FundLoans Aspire X Guidelines

ASPIRE X (2nd Mortgage / Closed-End Second Lien)

Effective 04-14-2026 | V3.6

PROGRAM OVERVIEW

ASPIRE X is a high CLTV, exterior-only appraisal cash-out, debt consolidation or piggy-back purchase junior lien (second position or better only) program available for 1-4 unit primary residences, second homes, and investment properties.

1.1 Overview and Underwriting Philosophy

The FundLoans Apex X Mortgage Guidelines (hereafter referred to as "Guidelines") outline the requirements for residential mortgage loans to be originated to FundLoans Capital (hereafter referred to as "FundLoans"). This document serves to provide guidance and consistency in the underwriting and review of the loan and its characteristics related to the borrower and property. FundLoans offers programs to originators for borrowers who may have limited access to credit. As such, FundLoans evaluates many elements of the loan but primarily relies on the evaluation of the borrower's ability to repay the loan. In addition to ability-to-repay (ATR), FundLoans' programs take into consideration—with the expectation of full verification and examination—the borrower's income stability and employment history, credit history, asset position, and the property being used for collateral. Each loan is assessed on the basis of its individual merits with a common sense and holistic approach to the borrower's ability and willingness to repay. To this end, FundLoans' programs consider the benefit to the borrower on each loan.

1.2 Underwriting Criteria

The Guidelines are intended to reference and supplement the Fannie Mae Seller Guide. For specific information concerning qualification requirements that are not referenced in this document, Originators should refer to the Fannie Mae Seller Guide. For specific loan characteristic and eligibility requirements related to LTV, FICO, DTI, etc., refer to the FundLoans Matrix (hereafter referred to as "Matrix"). Loans originated to FundLoans must meet the criteria of the current published Guidelines and Matrix as of the loan application date.

1.2.1 Ability-To-Repay (ATR)

FundLoans requires the Ability-To-Repay Borrower Attestation or similar document be included with all loan files originated.

1.2.2 Alternative Loan Review / AUS

All loans will be manually underwritten. The Underwriting Approval, Income Calculation Worksheet, and the Underwriter's determination of ATR is required. All loans must have evidence of agency ineligibility. As an option, the lender may utilize an AUS Recommendation for guidance on income documentation in lieu of documentation requirements on matrix.

2.1 Program Overview

The FundLoans closed-end second can be stand-alone and in combination with new first liens (piggy-back). When used in combination with a new first mortgage, the income documentation used for qualifying must be the same for both liens.

See Matrix for details and program specific.

The program is designed for primary, second home and investment borrowers. For both QM and Non-QM transactions, with flexibility in mortgage history, credit history, and/or payment and documentation options. This program offers expanded credit parameters for multiple borrower profiles while utilizing standard and alternative document types. On piggy-back transactions, the income documentation type must match the requirements of the 1st lien approval.

• Full Doc 1 or 2 Yrs: Standard FNMA Documentation • Alt Doc Bank Statements: 12, 24 Bank Statements • Alt Doc 1099: 1yr 1099 Statement • Alt Doc WVOE: FNMA Form 1005 • Alt Doc P&L: 12 mo P&L Statement • DSCR (NOO Only): Gross rents divided by PITIA

Loan amounts are rounded down to the nearest $100.

Example $205,631, round down to $205,600

Maximum exposure to a single borrower may not exceed $5,000,000 in current UPB or maximum eight (8) properties.

Texas Section 50(a)(6) Equity Cash-out are ineligible.

2.2 Eligible Products

The following loan products are eligible. See Matrix for details.

• Fully Amortizing Fixed Rate: 10, 15, 20, 30 year fixed rate: Qualifying ratios are based on PITIA payment with the principal and interest payments amortized over the loan term.

• Interest-Only Fixed Rate o 20, 30 year fixed rate: Qualifying ratios are based on PITIA payment with the principal and interest amortized over the remaining term after the expiration of the interest-only period ▪ 20-year Fixed Rate – 3-year interest-only with 17-year amortization ▪ 30-year Fixed Rate – 3-year interest-only with 27-year amortization o Restrictions: ▪ Owner-Occupied only (2nd home & Non-Owner Occupied not allowed) ▪ Max 80% CLTV ▪ Min 700 credit score

• Balloon Notes: 30/15, 40/15 (See matrix for limitations).

2.3 Ineligible Senior Liens

A copy of the most current 1st mortgage statement is required to determine eligibility. Statement date to be within 60 days of Note date. Additional 1st mortgage documentation my be required to provide sufficient data for underwriting.

• Loans in active forbearance or deferment. Deferred balances from modifications seasoned greater than 12 months may remain open. If seasoned less than or equal to 12 months, deferred balances must be paid through closing. Senior lien must be out of forbearance at time of application in order to be eligible. • Loans with negative amortization. • Reverse mortgages. • Balloon loans that the balloon payment comes due during the amortization period of the 2nd loan. • Mortgages not reporting on credit report (see 6.5 Housing History below) • Private Party.

2.4 Interest Only Senior Loans

Interest only senior liens are acceptable when qualified at a maximum DTI of 50%. Qualify I/O on fully-amortized payment on the remaining term after the I/O period. 1st lien ARMS with less < 3 years fixed period remaining are qualified on the fully indexed payment.

2.5 Maximum Combined Liens

Maximum combined 1st and 2nd liens based on loan amount. See matrix for limits.

2.6 Seasoning: Loan and Document

Age of documents from Note date:

2.7 Seasoning: Property Listing

Properties that have been on the market within six months of the note date are ineligible.

NOTE: DSCR loans with a prepayment penalty (where allowed by state) are eligible with no seasoning, so long as the subject property has been taken off the marker prior to the application date.

2.8 Seasoning: Ownership

Properties owned less than six (6) months ineligible. Properties owned greater than six (6) months – no restrictions.

2.9 State and Federal High Cost Loans

To assist the loan servicer in contacting the borrower in a timely manner, the broker/orginator is required to obtain a valid phone number for the borrower(s). The phone number can be collected on the 1003 loan application or by using the Borrower Contact Consent Form as may be provided by FundLoans.

2.10 State and Federal High Cost Loans

Not eligible. NOTE: Fannie Mae High-Cost limits do not apply to business purpose loans purchased by Vista Point Mortgage, unless required by state or local laws.

2.11 Interest Credit

FundLoans may use its own documents or Fannie Mae security instruments, notes, riders/addenda, and special purpose documents.

2.12 Interest Credit

Loans closed within the first ten (10) days of the month may reflect an interest credit to the borrower.

2.13 Assumability

Not assumable.

2.14 Escrows

No loan may have holdbacks or escrows.

2.15.1 Coverage Requirements

Following Fannie Mae (FNMA) guidance, the property insurance policy must provide the claims to be settled on a replacement cost basis. The coverage amount must be at least equal to the lesser of:

• 100% of the replacement cost of the improvements as of the current property insurance effective date, or • The unpaid principal balance of all liens, provided it equals no less than the replacement cost value of the improvements

Follow FNMA guidance for additional information.

Lender is to be added as additional loss payee.

2.16 Flood Insurance

Flood insurance is required for any property located within any area designated by the Federal Emergency Management Agency (FEMA) as a Special Flood Hazard Area (SFHA). A SFHA is typically denoted as Flood Zone A or Zone V (coastal areas). Properties in Flood Zone A or V must be located in a community which participates in the FEMA program to be eligible for financing.

Flood insurance must be maintained throughout the duration of the loan.

2.16.1 Flood Certificate

Determination whether a subject property is in a flood zone must be established by a Flood Certificate provided by the Federal Emergency Management Agency (FEMA). Flood Cert from CoreLogic or ServiceLink is preferred. The appraisal report should also accurately reflect the flood zone.

The flood insurance requirement can be waived if:

• Subject property improvements are not in the area of Special Flood Hazard, even though part of the land is in Flood Zone A or V; or • Borrower obtains a letter from FEMA stating that its maps have been amended so that the subject property is no longer in an area of Special Flood Hazard

2.16.2 Minimum Flood Insurance Coverage

For reference, the minimum amount of flood insurance required for most first mortgages secured by 1-unit properties and individual PUD units is the lower of:

• 100% of the replacement cost of the insurable value of the improvements; • the maximum insurance available from the National Flood Insurance Program (NFIP), which is currently $250,000 per dwelling; or, • the unpaid principal balance of the mortgage.

The minimum amount of flood insurance required for a PUD or condo project is the lower of:

• 100% of the insurable value of the facilities; or, • the maximum coverage available under the appropriate National Flood Insurance Program (NFIP).

The flood policy for a PUD or condominium project must cover any common element buildings and any other common property located in a SFHA.

2.17 Prepayment Penalties

Prepayment penalties are only eligible for DSCR Closed-End Second loan transactions on non-owner and investment properties (business purpose only - both DSCR and non-DSCR programs). See Rate Sheet and Exhibit A – Prepayment Penalty Restrictions for details.

DSCR loans require a minimum 1-year prepayment penalty where allowable by state law.

For all other loan transactions (primary residence, second home, non-business purpose investment), prepayment penalties are prohibited.

Note: States may impose different definitions of points and fees, rate/APR, or prepayment penalties that apply under HOEPA. States may also use different triggers in each category for determining whether a loan will be a "high-cost mortgage" (or equivalent terms) under state law. Prepayment penalty must be in compliance with the terms and limitations of the applicable state or federal law.

2.18 Title Reports

The following are eligible title report types:

• ALTA • Jr. ALTA • ALTA Lite • ALTA Short Form – Lender's Policy

2.19 Subordinate Financing

All existing subordinate liens must be satisfied at or prior to closing, with the exception of those solar liens addressed in Section 3.5.1 Solar Liens (subject to CLTV limits referenced in the matrix).

3.1 Appraisals

There are two collateral evaluation methods available for the second mortgage program.

3.1.1 Appraisal Options

On purchase transactions, a copy of the appraisal with original pictures and any secondary valuation used on the 1st mortgage is acceptable.

Higher-Priced Mortgage Loan (HPML)

Primary and 2nd Homes: • Full Appraisal (1004, 1025, 1073) • Declining markets maximum 75% CLTV

HPML QM Safe Harbor or Rebuttable Presumption (Full Doc only)

Primary and 2nd Homes: • Loan amounts < $400,000 AVM with a 90% Confidence Factor and a Property Condition Inspection from: o Clear Capital o Collateral Analytics o CoreLogic o HouseCanary o Homegenius o Quantarium o Veros • Full appraisal required when AVM has less than 90% Confidence Factor. • Loan amounts > $400,000 Full Appraisal (1004, 1025, 1073) • Declining markets maximum 75% CLTV

Non-HPML:

Primary / 2nd Homes / Investment Properties: • Loan amounts < $400,000 AVM with a 90% Confidence Factor and a Property Condition Inspection from: o Clear Capital o Collateral Analytics o CoreLogic o HouseCanary o Homegenius o Quantarium o Veros • Full appraisal required when AVM has less than 90% Confidence Factor. • Loan amounts > $400,000 o Full Appraisal (1004, 1025, 1073) • Declining markets maximum 75% CLTV

3.2 Minimum Property Standards

Minimum property standards include but may not be limited to:

• 600 square feet. • Property constructed for year-round use • Permanently affixed continuous heat source • Maximum deferred maintenance cannot exceed $2,000 • No health or safety issues both internal or external

3.2.1 Eligible Property Types

• SFR, PUD, Townhome, Rowhome • 2-4 Units • Condos – Warrantable • Rural – Primary, Maximum 10 acres. Max 80% CLTV.

3.2.2 Ineligible Property Types

• Rural Investment Properties & Rural 2nd Homes • Condotels • Non-warrantable Condos • Manufactured/Mobile Homes • Log Homes • Working Farms and Hobby Farms • Unique Properties • Agricultural or Commercial Zoned Properties • Co-ops • Room and Board Facilities • Adult Assisted Living/Care Facilities • Mixed-Use • Land Trust • Deed Restricted Properties • Hawaii properties located in lava zones 1 or 2 • Houseboats • Income producing properties with acreage • Multiple dwellings on a single lot (Legal ADUs acceptable)

3.2.3 Acreage Limitations

• Maximum 10 acres

3.3 State Ineligibility

• Texas Section 50(a)(6) cash-out loans and Texas Section 50(a)(4) no cash-out loans are eligible only with prior approval. Not eligible for Interest-Only. Non-business purpose above APR 10% ineligible.

3.4 Title Vesting and Ownership

Ownership must be fee simple or leasehold.

Acceptable forms of vesting are:

• Individuals • Joint tenants • Tenants in Common • Inter Vivos Revocable Trust

Business Entity – Investor properties only. With current vesting in: o Limited Liability Company (LLC) o Limited and General Partnerships o Corporations

3.4.1 Inter Vivos Revocable Trust

Inter Vivos Revocable Trusts are allowed when the requirements outlined below are met.

• The trust must be established by one or more natural persons, solely or jointly. • The primary beneficiary of the trust must be the individual(s) who is establishing the trust. • Trust must be in the borrower's name. • Trust must state that the borrower(s) have a right to revoke the Trust during their lifetimes. • Income and assets of at least one borrower of the individuals establishing the Trust must be used to qualify for the mortgage. • Trust must comply with all applicable state and local laws and regulations. • Trustee must have the power to mortgage the property. • The trust must become effective during the lifetime of the person establishing the trust.

Provide copy of Trust Agreement or Trust Certificate (where allowed by law) reviewed and approved by Title company. Title must not contain any title exceptions and offer full title protection without exception to the trust.

3.4.2 Business Entity

Vesting solely in the name of a business entity (LLC, partnership or corporation) is acceptable on investor properties only on the 2nd mortgage program (for both DSCR and non-DSCR). Sellers must ensure loans that are secured by properties vested in a business are solely business purpose loans for the purchase or refinance of an investment property.

For partnerships and corporations, loans must be originated only in the individual borrower(s) names (eligible for vesting only). For LLC's, loan application is allowed to remain in the name of the entity with a personal guaranty.

The following standards apply:

• All persons with >25% interest in the business entity ("Interested Persons") must apply for the loan and meet credit requirements • Maximum of four (4) individual members/partners/shareholders. No entities as members. • Persons who sign the note or a personal guaranty must sign an Occupancy Affidavit prior to closing.

Collateral documents must be signed as follows:

The following documentation must be provided:

• Formation and Operating documents o Articles of Incorporation and bylaws o Certificate of Formation and Operating Agreement, or o Partnership Agreement • Tax Identification Number • Certificate of Good Standing

3.4.3 Power of Attorney

Power of Attorney(s) are not allowed under any circumstance.

3.5 Leasehold Properties

In areas where leasehold estates are commonly accepted and documented via the Appraisal, loans secured by leasehold estates are eligible. The mortgage must be secured by the property improvements and the borrower's leasehold interest in the land. The leasehold estate and any improvements must constitute real property, be subject to the mortgage lien, and be insured by the lender's title policy.

Leaseholds must meet all FNMA eligibility requirements (i.e. term of lease).

3.6 Solar Liens

Determination of the ownership and any financing structure of the subject property's solar panels must be done in order to properly underwrite the loan and maintain the lien position of the mortgage. This includes, but is not limited to, the review of power purchase leases/agreements, UCC filings, credit report, preliminary title reports and other applicable documents.

• Leased Solar Panels or Panels Under a Power Purchase Agreement Requirements: ▪ Copy of the lease or power purchase agreement ▪ Power Purchase Agreement Liability: • Payment may be excluded from DTI when payment is based on energy produced only. If not the case, payments must be included as part of the DTI calculation ▪ Lease Liability • Lease payments must be included in the DTI calculation ▪ The value of the solar panels cannot be included in the appraised value ▪ The lease liability should not be included as part of the CLTV calculation ▪ UCC Filing: • Only the solar equipment may be mentioned as collateral for the UCC filing. If so, the UCC filing may remain on title. • Title must provide a supplement that confirms the lien position of our new mortgage ahead of the UCC or financing statement filing ▪ The property must maintain access to an alternate source of electric power that meets local community standards ▪ The owner of the solar panels cannot be included as a loss payee on the property hazard insurance policy ▪ Since the borrower does not own the solar panels, any damage resulting from installation and malfunction is the responsibility of the equipment owner

• Purchased Solar Panels Requirements: ▪ UCC Fixture Filing • Copy of purchase agreement. • UCC fixture filing, credit report & preliminary title report • Appraiser may consider the solar panels as part of the value of the property • Financing balance must be included as part of the CLTV. Max CLTV as shown on the matrix cannot be exceeded • Monthly finance payments must be included in DTI calculation • UCC fixture filing must be subordinated or UCC must be terminated ▪ Financing Statement on Title • Copy of purchase agreement. • Credit report & preliminary title report • Appraiser may not consider the solar panels as part of the value of the property • Financing balance may not be included as part of the CLTV • Monthly finance payments must be included in the DTI calculation • Title supplement must be obtained confirming our lien position

• PACE/HERO Existing PACE/HERO financing must be paid-in-full prior to or at closing

3.7 Limitations on Financed Properties

Primary and Second Homes

• The maximum number of financed properties to any one borrower is limited to twenty (20) residential properties including subject property. • Commercial properties and residential > 5-units excluded from calculation.

Investor Properties

• There is no limit on the number of financed properties.

3.8 Disaster Areas

Must identify geographic areas impacted by disasters and taking the appropriate steps to ensure the subject property has not been adversely affected.

Subject properties that have been adversely affected by disaster events that receive a formal disaster declaration issued by local, state or federal departments of emergency management must follow the procedures listed below. The following guidelines apply to properties located in FEMA declared disaster areas, as identified on the FEMA website at http://www.fema.gov/disasters.

In addition, when there is knowledge of an adverse event occurring near and around the subject property location, such as earthquakes, hurricanes, floods, landslides, tornadoes, wildfires, volcanic eruptions, civil unrest or terrorist attacks, additional due diligence will be used to determine if the disaster guidelines should be followed.

Guidelines for disaster areas should be followed for 90 days from the disaster period end date or the date of the event, whichever is later.

3.9 Declining Values

Properties in which the appraiser is reporting a declining trend in values for the subject's market area are limited to a maximum 75% CLTV on primary and 2nd homes, and 70% CLTV on non-owner.

3.10 Condominiums

Fannie Mae eligible condominium projects allowed.

FundLoans may review and approve FNMA warrantable projects following the review process required by Fannie Mae for Limited Review.

Site Condos meeting the Fannie definition are eligible for single-family dwelling LTV/CLTV.

4.1 Eligible Transactions

• Purchase • Cash-out

4.1.1 Cash-out Seasoning

Properties owned for 6 months or greater, no restrictions. Properties owned less than 6 months ineligible.

See 2.7 Seasoning: Ownership for exceptions to cash-out seasoning.

4.1.2 Standalone Cash-out

Stand-alone 2nd loans are available for cash-out on Primary, Second Home or investor property. A letter of explanation regarding the use of loan funds must be provided for cash-out refinance transactions.

4.1.3 Prior Refinance Seasoning

Any previous cash-out refinance transaction, either the 1st or a 2nd lien, within the prior six (6) months limits the maximum CLTV to 80%.

4.1.4 Piggy-Back Purchase

2nd loans can be combined with a new 1st mortgage for the purchase of a Primary, Second Home or investor property.

When the product is combined with a new 1st mortgage in a purchase transaction, the required income and asset documentation will follow the AUS Recommendations and/or the 1st mortgage loan approval.

The following credit requirements will default to the AUS Recommendation and/or the 1st loan approval:

• Housing history limit of 0x30x12 can be waived if allowed by 1st loan approval. • FTHB overlays can be waived if allowed by 1st loan approval. • Minimum tradelines requirements are waived when the 1st lien has an AUS Approve/Eligible or Approve/Ineligible Recommendation.

Overlays apply with an AUS "Out of Scope" finding.

A copy of the appraisal and original pictures and any secondary valuation (if applicable) used for the 1st mortgage is required for the file. Appraisal waivers not accepted.

4.2 Non-Arm's Length

Non-arm's length transactions ineligible.

5.0 Borrower Eligibility and Requirements

Refer to Fannie Mae guidelines for all definitions of eligibility status.

5.1 Fraud Report and Background Check

All loans must include a third-party fraud detection report for all borrowers. Report findings must cover standard areas of quality control including, but not limited to: borrower validation, social security number verification, criminal records, and property information (subject property and other real estate owned). All high-level alerts on the report must be addressed by the seller. If the FundLoans cannot electronically access the fraud report to clear high-level alerts within the fraud provider's system, an Underwriter's Certification from is acceptable. The Certification must address each individual high alert and explain what actions were taken to satisfy the issues. It must be signed and dated by a member of the FundLoans's underwriting staff or operations management personnel.

5.2 Non-Occupant Co-Borrowers

Non-Occupant co-borrowers are ineligible.

5.3 First Time Homebuyers

FundLoans defines a First Time Home Buyer as a borrower who has no ownership interest (sole or joint) in a residential property during the three-year period preceding the date of the purchase of the subject property.

A First Time Home Buyer is required to have a documented 0x30x12 month housing history. Private party housing histories are ineligible.

For Piggyback loans, a First Time Home Buyer's housing history defaults to the 1st lien requirements.

5.4.1 U.S. Citizen

Eligible without guideline restrictions.

• Permanent Resident Alien Eligible without guideline restrictions.

A permanent resident alien is a non-U.S. citizen authorized to live and work in the U.S. on a permanent basis.

Acceptable evidence of lawful permanent residency must be documented and meet one of the following criteria: • I-551: Permanent Resident Card (Green Card) issued for 10 years that has not expired • I-551: Conditional Permanent Resident Card (Green Card) issued for 2 years, that has an expiration date, and is accompanied by a copy of USCIS form I-751 requesting removal of the conditions • Un-expired Foreign Passport with an un-expired stamp reading as follows: "Processed for I-551 Temporary Evidence of Lawful Admission for Permanent Residence. Valid until mm-dd-yy. Employment Authorized."

• Non-Permanent Resident Aliens Eligible without guideline restrictions. All borrowers signing the mortgage note must have a valid Social Security Number.

A Non-Permanent Resident Alien is a non-U.S. citizen authorized to live and work in the U.S. on a temporary basis.

• Legal Status Documentation:

Visa types allowed: E-1, E-2, E-3, EB-5, G-1 through G-5, H-1, L-1, NATO, O-1, R-1, TN NAFTA

Visa must be current. If the visa will expire within six (6) months of the loan closing date, additional documentation is required. Document that extension steps and fees paid as shown by the USCIS website.

When applicable, valid employment authorization doc (EAD) required for US employment if not sponsored by current employer

5.4.2 Ineligible Borrowers

The following borrowers are ineligible:

• Irrevocable Trust • Land Trust • Individual possessing diplomatic immunity or otherwise excluded from US jurisdiction • Any material parties (company or individual) to transaction listed on HUD's Limited Denial of Participation (LDP) list, the federal General Services Administrative (GSA) Excluded Party list or any other exclusionary list. • Foreign Nationals. • Borrowers without a valid Social Security Number. • Borrowers who are party to a lawsuit

6.1 Credit Report

A credit report is required for every borrower. All applicants must have a valid SSI number. Fannie Mae guidelines should be utilized for processing and documenting all required credit reports and determining borrower's credit eligibility.

Borrower explanations are to be provided for any Disputed Tradelines with derogatory information reported in the last two years.

For borrowers who have a security freeze on their credit, the security freeze must be removed and credit repulled.

6.2 Loan Integrity and Fraud Check

Data integrity is critical to quality loan file delivery and mitigation of fraud risk. All loans must be submitted to an automated fraud and data check tool (i.e. FraudGuard, DataVerify, etc.). A copy of the findings report must be provided in the loan file along with any documentation resolving any deficiencies or red flags noted.

6.3 Credit Inquiries

Originators must inform borrowers that they are obligated to notify FundLoans of any new extension of credit, whether unsecured or secured, that takes place during the underwriting process and up to the consummation of the loan.

For all inquiries within the most recent 90 days of the credit report date, a signed letter of explanation from the borrower or creditor is required to determine whether additional credit was granted as a result of the borrower's request. If new credit was extended, borrower must provide documentation on the current balance and payment; based on the verification of all new debt/liabilities, the borrower should be qualified with the additional monthly payment. If no credit was extended, borrower must state the purpose of the inquiry.

6.4 Gap Credit Report

FundLoans will confirm there are no new or higher debt obligations for the borrower by using a gap credit report, soft-pull or undisclosed credit monitoring (UDM) report. This type of report is required if Note date is greater than 30 days after the date of the credit report relied upon for underwriting. The gap credit report, soft-pull or UDM report for the undisclosed debt monitoring is to be dated within 10 days of the Note date.

This requirement does not apply to loans documented under DSCR.

When gap credit report, soft-pull or UDM report is required, it becomes part of the Mortgage File and all payments/balances and DTI are to be updated. Based on the recalculated DTI, the mortgage loan would not be required to be re-underwritten if both of the following applies:

• The updated DTI ratio has not increased by 3% or higher, AND • The final updated DTI does not exceed 45%

6.5 Housing History

Borrowers must have satisfactory consecutive 12-month mortgage and/or rent payment history in the three (3) years prior to loan application. All files must be documented with one of the following:

• Purchase – 12-month housing history consisting of mortgage reported on credit or VOR from management company. Combination of mortgage and rent history covering 12 months acceptable. • Cash-out - 6 months current senior lien reporting on credit report, OR one of the following: o VOM from an institutional lender. o Legally inherited property supported by cancelled checks to senior lien

6.6.1 Consumer Credit History

Applicants with current credit delinquencies are ineligible.

30-day charge accounts (e.g. Amex) can remain open if borrower has sufficient funds in reserve (cash-out funds included) to cover the balance.

6.6.2 Consumer Credit Charge-offs and Collections

Open charge-offs or collections < $1,000 per occurrence are acceptable. Open medical collections < $1,000 per occurrence are acceptable.

6.6.3 Consumer Credit Counseling Services

Borrowers enrolled in credit counseling are ineligible.

6.6.4 Judgment or Liens

No open judgements or liens.

6.6.5 Income Tax Liens

All income tax liens (federal, state, local) must be paid off prior to or at loan closing.

6.7 Credit Event Seasoning

No foreclosure actions (NOI, NOD), short-sale, deed in lieu, bankruptcies, NOD in last 48 months.

No multiple credit/housing events (FC, BK, SS/DIL, NOD) in the last seven (7) years.

6.8 Credit Score

The Representative Credit Score is to be used for the Credit Decision. A valid score requires one (1) score from at least two (2) of the following agencies: Experian (FICO), Trans Union (Empirica), and Equifax (Beacon). Only scores from these agencies are acceptable.

A borrowers' representative credit score is the lower of two (2) scores or the middle of three (3) scores.

For loans with multiple borrowers:

The borrower with the highest income is the primary borrower and their representative credit score is to be used. When borrowers are self-employed and have equal ownership of a business, the highest representative score of all borrowers is to be used.

DSCR and Asset Depletion: Use the lowest representative score of all borrowers.

Minimum credit score for co-borrowers is 500.

6.9 Standard Tradeline Requirements

The primary wage-earner must meet either of the minimum tradeline requirements listed below:

• At least three (3) tradelines reporting for a minimum of twelve (12) months with activity in the last 12 months; or, • At least two (2) tradelines reporting for a minimum of twenty-four (24) months with activity in the last 12 months

On Primary residence only, borrowers who do not have the minimum tradelines are acceptable with a current mortgage history on their credit report reporting 0x30x12 (no private party mortgages).

Valid tradelines have the below characteristics:

• The credit line must be reflected on the borrower's credit report • The account must have activity in the last 12 months but may be open or closed • Student loans may be counted as tradelines as long as they are in repayment and are not deferred • An acceptable 12 or 24-month housing history not reporting on credit may also be used as a tradeline (VOR from professional management company).

The following are not acceptable to be counted as valid tradelines:

• Liabilities in deferment status • Accounts discharged through bankruptcy • Authorized user accounts • Charge-offs • Collection accounts • Foreclosures • Deed-in-lieu foreclosures • Short sales • Pre-foreclosure sales

On piggy-back loans, minimum tradelines are waived when the 1st lien has an AUS with Approve/Eligible or Approve/Ineligible Recommendation.

6.10.1 Housing and Mortgage Related Obligations

All properties owned by the borrower must be fully documented. These obligations must be verified using reasonably reliable records such as taxing authority or local government records, homeowner's association billing statements, information obtained from a valid and legally executed contract.

The monthly mortgage payment (PITIA) used for qualification consists of the following:

• Principal and Interest • Hazard and flood and insurance premiums • Real Estate Taxes • Special Assessments • Association Dues • Any subordinate financing payments. • Premiums and similar charges that are required by the creditor (i.e., mortgage insurance)

6.10.2 Current Debt Obligations, Child Support, Alimony or Maintenance Obligations

A credit report maybe used to verify a borrower's current debt obligations, unless the FundLoans has reason to know that the information on the report is inaccurate or disputed.

Monthly alimony, child support or separate maintenance fees should be current at time of application and must be included in the borrower's DTI ratio. The file should contain supporting documentation as evidence of the obligation, such as a final divorce decree, property settlement agreement, signed legal separation agreement, or court order. If payments are past due, the borrower is ineligible.

7.1 Document Options

For purchase files, documentation of sufficient funds from acceptable sources for down payment, closing costs, prepaid items, debt payoff are required and follow 1st lien approval when applicable. FNMA guidelines used to verify funds. All documentation to follow AUS requirements when applicable.

8.1 Income Analysis

For stand-along loans, The income documentation and calculation per FNMA guides with 2 years verification unless otherwise noted by the program document requirements.

For Piggy-back loans, the income documentation and calculation follow 1st lien approval.

8.1.1 Income Worksheet

Stand-alone loans using bank statement program must include FundLoans' income calculation worksheet detailing income calculations.

Income analysis for borrowers with multiple businesses must show income/(loss) details separately, not in aggregate.

8.1.2 Employment and Income Verification

For stand-alone loans, most recent two (2) years employment is required to be documented and verified for all income/documentation types unless otherwise noted by specific program requirements.

A two-year employment history is required for the income to be considered stable and used for qualifying.

When the borrower has less than a two-year history of receiving income, documentation must be provided with written analysis to justify the stability of the income used to qualify the Borrower.

For piggy-back loans, documentation to follow 1st lien approval.

8.2 Debt to Income Ratio / DTI

Standard Debt-to-Income ("DTI") maximums as per Matrix. See Section 2.4 for DTI limits on loans with Interest Only First Liens.

DTI is calculated and reviewed for adherence to Fannie Mae guidelines and inclusion of all income and liability expenses.

8.3 Documentation Options

Full income documentation for wage earners and self-employed borrowers.

Bank statement documentation for self-employed borrowers.

For piggy-back loans, follow 1st lien documentation requirements. Documentation used for the 2nd must be the same as used for the 1st lien.

8.4.1 Full Doc

Self-employed borrowers: • 1 or 2 years tax returns (business and personal) including all schedules. • Current YTD P&L (borrower prepared acceptable) or 3 months bank statements • Qualifying income based on tax returns. P&L or bank statement to support tax return income. • Tax transcripts.

Wage/Salaried borrowers: • W-2 for most recent 1 or 2 years and current paystubs reflecting 30 days earnings • W-2 transcripts

Other Requirements: • A verbal VOE from each employer within 10-days of the note date for wage and salaried employees. • For self-employed verify existence of business within 30-days of the note date with one of the following:

• Letter from business tax professional.
• On-line verification from regulatory agency or licensing bureau.
• Certification verifying business existence through direct contact or internet search.

Other Miscellaneous Income • Treatment of miscellaneous income sources follow FNMA guidelines.

8.5.1 Alt-Doc: 12 or 24 months Bank Statements

For self-employed borrowers. Bank statements (personal and/or business) may be used as an alternative to tax returns to document a self-employed borrower's income.

The Primary Borrower (greater than 50% of the income) should be self-employed for at least 2 years (25% or greater ownership) to qualify for this program. If there is less than 2 years but more than 1 year of self-employment with the same business, the borrower may qualify if they can evidence at least:

• 2 years of previous employment in the same industry/line-of-work of the current business, OR • 1 year previous employment in the same industry/line-of-work and 1 year of formal education or training in the same industry/line-of-work.

No 4506-C/tax transcripts/Tax Returns (4506-C required for salaried co-borrowers)

The lower of the stated income on the initial 1003 or UW income analysis is used to qualify.

8.5.2 Alt-Doc: Bank Statement Restrictions

Excessive NSFs on the bank statements may cause the loan to be ineligible. Business bank statements must be operating account(s) reflecting normal business expenses.

If the bank account has overdraft protection that is linked to another account with the same financial institution, an overdraft would not be considered as an NSF so long as the account does not reflect a negative balance at day's end & shows the transfer from the linked account.

8.5.3 Alt-Doc: Bank Statement Documentation

• Borrower must document two years current continuous self-employment with business license or statement from corporate accountant/CPA confirming the same.

• Other documentation from third parties may be acceptable on a case by case basis (e.g., letter from an attorney).
• Acceptable business license must be verified by third party (e.g., government entity, borrower's business attorney). Borrowers whose self-employment cannot be independently verified are not eligible.
• In instances where a license is not required (e.g., choreographer), a letter from a CPA confirming employment may be accepted in lieu of a license.

1099 Contractor • A borrower who is a "1099 contractor" may be considered self-employed for this program with confirmation from a CPA that the borrower is a 1099 contractor and files Schedule C or Schedule E with the IRS (personal tax returns). Borrower cannot have ownership of 1099 Payor's business.

8.5.4 Alt-Doc: Bank Statement Income Analysis

Bank statements are used to calculate and show consistency of income for the self-employed borrower.

When using 12 or 24 months of bank statements, no P&L is required.

Personal & Business Bank Statements Combined

• If personal and business bank activity are combined in one bank account, borrower is to provide the most recent 24 or 12 months consecutive bank statements from the same account. • Standard expense factor applies; 50% expense factor. • If the type of business operates more efficiently or typically has a materially different expense factor (lower than standard expense factor), then the expense factor per either a CPA/CTEC/EA letter or P&L may be applied. PTIN acceptable if documented as employed by a 3rd party tax preparation service. • The underwriter may use an expense factor higher than the standard 50% when the analysis of the bank statements reflect higher expenses. • If the type of business operates more efficiently or typically has a materially different expense factor (lower than standard expense factor), then the expense factor per a CPA/CTEC/EA letter may be applied. PTIN acceptable if documented as employed by a 3rd party tax preparation service.

• When a CPA or tax preparer produced statement is provided, apply the stated expense factor to calculate the qualifying income (subject to the minimum expense factors). Provide either of the following: o A CPA/CTEC/EA produced written statement/letter specifying the actual expense ratio of the business (including cost of goods sold and all other business expenses) based on the most recent year's filed tax returns. Such statement shall not include unacceptable disclaimer or exculpatory language regarding its preparation; or, o A CPA/CTEC/EA produced Profit and Loss (P&L) statement that has been reviewed by the CPA/CTEC/EA, the CPA/CTEC/EA states they have reviewed the P&L in writing, and the P&L and accompanying statement do not have unacceptable disclaimer or exculpatory language regarding its preparation. o The expense factor per the P&L or CPA/CTEC/EA produced statement must be reasonable. The annual deposits on the bank statements must be at least 75% of the gross receipts per the P&L. • A CPA/CTEC/EA-produced Profit and Loss (P&L) statement, covering the same period as the bank statements (12 or 24 months) can be provided as long as the following applies: o CPA/CTEC/EA who prepared the P&L acknowledges in writing that they have prepared or reviewed the P&L ▪ PTIN acceptable if documented as employed by a 3rd party tax preparation service. o The accompanying statement does not have unacceptable disclaimer or exculpatory language regarding its preparation o The annual deposits on the bank statements must be at least 75% of the gross receipts per the P&L • When the borrower is an inter vivos trust, personal bank statements in the name of the trust are allowed for qualification.

Personal & Business Bank Statements Separated

• If the borrower maintains separate bank accounts for personal and business, only personal bank statements are used for qualifying. • The borrower is to provide the most recent 24 or 12 months consecutive personal bank statements and two (2) months business bank statements (to support the borrower does maintain separate accounts, and to show business cash flows in order to utilize 100% of business-related deposits in personal account). • The deposits are analyzed and averaged to determine monthly income.

• No expense factor
• Deposits to a personal account from sources other than self-employment is not to be included. • When the borrower is an inter vivos trust, personal bank statements in the name of the trust are allowed for qualification.

Business Bank Statements Only

• If only using business bank statements, borrower is to provide the most recent 24 or 12 months consecutive business bank statements. • The bank statements are analyzed per Section 8.7.5 to determine monthly income. • Standard expense factor applies; 50% expense factor. • If the type of business operates more efficiently or typically has a materially different expense factor (lower than 50%), then the expense factor per either a CPA/CTEC/EA letter or P&L may be applied. PTIN acceptable if documented as employed by a 3rd party tax preparation service. • The underwriter may use an expense factor higher than the standard 50% when the analysis of the bank statements reflect higher expenses. • The minimum expense factor with CPA letter or P&L is 20%.

• When a CPA or tax preparer produced statement is provided, apply the stated expense factor to calculate the qualifying income. Provide either of the following: o A CPA/CTEC/EA produced written statement/letter specifying the actual expense ratio of the business (including cost of goods sold and all other business expenses) based on the most recent year's filed tax returns. Such statement shall not include unacceptable disclaimer or exculpatory language regarding its preparation; or, o A CPA/CTEC/EA produced Profit and Loss (P&L) statement that has been reviewed by the CPA/CTEC/EA, the CPA/CTEC/EA states they have reviewed the P&L in writing, and the P&L and accompanying statement do not have unacceptable disclaimer or exculpatory language regarding its preparation. o The expense factor per the P&L or CPA/CTEC/EA produced statement must be reasonable. The annual deposits on the bank statements must be at least 75% of the gross receipts per the P&L. • A CPA/CTEC/EA-produced Profit and Loss (P&L) statement, covering the same period as the bank statements (12 or 24 months) can be provided as long as the following applies: o CPA/CTEC/EA who prepared the P&L acknowledges in writing that they have prepared or reviewed the P&L ▪ PTIN acceptable if documented as employed by a 3rd party tax preparation service. o The accompanying statement does not have unacceptable disclaimer or exculpatory language regarding its preparation o The annual deposits on the bank statements must be at least 75% of the gross receipts per the P&L

The bank statements should show a trend of ending balances that are stable over the 24 or 12 month period.

• Large deposits inconsistent with history must be documented as business income. • Net deposits must not reflect any other income sources already taken into consideration (i.e. deduct SS payments, W-2 wage earnings, etc., that have already been used for income calculation).

8.6.1 Alt-Doc: 1099

This program is designed for borrowers who are paid on a 1099 basis and would benefit from alternative loan qualification methods. Most recent 1 year IRS Form 1099 may be used as an alternative to tax returns to document the borrower's income.

8.6.2 Alt-Doc: 1099 Restrictions

Borrower cannot have any ownership interest in the company(s) providing 1099 income. 1099 statements must be payable to the individual borrower(s). 1099 statements payable to a business entity owned by the borrower(s) are not eligible.

8.6.3 Alt-Doc: 1099 Requirements and Documentation

The following is required:

• Most recent 1 year IRS Form 1099(s) from employer(s). Borrower must have 2 year history of 1099 employment. • Current paystub or bank statement deposit for each 1099 source utilized for qualification (e.g. if borrower provided 1099 forms from five (5) separate sources, then a separate paystub/bank statement deposit must be provided from each of the five (5) 1099 sources to support current receipt) • Third party documentation (CPA/CTEC/EA) supporting a 2 year employment history when 1 year 1099 used. • Tax transcripts are required for each 1099 provided • 1099 income minus 10% expense factor / 12 months = Qualifying Income

Please see below example for qualification of 1099 income, with a borrower obtaining 1099 income from two (2) different sources:

• 1099 income that is not supported by documentation of current receipt cannot be used for qualification.

8.7.1 Alt-Doc: WVOE

This program is designed for wage or salaried borrowers providing a streamlined loan qualification method.

8.7.2 Alt-Doc: WVOE Restrictions

See Equity Solutions matrix for acceptable credit, max CLTV, loan amount, combined lien amount and DTI for the transaction.

This documentation program is not available to borrowers employed by a family-owned/managed business.

8.7.3 Alt-Doc: WVOE Requirements and Documentation

• Acceptable documentation forms o FNMA Form 1005 plus 2 months personal bank statements o Equifax (The Work Number) o Finicity (TXVerify) o Any other acceptable online income data vendor • 2 months personal bank statements supporting WVOE employment wages

Form 1005 must be fully completed (current gross pay, YTD earnings, past 2 years earnings) by an authorized company representative (Owner, Officer, HR). When Form 1005 is provided as specified above, 2 months personal bank statements supporting WVOE employment wages must be provided.

8.8.1 Alt-Doc: P&L

This program is designed for borrowers who are self-employed and would benefit from alternative loan qualification methods. A CPA/CTEC/EA completed and signed P&L may be used as an alternative to tax returns to document a self-employed borrower's income. No other income documentation type other than Asset Depletion can be combined with the P&L for the self-employed borrower.

At least one of the borrowers must be self-employed for at least 2 years (25% or greater ownership) to qualify for this program.

No 4506-C/tax transcripts/Tax Returns

8.8.2 Alt-Doc: P&L Restrictions

The borrower's qualifying income will be based on the net income as shown on the P&L statement (multiplied by the borrower's ownership percentage).

8.8.3 Alt-Doc: P&L Requirements and Documentation

All of the following is required:

• CPA/CTEC/EA signed/prepared Profit and Loss Statement(s) covering the most recent 12 month period. o PTIN's are not acceptable to sign/prepare P&L statements. • A signed letter from the CPA, CTEC (CA Tax Education Council) or EA (Enrolled Agent) on their business letterhead showing address, phone number, and license number is required with the following information: o CPA/CTEC/EA confirms they have prepared and/or reviewed the most recent year's business tax return filing; and, o The business name, borrower's name, and percentage of business ownership by the borrower. • Evidence the business has been in operation for twelve (12) months or greater • Evidence of business ownership percentage if the business is a corporate entity and the P&L covers the business as a whole (not just the borrower's share of the business). o Borrower must have at least 25% ownership of the business. o Acceptable forms of documentation include a business license, signed written statement from the CPA/CTEC/EA, an Operating Agreement, Articles of Incorporation/Articles of Organization, a Partnership Agreement, or a Business Certificate filed with a governmental agency. o Documentation showing sole member entity or sole proprietor is acceptable to indicate 100% ownership. • Third-party documentation must be provided from which the borrower's ownership percentage can be determined. Documents which are not required to list all owners do not meet this requirement. • Income from co-borrowers who are W2 wage earners is to be documented with most recent W2 and paystub.

P&L statements not meeting the aforementioned requirements, or which are suspicious in nature, may require additional verification.

8.9.1 Alt-Doc : Asset Depletion Requirements and Documentation

Asset depletion can be used as a stand-alone qualifier or in combination with all documentation types except DSCR to determine or augment qualifying income.

Employment and income are not required to be disclosed on the 1003 loan application for loans where Asset Depletion is the sole income qualifier.

On Piggy-back loans, use of asset depletion as qualifying income must follow 1st lien requirements and calculations if applicable. Asset depletion cannot be used if not included in 1st lien qualifying income.

8.9.2 Alt-Doc: Asset Depletion Restrictions

See Matrix for acceptable credit, max CLTV, loan amount and DTI for the transaction.

• Owner-Occupied only (2nd home & Non-Owner Occupied not allowed)

Cash-out proceeds from the subject transaction may not be used for qualifying.

8.9.3 Alt-Doc: Asset Depletion Requirements and Documentation

Statements covering the most recent six (6) months are required for each asset used for qualifying. Quarterly statements covering the most recent two (2) quarters are acceptable.

8.9.4 Alt-Doc: Assets and Qualification Analysis

Borrower is qualified utilizing the most recent 6 months asset documentation verified: cash in bank (100%), stocks (90%), bonds (90%), IRA's (80%), 401K (80%), mutual funds (90%), and/or retirement accounts (80%).

The total allowable assets less required reserves are divided by 60 months to determine the qualifying monthly income to be used in calculating the debt to income (DTI).

Assets / 60 months = Qualifying Income

Total monthly liabilities / Qualifying Income = DTI

8.9.5 Alt-Doc: Eligible Asset Types for Loan Qualification

Considered assets must be comprised of the following readily marketable assets which must be available to the borrower and are limited as follows:

• Bank Deposits – Checking, Saving, Money Market accounts = 100% • Publicly traded stocks and bonds = 90% (stock options not allowed) • Mutual Funds = 90% • Retirement Accounts: • 401(K) plans or IRA, SEP or KEOUGH accounts = 80% (can only be used if distribution is not already set up) • For eligible asset types, any debt tied to that asset must be netted out. Example: Stocks bought on margin or 401(K) loan against the 401(K) account. • Assets must be in liquid or semi liquid form, no privately held stock, deferred compensation or non-regulated financial companies.

8.9.6 Alt-Doc: Ineligible Asset Types for Loan Qualification

Ineligible Asset Types

• Business funds • Non-liquid assets (automobiles, artwork, business net worth etc.) • Life insurance – Face Value not allowed o Cash value of a vested life insurance policy is allowed at 100% o When used for reserved, the cash value must be documents but does not need to be liquidated or received by borrower. • Annuities of any type are not allowed • Cryptocurrency

8.10.1 DSCR: Investor DSCR (Debt Service Coverage Ratio)

This program is designed for experienced real estate investors and qualifies borrowers based on cash-flows solely from the subject property. Only stand-alone cash-out transactions are eligible for this program.

The borrower must have a history of owning and managing commercial or residential investment real estate for a period of at least 12 months within the most recent 36 months. Proof of this investor experience must be in loan file. See also 8.11.5 DSCR: Professional Investor.

No borrower employment or income to be included on the application.

Borrower must acknowledge the loan is a "business purpose loan" via the Occupancy Affidavit.

DSCR loans are classified as business loans. Appendix Q and ATR requirements do not apply.

First-Time Investors are not eligible for this transaction type.

8.10.2 DSCR: Restrictions

See Matrix for acceptable credit, max CLTV, reserves, loan amount and DSCR for the transaction.

Not eligible for owner occupied or second home.

Not eligible for purchase/piggyback transactions, or transactions involving first time investors.

Pre-payment penalty must be in compliance with the terms and limitations of the applicable state or federal law.

8.10.3 DSCR: Documentation

Income used to qualify borrower is based upon cash flow from subject property.

All DSCR loans must include a Form 1007 Comparable Rent Schedule for long-term rental leases. For short-term rental leases, Form 1007 or Short-Term Rental Analysis form developed by the AMC must be provided.

A 4506-C is NOT required.

Refinance Currently Leased 1-4 units:

DSCR is calculated using lower of lease agreement or rent survey (1007).

If existing lease agreement(s) show a higher rental amount than the market rent, the higher rents may be used with receipt of most recent three (3) months payments (e.g. cancelled checks, bank statements, etc.), or as per the terms on the lease agreement for new leases (must document receipt of first month's payment and security deposit).

If the market rent on Form 1007 is greater than the existing lease, the higher market rents may be used as listed not exceeding 120% of the lease amount to qualify (e.g. lease is $1,400 and Form 1007 is $1,800, then $1,680 may be used to qualify. A copy of the lease is not required if the appraiser lists the rent amount for the subject on Form 1007. Otherwise, a copy of the lease is required.

Refinance vacant single unit property: • Utilize rent survey to calculate DSCR.

Refinance 2-4 unit with a vacancy:

Eligible with maximum of 1 vacant unit. Use lower of lease agreements or market survey for leased units. Use market survey for vacant unit to calculate DSCR.

If existing lease agreement(s) show a higher rental amount than the market rent, the higher rents may be used with receipt of most recent three (3) months payments (e.g. cancelled checks, bank statements, etc.), or as per the terms on the lease agreement for new leases (must document receipt of first month's payment and security deposit).

If the market rent on Form 1007 is greater than the existing lease, the higher market rents may be used as listed not exceeding 120% of the lease amount to qualify (e.g. lease is $1,400 and Form 1007 is $1,800, then $1,680 may be used to qualify. A copy of the lease is not required if the appraiser lists the rent amount for the subject on Form 1007. Otherwise, a copy of the lease is required.

DSCR Refinance Seasoning: • Not available with less than six (6) months seasoning. After 6 months seasoning, the current appraised value may be used to calculate CLTV.

Accessory Dwelling Unit (ADU)

For properties defined as a one-unit property with an accessory unit (ADU), rental income may be qualified from the accessory unit subject to the following:

• Appraisal must reflect that the zoning compliance is legal (permits are not required to establish zoning compliance), • The appraisal must include at least two (2) sales comparables with an accessory unit, and Form 1007 must include at least one rental comparable with an accessory unit in which the ADU receives rental income. • The following are considered on a case-by-case basis: o 1-unit property with up to three (3) ADUs o 2-unit property with up to two (2) ADUs o 3-unit property with a single ADU o ADU not allowed on 4-unit property • Market rent for the accessory dwelling unit should be documented on Form 1007, and the file must include a copy of the current lease with two (2) months proof of current receipt.

Short Term Rental:

Short Term Rental is defined as a property that is rented based on a nightly rate charge. Any leases or rentals that include a monthly rental amount are considered long-term rental (LTR).

Parameters for Short Term Rental are as follows:

• Nightly rate charge must be provided • Property must be located in an established short term rental market and confirmed in the property appraisal o Short-term rents may not be utilized if state or local (city or county, etc.) regulations restrict the ability of the subject property to be rented on a short-term basis. • Gross rents reduced by 20% for specific costs (advertising, cleaning, etc.) • Use the leases used throughout the year and average over the 12-month period. If there are months where the property is vacant, use zero for that month in the average. The average should be supported by the comparable rent schedule (within reason). o If subject property leased on a short-term basis utilizing an on-line service such as VRBO/Air BNB; gross monthly rents can be determined by using a 12-month look back period and either 12-monthly statements or an annual statement provided by the on-line service to document receipt of rental income. If documentation cannot be provided covering a 12-month period, the property will be considered unleased.

An expired lease agreement that has verbiage that states the lease agreement becomes a month-to-month lease once the initial lease/rental term expires is allowed.

All borrowers must provide the following: • A complete schedule of all real estate owned, indicating financed and "free and clear" properties • Mortgage/lien rating for the subject property and the primary residence • Documented proof that lien-free properties are truly "free and clear" of all liens

8.10.4 DSCR: Qualification

Loan qualification is based on Debt Service Coverage Ratio (DSCR) for the subject property.

• Use Note Rate to calculate PITIA for use in Debt Service Coverage Ratio (DSCR).

Debt to Income (DTI) ratio is not calculated.

DSCR (Debt Service Coverage Ratio):

The debt service coverage ratio is calculated by taking the gross rents divided by the PITIA of the subject property.

• No vacancy factor for leased properties. • Use the Note Rate to calculate PITIA (see Matrix for details). • Rents are derived from the lesser of the rental/lease agreement or the rent survey (Form 1007). See 8.11.3 for allowance to use higher rent amount from lease agreement. • Minimum DSCR – 1.00

8.10.5 DSCR: Housing History

A satisfactory housing payment history for the previous twelve (12) months is required for the borrower's primary residence, as well as the subject property. If housing payment history(s) are verified using a VOM or VOR (private mortgage, landlord, etc.), no additional documentation (e.g. cancelled checks) is required. Any housing event or mortgage tradeline delinquency reported on the credit report for any property owned by the borrower needs to be included in the housing history eligibility. For any non-subject property, non-primary mortgages not reporting to the credit bureau, additional housing history is not required.

• If a borrower has less than 12-months primary housing history verified, a 12-month satisfactory mortgage history from another REO owned by the borrower may be utilized. • If borrower is a Professional Investor (see section 8.11.6 DSCR: Professional Investor for additional information).

8.10.6 DSCR: Professional Investor

Provides reduced documentation on non-subject properties for the borrower who has a strong investor track record exhibited by the following:

• Currently owns 5 properties (Primary residence included). • Has five (5) years credit depth reported on credit report. • At least three (3) mortgages are reported on credit report within the last three (3) years. No minimum months reporting required. No delinquencies allowed on months reported.

Reduced Documentation: • Mortgage histories on non-subject properties are not required. • Borrower housing history not required.

Required Information: • At least five (5) properties owned by the borrower to be listed on REO schedule o For properties not listed on the credit report, these can be included in the REO • All information completed on REO schedule (mortgage balances, gross rents, etc.).

9.0 Senior Liens

Stand-Alone 2nd: • Current (within 90 days) first mortgage statement showing:

• Current principal balance.
• Fully amortized.
• Term. • HOA statement (if applicable). • HOI, flood insurance (if applicable), flood cert.

Piggy-Back 2nd: • Follow 1st lien income requirements. • 1st mortgage approval reflecting 2nd • DU/LP Approve/Eligible, or LP Accept • Purchase agreement (if applicable) • HOA Statement (if applicable) • HOI, flood insurance (if applicable), flood cert • Closing instructions reflecting 2nd • Full appraisal from 1st mortgage and any additional collateral evaluation

EXHIBIT A

Prepayment Penalty Restrictions Chart

Prepayment Penalty offered on Business Purpose loans only. All prepayment penalty options are available for states not listed below.