Adjustment: N/A
Conversion Option: N/A
Conversion Fee: N/A
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Assets / The borrowers must have enough liquid assets to cover the down payment, reserve requirements, closing costs and any prepaid items. VOD or bank statements required per DU findings.
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Assumptions / Not permitted.
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Borrower Eligibility / Borrower Type / Requirements
U.S. Citizens /
  • Allowed with a valid Social Security Number

Permanent Resident Aliens /
  • Allowed under the same terms as US citizens.
  • Permanent resident aliens must provide proof of their residency (i.e. green card).
  • The Permanent Resident Alien certification must be completed and included in the loan file.

Non-Permanent Resident Aliens /
  • Borrowers are eligible for financing under the same terms as a US citizen.
  • Must currently reside in the U.S. and have a social security number
  • Borrower must be employed in the U.S. The source of the income must be verified and must be expected to continue for at least 3 years and
  • Have a 2-year work history including their employment in a foreign country. Standard documentation authenticity, accuracy, and completeness apply
  • Tax Identification Number (TIN) is not acceptable
  • One of the following valid Visas are required:
- A Series (A-1, A-2, A-3), only those without diplomatic immunity.
- H-1B or H-1C, Temporary Worker.
- L-1, Intra-Company Transferee.
- E-1, Treaty Trader.
- E-2, Treaty Investors
- G series (G-1, G-2, G-3, G-4, G-5).
- TN or TC NAFTA VISA – Used by Canadian or Mexican citizens.
Foreign National /
  • Not allowed

First Time Homebuyer /
  • Allowed with no restrictions

Maximum number of borrowers is limited to 4.
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Closing Requirements /
  • Impounds for Taxes and Insurance are required on LTV’s above 89.99%
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Construction to Permanent / Construction to permanent financing involves the granting of a long-term mortgage to a borrower for the purpose of replacing interim financing that the borrower obtained in order to fund the construction of the home.
  • Owner occupied single family and second homes only. Investments not allowed.
  • Condos and Attached PUD’s not allowed
  • A final Certificate of Completion is required or the current appraisal indicates subject property is 100% complete
  • Photographs of the completed property must be provided
  • A Certificate of Occupancy or equivalent from the local authority must be provided
  • Construction to Permanent transactions may be treated as:
  • A purchase where the applicant receives no cash out or;
  • As a refinance where the applicant may or may not receive cash out.
The dates of verification of employment, income, source of funds and credit history must not be more than 120 days prior to the Note date of the permanent mortgage
The date of the appraisal report must not be more than 120 days prior to the Note date
Purchase Transactions:
When a purchase transaction is used in connection with a lot that the borrower acquired 12 or more months before applying for the construction financing or if the borrower acquired the lot through an inheritance or gift (regardless of the date of acquisition), the LTV ratio is determined by dividing the loan amount by the lesser of:
  • The current appraised value for the property (both the lot and improvements), OR
  • The sum of the documented costs of the construction and the current appraised value of the lot.
If the borrower acquired the lot within the 12 months preceding the date of the application for the construction financing, the LTV ratio is determined by dividing the loan amount of the construction to permanent mortgage by the lesser of:
  • The current appraised value for the property (both the lot and improvements), OR
  • The total acquisition costs (which are the sum of the documented costs of the construction and the sales price of the lot).
Note: The sales price of the lot must be documented by a copy of either the purchase contract or the related HUD-1 Settlement Statement. The borrower must use his/her own savings or other liquid assets to make a minimum required down payment of 5%. The remainder of the down payment may come from other sources.
The purchase price must be clearly supported with the documented cost to construct including the lot. All LTV, loan amount and down payment requirements for purchase transactions must be met.
Refinance Transactions:
When underwriting as a refinance transaction, the construction financing must be in the borrower’s name. The borrower must have held legal title to the lot before he/she applied for the construction financing.
  • If the borrower acquired the lot 12 months or more prior to the application for the construction loan, the LTV/CLTV/HCLTV is based off of the current appraised value.
  • If the borrower acquired the lot less than 12 months prior to the application for the construction loan, the LTV/CLTV/HCLTV is based off the lesser of the current appraised value or the total acquisition cost (cost of improvements plus the lot)
The loan is subject to all LTV and loan amount restrictions for refinance transactions (either rate/term or cash out). All improvements must be completed prior to funding.
For the borrower to be eligible for a cash-out refinance transaction, the borrower must have held legal title to the lot for at least six months prior to the closing of the permanent mortgage.
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Credit / The minimum representative credit score is 620, except where specifically modified in the Maximum LTV/CLTV/HCLTV tables, regardless of the DU findings.
All Borrower(s) must have sufficient credit experience regardless of DU findings (generally defined as a minimum of three open trade lines for 12 months or more).
Non-Traditional credit is not allowed.
High Balance - 0 x 30 in the last 12 months, 1 x 30 in last 24.
A single representative credit score is required to be selected for each borrower. A representative score is determined for the borrower and the loan, as follows:
Borrower Representative Score:
  • If a total of 3 scores are obtained for a borrower, the designated score for that borrower shall be the middle score.
  • If a total of 2 scores are obtained, the lower score will be the designated score for that borrower.
Loan Representative Score:
  • If there are co-borrowers on the loan, the credit score applicable to the loan itself will be the lowest of the respective borrowers’ scores.
  • If only one score is available from all three repositories, the one score will be designated as the loan score.
Late payments are considered accounted for in the credit score. However, the following items are subject to individual evaluation, no matter how high the credit score:
  • Bankruptcy, foreclosure, deed-in-lieu, short sale.
  • Judgments, collections, charge-offs, tax liens.
Bankruptcy, Pre-foreclosure, Short Sale, Deed-in-Lieu and Foreclosures are not allowed on High Balance loans.
The following table summarizes the waiting period requirements for all significant derogatory credit events:
Derogatory Event / Waiting Period Requirements / Waiting Period with Extenuating Circumstances
Bankruptcy — Chapter 7 or 11 / 4 years
Minimum 680 FICO required / 2 years
Bankruptcy — Chapter 13 / 2 years from discharge date
4 years from dismissal date / 2 years from discharge date
2 years from dismissal date
Multiple Bankruptcy Filings / 5 years if more than one filing within the past 7 years / 3 years from the most recent discharge or dismissal date
Foreclosure / 7 years
Minimum 680 FICO required / 3 years
Additional requirements after 3 years up to 7 years:
  • 90% maximum LTV ratios1
  • Purchase, principal residence
  • Limited cash-out refinance, all occupancy types

Deed-in-Lieu of Foreclosure and Preforeclosure,
Short Sale / 4 years — 90% maximum LTV ratios1
7 years — LTV ratios permitted by program
Minimum 680 FICO required / 2 years — 90% maximum LTV ratios1
1The maximum LTV ratios permitted are the lesser of the LTV ratios in this table or the maximum LTV ratios permitted by the program.
The credit report and other credit documentation must evidence that the borrower(s) has reestablished an acceptable credit history.
Borrowers who have completed a short sale, short refinance or restructured loan and are purchasing or refinancing a property which is not the subject of the short refinance / restructured loan must have no more than 1 x 30 days late on any mortgage in the past 12 months.
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Departure Residence / Pending Sale , Listing or Conversion of Primary Residence
If the Borrower's current Primary Residence in on the market and the sale will not close before the closing of the new Primary Residence, the following requirements must be met:
Qualifying with Current and Proposed Housing Payment
  • A minimum of six months PITI reserves for the current primary residence and new transaction is required
  • A minimum of two months PITI reserves is allowed if 30% equity in the retained principal residence as evidenced by a full appraisal dated no more than 60 days prior to the Note Date
Qualifying with Proposed Housing Payment Only
  • The fully executed sales contract for the previous residence with confirmation that any financing contingencies have been cleared.
  • A minimum of six months PITI reserves for the current primary residence and new transaction is required
  • A minimum of two months PITI reserves is allowed if 30% equity in the retained principal residence as evidenced by a full appraisal dated no more than 60 days prior to the Note Date.
  • Must be an Arm's Length transaction
Borrower Converting Primary Residence to a Second Home
  • Both the current and proposed mortgage payments must be used to qualify the Borrower for the new transaction
  • Six months PITI reserves required for both the retained and subject properties or
  • Reduced reserves of no less than two months for both the retained and subject properties may be considered if there is documented equity of at least 30% in the retained property as evidenced by a full appraisal dated no more than 60 days prior to the Note Date.
Borrower Converting Primary Residence to Investment Property
  • A fully executed lease agreement is required
  • Proof is required that a security deposit was received from the tenant and deposited into the borrower’s account
  • For a 1 unit property if there is documented equity of at least 30% as evidenced by a full appraisal dated no more than 60 days prior to the Note Date, up to 75% of the rental income may be used to offset the mortgage payment to qualify.
  • For a 2-4 unit property if there is documented equity of at least 30% as evidenced by a full appraisal dated no more than 60 days prior to the Note Date the following applies:
  • For the unit previously occupied by the borrower up to 75% of the rental income may be used to offset the mortgage payment to qualify.
  • For the remaining units the net rental income (or loss) will be calculated from the most recent year of signed tax returns and schedule E. Rental leases are permitted only if the property is not listed on Schedule E because it was acquired subsequent to filing the tax return.
  • For a 1 unit property if the 30% equity in the property cannot be documentedas evidenced by a full appraisal dated no more than 60 days prior to the Note Date no rental income will be allowed.
  • For a 2-4 unit property if there is documented equity of at least 30% as evidenced by a full appraisal dated no more than 60 days prior to the Note Date the following applies:
  • For the unit previously occupied by the borrower rental income may not be used to offset the mortgage payment.
  • For the remaining units the net rental income (or loss) will be calculated from the most recent year of signed tax returns and schedule E. Rental leases are permitted only if the property is not listed on Schedule E because it was acquired subsequent to filing the tax return.
  • Six months PITI reserves required for both the retained and subject properties or
  • Reduced reserves of no less than two months for both the retained and subject properties may be considered if there is documented equity of at least 30% in the retained property as evidenced by a full appraisal dated no more than 60 days prior to the Note Date.
  • A family member, individual with an Established Relationship with those involved in the transaction, or an interested party may not sign the lease agreement as the renter
  • At Underwriting discretion, a fair market rent letter may also be required
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