1. 1 Tracey B. James-Towe, Chief Insurance and Underwriting Division, Atlanta Gerry Glavey, Director Processing and Underwriting, Philadelphia HOPE for Homeowners (H4H) Loan Closing and Insurance Endorsement

2. 2 All existing lien holders must extinguish (release) their liens –Prepayment penalties and late fees must be waived –Senior lien holders must accept the new H4H loan as payment in full –Junior lien holders may share in future appreciation New subordinate financing is prohibited in the first 5 years –Exception: to bring property condition up to FHA standards H4H – Closing Requirements

3. 3 The following must be recorded: –Applicable riders such as condo, co-op, and PUD –Shared Equity Note and Mortgage (SEM) –Shared Appreciation Note and Mortgage (SAM) Borrower’s 1 st mortgage payment cannot be escrowed Register the H4H security instruments in the Mortgage Electronic Registration System (MERS) H4H – Closing Requirements (Cont’d)

4. 4 Equity = value at origination less the original principal balance on the H4H mortgage Originating lender prepares SEM (Exhibit D in Mortgagee Letter 2008-29) SEM executed by borrower and recorded in second lien position H4H – Shared Equity Mortgage

5. 5 H4H – Shared Appreciation Mortgage Appreciation = gross proceeds from sale less appraised value at origination –May subtract allowable closing costs connected with sale and a percentage of capital improvements Originating lender prepares SAM (Exhibit E in Mortgagee Letter 2008-29) SAM executed by borrower and recorded in third position

6. 6 Appreciation Share Calculation Amount Owed1 st Lien P&I2 nd Lien P&I3 rd Lien P&ITotal P&L Principal (P)158,50020,00040,000218,500 Accrued Interest (I)10,9002,2004,40017,500 Total P&I169,40022,20044,400236,000 Cumulative P&I as % of current appraised value of %150,000 112.9%127.8%157.3%

7. 7 Appreciation Share Percentages Subordinate Lien Holder% of unpaid P&I lien holder is entitled to receive from future appreciation if any % of unpaid P&I lien holder is entitled to receive upfront appreciation* Cumulative LTV > 135% 3%9% Cumulative LTV < 135% 4%12% * If authorized

8. 8 H4H – Equity and Appreciation Sharing Post Closing Document Delivery Within 15 days of endorsement send –Original recorded SEM/SAM documents –Copy of HUD-1 Settlement Statement –Copy of H4H Appraisal c/o C&L Service Corporation/Morris-Griffin Corporation 2488 East 81 st Street Suite 700 Tulsa OK 74137

9. 9 Additional Documentation for Right Side of Case Binder Prior Mortgage Origination Date Payment History Prior Total Mortgage Payment Primary Residence Consumer Disclosure and Certifications Conviction of Fraud Tax Returns Trial Modification (if applicable) First Payment Lender Certifications H4H – Endorsement Requirements

10. 10 H4H loans are eligible for Direct Endorsement and Lender Insurance Lenders must request insurance/insure within 120 days of closing with evidence the mortgage is current The case binder must include evidence the first mortgage payment was made by the borrower H4H – Endorsement Requirements

11. 11 By statute, FHA is prohibited from paying insurance benefits to any lender on any H4H loan where the borrower fails to make the 1 st payment –Lenders and interested third parties are prohibited from making any payment on behalf of the borrower, including escrowing any payment or applying any payment from closing proceeds H4H – First Payment Default

12. 12 100 percent of H4H loans will undergo a Post Endorsement Technical Review –Focus will be on compliance with H4H statute and documentation requirements Cases will be rated Conforming, Deficient, or Unacceptable Failure to respond satisfactorily to a Deficiency Letter may require the lender to indemnify HUD against loss H4H – PETRs