Offered through First Mortgage Corporation Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation is a summary and is not complete. This information is for mortgage professionals only and should not be distributed to or used by consumers or other third-parties. Information is accurate as of the date shown below and is subject to change without notice. 05/20/2010 FHA “ARM” TRAINING

 Introduction  Understanding ARMS  Available FHA Programs at FMC  Program Eligibility Guidelines  Interest Rate, Fees, Closing Costs  FMC Support AGENDA

First Mortgage Corporation is an independent residential Mortgage Banking firm with branch offices located throughout the west. Founded in 1975, FMC is a direct-lending mortgage banker approved as a lender and/or loan servicer by the Federal Housing Administration (FHA); the Veterans Administration (VA); the Federal National Mortgage Association (Fannie Mae); the Federal Home Loan Mortgage Corporation (Freddie Mac); the Government National Mortgage Association (Ginnie Mae); National Homebuyers Fund (NHF); the California Public Employees’ Retirement System (CalPERS); the California Teachers’ Retirement System (CalSTRS); the California Housing Finance Agency (CalHFA); the Nevada Housing Division (NHD); and many other major secondary market institutions. First Mortgage is currently rated the #5 FHA Lender in CA! Having funded in excess of $12 billion in residential real estate loans, FMC has assisted more than sixty thousand families with their mortgage needs. FMC enables families to enjoy the American Dream of Homeownership…“it’s the only thing we do.” FMC has a longstanding tradition of providing unparalleled customer service and a reputation built on adding value to the home loan process. That’s why FMC should be considered…“YOUR FIRST LENDING RESOURCE”. INTRODUCTION

What is an ARM? First Mortgage Corporation has been around since Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters! UNDERSTANDING ARMS

An Adjustable-Rate Mortgage (ARM) is a mortgage loan that allows a lender to adjust the interest rate in accordance with a specified index periodically, and as agreed to at the inception of the loan. Also referred to as a Variable Rate Mortgage (VRM). Adjustable Rate Mortgages (ARM) have the following related terms: Index Margin Initial Interest Rate (Note Rate) Calculated Interest Rate or Fully Indexed Rate (Index plus Margin) Adjusted Interest Rate (New Interest Rate charged to the borrower) Change Date (Effective date of an adjustment to the interest rate) Adjustment Caps (1 st, Subsequent, Lifetime) What is an ARM?

ARM Index First Mortgage Corporation has been around since Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters! UNDERSTANDING ARMS

Available Indices CMT (Constant Maturity Treasury) LIBOR (London Interbank Offered Rate) MTA (Monthly Treasury Average) COFI (Cost of Funds Index) CODI (Cost of Deposit Index) FHA uses two types of index and cannot be commingled: 1-Year LIBOR 1-Year CMT FMC FHA ARM Programs uses: 1-Year CMT – The most popular and commonly known index (Monthly 1-Yr CMT). This index is based on the 1-YR Constant Maturity Treasury and changes once a month. This use to be called 1-YR T-Bill or Treasury Bill; 1-Yr T-Bill is no longer issued by the Treasury. Index Comparison - See attached pages Available Index & Comparison

1-YR CMT Index

ARM Features Caps, Margins, Adjustment Periods First Mortgage Corporation has been around since Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters! UNDERSTANDING ARMS

HYBRID Arms & Frequency of Rate Changes Fixed Period FHA ARMS (Hybrid ARMS) provide a low initial rate with a security of a fixed payment for the first 1 year, 3 years, 5, 7 or 10 years before the loan converts to an adjustable rate mortgage. After the initial fixed period, rate adjustments occurs on an annual basis. ARM Program1 st Adjustment Occurs no sooner than… Subsequent Adjustments 1 Year ARM12 months 3/1 ARM36 months12 months 5/1 ARM60 months12 months 7/1 ARM84 months12 months 10/1 ARM120 months12 months

Calculating annual adjustments Originator (Lender/Broker) negotiates the initial interest rate and margin with the borrower. See rate sheet for available rates. The margin, remains constant for the entire term of the mortgage. Fixed Period ARMS (Hybrid ARMS): Interest Rate remains constant for the initial period only (1,3,5,7 or 10); and then it changes annually. Slide 11Slide 11 To calculate the annual adjustments: 1. Determine the current Index value (CMT) 2. Determine the calculated interest rate (Fully Indexed Rate), and 3. Compare the calculated interest rate (FIR) to the existing interest rate to determine the new adjusted interest rate, subject to the annual and lifetime caps.

Determining the Calculated Interest Rate aka “ FULLY INDEXED RATE ” The calculated interest rate (aka Fully Indexed Rate) is the current index, plus the margin, rounded to the nearest 1/8 th of one percentage point. Margin is the “fixed” component of the ARM with a fixed value for the life of the loan. Index is the “variable” component of the ARM and can change on a monthly basis. FULLY INDEXED RATE = INDEX + MARGIN Example 1: If margin is 2.75% and index is 1.50% Fully Indexed rate is: ______________ Example 2: If margin is 2.250% and index is.40% Fully Indexed rate is: ______________ 4.25% 2.65%

Caps 1 st Adjustment Cap – Adjustment to the interest rate during the 1 st adjustment may not change (up/down) by more than… Subsequent Caps – Adjustment to the interest rate after the 1 st adjustment may not change (up/down) by more than… Lifetime Cap – Adjustments to the interest rate over the entire term of the mortgage may not exceed… ARM Program1 st Adjustment CapSubsequent CapsLifetime Cap 1 Year ARM115 3/1 ARM115 5/1 ARM115 7/1 ARM226 10/1 ARM226

Example of Calculating New Interest Rate 1st Adjustment: Program: 5/1 ARM Start Rate: 5.00% 1 st Adjustment Cap: 1% Subsequent Caps: 1% Lifetime Cap: 5% Margin: 2.25% After 5 years Current Index:.45% Calculate Fully Indexed Rate: Index:.45% + Margin: 2.25% = Fully Indexed Rate: 2.70% Compare FIR to Current Rate: Current Interest Rate 5.00% - Fully Indexed Rate: 2.70% Diff (exceeds 1% cap) 2.30% Calculate New Interest Rate Current Interest Rate: 5.00% Less max Cap: 1.00% New Interest Rate Yr 6: 4.00% 2 nd Adjustment (after Yr 6) New Index Rate after Yr 6: 3.50% Calculate Fully Indexed Rate: Current Index: 3.50% + Margin: 2.25% = Fully Indexed Rate: 5.75% Compare FIR to Current Rate: Current Interest Rate: 4.00% - Fully Indexed Rate: 5.75% Diff (exceeds 1% subs cap) 1.75% Calculate New Interest Rate Current Interest Rate: 4.00% Plus difference: 1.00% New Interest Rate Yr 7: 5.00%

Fixed minimum payment at low teaser interest rate for up to 10 years. Lower monthly payments means more cash available each month. Gain financial control and flexibility. Low initial rates allow borrowers to purchase larger homes. (Hint: Ideal for self-employed borrowers, professionals and commissioned sales people) Advantages of an ARM loan

Standard FHA ARM Program – Conforming or Jumbo First Mortgage Corporation has been around since Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters! Available FHA ARM Programs

1 Yr ARM – Program 07, 72 3/1 ARM – Program 07, 72 5/1 ARM – Program 07, 72 7/1 ARM – Program 07 10/1 ARM – Program 07

TopicDescription Program TypesFHA 1 Year CMT ARM FHA 3/1, 5/1, 7/1, 10/1 CMT ARM (See previous slide for available programs) Interest RateInitial Interest rate and monthly payment are low, but these may change during the life of the loan based on the fluctuation of the 1-year CMT Index, margin and caps. Rates can be obtained through: FMC Retail: Available on FMC website or from Secondary Marketing FMC Wholesale: Available from your AE or their website Qualifying RateFHA 1 Year ARM: 95% LTV or higher – Qualify at 1% over Note Rate < 95% LTV – Qualify at the Note Rate FHA 3/1, 5/1, 7/1, 10/1 ARM: Qualify at the Note Rate Term30 years Max LTVUp to 96.50% for Purchases Up to 97.75% for Rate & Term Refinances Up to 85% for Cash Out Refinances Max CLTVUp to 100% for Purchases Up to 100% of appraised value for Refinances with new Subordinate Financing Max Loan AmountLoan amount is determined by the County in which the property is located by going online to: FHA ARM Program

TopicDescription Highlights Purchases to 96.5% LTV Down Payments as low as 3.5% (borrowers own funds, gift, approved DAPs) Rate & Term Refinances to 97.75% LTV Cash out to 85% LTV No minimum credit score required – 4155 guidelines plus FMC overlays Non-traditional credit is acceptable / Insufficient Credit allowed Gift funds can be used for DP or CC Non-occupant co-borrower permitted – see credit overlays Expanded qualifying ratios on manual UW to 46%– see credit overlays No Reserves for 1-2 units 3-4 Units available (3 mos. PITI required on Purchase transactions) Manufactured Homes allowed – see overlays Financed closing costs Jumbo loan amounts available (Up to $729,750 in high cost areas) DU, LP, Manual UW available Minimum Fico Score 1. Investor 72: Conforming or Jumbo 2. Investor 07: NONE - Follow 4155 with FMC overlays; Jumbo – 620 Underwriting Follow Standard FHA guidelines – 4155 and FMC Overlays DU, LP or Manual UW acceptable FHA ARM Program Highlights

FHA Program Matrix First Mortgage Corporation has been around since Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters! FHA Matrix

FMC FHA Overlays Non-Traditional Credit First Mortgage Corporation has been around since Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters!

FMC - FHA Overlays FHA FICOS UNDER 620 ‘AND’ MANUALLY UNDERWRITTEN LOANS – APPLIES REGARDLESS OF DU / LP APPROVAL Homebuyer education course completed by all borrowers with certificate signed by all borrowers (See FMC Product Overview Training for MGIC Free Online Course) Verification of rent / cancelled checks / bank statements covering the last 12 months; if living with family, require an acceptable budget letter Letter of explanation from borrowers regarding all inquiries Letter of explanation from borrowers for all derogatory credit regardless of the date of the incident No late payments on any account in the last 12 months * Maximum stretch ratios of 40 % front and 46.0 % back * ‘Significant’ compensating factors (generally two to three) from the (Chapter 4; section F; page 4-F-6) for ratios in excess of 31.0 % / 43.0 % * Non-occupant co-borrowers / co-signers must be related as parents, children or siblings. Proof of relationships will be required (i.e. birth certificates). Other blood relatives (aunts, uncles, cousins, etc.) will only be allowed if the occupant borrowers DTI does not exceed 50.0 % FHA FICOS OVER 620 WITH DU / LP APPROVAL Letters of explanation from the borrower for all inquiries Letters of explanation from the borrower for derogatory credit in the last 12 months

FMC - FHA Manufactured Homes Overlays FHA MANUFACTURED HOMES Purchase / R&T Refinances – 90% Max LTV/CLTV Cash-out Refinances – 70% Max LTV/CLTV No flood zones Maximum 2 acres No dirt road One appraisal required A second appraisal may be required at underwriters discretion FHA Streamlines – Manufactured Homes No appraisal required with one year seasoning and satisfactory payments for the 12 months prior. An appraisal is required if less than one year seasoning 90% Maximum LTV/CLTV Maximum 2 acres No flood zones Non-occupying co-borrower not allowed Credit supplement with most recent 12 months paid as agreed No late pays

HUD Website – Website – Mortgage Credit Analysis – Application through Process Mortgagee Letters FHA Loan Limits – http ://entp.hud.gov/idapp/html/hicostlook.cfmFHA Loan Limits FHA Approved Condos - FHA Approved Condos FHA Connection - Connection Resources

Interest Rates Origination Points & Fees Closing Costs First Mortgage Corporation has been around since Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters! PRICING, FEES, SUPPORT

 Interest Rates for the FHA programs are available on the FMC rate sheet – Page 1:  Retail Division – From Retail website or Secondary Marketing  Wholesale Division – Contact your AE or go to your AE’s website Interest Rates

TopicDescription Origination Points Follow new HUD RESPA rules – ML where HUD removed the 1% origination cap Discount Points Allowed and negotiated between Borrower and Loan Officer – cannot charge for additional compensation Premium Pricing  May be used to pay normal closing costs and/or prepaid expenses including accrued interest on refinance transactions Closing costs paid in this manner need not be included as part of the 6% seller contribution  May be used to pay lender funded buy-downs  May be used as additional compensation  Must be disclosed on HUD and GFE Fees See Standard Doc Order form on FMC Website: Retail.lpx.com Fees

WEB SITE Go to our FMC websites for: 1.RATE SHEET 2.TRAINING MATERIALS 3.GUIDELINES 4.FORMS 5.CALCULATORS 6.TOOLS 7.MARKETING TRAININGS First Mortgage offers FREE Weekly ONLINE Trainings See current Training Schedule for upcoming trainings Upcoming Trainings: Property Flipping FHA Program FHA Streamline FHA ARMS SUPPORT Retail: Contact Loan Help Wholesale: Contact your A/E For help with your: Scenarios Pricing Program Guidelines Loan Submissions Fees

On behalf of First Mortgage, we thank you for joining our training today and hope the information provided was informative and will help you… Build Your Business!