9/8/2018 09 14 2017

Chenoa 2nd behind an FHA 1st soft or amortized 2nd Issued in conjunction with 1st FHA insured loan 3.5% Soft Second, or Amortized Second No Borrower Investment Required (With Seller or 3rd party paid Closing Costs) Borrower paid program – max broker charge is 2.25%; must meet 3% points and fees test. We will advise at submission, as this could change based on loan amount, and fees charged if your loan meets the 3% point and fee test. 09 14 2017

Advantages No borrower investment required FICO Scores down to 620 – see FICO hits on rate sheet. Non-occupant co-borrowers OK – income not used toward AMI % Income on 2nd unit not counted toward AMI limits; can be used to qualify at 75% Income >115% AMI OK - requires amortized 2nd Income up to or = 115% AMI – soft 2nd okay Only Qualifying Income used for AMI calculations DTI per AUS – required DU approval. Add an MCC and increase your buying power (CA only) MCC can only be used toward increasing income for debt ratios (not used in the AMI calculation) 09 14 2017

PROGRAM LOCKING & Program fees – borrower paid only PROGRAM LOCKING & Program fees – borrower paid only These fees affect the 3% point and fees test. Loan must be locked by 1:00 PM, PST All PTD’s must be cleared before locking. $1095 to Essex Up to 2.25% Broker fee - (unless loan does not meet 3% points and fees test. Contract Processing fee allowed. Does not count in points and fees. Program hits, i.e, FICO score and loan amount hits also go toward points and fees. 09 14 2017

Program codes FHA 1ST: 2ND Program Codes Code 3030CH Soft 2nd : 4030CHZ Fully Amortized 30 year 5% rate: 4030CHFR Full amortized 10 year 0% rate: 403CHZR 09 14 2017

Chenoa Fund FHA Overlays Lends in CA, Nevada, Utah, Idaho, Florida, Texas (all states where Essex is lending) 1-2 unit property only (no 3-4 units) (FHA loan limits for the 2nd unit okay.) SFR, PUD, Townhome, Condo, Attached, Detached No Manufactured Homes FICO Score 620 or higher – see price hits on rate sheet 09 14 2017

Chenoa Fund Soft Second Qualifying Income <= 115% AMI No Payment 0% Interest Rate and 30-year Term Forgiven after 36 consecutive on-time payments on FHA 1st Mortgage Section H of 1003 must indicate down payment borrowed 09 14 2017

Chenoa Fund amortized Second Qualifying Income > 115% AMI (meaning no income limit) 10-Year term 0% interest rate; or 30-Year term 5% interest rate Requires monthly payment Payment must be included in housing ratio Borrower must indicate down payment borrowed in declarations section of 1003 (question H) 09 14 2017

Secondary Financing on 1003 09 14 2017

Declarations page of 1003 09 14 2017

Secondary Financing –DO/DU Page 2-Types, Terms, & Property Page 7-Transaction Details 09 14 2017

Secondary Financing LP 09 14 2017

Calculating Area Median Income Go to the HUD Area Median Income Site. This can be found online at: https://www.huduser.gov/portal/datasets/il.html Select the MOST RECENT fiscal year 09 14 2017

Select the state, select the county, click the button “View County Calculations” 09 14 2017

66,200 X 115% = 76,130 IMPORTANT! FAMILY SIZE TAKEN FROM 1003. Always use 4 persons for 1-4 Family Size. The minimum starts at 4 persons family, ie., family of 2 can use 4 family income. The generic median income number is located on the left-hand side of the results screen under the column heading ‘Median Income’. This result multiplied by 115% is what should be used in “most cases”. 66,200 X 115% = 76,130 IMPORTANT! FAMILY SIZE TAKEN FROM 1003. 09 14 2017

38,400 X 2 = 76,800 X 115% = 88,320 for family of 6 09 14 2017

09 14 2017

Next Steps… Process your loan file as usual (upload 1st& 2nd – 2 loan numbers) 1st: FHA guidelines (okay to use FHA submission sheet); submit complete file. 2nd : Submit 1003 with loan amount of 2nd – and submission sheet (nothing else) Advise submission@essexmortgage.com of both loan numbers when uploaded. We approve – We fund! 09 14 2017

Underwriting… FHA Guidelines TRID compliance 9/8/2018 Underwriting… FHA Guidelines TRID compliance Industry Standards (example 4506-T (W-2 only ok) LOE for Employment Gaps 30 Days or More 09 14 2017

CD disclosing must follow TRID Closing Disclosure CD disclosing must follow TRID Initial CD must be issued 3 days prior to funding just like the first mortgage and is sent with the final CD and closing documents 09 14 2017