CONFORMING AND SUPER CONFORMING - BB&T Guide...CONFORMING AND SUPER CONFORMING UNDERWRITING ......

CONFORMING AND SUPER CONFORMING UNDERWRITING GUIDELINES 5/16/2016

Please be advised that BB&T is not liable for any changes made to this document once it has been distributed.

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CONFORMING AND SUPER CONFORMING UNDERWRITING GUIDELINES

3:1 INTRODUCTION

BB&T Correspondent Lending expects its Correspondents to be fully familiar with mortgage underwriting secondary marketing requirements, and to keep abreast of industry changes that impact residential mortgages. This section is designed for two purposes: • To supplement information referred to in the Conforming/Super Conforming Product Description sections. • To clarify BB&T’s exceptions, allowances and restrictions regarding specific underwriting issues.

In general, BB&T follows current standard Freddie Mac published guidelines for Conforming and Super Conforming loans. The Freddie Mac Seller/Servicer Guide may be accessed free of charge at http://www.freddiemac.com/singlefamily/index.html?intcmp=SFMAIN-T. The Freddie Mac Loan Prospector Documentation Matrix (www.freddiemac.com/learn/pdfs/uw/docmatrix.pdf) and the Freddie Mac Rental Income Matrix (www.freddiemac.com/learn/pdfs/uw/rental.pdf) serve as references for documentation of Loan Prospector loans. The Fannie Mae Selling and Servicing Guides may be accessed free of charge at https://fanniemae.com/content/guide/selling/index.html Manual underwrites are not permitted on any Conforming loan without prior BB&T Correspondent Underwriting authorization. Manual underwrites are not accepted on Super Conforming loans. BB&T policy applies to both Conforming and Super Conforming loan amounts unless otherwise specified. Questions regarding specific underwriting issues can be directed to BB&T Correspondent Lending Information Central (CLIC). ALL CONVENTIONAL LOANS MUST FIRST ADHERE TO BB&T CORRESPONDENT LENDING REQUIREMENTS STATED IN BB&T’S OPERATIONS AND PRODUCT GUIDE. The next sub section in this section provides specific information on the expectations of utilizing Freddie Mac’s Loan Prospector and Fannie Mae’s Desktop Underwriter. The last sub-section in this section lists transactions that are ineligible for financing through BB&T Correspondent Lending. References in the Documentation Matrix and Rental Income Matrix to “Caution (not A-Minus eligible)” and “Manufactured Housing” do not apply as BB&T Correspondent Lending does not allow them.

3:2 LOAN PROSPECTOR (LP) FEEDBACK RESPONSES BB&T Correspondent Lending accepts conventional loans with either LP Accept or

LP A-Minus ratings on Conforming loans and LP Accept on Super Conforming loans. Correspondents are reminded that credit score and debt ratio limits may impact the decision returned by LP. Loans receiving an approval through LP where the AUS has been customized for a specific Lender are ineligible for delivery to BB&T Correspondent Lending.

AUS switching prior to the Note Date (LP to DU or DU to LP) is unacceptable.

http://www.freddiemac.com/singlefamily/index.html?intcmp=SFMAIN-T

http://www.freddiemac.com/learn/pdfs/uw/docmatrix.pdf

http://www.freddiemac.com/learn/pdfs/uw/rental.pdf

https://fanniemae.com/content/guide/selling/index.html




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Loans may be resubmitted to LP after the Note Date, or the Effective Date of Permanent Financing, and prior to delivery to BB&T Correspondent Lending. Loans must continue to be initially submitted to LP on or before the Note Date, or the Effective Date of Permanent Financing. Detailed requirements for resubmitting loans to LP are in the Freddie Mac Seller/Servicer Guide. Correspondent must select “Post Closing Quality Control” as the Loan Processing Stage A loan cannot be resubmitted to LP after the Note Date or the Effective Date of Permanent Financing, if:

• Resubmission is more than 120 days after the “Loan Prospector Assessment Expiration Date”

displayed on the Feedback Certificate in effect as of the Note Date; or • A Borrower is being added or deleted, or a change is being made to a Borrower’s last name or Social

Security Number; or • A new credit report company needs to be selected; or • The single or joint merged credit report indicator changes; or • The order of Borrowers changes on a joint merged credit request; or • The merged credit report number does not match the merged credit report number from the most

recent complete transaction. If the loan cannot be resubmitted to LP after the Note Date, or the Effective Date of Permanent Financing, the loan is not eligible for sale to BB&T Correspondent Lending.

3:3 DESKTOP UNDERWRITER (DU) FEEDBACK RESPONSES BB&T Correspondent Lending accepts conventional loans with DU Approve/Eligible ratings on Conforming

loans and Super Conforming loans. Correspondents are reminded that credit score and debt ratio limits may impact the decision returned by DU.

Loans receiving an approval through DU where the AUS has been customized for a specific Lender are ineligible for delivery to BB&T Correspondent Lending.

AUS switching prior to the Note Date (LP to DU or DU to LP) is unacceptable.

Conforming and Super Conforming mortgages with DU Approve/Eligible are to be documented in accordance with Fannie Mae requirements pertaining to credit underwriting (including credit reputation and capacity to repay) and property valuation and comply with Freddie Mac requirements for all matters other than credit underwriting and property valuation. Fannie Mae’s Selling and Servicing Guides may be accessed free of charge at https://fanniemae.com/content/guide/selling/index.html • Each Conforming DU Mortgage must: be evaluated using the version of DU that Fannie Mae requires for such Mortgage to be eligible for

sale to Fannie Mae; receive an Approve/Eligible Underwriting Recommendation; be a 10-, 15-, 20-, or 30-year fixed rate mortgage; be a 3/1, 5/1, 7/1, 10/1 P&I ARM;




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• Each Super Conforming DU Mortgage must: be evaluated using the version of DU that Fannie Mae requires for such Mortgage to be eligible for

sale to Fannie Mae; receive an Approve/Eligible Underwriting Recommendation; be a 10-, 15-, 20-, or 30-year fixed rate mortgage; be a 5/1 P&I ARM; have an original principal balance not exceeding $1 million; have no financed mortgage insurance; have a maximum DTI of 45%; and comply with additional guidelines within this guide and specific product description.

• DU Mortgages originated with provisions negotiated with Fannie Mae to be less restrictive than DU guide

requirements are not allowed.

• The LTV/TLTV/HTLTV must not exceed the most restrictive of the maximum LTV/TLTV/HTLTV ratios allowed by: Freddie Mac requirements (Seller/Servicer Guide Maximum LTV, TLTV, and HTLTV ratios), or Fannie Mae requirements (Seller Guide B2-1.1 LTV, CLTV, HCLTV, and Subordinate Financing)

• Loans must comply with the following documentation requirements relating to credit reputation, capacity to repay, and property valuation as of the date of the Note or for Construction Conversion mortgages, the effective date of permanent financing:

Existing and New Construction

o Credit documents are to be no older than 4 months o Appraisals are to be no older than 4 months

If the age of the valuation or other collateral documentation exceeds the maximum permitted above,

the appraisal is outdated and the documentation must comply with requirements in Freddie Mac Seller/Servicer Guide.

If the date of the appraisal is more than 12 months before the Note Date, the file must contain a new

appraisal and must not incorporate any prior appraisal.

• If the DU Report states an appraisal is not required or that a DU Property Inspection Waiver (PIW); Exterior-Only Inspection Residential Appraisal Report Form 2055; Exterior-Only Inspection Individual Condominium Unit Appraisal Report Form 1075; or a DU Property Inspection Report Form 2075 is allowed, the file must contain an appraisal with an interior and exterior inspections (Forms 1004, 1025, 1073)

• If the borrower is receiving gift funds or a gift of equity, a fully executed gift letter is required regardless of

LTV and/or LP/DU feedback. • If the borrower is receiving a gift of equity, the Closing Disclosure listing the gift of equity is required.

• Minimum borrower contribution requirements from borrower’s own funds per LP or DU.

• If the DU Report does not require the Borrower’s income and/or assets to be verified and/or documented,

then, the file must be documented in accordance with Freddie Mac Streamlined Accept Documentation.



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• If the Fannie Mae guidelines require the establishment of value of the Borrower’s current primary residence because; the Borrower is purchasing a new primary residence, the Borrower’s current primary residence is on the market and the sale will not close before the Note

Date, or the Borrower is converting the primary residence to a second home or investment property, then, the value must be established and evidenced by at least Form 2055, Exterior Only Inspection.

• Loans must comply with the following Freddie Mac mortgage insurance requirements:

standard mortgage insurance, or financed mortgage insurance must comply with the following:

o the Base LTV must not exceed 95%; o the Gross LTV must not exceed 95%; o property must be a 1-unit primary residence or a second home; o the amount of coverage must meet the standard coverage level requirements using the Base

LTV; o the mortgage insurance premium must be paid with a single-premium payment.

• Maximum allowable number of financed properties: If the subject property is a primary residence, there is no limit on the number of financed properties

the borrower may own and/or be obligated. If the subject property is a second home or investment property, each borrower individually and all

borrowers collectively must not own and/or be obligated on more than four 1-4 unit financed properties, including the subject property. NOTE: 1-4 unit financed properties titled as a LLC must be included when determining borrower eligibility and the maximum allowable number of financed properties; and

See “Non-Arms Length Transactions” for additional details.

• The following property types must comply with Freddie Mac requirements: Condominiums Leasehold estates Restricted units PUDs Higher-Priced Mortgage Loans (HPMLs)

• DU Mortgages secured by manufactured housing are not eligible to be delivered to BB&T.

• If DU Mortgage is a Construction Conversion mortgage, the Borrower must own the land in fee simple or

have a leasehold estate prior to the beginning of construction. The Borrower may have acquired the land through a purchase, inheritance, gift or divorce settlement.

• The following documentation must be maintained in the loan file in addition to complying with requirements specified in the Freddie Mac Seller/Servicer Guide: DU Report DU Underwriting Analysis Report, Any documents required to satisfy conditions in the DU Report, and Any other documents required under this DU provision throughout the Guide.



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3:4 AGE OF CREDIT DOCUMENTS AND APPRAISALS

• LP loans – follow Freddie Mac guidelines • DU loans – follow Fannie Mae guidelines

Re-use of an existing appraisal for a subsequent refinance is not permitted. A new appraisal must be ordered for each mortgage transaction. Please refer to the Overlay and Allowances Matrix: Conventional Conforming and Super Conforming for any applicable overlays.

3:5 LTV/TLTV/HTLTV • LP and DU loans – refer to BB&T’s Price Adjustments and LTV Charts

3:6 LOAN AMOUNTS

• Conforming Loans (LP or DU) – refer to specific product descriptions for details

• Super Conforming Loans (LP or DU) Refer to specific product descriptions for details Loans may not have an original principal balance exceeding $1 million

http://www.allregs.com/tpl/Viewform.aspx?formid=00023678&formtype=agency

http://www.allregs.com/ao/Viewform.aspx?formid=00023712&formtype=agency



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3:7 MINIMUM CREDIT SCORE • Conforming Loans (regardless of LP or DU):

Purchase and No Cash Out Refinance Transactions: 640 Cash Out Refinance Transactions: 660

• Super-Conforming (regardless of LP or DU): Purchase and No Cash Out Refinance Transactions:

• 1 unit Primary Residence LTV/TLTV > 75%: 700 • 1 unit Primary Residence LTV/TLTV <= 75%: 680 • 2-4 unit Primary, Second Homes & 1-4 Investment, All LTV/TLTV’s: 740

Cash Out Refinance Transactions: 740 Reference the Price Adjustments and LTV Charts for minimum credit score requirements on specific product/loan types.

RESCORING AND CREDIT REPAIR

• Legitimate corrections to a borrower’s credit profile are acceptable, i.e. John Doe Jr.’s derogatory credit is reflected on John Doe Sr.’s credit report.

• In order to ensure the accuracy of the information, corrections should be made at the credit repository level.

• Any supporting documentation sent to the credit repositories along with all copies of credit reports should be maintained in the Correspondent’s loan file and included with the file submission when delivered to BB&T Correspondent Lending.

The use of credit repair vendors who assist borrowers to falsely repair their credit by the manipulation of data contained in the borrower’s credit profile to improve credit scores for purposes of loan eligibility, pricing/fee improvement and creditworthiness is expressly prohibited by BB&T Correspondent Lending. It is at BB&T Correspondent Lending’s discretion to determine if the credit history and credit scores are legitimate, acceptable and meet guideline requirements.

Credit Score Indicator The term Loan Score refers to the overall score using the Agencies’ “middle/lower, then lowest” credit score

selection methodology. It is equivalent to Freddie Mac’s Indicator Score and Fannie Mae’s Representative credit score.

Credit Score Selection

The following criteria may be used to determine each individual borrower’s Credit Score using the “middle/lower” method: • If there are three valid scores for a borrower, the middle score (numerical middle of the three scores) is

used. • If there are three valid scores for a borrower but two of the scores are the same, the duplicate score

is used. • If there are two valid scores for a borrower, the lower of the two scores is used. • If there is one valid score for a borrower, that score is used.

Loan Score Selection After selecting the appropriate Credit Score for each borrower, the Loan Score must be determined. • If there is more than one borrower, the lowest selected Credit Score among all borrowers is the Loan Score. • When there is only one borrower, the selected Credit Score for that borrower is also the Loan Score.



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3:8 BORROWER ELIGIBILITY

LIVING TRUST Follow respective Agency’s guidelines, Freddie Mac or Fannie Mae.

Correspondent must submit a completed “Living Trust Certification” with the delivery package. The certification is available on the website

NON-ARMS LENGTH TRANSACTIONS Non-Arms length transactions are purchase transactions in which there is a relationship or business affiliation

between the borrower and the builder, developer, or seller. BB&T Correspondent Lending will allow non-arms length transactions for the purchase of newly constructed or existing properties secured by a primary residence, and existing properties secured by second homes. Investment properties are ineligible.

If a borrower has a business affiliation (any ownership interest or employment) with the builder, developer or seller of the property, additional due diligence including, but not limited to, detailed information regarding unsold builder/developer inventory held individually and/or through his or her business (LLC’s, DBA’s, etc.) is required to determine the legitimacy of the transaction.

LOANS TO BUILDERS/DEVELOPERS See “Non-Arms Length Transactions” section for details. BB&T Correspondent Lending will not fund loans where the builder/developer is purchasing or refinancing their

current unsold inventory.

USA PATRIOT ACT The Correspondent is required to comply with all aspects of the USA PATRIOT ACT. Due to the nature of the law and severity of penalties associated with non-compliance, BB&T strongly urges the Correspondent adopts procedures to insure that their staff fully complies with the requirements of the Act and that Correspondent files are properly documented. For additional information concerning the USA PATRIOT ACT, Correspondents should contact their regulatory agency or access information via the web at www.bankersonline.com.

NON-U.S. CITIZENS BB&T has adopted the following policy for extending mortgage loans to non-U.S. Citizens. USA Patriot Act

documentation is required in addition to the following guidelines. A non-U.S. Citizen who is lawfully residing in the U.S. as a permanent or non-permanent resident alien is eligible for a mortgage on the same terms as a U.S. Citizen. BB&T does not differentiate between U.S. Citizens, permanent resident aliens and non-permanent resident aliens for general underwriting guidelines.

• All permanent resident aliens must provide their valid Permanent Resident Card. • All non-permanent resident aliens must provide evidence of a valid, unexpired visa. Evidence must be

included in closed loan file. Visas granting diplomatic immunity or Foreign Nationals are not allowed.

• BB&T requires sufficient documentation that the borrower is lawfully residing in the U.S., as a permanent or non-permanent resident alien.

• To obtain a valid AUS response, a Social Security Number is required. An ITIN is not eligible in obtaining a valid AUS response.

• Non-U.S. Citizens will not be accepted under manual underwriting guidelines.

• Borrowers must qualify on U.S. credit; U.S. reported income, U.S. assets, and U.S. residency history. (Continued next page)

http://www.allregs.com/AO/Viewform.aspx?formid=00023695&formtype=agency

http://www.bankersonline.com/



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• All standards for determining stable monthly income, adequate credit history, and sufficient liquid assets must be applied in the same manner to each borrower including borrowers who are non-permanent resident aliens.

• For non-permanent resident aliens, BB&T requires the loan to be fully documented in accordance with

standard LP or DU guidelines regarding income, assets, credit and residency. • For non-permanent resident aliens who work for an International Organization (i.e., Red Cross, UNICEF,

World Bank, etc.), BB&T requires a copy of the most recent year’s tax transcript evidencing “no record of return filed”. For these borrowers who do not report income to the IRS, BB&T will not allow their income to be “grossed up” for qualifying purposes.

PROPERTIES CURRENTLY OR FORMERLY IN THE NAME OF AN LLC If a property is currently in the name of borrower’s LLC or has been in the name of the borrower’s LLC in the most recent six month period, as measured backward from the date of the initial application, it is not eligible for refinancing into the borrower’s name. If there is an outstanding lien against the property, it also must be in the borrower’s name for a minimum of six months in order to be refinanced. SIGNIFICANT ADVERSE OR DEROGATORY CREDIT/WAITING PERIODS Unless otherwise noted below, follow respective Agency’s guidelines, Freddie Mac or Fannie Mae. Short Sale If evidence of a short sale is disclosed on a credit report or contained elsewhere in the mortgage file, the following Freddie Mac requirements for handling significant adverse or derogatory information caused by extenuating circumstances and financial mismanagement related to short sales must be met.

Significant Derogatory Event

Recovery Time Periods for Reestablishment of Credit with

Financial Mismanagement

Recovery Time Periods for Reestablishment of Credit with

Extenuating Circumstances Short Sale

48 months from completion date

24 months from completion date

Additional Requirements Additional Requirements Whenever the Borrower has had a previous short sale within the last seven years, the mortgage must either be: • A purchase transaction

secured by a primary residence with a maximum LTV/TLTV/HTLTV ratio of the lesser of 90% or the maximum LTV/TLTV/HTLTV ratio for the transaction, or

• A no cash out refinance that meet the requirements of the Freddie Mac Seller/Servicer Guide.

Additionally, the Mortgage file must contain evidence of the completion of the short sale.

Whenever the Borrower has had a previous short sale within the last seven years, the mortgage must either be: • A purchase transaction

secured by a primary residence with a maximum LTV/TLTV/HTLTV ratio of the lesser of 90% or the maximum LTV/TLTV/HTLTV ratio for the transaction, or

• A no cash out refinance that meet the requirements of the Freddie Mac Seller/Servicer Guide.

Additionally, the Mortgage file must contain evidence of the completion of the short sale.



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3:9 EMPLOYMENT AND INCOME

Unless otherwise noted below, follow LP or DU. However, if the DU Report does not require the Borrower’s income to be verified and/or documented, the file must be documented in accordance with Freddie Mac Streamlined Accept Documentation. PAYSTUBS Per LP or DU findings

TAX RETURNS Self-Employed Borrowers

• Tax returns filed by Borrower or licensed CPA are acceptable. • Amortization may be added back when calculating income for the Self-Employed Borrower pursuant

to the calculations on Income Analysis Form 91. • For LP and DU – follow income guidelines for personal and business tax returns.

• Personal tax returns – Borrower signature not required.

• Business tax returns – Borrower signature required.

• Federal tax return extensions will be allowed up to August 31st. A copy of extension is required. Tax

return extensions will not be allowed for loans closed (note date) after August 31st, regardless of the Federal extension deadline.

• If the Borrower/licensed CPA has filed the tax return, but the tax transcripts are not yet available and

the underwriting date is before August 31st, the following must be provided:

Salaried Borrowers who have income relied on sources reported on tax returns: o Copy of tax transcript showing “no record of return filed”, o Previous years’ tax return and tax transcript, AND o The filed tax return verified in one of the following ways:

• Officially stamped by the IRS as received • Evidence that the return was electronically received, OR • Evidence of a refund check or payment made.

Self-Employed Borrower: o Copy of tax transcript showing “no record of return filed”, o Previous 2 years’ tax transcripts, o Previous years’ tax return, AND o The filed tax return verified in one of the following ways:




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IRS FORM 4506-T IRS 4506-T and Official Tax Returns Transcripts are important tools for not only income qualification, but also fraud deterrence, documentation validation, and data integrity confirmation. By requiring this earlier in the process, BB&T hopes this will protect our valued clients, as well as BB&T’s interest, by identifying issues prior to closing. IRS 4506-T REQUIREMENT • The requirement for a completed, signed, and dated IRS 4506-T form applies to ALL loans. • The 4506-T form is to be dated as of the date of loan application and at loan closing. • The 4506-T form is required whether or not the borrowers are employed. • The 4506-T form is required whether or not the loan is income qualifying.

TAX TRANSCRIPTS • The most recent available IRS tax return transcript requirement applies to every loan, regardless of the loan

type or borrower’s income source. • The official tax return transcript is required on each borrower. • The official tax return transcript is required even if tax returns are NOT required for loan qualification.

VERBAL VERIFICATION OF EMPLOYMENT (VOE) The following options are permitted for Salaried Borrowers: • Verbal Verification of Employment (VOE) dated no more than 10 business days prior to the Note Date; or • Verbal Verification of Employment (VOE) dated after the Note Date, but prior to delivery to BB&T for

funding.

Note: • In lieu of a Verbal VOE, a Leave and Earning Statement (LES) dated not more than 30 days prior to

the note date may be provided. A LES can be used as a replacement for a Verbal VOE for only active duty or reserve military personnel. A LES may not be used as a substitute for a Verbal VOE for non-military employees, such as Civil Service employees or Department of Defense contract employees.

• Loans originated utilizing “Qualifying income commencing after the Note Date/Employment Contracts or Offers of Employment” must follow the requirements as stated below in this section of the Conforming and Super Conforming Underwriting Guidelines.

VERIFICATION OF EXISTENCE OF BUSINESS The following options are permitted for Self-employed Borrowers: • Verification of existence of business from a third-party source no more than 30 calendar days prior to the

Note Date; or • Verification of existence of business from a third-party source after the Note Date, but prior to delivery to

BB&T for funding.

FOREIGN INCOME All U.S. Citizens using foreign income to qualify must document income with the following: • Two years signed U.S. federal tax returns • Standard income documentation (YTD paystubs, 2 years W-2’s. etc.) • All income translated into U.S. Dollars (i.e. paystubs).



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QUALIFYING INCOME COMMENCING AFTER THE NOTE DATE/EMPLOYMENT CONTRACTS OR OFFERS OF EMPLOYMENT The calculation of the Borrower’s Stable Monthly Income and documentation of the amount in the Mortgage file may include income from a future salary increase or income from future employment provided that: • Income received from a salary increase (LP approval required):

The borrower’s employer verifies in writing the amount and effective date of that salary increase and the documentation is retained in the Mortgage file.

The effective date of the salary increase is not more than 90 days after the Note Date. No more than 10 Business Days prior to the Note Date, or after the Note Date but prior to delivery to

BB&T for funding, the Seller obtains a verbal verification of employment (VOE) that meets the requirements of the Freddie Mac Seller/Servicer Guide.

• Income from future employment (LP approval required):

The borrower’s employment offer must be non-contingent and the non-contingent offer letter must be retained in the Mortgage file.

The borrower’s written acceptance of the employment offer must be retained in the Mortgage file. The time period between the Mortgage Note Date and the commencement of employment (the

employment gap) must not exceed 90 days. Each Mortgage must be a purchase transaction Mortgage secured by a 1-unit Primary Residence. The borrower must have adequate cash reserves after the Note Date to pay the monthly housing

expense during employment gap plus one additional month. The Seller is not required to obtain a verbal (VOE) in connection with the borrower’s future

employment. • Income from future employment (DU approval required – B3-3.1-09):

The borrower’s income and employment history must be documented according to Fannie Mae guidelines (B3-3.1-01).

The borrower’s employment offer or contract for future employment and anticipated income must be retained in the Mortgage file.

A paystub supporting the income used to qualify the borrower must be obtained prior to delivery of loan to BB&T for funding. The paystub must be retained in Mortgage file.

OTHER INCOME Unless otherwise noted below, follow LP or DU: • Freddie Mac: See Freddie Mac Seller/Servicer Guide. • Fannie Mae: See Fannie Mae Selling Guide Section B3-3.1-09.

Mortgage Credit Certificates (MCC) – The amount of the MCC tax credit is to be added to qualifying income (not deducted from the monthly housing expense). The amount used as qualifying income cannot exceed the maximum Mortgage interest credit permitted by the IRS. Use the following calculation when determining the available income: [(Mortgage Amount) x (Note Rate) x (MCC %)] divided by 12 = Amount added to borrower’s monthly income File must contain a copy of the MCC, copy of the Form IRS W-4 “Employee’s Withholding Allowance Certificate” and Worksheet, and MCC Worksheet. Note: For each loan involving a Mortgage Credit Certificate (MCC), Correspondent is in compliance with all requirements of the MCC’s issuing authority including all required reporting to the IRS.



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RENTAL INCOME Two year history of managing investment properties is required in order to utilize the income from subject investment property and other investment properties owned by the Borrower for qualifying purposes. SCHEDULE F INCOME Loans subject to Schedule F Income will be considered on a case-by-case basis. If Schedule F Income is reflected on the IRS tax transcripts, the actual Schedule F must be reviewed for the existence of leases and true gross income. Schedule F income on the subject property indicates there may be non-residential use of the subject property and represents higher risk. Therefore, both the property and the income will be analyzed for acceptability. Any Schedule F income reflected on tax returns is not allowed as qualifying income if it is a gain. A loss will be deducted from qualifying income. SECTION 8 INCOME • Freddie Mac: See Freddie Mac Seller/Servicer Guide for additional information. ♦ Homeownership Voucher Program payments (formerly referred to as Section 8 homeownership

assistance payments) paid directly to the Borrower are an acceptable source of qualifying income. ♦ Pursuant to Freddie Mac guidelines, the payments may not be used to offset the monthly housing

payment amount used for qualification. ♦ The correspondent must provide documentation showing the amount and terms of the monthly payment

received from the public housing agency that issued the voucher. ♦ Homeownership Voucher Program payments must be likely to continue for the next three years.

• Fannie Mae: See Fannie Mae Selling Guide Section B3-3.1-09. ♦ The Section 8 Housing Choice Voucher Program is an acceptable source of qualifying income. ♦ There is no requirement for the Section 8 voucher payments to have been received for any period of

time prior to the date of the mortgage application or for the payments to continue for any period of time from the date of the mortgage application.

♦ Determination must be received from the public agency that issues the vouchers about the monthly payment amount and whether the income is non-taxable.

♦ If the income is non-taxable, the correspondent can develop an adjusted gross income for the borrower. See B3-3.1-01, General Income Information, for additional information.

SOCIAL SECURITY DISABILITY INCOME Benefits that have a defined expiration date may be used if the income will continue to be received for at least the next three years. If the benefit does not indicate a defined expiration date, the income should be considered likely to continue. Pending or current re-evaluation of medical eligibility for benefits payments is not considered an indication the payments are not likely to continue. Under no circumstances may lenders inquire into or request documentation concerning the nature of the disability or the medical condition of the borrower.



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3:10 ASSETS AND FUNDS TO CLOSE

Unless otherwise noted below, follow LP or DU. However, if the DU Report does not require Borrower’s assets to be verified and/or documented, the file must be documented in accordance with Freddie Mac Streamlined Accept Documentation. MINIMUM BORROWER CONTRIBUTION Follow LP or DU Property seller's prorated taxes are allowed as part of the borrower's required 5% downpayment. GIFT FUNDS/GIFT OF EQUITY

• Follow standard Freddie Mac/Fannie Mae guidelines. • For gift documentation, follow standard Freddie Mac/Fannie Mae guidelines.

LARGE DEPOSITS Large deposits are defined as a single deposit that exceeds 50% of the total gross monthly qualifying income for the loan. This requirement is for all transactions where the deposit is needed to meet the requirements for Borrower Funds and/or required reserves. When a deposit that meets the definition for large deposits is not documented and is not needed for Borrower Funds and/or required reserves, the funds used for qualifying purposes by the amount of the unverified deposit must be reduced. Any borrowed funds including any related liability must be considered, including undisclosed debt. Therefore, a signed statement from the borrower explaining the origin of unverified deposits is required and must be included in the loan file. When a single deposit consists of both verified and unverified funds, the unverified funds are used when determining whether the deposit exceeds the 50% requirement. Note: The reduced amount of the asset must be entered into Loan Prospector or Desktop Underwriter. USE OF CREDIT CARDS, CASH ADVANCES OR UNSECURED LINES OF CREDIT – BORROWER FUNDS Follow respective Agency’s guidelines, Freddie Mac or Fannie Mae VERIFICATION OF FUNDS FOR REFINANCE TRANSACTIONS Verification of funds is required for the following: • All refinance transactions: No-Cash-Out, Cash-Out, and special purpose transactions; and • Freddie Mac Relief mortgages where the P&I increase exceeds 20% of the current P&I, or • Freddie Mac Relief mortgages where the LTV is less than or equal to 80%.

All funds listed on the application must match those verified in the loan file and entered into LP or DU. This includes any funds required to complete the refinance transaction including reserves, funds to cover either or both the balance of the first and pay the closing of the new loan or to payoff any subordinate financing. This applies to Conforming and Super Conforming Refinance transactions including DU Refi Plus mortgages. This requirement does not apply to the Freddie Mac Relief mortgages where the P&I increases does not exceed 20% of the current P&I.



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RESERVES Reserves are calculated on the full monthly payment amount for the property, which is the sum of the following:

• Principal and interest payments on the Mortgage (P&I) • Property hazard, flood, and mortgage insurance premiums (as applicable) • Real estate taxes • Leasehold payments • Payments on secondary financing secured by the subject property • Ground rent • Special assessments • Homeowners association dues (including utility charges that are attributable to the common

areas, but excluding any utility charges that apply to the individual unit) For loan approvals that require documented reserves, the following apply: • Accounts must be verified per standard or alternate documentation. • Accounts must be in the Borrower’s name. • Personal liquid or non-liquid assets including hardship value of IRA’s, 401K’s, stock/bond accounts, cash-

value of insurance policies are allowed. • Undocumented, borrowed or recent large deposits are not allowed. Stable, seasoned assets accounts are

accepted. UNACCEPTABLE SOURCES OF RESERVES The following cannot be included as part of the borrowers’ reserves:

• Funds that are not vested; • Funds that cannot be withdrawn under circumstances other than the account owner’s retirement,

employment termination or death; • Stock held in an unlisted corporation; • Stock options and non-vested restricted stock; • Personal unsecured loans; • Interested Party Contributions (IPC’s) – see Fannie Mae Selling Guide B3-4.1-02 Interested Party

Contributions (IPC’s)(4/30/2010); and • Cash proceeds from a cash out refinance transaction.

RESERVE REQUIREMENTS Primary Residence: • 1 unit - Per LP or DU findings

• 2-4 units - Six months Second Homes: • Two months for subject property AND two months for each other financed property that the borrower owns

and/or is obligated on the mortgage. “Other financed property” includes 1-4 unit financed properties titled as a LLC.

Investment Properties: • 1 - 4 unit Investment Property - six months for subject property AND two months for each other financed

property that the borrower owns and/or is obligated on the mortgage. “Other financed property” includes 1-4 unit financed properties titled as a LLC.



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TRADE OF REAL ESTATE The net proceeds of the trade-in of the Borrower’s previously owned home documented by an appraisal of the Borrower’s previously owned residence and a copy of the trade-in contract is permitted for other equity. The Borrower’s equity in the previously owned home is determined by subtracting any outstanding liens on the previously owned residence, plus any transfer costs, from the lesser of the appraised value of the previously owned residence or its trade-in price as shown in the trade-in contract. 1031 TAX DEFERRED EXCHANGE Section 1031 of the Internal Revenue Code provides individuals with real estate net proceeds to defer payment of taxes for any portion of the proceeds that are used to acquire additional real estate. This section of the tax code applies specifically to investment property. It does not apply to owner occupied property, which includes primary residences and second homes. In order for 1031 exchange proceeds to be used for the acquisition of another property, that property must be treated as investment property. Loans received by BB&T that evidence 1031 proceeds used for the acquisition of a property that is registered as either primary residence or second home will be re-registered as investment, and appropriate delivery fees assessed.



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3:11 LIABILITIES/RATIOS AUTHORIZED USER ACCOUNTS Follow respective Agency’s guidelines, Freddie Mac or Fannie Mae.

CONTINGENT LIABILITIES

If a Borrower can qualify with a contingent liability, then no other documentation is required other than verifying the debt. However, in most cases the Borrower cannot qualify using the contingent liability, and further documentation is required to prove that another person is responsible for the debt. For loans submitted to LP, follow the requirements on the LP feedback certificate. For DU loans, follow Standard Freddie Mac documentation requirements.

UNDISCLOSED LIABILITIES

BB&T strongly suggests that Correspondents determine that all liabilities incurred by the borrower from application through loan closing are included in loan qualification. The methods that should be used for this purpose are: • A new or refreshed credit report obtained prior to closing. • A MERS report for determination of any other mortgages being obtained. • Direct verification of recent inquiries, if a credit report is obtained.

The above list is not all inclusive. It is strongly suggested that Correspondents employ these methods for determination. If additional liabilities are discovered, those liabilities must be used to re-qualify the borrower. The loan must be re-submitted through an AUS engine prior to closing. If an updated credit score is provided, then that score will be used to determine product eligibility and pricing. CREDIT REPORT INQUIRIES

Follow the respective Agency’s guidelines, Freddie Mac or Fannie Mae. DEFERRED STUDENT LOANS

Deferred installment debt, such as deferred student loans, must be included as part of the Borrower’s recurring monthly debt obligations. When the Borrower’s credit report does not indicate the required minimum monthly payment for a student loan that is deferred or is in forbearance, a monthly debt payment must be determined. To determine the Borrower’s monthly debt payment for purposes of calculating the monthly debt payment-to-income ratio, 1% of the outstanding balance of the student loan may be used as the monthly payment instead of obtaining documentation to support the payment amount. However, if any documentation is provided by the Borrower that indicates the actual monthly payment, that figure must be used in qualifying the Borrower.

RESIDENCY HISTORY DOCUMENTATION Follow LP or DU feedback requirements concerning residency documentation. DEBT-TO-INCOME RATIOS ▪ Conforming loans (LP) – Maximum Debt-to-Income (DTI) with Accept or LP A-Minus is 55%. ▪ Conforming loans (DU) – Maximum Debt-to-Income (DTI) with Approve/Eligible is 45%. ▪ Super Conforming loans (LP or DU) – Maximum Debt-to-Income (DTI) with Approve/Eligible is 45%.



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SALE OR CONVERSION OF CURRENT PRIMARY RESIDENCE- CONFORMING AND SUPER CONFORMING If the Borrower’s current primary residence is pending sale and the sale will not close before the Note Date of the mortgage, or for Construction Conversion and Renovation Mortgages, the effective date of permanent financing, or the current primary residence is being converted to a second home or investment property, the monthly payment amount for the property pending sale may be excluded from the monthly debt payment-to-income ratio if the mortgage file contains: • An executed sales contract for the property pending sale. If the executed sales contract includes a

financing contingency, the mortgage file must also contain evidence that the financing contingency has been cleared or a lender’s commitment to the buyer of the property pending sale; OR

• An executed buyout agreement that is part of an employer relocation plan where the employer/relocation company takes responsibility for the outstanding Mortgage(s)

If the mortgage file does not contain the above required documentation, the monthly payment amount for the property pending sale and the monthly housing expense for the subject property must be used to qualify the borrower for the new transaction. Please note: DU loans only If the Fannie Mae guidelines require the establishment of value of the Borrower’s current primary residence because;

• the Borrower is purchasing a new primary residence, • the Borrower’s current primary residence is on the market and the sale will not close before the Note

Date, or • the Borrower is converting the primary residence to a second home or investment property,

then, the value must be established and evidenced by at least Form 2055, Exterior Only Inspection. PAYING OFF DEBT TO QUALIFY If all or any portion of the proceeds of the mortgage are being used to pay off or pay down existing debts in order to qualify for the mortgage, the seller must document such payoff in the mortgage file. Canceled checks, paid receipts and/or a copy of the Settlement/Closing Disclosure Statement or other closing statement may be used to document the repayment. A borrower who increases debt and then periodically uses refinance or debt consolidation to reduce payments to a manageable level presents a higher risk and the qualifying ratios should be close to guidelines. The borrower’s history of credit use should be carefully evaluated. The correspondent should consider the Borrower’s short term and long-term ability to repay the mortgage.

Follow respective Agency guidelines: • Freddie Mac: See Freddie Mac Seller/Servicer Guide • Fannie Mae: See Fannie Mae Selling Guide Section B3-6-07

PAYMENT PLANS FOR UNPAID INCOME TAXES Payment plans for unpaid income taxes, whether or not there is an IRS tax lien on the subject property, must be paid in full prior to, or at loan closing.



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3:12 OCCUPANCY

PROPERTIES SOLD AT AUCTION, FORECLOSURES, DEED IN LIEU, REO, BANK-OWNED, OR SHORT SALE

Eligible for financing for all occupancy types. For Investment Properties, the following restrictions apply:

Properties Sold at Auction/Foreclosure/Deed in Lieu/Short Sale for Investment Properties: • Arms length transactions only • Minimum fico score 740 • LTV/TLTV: 10% mandatory reduction from maximum financing

Properties Sold at REO/Bank-Owned for Investment Properties: • A standard full appraisal is required.

PRIMARY RESIDENCES

If the subject property is a primary residence, there is no limit on the number of financed properties the borrower may own and/or be obligated.

SECOND HOME A second home is defined as a 1-unit property (not a 2-4 unit property) owned by an individual and occupied

by the Borrower for some portion of the year and not subject to any timesharing ownership or agreement. The property must be in a location so as to reasonably function as a second home. Typically, it should be remote in distance or time of travel from the Borrower’s primary residence. The Borrower may not own other residential property in the same geographic location as the subject property. The property must also be suitable for year round occupancy, must be available for the Borrower’s exclusive use and enjoyment and is not subject to any rental pools or agreements that require the Borrower to either rent the property or give a management firm control over the occupancy of the property. The property cannot be occupied by tenants or other family members as their primary residence. The property must not be located in a project that allows for short-term (daily or weekly) rentals. (This definition of a second home should make it clear that location is a factor in determining whether a property is a second home). BB&T may, in its discretion, determine that a property is not a Second Home.

Any property that is not a true second home must be underwritten to investment property guidelines. ADDITIONAL REQUIREMENTS: • No rental income is allowed to offset the debt. • A gift of equity is permitted provided it is reflected on the Settlement/Closing Disclosure Statement and the appraised value is supported. • For qualifying purposes, the monthly payment amount on the subject property should be used in the

second ratio. The Borrower’s monthly payment expense on the primary residence should be used in calculating the first ratio.

• See “Non-Arms Length Transactions” for additional details. • The sales contract and gift letter are executed agreeing to the price, dollar amount of the gift, and

relationship. • If the subject property is a second home, each Borrower individually and all Borrowers collectively must not

own and/or be obligated on more than four 1 to 4 unit financed properties, including the subject property. Note: 1-4 unit financed properties titled as a LLC must be included when determining borrower eligibility and the maximum allowable number of financed properties.

• Ownership of commercial real estate or multi-family (5 or more units) is not included in this limitation.



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SECOND HOMES NOT SUITABLE FOR YEAR-ROUND OCCUPANCY Due to investor relations, loans utilizing this feature must receive an approval through LP. Eligible for Conforming and Super Conforming loans. Mortgages secured by second homes which are not suitable for year-round occupancy are eligible for purchase, provided that: • In the appraisal report, the appraiser includes comparable sales that demonstrate properties not suitable for

year-round occupancy are typical for residential properties in the market area; and

• The Mortgage complies with all other requirements in Freddie Mac Seller/Servicer Guide.

INVESTMENT PROPERTY For all 1-4 unit investment property mortgages, the borrower must have demonstrated at least a two-year history of managing 1-4 unit investment properties if rental income is being used to qualify the borrower. Cash-Out Refinances are not eligible for delivery to BB&T. • For qualifying purposes, the Borrower’s monthly housing expense on the primary residence should be used

in calculating the first ratio. • If rental income is not used for qualifying, the monthly payment amount for the subject property plus

operating expenses must be used in calculating the second ratio. • The Borrower may not be affiliated in any way with the builder, developer or seller of the subject property. • If the subject property is an investment property, each Borrower individually and all Borrowers collectively

must not own and/or be obligated on more than four 1 to 4 unit financed properties, including the subject property. Note: 1-4 unit financed properties titled as a LLC must be included when determining borrower eligibility and the maximum allowable number of financed properties.

• Ownership of commercial real estate or multi-family (5 or more units) is not included in this limitation. If the Borrower owns more than one financed investment property and meets the requirements above, subject loan cannot be an A-minus mortgage. RESERVE REQUIREMENTS Regardless of whether rental income from the subject property is used in qualifying, the following apply: • Six months reserves required for the subject property, AND • Two months reserves required for each other financed property in which the Borrower has ownership

interest or on which the Borrower is obligated. “Other financed property” includes 1-4 unit financed properties titled as a LLC.

• Ownership of commercial real estate or multi-family (5 or more units) is not included in this limitation. Refer to the Freddie Mac Rental Income Matrix for further information. Cash-Out Refinances are not allowed. MULTIPLE MORTGAGES TO SAME BORROWER Borrowers may own more than one financed property provided the following apply: • If the subject property is a primary residence, there is no limit on the number of financed properties the

borrower may own and/or be obligated. • If the subject property is a second home or investment property, each Borrower individually and all

Borrowers collectively must not own and/or be obligated on more than four 1 to 4 unit financed properties, including the subject property. Note: 1-4 unit financed properties titled as a LLC must be included when determining borrower eligibility and the maximum allowable number of financed properties.

• The subject property cannot be an A-Minus mortgage. • Ownership of commercial real estate or multi-family (5 or more units) is not included in this limitation.



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3:13 REFINANCES

Per Freddie Mac Seller/Servicer Guide, all refinances, No Cash Out, Cash Out and Special Purpose Cash

Out, must comply as follows:

When the current mortgage will be satisfied as the result of the refinance transaction, ONE of the following three numbered requirements must be met relating to the borrowers on the new mortgage;

(1) At least one borrower on the new refinance was a borrower on the mortgage being refinanced, OR

(2) At least one borrower on the new refinance held title to and resided in the subject property as their primary residence for the most recent twelve month period AND the documentation provided that the borrower EITHER:

a. has been making timely mortgage payments, including the payments for any secondary financing, for the most recent twelve month period; OR

b. is a Related Person to a borrower on the mortgage being refinanced; OR

(3) At least one borrower on the new refinance has inherited or was legally awarded the mortgaged premises by a court in the case of divorce, separation or dissolution of a domestic partnership.

BB&T Correspondent Lending has imposed the following restrictions in regards to all refinances:

Marital/Spousal rights are not acceptable as proof of legal title to the property.

Loans may not be refinanced in which a Life Estate exists on the current title.

Residential loans must be titled in the name of individuals only. Loans may not be titled in the name of

a business, Corporation, S-Corp, Partnership, LLC or other non-living business entity.

Transfer of ownership from an LLC, Corporation, S-Corp, Partnership, or any other non-living business entity for the purpose of refinancing the loan into the prospective borrower’s name is unacceptable. See Section 3:8 for additional information.

NO CASH OUT REFINANCES Recently Acquired Properties Primary Residences, Second Homes and Investment Properties: No seasoning requirement for No Cash Out Refinances



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CASH OUT REFINANCES Primary Residences and Second Homes At least one Borrower must have been on the title to the subject property for at least six months prior to the Note Date except as specified below: If none of the Borrowers have been on the title to the subject property for at least six months prior to the Note Date on a cash out refinance, the following requirements must be met: At least one Borrower on the refinance mortgage inherited or was legally awarded the subject property (for

example, in the case of divorce, separation or dissolution of a domestic partnership) OR, all of the following: The executed Settlement/Closing Disclosure Statement from the purchase transaction must reflect that no

financing secured by the subject property was used to purchase the subject property. If the mortgage has an application received date prior to October 3, 2015, the Settlement/Closing Disclosure Statement must be an executed version. A recorded trustee’s deed or equivalent documentation may be used when a Settlement/Closing Disclosure Statement was not used for the purchase transaction.

The preliminary title report for the refinance transaction must reflect the Borrower as the owner of the subject property and must reflect that there are no liens on the property.

The source of funds used to purchase the subject property must be fully documented. If funds were borrowed to purchase the subject property, those funds must be repaid and reflected on the

Settlement/Closing Disclosure Statement for the refinance transaction. The amount of the cash-out refinance Mortgage must not exceed the sum of the original purchase price

and related Closing Costs, Financing Costs and Prepaids/Escrows as documented by the Settlement/Closing Disclosure Statement for the purchase transaction, less any gift funds used to purchase the subject property. A recorded trustee’s deed or equivalent documentation may be used when a Settlement/Closing Disclosure Statement was not used for the purchase transaction.

There must have been no affiliation or relationship between the buyer and seller of the purchase transaction.

The cash out refinance must comply with the applicable LTV/TLTV/HTLTV ratio limits and all other BB&T Conforming and Super Conforming guideline requirements.

Investment Properties: Cash Out Refinances are not eligible on investment properties. SPECIAL PURPOSE CASH OUT REFINANCE A Cash Out Refinance mortgage where the owner of a property uses the proceeds of the refinance transaction to buy out the equity of a co-owner is a Special Purpose Cash Out Refinance. Specific guidelines are stated in the Freddie Mac Seller/Servicer Guide. When registering/locking a Special Purpose Cash Out Refinance via BB&T's website, "Cash Out Refi Unlimited" must be selected from the drop down box in the Loan Purpose field on the Loan Information screen. "Special Purpose Cash Out Refi" must be selected from the drop down box in the Investor Feature Identifier Code field on the Product Selection and Details screen.



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RECENTLY LISTED FOR SALE No Cash Out Refinances The subject property must not be currently listed for sale. It must be taken off the market on or before the disbursement date of the new Mortgage loan, and the Borrowers must confirm their intent to occupy the subject property (for principal residence transactions). Cash Out Refinances Properties listed for sale in the six (6) months preceding the disbursement date of the new Mortgage loan are limited to 70% LTV/TLTV/HTLTV ratios. Properties that were listed for sale must have been taken off the market on or before the disbursement date of the new Mortgage loan, otherwise they are ineligible. PRIVATELY FINANCED FIRST AND/OR SECOND MORTGAGES Follow LP or DU SECOND MORTGAGES INCLUDED IN REFINANCE A purchase money second lien being paid off in its entirety with proceeds of the new first mortgage can be considered a No Cash Out Refinance. Loans with proceeds to pay down any debt, including an existing second, would be considered as a Cash Out Refinance. STREAMLINE REFINANCES Streamline refinances are not permitted through Correspondent Lending. CEMA LOANS (NEW YORK STATE) - See the Funding Procedure section for more information.



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3:14 TEXAS EQUITY SECTION 50(a)(6) TRANSACTIONS Texas Equity section 50(a)(6) laws/guidelines must be followed when refinancing an existing Texas Equity

section 50(a)(6) mortgage (regardless of any new Cash Out) or providing any cash back to the borrower on a Primary residence refinance.

Schedule C of the title commitment must be reviewed to determine if the loan being refinanced is a Texas

Equity loan.

Correspondents must indicate that the loan being delivered for funding is a Texas Equity section 50(a)(6) at the top of the BB&T Mortgage Correspondent Lending Document Checklist.

Eligible Loan Programs: Conforming and Super Conforming:

• Fixed Rate programs with 10-30 Year Amortizations

• 7 Year and 10 Year Fully Amortizing ARMs Product Purpose: No Cash Out Refinance and Cash Out Refinances • Please note that the Standard Agency (Freddie Mac/Fannie Mae) classifications of No Cash Out and Cash

Out Refinances differ from the manner in which Texas Law classifies these mortgages.

• Under Texas Law, if the borrower receives any cash back at closing, the loan must follow the Texas Equity section 50(a)(6) laws/guidelines. Closing costs, Prepaids and Taxes may be rolled into the loan amount: however, no cash back is allowed at closing. A principal curtailment is allowed to eliminate any cash back at closing. Additionally, if an existing Texas Equity section 50(a)(6) mortgage is being refinanced, the new mortgage must conform to Texas Equity laws/guidelines.

Loan Term/Amortization: 30, 20, 15 and 10 Year Amortization. Assumption: Varies - Please refer to the Product Description for specific product/program chosen. Mortgage Insurance: Loan-to-Value over 80% is not allowed. Temporary Buydowns: Not allowed Escrows: Not required




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3:15 TEXAS EQUITY SECTION 50(a) (6) UNDERWRITING GUIDELINES Automated Underwriting: LP and DU Eligible. Borrower Eligibility: U.S. Citizen, Permanent Resident Alien, and Non-Permanent Resident Alien. Occupancy: Owner Occupied, Primary residence only. Property Types: 1-unit Single Family Dwelling, Condominium and PUD classification as the borrower’s

Homestead located in the State of Texas. Documentation: Follow LP or DU Feedback. Credit Requirements: Follow LP or DU Feedback. Credit Score: Refer to the Minimum credit score requirements located within the Price Adjustments

and LTV Charts. LTV/TLTV: Refer to the Price Adjustments and LTV Charts.

Ineligibles: • Property designated as agricultural use, unless property is used primarily for the production of milk. Minimal

farm type animals are acceptable as long as it is clear they are being kept as pets.

• Properties subject to roll back taxes (i.e. properties where the Agricultural use exemption was removed and subjected to roll back taxes).

• 2-4 unit dwellings, Investment Properties and Second Homes.

• Properties with more than one Texas Equity section 50(a)(6) loan. • Texas Equity section 50(a)(6) loans may not be closed in a trust.

• The utilization of a Power of Attorney is unacceptable on Texas Equity section 50(a)(6) transactions. • Loans with closing costs that exceed 3% of the loan amount. Includes third party, attorney, title company

fees and discount points, but excludes prepaid interest and escrows. Closing cost over the 3% limitations cannot be cured by a lender credit, they must be waived or Paid outside of Closing by the Lender.

• Government, Affordable and Relief Refinance loan programs. Secondary Financing: • No new secondary financing allowed, regardless of LTV/TLTV.

• Existing, purchase money second mortgages may be resubordinated provided the TLTV is less than or

equal to 80%. Qualifying Ratios: • Conforming (LP) – Maximum DTI is 55% • Conforming (DU) – Maximum DTI is 45% • Super Conforming (LP or DU) – Maximum DTI is 45%



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Reserves: See “Reserves” section of this guide for more details. Appraisal Requirements: One full URAR with interior/exterior inspections is required, even if the AUS feedback recommends a different property valuation method. Seasoning Requirement: 12 months (Note Date of the mortgage being refinanced to Note Date of the new refinance transaction). Title Requirements and Additional Disclosures: • Every borrower must be on title prior to Closing. Properties held in a Trust are not eligible.

• Every borrower and his/her spouse must sign the following documents twelve days prior to closing.

Loan application (1003) Notice concerning extensions of credit defined by section 50(a)(6), Article XVI, Texas Constitution.

• Mortgage Policy of Title Insurance (Form T-2) supplement by an Equity Loan Mortgage Endorsement

(Form T-42) and a Supplemental Coverage Equity Loan Mortgage Endorsement (Form T-42.1). • Schedule C of the title commitment

• The following documents must be signed at Closing:

Notice of right to cancel Acknowledgement of Fair Market Value of Homestead Property

Special Considerations: • Borrowers who reside in Texas and request a Cash Out refinance on an Investment Property will be

subjected to Texas Equity section 50(a)(6) laws/guidelines if they do not own any other property.

• All loans must close at a title company, bank branch or Attorney’s office.

• In the event, that an internal review or customer notification uncovers that a loan was originated out of compliance with Texas Equity section 50(a)(6) statues, the closing attorney should be contacted within 24 hours.

• BB&T cannot require that the borrower pay off any BB&T-owned debt that is not tied to the subject

property, in order to qualify. This includes debt that may be owned by one of BB&T’s affiliates. Internal Use By BB&T • The business type of “Texas Equity” must be selected on the Loan Data screen of Unifi.

• SFC 304 (TX section 50(a) (6) must be entered on delivery screen two (2).

• Investor Feature Identifier code 221 (TXsection50 (a) (6) must be entered on delivery screen three (3).

*END OF TEXAS EQUITY SECTION*



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3:16 CONSTRUCTION CONVERSION AND RENOVATION MORTGAGES

• Loans receiving LP “Accept” & DU “Approve/Eligible” are eligible. LP Caution A-minus is not eligible.

• Freddie Mac: Separate Construction Conversion Documentation option only. See Freddie Mac Seller/Servicer Guide.

• Fannie Mae: Conversion of Construction-to-Permanent Financing Two-Closing Transactions option only. See Fannie Mae Selling Guide Section B5-3.1-03.

The following apply regardless of LP or DU approval:

• Construction Conversion and Renovation Mortgages must adhere to BB&T Correspondent Lending requirements as stated in the BB&T Correspondent Lending Guide.

• BB&T Correspondent Lending overlays apply.

• Primary Owner Occupied and Second Homes only.

• 1 – 4 Unit Site Built homes only.

• All improvements must be fully completed before delivery to BB&T Correspondent Lending.

• Age of Credit Documentation: Credit documents must not exceed 120 days as of the Note Date (effective date of permanent financing).

• Appraisal Requirements: Interior/Exterior appraisal (Freddie Mac Form 70/Fannie Mae Form 1004 for 1 unit properties; Freddie

Mac Form 72/Fannie Mae Form 1025 for 2 – 4 unit properties) required regardless of LP feedback.

Appraiser’s opinion of value must provide the “as completed” value.

Age of Appraisals: • If the effective date of the appraisal report is more than 120 days before the Note Date, and not more

than 12 months before the Note Date, an appraisal update with at least an exterior-only inspection is required. For the purpose of this section, the Note Date is equivalent to the Effective Date of Permanent Financing when the mortgage is a Construction Conversion or Renovation Mortgage.

• If the effective date of the appraisal report is more than 12 months before the Note Date, a new appraisal with an interior and exterior inspection is required.

• If the new refinance mortgage replaces the interim construction mortgage more than 180 days after the

property completion, a Right to Cancel would be required. • Escrow holdbacks are eligible for landscaping only.

Ineligible Mortgages • Loans receiving LP Caution A-Minus • Mortgage term below 15 years or exceeding 30 years • Freddie Mac Special Purpose Cash Out Refinance transactions • Mortgages subject to temporary buydowns • Freddie Mac Home Now and Neighborhood Home mortgages • Manufactured Homes • Initial Interest Mortgages • Freddie Mac Construction Conversion and Renovation Mortgages Documentation structure:

Integrated Construction Conversion Documentation Modification Construction Conversion Documentation

• Fannie Mae Conversion of Construction-to-Permanent Financing: Single-Closing Transactions • LP and DU Approved Modified Construction Loans



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Mortgage File Documentation Requirements

Freddie Mac Separate Construction and Conversion and Fannie Mae Construction-to-Permanent Financing Two-Closing Transactions utilize two separate loan closings with two separate sets of legal documents; therefore, there must be separate applications and disclosures for both the Interim Construction and the Permanent Financing. BB&T only purchases the refinance of interim construction to permanent financing mortgages. Freddie Mac: Construction Conversion and Renovation Mortgages The following requirement applies in addition to the mortgage file documentation requirements located in the Freddie Mac Seller/Servicer Guide. Purchase Transactions: Correspondents must provide an explanation on the Transmittal Summary addressing the decision to structure as a purchase transaction while documenting as a refinance.

For guidance with entering data into Loan Prospector visit the following link:

Loan Prospector® - How to Enter Data for Construction Conversion and Renovation Mortgages

http://www.freddiemac.com/learn/pdfs/uw/mnch_fun_guide.pdf



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3:17 MORTGAGE INSURANCE OPTIONS Private mortgage insurance is required on all non-government loans with LTV’s that exceed 80%. The

Correspondent is responsible for securing private mortgage insurance from an approved provider. The private mortgage insurance must comply with secondary market guidelines for coverage, structure, and qualifying. When Mortgage Insurance is required, it is the Correspondent’s responsibility to remit the required insurance premium directly to the mortgage insurer. Should a loan enter into a claim situation and BB&T discovers that the Correspondent has not paid the premium, and the loan is uninsured, the Correspondent will be required to repurchase the uninsured loan.

Private mortgage insurance companies may impose different credit or property restrictions that can impact the ability to secure their coverage. Correspondents are responsible for being knowledgeable of guideline changes and restrictions implemented by the mortgage insurance companies. BB&T Correspondent Lending does not self-insure loans that exceed 80% or offer pricing adjustments to offset the inability to secure private mortgage insurance on a particular transaction. NOTE: Loans disclosed at loan application with Borrower Paid Mortgage Insurance (BPMI) must be closed with the borrower paying any upfront premiums with their own funds. BPMI cannot be paid with a lender credit.

Acceptable Mortgage Insurance Options:

• Standard Premium-Conforming and Super-Conforming (LP and DU) Split Premium MI combining monthly MI with upfront premium paid at closing. Upfront premium must be

paid by the Borrower, Seller or Builder and cannot be paid through a Lender credit. • Single Premium aka Super Single Premium- Conforming and Super-Conforming (LP and DU) Single upfront premium paid at closing. Proof of payment to MI Company required. Copy of check is

sufficient.

• Reduced Premium- Conforming and Super-Conforming (LP Approvals Only)

• Financed Single Premium - Conforming (LP) Maximum Gross LTVs are product and loan type specific. Refer to Price Adjustments and LTV Charts

♦ Maximum Gross LTV is 95% for Fixed Rate products (includes financed MI) ♦ Maximum Gross LTV is 90% for ARM products (includes financed MI)

Standard coverage is required. Super Conforming loans are NOT ELIGIBLE for Financed MI.

• Financed Single Premium - Conforming (DU) Maximum LTVs are product and loan type specific. Refer to Price Adjustments and LTV Charts The Base LTV must not exceed 95% for Fixed Rate products; 90% for ARMs products The Gross LTV is 95% for Fixed Rate products; 90% for ARM products (includes financed MI); Property must be a 1-unit primary residence or second home. The amount of coverage must meet the standard coverage level requirements using the Base LTV. The mortgage insurance premium must be paid with a single-premium payment. Super Conforming loans are NOT ELIGIBLE for Financed MI.

If the mortgage insurance is being financed or paid in cash, this information must be included in the data submitted to LP or DU and, if borrower is paying in cash, adequate funds must be verified. See the final 1003 application, page four, section VII, letter (n) to confirm if the premium is financed or being paid in cash. The dollar amount for the single premium must be disclosed on the settlement statement.

• Lender- Paid MI- Conforming & Super Conforming (LP and DU) Single Premium Option only. Proof of payment to MI Company required for LPMI. Copy of check is sufficient. The Correspondent is the Lender. BB&T does not offer special pricing for Lender-Paid MI. See Freddie Mac Seller/Servicer Guide for additional information. Super Conforming loans are eligible for Single Premium Lender Paid MI.





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Unacceptable Mortgage Insurance Options: • Freddie Mac Custom MI • Fannie Mae Lower-Cost MI • Fannie Mae Reduced MI • Split Premium MI – A portion of the borrower-purchased mortgage insurance premium is paid and the

other portion is financed in the loan amount. • Insured loans with Declining Renewals • Borrower Paid Mortgage Insurance (BPMI) - Loans disclosed at loan application with BPMI, upfront

premiums cannot be paid with a lender credit.

Eligible Private Mortgage Insurance Companies* • GENWORTH • MGIC • UGIC • RADIAN • ESSENT GUARANTY • Arch Mortgage Insurance Company f/k/a CMG Mortgage Insurance Company • National Mortgage Insurance Corporation (National MI)

*NOTE: Loans submitted to BB&T for Pre-Close Underwriting must choose either Essent Guaranty or MGIC as the mortgage insurance provider. MINIMUM COVERAGE REQUIREMENTS The following minimum coverage is required for all Zero-Up Front MI Plans for 30 Year (21 – 30 Year) Fixed & all ARM Programs, Conforming and Super Conforming: LTV STANDARD COVERAGE

90.01% to 95.00% 30% 85.01% to 90.00% 25% 80.01% to 85.00% 12%

The following minimum coverage is required for all Zero-Up Front MI Plans for 15 & 20 Year Fixed Programs. Conforming and Super Conforming:

LTV STANDARD COVERAGE 90.01% to 95.00% 25% 85.01% to 90.00% 12% 80.01% to 85.00% 6%

The following minimum coverage is required for Reduced Coverage loans per Freddie Mac. Conforming and Super Conforming:

LTV REDUCED COVERAGE

90.01% to 95.00% 25% 85.01% to 90.00% 17%

Special Products (MI Requirements)

SPECIAL PRODUCT COVERAGE N/A N/A

Ineligible Product Types • A-Minus • Property and occupancy requirements are subject to the MI coverage options.



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MORTGAGE INSURANCE CANCELLATION BB&T follows Homeowner’s Protection Act requirements (minimum 24 month history and current value required prior to PMI deletion; auto termination on the date the loan is first scheduled to reach 78%; this date is provided on the PMI Disclosure.) The Homeowner’s Protection Act defines “residential mortgage transaction” as a transaction…in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against a single-family dwelling that is the principal residence of the mortgagor to finance the acquisition, initial construction, or refinancing of that dwelling. BB&T will continue to require that the Truth-in-Lending disclose life-of-loan PMI for second homes. BB&T is not under any obligation to remove the PMI on any loan prior to the automatic termination date disclosed. A client’s rights as described in the Notice are as follows: Clients have the right to submit a request for PMI deletion once their loan amortizes or is paid down to 80% of the original value. This does not mean the PMI will be removed unconditionally upon receipt of said request. A client has the right to request a PMI deletion review at any time once their loan-to-value ratio reaches 80% of the original value of their home. The 80 % LTV may be achieved ahead of scheduled amortization, but still does not compel the lender to delete the PMI; it is only the benchmark at which the client can submit a request for review. The Act further states that upon receiving any client-initiated request for PMI deletion, the lender can expect certain requirements are met prior to approving the removal of PMI from a loan. Those requirements are shown on the disclosure. Homeowner’s Protection Act Disclosure This disclosure is required on all One-Unit, Single-Family and Owner-Occupied residence transactions that are required to maintain private mortgage insurance. A disclosure must be given to the borrower(s), but is not required to be signed.



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3:18 APPRAISAL POLICY AND PROCEDURES

INTRODUCTION

All appraisal reports must establish and support the most probable market value as defined in the Uniform Standards of Professional Appraisal Practice (USPAP). All appraisals must comply with FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act of 1989), applicable regulatory requirements, and the policies outlined below. Since it is the policy of BB&T to sell loans in the secondary market, all appraisal reports must comply in all respects with all appraiser independence requirements, restrictions and guidelines including those contained in the Appraiser Independence Requirements as adopted by Freddie Mac (Bulletin 2010-13) and Fannie Mae (Ann. SEL-2010-14) and the Appraisal Independence Requirements set forth in Title XIV, Subtitle F, Section 1472 of the Dodd-Frank Wall Street Reform and Consumer Protection Act along with the applicable requirements, restrictions and guidelines contained in the BB&T Correspondent Lending Guide.

BB&T does not approve the individual appraisers used by Correspondents. However, BB&T does expect Correspondents to have sound internal procedures for approving and selecting appraisers. These internal procedures should be structured so that the spirit and intent of the appraisal policies and procedures contained herein are included.

Each appraiser must meet legal requirements of the state in which he/she resides and/or practices, and be in

good standing with the licensing agency and the state. A favorable indication of an appraiser’s professionalism is characterized by having an acceptable Errors & Omissions/Professional Liability Policy in an amount commensurate with the appraisal values to be performed for lending institutions, generally an amount of at least $500,000.

All appraisals must be prepared by qualified, state licensed or certified appraisers who have been approved by the Correspondent. In order to maintain sound lending practices, the appraiser must remain independent and unbiased. For this reason, the Correspondent is responsible for selecting the appraiser. The selected appraiser should in no way have direct or indirect interest in the real estate transaction. Appraisers selected by the Correspondent must be qualified by experience, training, competence and knowledge to perform appraisals that will meet the objective of BB&T and secondary market. In addition, they must have a positive reputation, generate quality appraisals, maintain the capacity for independent judgment, and be committed to continuing education and professional development.

APPRAISAL PORTABILITY

The Correspondent may accept an appraisal prepared by an appraiser for another federally regulated lender (FDIC, OTS, FRB or OCC), financial services institution or Mortgage Banker who is a wholly-owned subsidiary of a federally regulated institution. This definition does not include Mortgage Brokers or Mortgage Bankers who are not wholly-owned subsidiaries of a federally regulated institution. A transfer is acceptable if:

• The appraiser has been selected and engaged by the transferring lender; • The appraisal must be in the name of the transferring lender and be accompanied by a transfer letter from

the lender signed by a corporate officer (included in submission file); and • The lender assures it is in compliance with Freddie Mac and Fannie Mae’s Appraiser Independence

Requirements.



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PERFORMANCE REVIEW The appraisal reports prepared by each approved appraiser shall be periodically reviewed by BB&T Correspondent Lending personnel as well as BB&T’s Quality Control Department. The reports will be judged on thoroughness, accuracy and usefulness in the underwriting process, and compliance with Investor requirements. If BB&T determines that an appraiser’s reports are unsatisfactory in relation to BB&T and/or Secondary Market requirements or if an appraiser has been disciplined by the state, or had their license removed by the state, the appraiser must not be used by a Correspondent.

Each person employed as an appraiser should sign a certification that they will abide by USPAP, and comply with all respects of the appraiser independence requirements, restrictions and guidelines including, but not limited to, those contained in the Appraiser Independence Requirements as adopted by Freddie Mac and Fannie Mae. DIGITAL PHOTOS/ELECTRONIC SIGNATURES Electronic imaging is acceptable for the appraiser’s signature provided the appraisal contains the following (or similar language): “The signatures affixed to this report were applied by the original appraiser(s) or supervisory appraiser and represents their acknowledgements of the facts, opinion and conclusion found in the report. Each appraiser may apply their own signature electronically. Electronically applied signatures use password-protected digital methods. They have the same or more safeguards and carry the same validity as the appraiser(s) hand applied signature”.



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3:19 PROPERTY ANALYSIS BB&T Correspondent Lending follows standard appraisal procedures for documentation and disclosure on all

appraisals. Some issues regarding specific areas of appraisals are addressed below. BB&T Correspondent Lending Underwriting is available to discuss or review any unusual circumstances that may apply to a particular property.

APPRAISAL FORMAT • Conforming Fixed Rate and ARM Loans approved through LP - BB&T will accept the appraisal form

required by LP with all applicable addendums. See the “Photographs” section regarding requirements of interior/exterior appraisals.

• Conforming Fixed Rate and ARM Affordable Loans (HOME Mortgages) approved through LP – must

comply with the appraisal guidelines in the Freddie Mac Seller/Servicer Guide. Interior/exterior appraisal is required regardless of LP feedback.

• Conforming Fixed Rate and ARM Loans approved through DU - BB&T will accept the appraisal form

required by DU with all applicable addendums. See the “Photographs” section regarding requirements of interior/exterior appraisals. Exception: Forms 2055 (Exterior Only Inspection Residential Report) are not allowed.

• Super Conforming- All Loan Types (LP or DU) - Full interior/exterior URAR (Freddie Mac Form 70/Fannie

Mae Form 1004 for 1 unit properties; Freddie Mac Form 72/Fannie Mae Form 1025 for 2 – 4 unit properties) with all applicable addendums, regardless of LP or DU findings. For loans with LTV/TLTV/HTLTV ratios greater than 75% and the value is greater than or equal to $1,000,000, a full URAR and field review (Form 1032 for 1 unit properties and Form 1072 for 2-4 unit properties) are required. When the field review results in a different value, the lower of the original appraised value, field review value or sales price must be used to calculate the LTV/TLTV/HTLTV. See the “Photographs” section regarding requirements of interior/exterior appraisals.

• The Market Conditions Addendum (Freddie Mac Form 71 and Fannie Mae Form 1004MC) are required for

all property types and appraisal types completed on or after April 1, 2009. • For additional information regarding acceptable appraisal forms, see the “Appraisal Form Matrix” located

under “Matrices” in the Correspondent Lending Library. • For additional information regarding delivery and purchase of Conforming and Super Conforming loans,

refer to Section 5:3 “Loan File Submission” of the Funding Procedures.

Re-Certification of Value • Existing Construction and New Construction:

▪ If the effective date of the appraisal report is more than 120 days before the Note Date, and not more

than 12 months before the Note Date or the Effective Date of Permanent Financing when the mortgage is a Construction Conversion or Renovation Mortgage, an appraisal update with at least an exterior-only inspection is required.

▪ If the effective date of the appraisal report is more than 12 months before the Note Date, a new appraisal with an interior and exterior inspection is required.

• For additional information please refer to the Freddie Mac Seller/Servicer Guide.



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Photographs – APPRAISALS WITH COLOR PHOTOGRAPHS REQUIRED FOR LOANS DELIVERED TO BB&T, ON AND AFTER JANUARY 1, 2012.

When an interior and exterior appraisal inspection is performed on the subject property, it is now required that interior photographs of specific rooms and areas be included. At a minimum, pictures of the following rooms are required. This is in addition to the typical exterior inspection pictures, front, rear and street scenes. Additional room pictures are also acceptable. • The kitchen; • All bathrooms; • Main living area; • Examples of physical deterioration, if present; • Examples of recent updates, such as restoration, remodeling, and renovation, if present; and • Examples of amenities, conditions and external influences that materially impact market value or

marketability. Challenge to Value When the Correspondent Underwriter has reviewed the appraisal and disagrees with the value, the underwriter should seek to resolve their concerns with the appraiser as a normal process; i.e. obtaining additional comps or sales listings to help support the current value. The Correspondent Underwriter should not adjust the value but rather discuss with the appraiser their concerns. After discussion with the appraiser, if the appraisal value is still deemed unacceptable, another appraisal may be obtained from another approved appraiser provided the initial appraisal is found to be flawed or tainted and the basis for such determination is documented in the file or, when written pre-established policies allow for a second appraisal or if required by law. If a second appraisal is obtained, and found acceptable, the lower value of the two appraisals must be used. Any deficiencies to the appraisal that cannot be resolved through normal channels would make the property unacceptable. Files submitted with more than one appraisal which is outside the Correspondent Lending Underwriting and Product guidelines must include an acceptable explanation as to it presence in the loan file. Appraisal Sources Appraisals must list both data sources and verification sources with respect to comparable sales selected by the appraiser. If the Correspondent Underwriters find appraisers are not doing this correctly, then interaction with the appraiser is necessary to receive the complete data required. Comparable Sales for Distressed Properties For a subject property that is the result of a foreclosure, short sale or builder sale, the appraiser is responsible for determining which comparables are most appropriate for the assignment at hand. The appraisal must be reviewed to ensure the comparables are reflective of other foreclosure, short sales or builder sales. Seller Concessions Excessive seller concessions artificially inflate the sale price of the property, thus leading to an inflated market value. In particular, closer scrutiny to unusual sales or financing concessions is necessary to ensure they are properly accounted for in the appraisal report.



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3:20 GENERAL APPRAISAL REQUIREMENTS

• Re-use of an existing appraisal for a subsequent refinance is not permitted. A new appraisal must be ordered for each mortgage transaction.

• The appraisal must be requested by the Correspondent and it must be signed by an appraiser approved by the Correspondent. (BB&T will not accept appraisals ordered by the borrower).

• For additional information regarding BB&T Correspondent Lending’s appraisal format and/or re-certification of value requirements, see the “Property Analysis” section (3:19).

• The appraisal must include the appraiser’s license/certification number and the license/certification expiration date.

• Correspondents are expected to know whether or not a property is subject to any special assessments and to be aware of the effect of the assessments on the property’s value and marketability. Appraisers are required to reflect the effect of the assessments on the value or marketability of the property, if applicable.

• BB&T does require escrow for the payment of special assessments including but not limited to front foot assessments, user benefit fees, water/sewer fees, etc.

• BB&T will not accept any mortgages supported by an appraisal report that makes reference to the race, color, religion or national origin of any person or the racial composition of the neighborhood.

Quality and Condition Rating on Appraisals The appraisal report must contain an accurate description of the improvements and any factors that may affect the value or marketability of the subject property. For appraisal reports that are required to be completed using the Uniform Appraisal Dataset (UAD), the appraiser is responsible for reporting on the condition and quality of the property. A property with a quality rating of Q6 is not acceptable collateral. It is acceptable for an appraisal to be completed subject to repairs or alterations required for the subject property to be rated Q5 or better. A property with a condition rating of C5 or C6 is not acceptable collateral. It is acceptable for an appraisal to be completed subject to repairs or alterations required for the subject property to be rated C4 or higher. For property with an unacceptable rating the appraiser may be requested to complete the report “subject to” and list the repairs or alterations needed to bring the property up to an acceptable rating. The increased quality or condition rating should be reflected in the adjustment made to comparable sales. Properties appraised “subject to” require that a Final Inspection and completion report be done verifying required repairs or alterations have been completed.

Note: Any required repairs or alterations must be completed prior to closing. Appraisal Best Practices

Appraiser qualifications • Lenders should review appraisers’ licensing and performance at least once each licensing cycle. • Lenders should consider membership in a professional appraisal organization as a qualification criterion,

but membership or lack of membership in such an organization should not be the only criterion for or against approving, appraisers, or selecting appraisers for specific assignments.

Lender staff qualifications • Staff must be trained to properly underwrite the appraisal to ensure that the appraiser’s opinion of value

meets the definition of “market value”, and that the appraisal is accurate and fully supported. • Staff should be familiar with Uniform Standards of Professional Appraisal Practice, applicable laws, and

Freddie Mac appraisal requirements. • Staff must be familiar with Appraiser Independence Requirements (formerly known as HVCC).



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Appraiser selection • Ensure that turn times for appraisers to perform appraisals are reasonable as unreasonable turn times may

adversely affect the quality and accuracy of the appraisals. • Some markets or properties may require that the appraiser have access to non-traditional data sources in

order to provide the Lender with a credible appraisal. In such cases, the Lender should ensure that the appraiser has access to the necessary market data to support any conclusions about the market.

Appraisal reviews • Underwriting and any appraisal reviews should include the following: All appraisal photos. Maps used to identify the location of comparable sales in relation to the subject property. Sales history of the mortgage premises to determine consistency with other file documentation. Current listings and pending sales support any adjustments, (Ensure that if the appraiser determines that

older sales are more representative of the subject property, the appraiser has provided current listings or pending sales to support any time adjustments or lack of adjustments for the differences in the age of the sales.)

Comparison of the original appraisal report or inspection report to the review appraisal report, if one was obtained for conflicting information; the Lender should have policies and procedures in place to reconcile conflicting information.

Review the appraiser signature, license number, and date of report. Have processes in place in which the appraisal, loan application and title work are compared for

consistency, and comparison of the application and legal documents to the property description is provided by the appraiser.

Perform random and target reviews. Be aware of market trends in the markets the Lender originates mortgages.

• Lenders should also thoroughly review the mortgage file to identify and investigate the following appraisal

red flags: Comparables not independently verified or recorded. Value not supported by the comparables, and/or the comparables are not appropriate. Incorrect appraisal report form or inspection type for the type of transaction. Inconsistencies or unexplained adjustments. Typographical and mathematical errors. Appraiser is not familiar with the market in which the property is located. Appraisal ordered prior to the sales contract date. Completion certification required and not in the mortgage file.

• The Lender’s due diligence in monitoring the quality and accuracy of appraisals is part of the Lender’s responsibility for the quality of its lending. Lender’s policies and procedures for valuation should address the following: The selection of appraisers in compliance with FHFA appraisal requirements, Appraiser Independence

Requirements and Freddie Mac requirements. Monitoring the quality and accuracy of appraisals performed by individual appraisers. Knowledgeable staff underwriting appraisals and performing quality control for appraisals. Appraiser’s opinion of value reflects the cash-equivalent price without undue stimulus such as

concessions. Use of automated valuation models and other tools to monitor appraisal quality.



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3:21 CONDOMINIUM REQUIREMENTS BB&T’s Condominium Policy Concerning Classification Certification and Warranties Each condominium loan delivered to BB&T must be classified to secondary market industry standards. BB&T

adopts Freddie Mac guidelines as the benchmark for classifying condominium properties. Loans submitted through LP or DU must comply with Freddie Mac requirements.

BB&T Correspondent Lending is now offering the Correspondent more flexibility in classifying condominiums.

This flexibility allows Fannie Mae Approved condos to be delivered to BB&T. Reference tools are available to help the Correspondents meet the requirements for condominium delivery. They are available in the Forms folder located in the BB&T Correspondent Lending Library within the document named “BB&T Condominium Guidelines” as well as the links listed below:

Standard Freddie Mac definitions and minimum requirements are located in the Freddie Mac Seller/Servicer guide: http://www.freddiemac.com/singlefamily/guide/

Condominiums approved under Fannie Mae’s Reciprocal Project Review option are eligible for delivery to BB&T. Requirements are located in the Freddie Mac Seller/Servicer guide.

The following link also provides a quick reference for minimum requirements: http://www.freddiemac.com/learn/pdfs/uw/condo.pdf The Correspondent may choose either of these review options if the situation permits. • The Condominium Classification Certification must be completed and included in each condominium file.

This form allows the Correspondent to indicate which classification to apply to the particular property.

• Full Condominium Review: Complete the Condominium Classification Certification. Provide completed Condominium Project Questionnaire – Full Form with all appropriate attachments including current budget and balance sheet for the HOA (or if applicable, Project Reserve Study) and declaration page for the current insurance policies which have been reviewed by the Correspondent. Questionnaire must be completed by the HOA representative.

• Streamlined Review: Determine if property is Streamline eligible. Complete the Condominium Classification Certification, and the Condominium Project Questionnaire – Short Form Questionnaire must be completed by the HOA representative.

Allowances and Limitations • BB&T requires the completion of the Condominium Project Questionnaire – Full Form or comparable

form on all classifications except Detached or Streamlined eligible condominiums. The Correspondent is responsible for reviewing the appraisal and all HOA information including the current budget and balance sheet (or if applicable, Project Reserve Study) along with the declaration page for the current insurance policies to determine the appropriate classification. This classification is then noted on the Condominium Classification Certification. The completed and signed Certification, appropriate attachments, including the current budget and balance sheet for the HOA and declaration page for the current insurance policies are also required to be submitted with the loan package.

• All condominiums must be classed for delivery to BB&T. This includes Conforming and Super Conforming loans.

• The Streamlined Review (Freddie Mac) is available for Conforming and Super Conforming Conventional

loans. Because of the unique allowances with this Review, investment properties are not eligible for the streamlined review.

• BB&T will accept either Fannie Mae approved projects (CPM or PERS) depending whether it’s a new or established condo, or Freddie Mac classed condos.

http://www.freddiemac.com/singlefamily/guide/

http://www.freddiemac.com/learn/pdfs/uw/condo.pdf


http://www.freddiemac.com/singlefamily/factsheets/sell/pdf/condo_questionnaire_form_full.pdf



http://www.freddiemac.com/singlefamily/factsheets/sell/pdf/condo_questionnaire_form_short.pdf




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FLORIDA PROPERTIES Mortgages secured by condominiums in Florida are restricted to lower LTV’s under the Streamlined Review process.

Important: Regardless of AUS (LP or DU), Florida condominium properties that are new projects or newly converted projects are eligible only if approved through Fannie Mae’s PERS process. New condominium projects for which evidence of PERS approval cannot be provided are not eligible for delivery.

Please see Streamlined Matrix below for additional information regarding Florida properties. 3:22 STREAMLINED REVIEW OF UNITS IN ESTABLISHED CONDO PROJECTS

The Streamlined Review is eligible for units in an ESTABLISHED condominium project for Conforming and Super Conforming conventional loans. The requirements to be classified as eligible for the Streamlined review are:

1. Must meet the definition of an Established Project: The Project is fully complete and NOT subject to additional phasing, AND at least 90% of the total units have been CONVEYED to unit purchasers other than the developer, AND the unit owners control the homeowners association (there is no seasoning requirement for the turnover of control to the unit owners).

2. A condominium project containing a mix of attached and detached units is eligible for the

streamlined review. 3. Must meet maximum LTV/TLTV/HTLTV Ratios in the table below:

Units in Established Condominium Projects

NOT Located in Florida Occupancy Maximum LTV/TLTV/HTLTV LP Accept Risk Class All Other Mortgages* Primary Residence 90% 80% Second Home 75% 75% Investment Property Not Eligible Not Eligible

Delivery Requirements: Refer to Freddie Mac Seller/Servicer Guide for special requirements

Units in Established Condominium Projects Located IN Florida

Occupancy Maximum LTV/TLTV/HTLTV Credit Score LP Accept Risk

Class All Other

Mortgages*

Primary Residence

75% 75% 680

Second Home 70% 70% 700 Investment Property

Not Eligible Not Eligible N/A

*DU Approve/Eligible and A-Minus Mortgages

4. Cannot be an Investment property OR Manufactured Home. 5. The Project cannot be an Ineligible Project as defined in the Freddie Mac Seller/Servicer Guide. 6. Appraisal review to determine the subject “unit” does not fall under any “Ineligible” criteria. 7. If a loan is run through Fannie Mae’s DU and receives an “Approve/Eligible,” property must meet

Freddie Mac Condominium Guidelines for Established Condominiums to be eligible for Streamlined Review process.

Review the Freddie Mac Seller/Servicer Guide for further instruction relative to Streamlined Reviews. The following must be submitted in all files originated utilizing the Streamlined Condominium Review:

• Condominium Project Questionnaire – Short Form • Condominium Classification Certification

http://www.freddiemac.com/singlefamily/factsheets/sell/pdf/condo_questionnaire_form_short.pdf



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3:23 PLANNED UNIT DEVELOPMENT (PUD) REQUIREMENTS GENERAL PROJECT WARRANTIES FOR PLANNED UNIT DEVELOPMENTS (PUDS) All PUDs submitted through LP or DU must comply with Freddie Mac requirements and must meet the

following: • Compliance with the law. The PUD must be in compliance with all applicable state and local laws. BB&T

will assume that a PUD meets this requirement unless there is information or reason to believe the project is not in compliance.

• Ineligible Project. The PUD may not be an ineligible project as defined by Freddie Mac. Special attention should be given to projects with resort type amenities.

• Common elements. The HOA must own the common elements including amenities, and property owners must have the right to their use.

• Master Association. If the subject PUD is part of a Master Association, the Master Association must meet PUD requirements.

3:24 DECLINING MARKET POLICY Conforming and Super Conforming loans must be underwritten in accordance with Freddie Mac and Fannie

Mae Guidelines. Loans underwritten to satisfy these guidelines will not require a reduction in the LTV/TLTV. Correspondents are responsible for obtaining required mortgage insurance on all loans sold to BB&T which

require mortgage insurance and for being knowledgeable of guideline changes and restrictions by the mortgage insurance companies.

3:25 PROPERTY FLIP GUIDELINES A large increase in property value coupled with a short time period between transactions may indicate that the

property is being flipped. Properties targeted for property flips generally include properties that can be acquired at lower prices than other properties in the same neighborhood and often include real estate owned (REO) properties, properties subject to a “short sale”, other distressed properties or newly constructed properties where the builder or developer must liquidate housing inventory quickly. Property flips are not inherently illegal and not all transactions involving a rapid purchase and resale are improper.

Some indications of property flip transactions that may be legitimate include:

• Sales of properties by a Government Sponsored Enterprise, state or federally chartered financial

institution, mortgage insurer, or federal, state or local government agency.

• Property sales by employers or relocation agencies related to employee relocations.

• Sales of properties that are acquired by the property seller through inheritance, divorce, or as a result of legal settlement or proceeding.

• Sales of properties that have been substantially improved by bona fide and verified renovations since the property was acquired by the property seller in which any increase in sales price over the seller’s acquisition cost is representative of the market given the improvements to the home.

• Sales of properties that the property seller acquired at below market value after purchasing as a result of a distress sale (i.e. REO sale, short sale, tax lien sale, bankruptcy trustee’s sales, etc.) where any increase in the sales price over the property seller’s acquisition cost can be clearly shown to be a result of the difference (if any) in the market’s reaction to distress and typical arms-length market sales.



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Best Practices for Loans Involving Property Flips or Suspected Property Flips To assist Lenders in their responsibility to ensure that any Mortgage involving a property flip or suspected property flip meets Freddie Mac’s definition of an investment quality Mortgage, Freddie Mac recommends that they consider adopting the following best practices: Appraisals • Be particularly selective in choosing appraisers who are familiar with the subject property’s market area

and are competent to appraise properties involved in complex transactions.

• Use automated valuation models and other collateral risk assessment tools in the origination and pre-funding quality control process to detect fraud and objectively measure the accuracy of the appraisal. Freddie Mac recommends the use of Home Value Explorer (HVE). More information about HVE can be found at http://www.freddiemac.com/hve/

• Make certain that the underwriters or reviewers who evaluate appraisals involving questionable transactions have experience, training and knowledge related to property flip transactions.

• Perform additional due diligence by obtaining either a field or desk review of the appraisal or a second appraisal if the Lender suspects that the increase in sales price/value is unreasonable or unusually large within the context of the property’s market.

Miscellaneous Underwriting/Closing/Title Issues • Perform additional due diligence in reviewing the chain of title of the property including a search of the

public land records for any recorded options contracts on the subject property and research any recent title transfer activity. Exercise additional due diligence to reconcile any differences in the owner of record as in the appraisal or any other documentation including the title report.

• Exercise additional due diligence when analyzing sales contracts and other documentation. Carefully analyze sales contracts looking for terms indicating there have been assignments or sale of the seller’s interest in a contract or option to acquire the property.

• Draft additional closing instructions designed to prevent title companies and/or attorneys from conducting two or more closings in quick succession without prior approval.

• Analyze and review estimated and final Settlement/Closing Disclosure Statement for unusual payments to parties not having a recorded interest on the property and abnormal real estate commission payments.

• Include effective provisions within Lender’s quality control programs designed to detect transactions that are property flips and evaluate such transactions to identify transactions that are improper. Report suspected cases of fraud to appropriate agencies.

• Train all employees and personnel involved in the loan production process and the quality control function on the issues regarding property flips including the characteristics associated with improper property flips.

BB&T Correspondent Lending’s policy requires any resale of a property to be no less than 90 days from the date of the seller’s recorded deed to the new buyer’s initial application date. Credit and collateral documentation must be dated on or after the application date. Exceptions may be for the following reasons: • Resale of property obtained through an inheritance. • Resale of property acquired as a result of a divorce agreement. • Resale of property directly from a Federally Chartered Institution or HUD. • Resale of property from a relocation company.

http://www.freddiemac.com/hve/



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3:26 MISCELLANEOUS

ULDD Data Entry Requirements – Investment and 2-4 Unit Owner Occupied Properties The following apply to all Conforming and Super Conforming loans delivered to BB&T Correspondent Lending on or after July 2, 2012 (see Bulletin 2012-41 dated June 21, 2012): A completed “Fair Market Rent Verification Form” providing the gross rent of the subject property for all

investment and 2-4 unit owner occupied properties regardless of whether rental income was relied upon for loan approval must be included in all loans delivered to BB&T Correspondent Lending for funding. The “Fair Market Rent Verification Form” is available under the “Forms” section of the BB&T Correspondent Lending Library.

Documentation must be provided showing how the gross rent figure was determined. The following items

are considered acceptable documentation for determining fair market rent:

• Signed lease stating the monthly rent received for all non-owner occupied units. • Bank statements showing monthly rental income for all non-owner occupied units. • Signed statement from the borrower certifying the fair market rent for all non-owner occupied

units. Please note: The above information is provided for ULDD data entry compliance purposes. If any income is needed in the qualifying process from an investment or owner occupied 2-4 unit property, BB&T Correspondent Lending income documentation guidelines must be followed. ESCROWS FOR COMPLETION OF CONSTRUCTION OR REPAIRS BB&T does not encourage escrowing for completion or repairs; however, if the improvements or repairs cannot be completed for valid reason, i.e. inclement weather or shortages of materials, funds may be escrowed for 1-1/2 times the required amount to complete the work. Examples of typical items which are commonly escrowed include landscaping, wallpaper, minor trim, minor painting or minor repairs. The appraiser or the party completing the work should notify the Correspondent of the amount required to complete or repair the property. The borrower must have sufficient assets verified on deposit if he will be responsible for the repairs. The items not completed may not adversely affect the habitability or structural integrity of the property, and the incomplete items may not exceed 10% of the value of the completed mortgage premises. Mortgage insurance and Title Insurance must not take exception to the escrow and completion normally takes two weeks to thirty days. The escrowed funds are to be held by the closing attorney. The Correspondent is required to submit to BB&T a final inspection with pictures, if applicable, to document that the repairs are completed prior to releasing the escrow funds. ACREAGE BB&T does not impose maximum limits on acreage. However, the following guidelines should be considered when reviewing properties with acreage: • The comparables must be within a reasonable radius, are recent closed sales and have similar land size

and valuation.

• Properties with excessive acreage are generally not considered to meet residential definition.

• No income-producing activity or potential activity whatsoever is allowed on the acreage (tree farms, orchards, boarding or training facilities, etc.)

• Land valuation should be typical for residential properties in the market. Adjustments for excess acreage for comparables should be minimal and an explanation provided on the effect these differences have on the subject property’s value or marketability.

• Additional residential structures (including homes) or significant/numerous outbuildings are not permitted.



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PROPERTY ACCESS • Access must be generally acceptable to community standards. • Recorded maintenance agreement is not required. See additional requirements below for title exceptions. • At least one comparable should exhibit similar access. • Access to property must have a legally enforceable ingress and egress. This is usually documented on

public record as an access easement and must appear on the final title policy. • Documentation requirements for title exceptions where the subject property is located on a private road:

▪ A signed private road maintenance agreement, or ▪ For loans receiving an approval through Loan Prospector (LP), a recorded ingress and egress

agreement is sufficient. ZONING Property should be zoned residential. No commercial zoning permitted. INCIDENTAL SECOND UNITS Freddie Mac Appraisal Form 70 is used for properties that have a second unit that is incidental to the overall value and appearance of the subject property, provided rental income is not considered in qualifying. Examples of such properties include a house with a unit above a detached garage or a house with a guest apartment or basement unit. The appraisal must describe the second unit and analyze any effect on the value or marketability of the subject property. Comparables should also include properties with incidental second units.

3:27 PROPERTY TYPES

The following property types must comply with Freddie Mac requirements whether loans are submitted through LP or DU: • Condominiums • Leasehold estates • Restricted units • PUDs • Higher Priced Mortgage Loans (HPMLs)

LAND CONTRACTS Not permitted under any loan type or program. LOG HOMES Acceptable with the following provisions: • No excessive acreage. • Must be typical for the area. • Comparable should reflect marketability. At least one comparable must be recent closed sale of a log

home. Rustic-styled properties will be considered as comparables on a case-by-case basis. MANUFACTURED HOUSING Not permitted if the structure meets the following definition:

A structure that is built on a permanent chassis and designed to be used as a dwelling affixed to a permanent foundation. The unit is built in compliance with the National Manufactured Housing Construction and Safety Standards promulgated by the Department of Housing and Urban Development. Compliance with these standards is evidenced by a “Certification label” permanently affixed to each transportable section of the Manufactured Home. MIXED-USE PROPERTIES Follow standard Freddie Mac guidelines.



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MODULAR HOMES Permitted if the structure meets the following definition:

A structure that is built in compliance with the State Building Codes and is built on a steel frame (on-frame) or a wood frame (off-frame). The unit does not have a permanent chassis. It is designed to be used as a dwelling with a permanent foundation. The minimum roof pitch can be 5/12 and the Certification Label (blue & silver label) is located normally in the electrical panel box inside the home.

Additionally, Modular homes must be existing construction with a 100% complete “as is” appraisal provided.

Modular homes that meet these requirements are comparable to stick-built homes and can be appraised as stick-built construction.

3:28 INELIGIBLE TRANSACTIONS Below is a brief summary of loan transactions that are currently ineligible for financing through BB&T

Correspondent Lending. This list is not all inclusive. Refer to specific underwriting guidelines for additional details. Loans with these criteria may be eligible through other channels, including commercial or consumer outlets. This list may be modified at any time based on market conditions or bank credit policy. AUTOMATED UNDERWRITING AUS Findings Dated/Changed after Closing AUS Switching prior to the Note Date (LP to DU or DU to LP) DU Refer with Caution LP A-Minus on Investment Property LP Caution LP or DU Custom Findings MANUAL UNDERWRITING Manual Underwrites MISCELLANEOUS Affiliation between buyer, seller and/or developer on investment property Cash-Out Refinances on Investment Properties Mortgages subject to temporary buydowns 1031 Exchange Transactions on primary residences or second homes MORTGAGE INSURANCE Borrower Paid Mortgage Insurance (BPMI) upfront premiums paid through Lender credit Fannie Mae Reduced or Lower-Cost MI Financed Mortgage Insurance for Super Conforming loans Freddie Mac Custom MI Insured loans with Declining Renewals MI Split Premiums (partially financed, partially paid) PRODUCTS/PROGRAMS Builder/Developer program for the purchase/refinance of current unsold inventory Downpayment Assistance Programs (Exception for HOME Now products. See product descriptions for information regarding eligible programs) DU: My Community, Homestyle or Homepath Products Energy Efficiency Programs Foreign Nationals "High-cost" criteria Model Home lease back Non-BB&T Serviced Fannie Mae DU Refi Plus or Freddie Mac Relief Refinance loans Non-US Citizens or Residents that cannot be AUS approved Second Mortgages (Continued next page)



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PROPERTY TYPES/RESTRICTIONS Actual or Potential Income-Producing Property (i.e. Farms, Boarding and Training of horses, etc.) Condominium Hotels/Condotels Co-ops Ineligible States: Alaska & Hawaii Land Contracts Lot Loans Manufactured Homes Recently Listed Property Restrictions (see Section 3:13 of Conforming Underwriting Guidelines) Restricted Access properties Unwarrantable Condos TITLE/DEED RESTRICTIONS Irrevocable Trusts Land Trusts Loans currently or recently titled in the name of a business, Corporation, S-Corp, Partnership, LLC or any other non-living business entity. Transfer of ownership from an LLC, Corporation, S-Corp, Partnership, or any other non-living business entity for the purpose of refinancing the loan into the prospective borrower’s name (see Section 3:8 of Conforming Underwriting Guidelines). Private transfer fee covenants that do not benefit the subject property Unacceptable Title/Deed Restrictions (Marital Rights, Reversion to Seller Clauses, Life Estates)

NON-CONFORMING/JUMBO UNDERWRITING GUIDELINES 5/16/2016


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NON-CONFORMING/JUMBO UNDERWRITING GUIDELINES

4:1 INTRODUCTION BB&T Correspondent Lending expects its Correspondents to be fully familiar with mortgage underwriting secondary marketing requirements, and to keep abreast of industry changes that impact residential mortgages. This section is designed for two purposes: • To supplement information referred to in the Non-Conforming/Jumbo Product Description section. • To clarify BB&T’s exceptions, allowances and restrictions regarding specific underwriting issues.

4:2 UNDERWRITING REQUIREMENTS All Non-Conforming/Jumbo loans, regardless of loan size, must be submitted to BB&T Correspondent Lending for manual underwriting and receive final underwriting approval from BB&T prior to loan closing. Loans must be documented according to the Non-Conforming/ Jumbo Underwriting Guidelines herein. Loans utilizing LP or DU validated/documented approvals are not eligible for delivery to BB&T Correspondent Lending.

BB&T policy applies to Non-Conforming/Jumbo loan amounts unless otherwise specified. Questions regarding specific underwriting issues can be directed to BB&T Correspondent Lending Information Central (CLIC). ALL NON-CONFORMING/JUMBO LOANS MUST ADHERE TO BB&T CORRESPONDENT LENDING REQUIREMENTS STATED IN BB&T’S CORRESPONDENT LENDING GUIDE.

4:3 AGE OF CREDIT DOCUMENTS AND APPRAISALS Existing and New Construction Credit documents cannot be older than 120 days. Appraisals cannot be older than 120 days.

If the effective date of the appraisal is more than 120 days before the note, the appraisal is outdated, and a new Full interior/exterior appraisal Freddie Mac 70/Fannie Mae Form 1004 is required.

4:4 LTV/TLTV

• Refer to BB&T’s Price Adjustments and LTV Charts

• Properties located in the state of California are limited to maximum 80% LTV/TLTV.




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4:5 MINIMUM CREDIT SCORE

Minimum credit score requirement is 720/740.

Reference the Price Adjustments & LTV Charts for minimum credit score requirements on specific product/loan types. RESCORING AND CREDIT REPAIR

• Legitimate corrections to a borrower’s credit profile are acceptable, i.e. John Doe Jr.’s derogatory credit is

reflected on John Doe Sr.’s credit report. • In order to ensure the accuracy of the information, corrections should be made at the credit repository

level. • Any supporting documentation sent to the credit repositories along with all copies of credit reports should

be maintained in the Correspondent’s loan file and included with the file submission when delivered to BB&T Correspondent Lending.

The use of credit repair vendors who assist borrowers to falsely repair their credit by the manipulation of data contained in the borrower’s credit profile to improve credit scores for purposes of loan eligibility, pricing/fee improvement and creditworthiness is expressly prohibited by BB&T Correspondent Lending. It is at BB&T Correspondent Lending’s discretion to determine if the credit history and credit scores are legitimate, acceptable and meet guideline requirements.

Credit Score Indicator The term Loan Score refers to the overall score using the Agencies’ “middle/lower, then lowest” credit score

selection methodology. It is equivalent to Freddie Mac’s Indicator Score and Fannie Mae’s Representative credit score.

Credit Score Selection The following criteria may be used to determine each individual borrower’s Credit Score using the

“middle/lower” method: • If there are three valid scores for a borrower, the middle score (numerical middle of the three scores) is

used. • If there are three valid scores for a borrower but two of the scores are the same, the duplicate score is

used. • If there are two valid scores for a borrower, the lower of the two scores is used. • If there is one valid score for a borrower, that score is used.

Loan Score Selection After selecting the appropriate Credit Score for each borrower, the Loan Score must be determined. • If there is more than one borrower, the lowest selected Credit Score among all borrowers is the Loan

Score. • When there is only one borrower, the selected Credit Score for that borrower is also the Loan Score.




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4:6 BORROWER ELIGIBILITY CO-BORROWER/CO-SIGNER/GUARANTOR Non-occupant co-borrowers are acceptable. The non-occupant co-borrower must be a parent, legal guardian,

child, grandparent or sibling to the occupant borrower. Maximum Debt-to-Income (DTI) cannot exceed 43% for the occupant borrower.

LIVING TRUST

Living Trusts also referred to as “inter vivos revocable trusts” or “inter vivos trusts” are allowed and must meet the following eligibility requirements: The trust is created by one or more Settlors (individual who creates a Living Trust) during his or her

lifetime. The trust becomes effective during the lifetime of the Settlor(s), and Each Settlor retains the right during his or her lifetime to revoke or amend the trust. The Settlor(s) is also: • The Trustee or one of the co-trustees, • Occupies the property as either a primary residence or second home, and • Is the primary beneficiary of the trust.

Correspondent must submit a completed Living Trust Certification with the delivery package. The certification is available through the BB&T Correspondent Lending Guide

NON-ARMS LENGTH TRANSACTIONS Non-Arms length transactions are purchase transactions in which there is a relationship or business affiliation

between the borrower and the builder, developer, or seller. BB&T Correspondent Lending will allow non-arms length transactions for the purchase of newly constructed or existing properties secured by a primary residence, and existing properties secured by second homes.

If a borrower has a business affiliation (any ownership interest or employment) with the builder, developer or

seller of the property, additional due diligence including, but not limited to, detailed information regarding unsold builder/developer inventory held individually and/or through his or her business (LLC’s, DBA’s, etc.) is required to determine the legitimacy of the transaction.

LOANS TO BUILDERS/DEVELOPERS See “Non-Arms Length Transactions” section for details. BB&T Correspondent Lending will not fund loans where the builder/developer is purchasing or refinancing their

current unsold inventory.

USA PATRIOT ACT The Correspondent is required to comply with all aspects of the USA PATRIOT ACT. Due to the nature of the law and severity of penalties associated with non-compliance, BB&T strongly urges the Correspondent adopts procedures to insure that their staff fully complies with the requirements of the Act and that Correspondent files are properly documented. For additional information concerning the USA PATRIOT ACT, Correspondents should contact their regulatory agency or access information via the web at www.bankersonline.com.


http://www.bankersonline.com/



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NON-U.S. CITIZENS

BB&T has adopted the following policy for extending mortgage loans to non-U.S. Citizens. USA Patriot Act documentation is required in addition to the following guidelines. A permanent resident alien who is lawfully residing in the U.S. is eligible for a mortgage on the same terms as a U.S. Citizen. BB&T does not differentiate between U.S. Citizens and permanent resident aliens for general underwriting guidelines. Non-Permanent Resident Aliens are subject to additional requirements as stated below. • All permanent resident aliens must provide their valid Permanent Resident Card. • All non-permanent resident aliens must provide evidence of a valid, unexpired visa. Evidence must be

included in closed loan file. Visas granting diplomatic immunity or Foreign Nationals are not allowed. • BB&T requires sufficient documentation that the borrower is lawfully residing in the U.S., as permanent or

non-permanent resident alien. • A Social Security Number is required. Borrowers with an ITIN are not eligible. • Borrowers must qualify on U.S. credit; U.S. reported income, U.S. assets, and U.S. residency history. • Non-Permanent Resident Aliens: must meet all requirements stated above, AND Maximum loan amount is limited to $1,000,000. If the mortgage is subject to subordinate financing, the

combined loan amounts of the first and second may not exceed $1,000,000, Requires a 5% LTV/TLTV reduction from maximum allowed financing for property and transaction type, LTV/TLTV may not exceed 75%.

• All guidelines herein regarding the determination and documentation for stable monthly income, adequate credit history, sufficient liquid assets and residency must be applied in the same manner to each borrower including borrowers who are non-permanent resident aliens.

• For non-permanent resident aliens who work for an International Organization (i.e., Red Cross, UNICEF, World Bank, etc.), BB&T will require a copy of the most recent year’s tax transcript evidencing “no record of return filed”. For these borrowers who do not report income to the IRS, BB&T will not allow their income to be “grossed up” for qualifying purposes.

PROPERTIES CURRENTLY OR FORMERLY IN THE NAME OF AN LLC If a property is currently in the name of borrower’s LLC or has been in the name of the borrower’s LLC in the most recent six month period, as measured backward from the date of the initial application, it is not eligible for refinancing into the borrower’s name. If there is an outstanding lien against the property, it also must be in the borrower’s name for a minimum of six months in order to be refinanced. CREDIT REPUTATION/REQUIRED MINIMUM NUMBER OF TRADELINES The credit report must show a minimum of two (2) years established credit history. Additionally, each borrower must have a minimum of three (3) tradelines with 12 months satisfactory history. A prior mortgage or rental history which evidences no late payments during the past 24 months is required. See Section 4:8 “Liability Assessment Standards” for additional requirements. Non-traditional credit is not permitted.



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AUTHORIZED USER ACCOUNTS A tradeline for an account for which the Borrower is not the primary account holder, but is listed as an authorized user, may be considered a Borrower’s tradeline if the Correspondent obtains and retains in the mortgage file documentation that evidences at least one of the following; and if considered as the Borrower’s tradeline, must be included in the qualifying ratios. An authorized user tradeline may be considered if:

• Another Borrower in the mortgage transaction is the owner of the tradeline; or the Borrower can provide written documentation (e.g. canceled checks, payment receipts, etc.) that he or she has been the actual and sole payer of the monthly payment on the account for at least 12 months preceding the date of the application.

• If written documentation of the Borrower’s monthly payments on the authorized user tradeline is provided, then the payment history, particularly any late payments that are indicated, must be considered in the credit analysis and the monthly payment obligation must be included in the debt-to-income ratio.

Note: An authorized user tradeline must be considered if the owner of the tradeline is the Borrower’s spouse and the spouse is not a Borrower in the mortgage transaction.

FOREIGN CREDIT REPORTS Use of foreign credit reports is unacceptable. PAYMENT PLANS FOR UNPAID INCOME TAXES Loans where the Borrowers have payment plans for unpaid income taxes are ineligible for delivery to BB&T Correspondent Lending regardless of whether or not a tax lien exists. DEROGATORY CREDIT The presence of significant derogatory credit events dramatically increases the likelihood of a future default and represents a significantly higher level of default risk. Examples of significant derogatory credit events include bankruptcies, foreclosures, deeds-in-lieu of foreclosure, pre-foreclosure sales, short sales, and charge-offs of mortgage accounts. The following must be determined:

• The cause and significance of the derogatory information; • Verification sufficient time has elapsed since the date of the last derogatory information; and • Confirmation the Borrower has re-established an acceptable credit history.

The recovery time is the amount of time that must elapse after a significant derogatory credit event before the Borrower is eligible for a new loan. The recovery time commences on the execution, completion, discharge, or dismissal date (as applicable) of the derogatory credit event and ends on the disbursement date of the new loan.



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Significant Derogatory Credit Events in the Credit Report The credit report and Section VIII, Declarations, of the loan application to identify instances of significant derogatory credit events; the public records section of the credit report and all tradelines, including mortgage accounts (first liens, second liens, home improvement loans, HELOCs, and manufactured home loans), to identify previous foreclosures, deeds-in-lieu, pre- foreclosure sales, charge-offs of mortgage accounts, and bankruptcies must be reviewed.

The current status of each tradeline, manner of payment codes, and remarks to identify these types of significant derogatory credit events must be carefully reviewed. Remarks Codes are descriptive text or codes that appear on a tradeline, such as “Foreclosure,” “Forfeit deed-in-lieu of foreclosure,” and “Settled for less than full balance.”

If there is any evidence of a short sale disclosed on the credit report or contained elsewhere in the mortgage file, the requirements for handling significant adverse or derogatory information caused by extenuating circumstances or financial mismanagement for Mortgages related to short sales apply and must be met.

Significant derogatory credit events may not be accurately reported or consistently reported in the same manner by all creditors or credit reporting agencies. If not clearly identified in the credit report, copies of appropriate documentation must be obtained. The documentation must establish the completion date of a previous foreclosure, deed-in-lieu or pre-foreclosure sale, or date of the charge-off of a mortgage account; confirm the bankruptcy discharge or dismissal date; and identify debts that were not satisfied by the bankruptcy. Debts that were not satisfied by a bankruptcy must be paid off or have an acceptable, established repayment schedule.



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Significant Derogatory Event

Recovery Time for Reestablishment of Credit with

Financial Mismanagement

Recovery Time for Reestablishment of Credit with

Extenuating Circumstances

Additional Requirements

Bankruptcy - Chapter 7 or 11

4 years (48 months) from the discharge or dismissal date


Whenever a Borrower has had a bankruptcy within the last seven years, the Mortgage file must also contain: ▪ Copies of the bankruptcy petition,

schedule of debts and discharge or dismissal

▪ Evidence to indicate that all debts not satisfied by the bankruptcy have been paid or are being paid

▪ Any other evidence necessary to support BB&T's determination that the Borrower has reestablished and maintained an acceptable credit reputation

Bankruptcy - Chapter 13

2 years (24 months) from the discharge date OR 4 years (48 months) from the dismissal date


Multiple Bankruptcy Filings

5 years (60 months) from the most recent discharge or dismissal date if more than one filing within the past 7 years

3 years (36 months) from the most recent discharge or dismissal date

Foreclosure 7 years (84 months) from the completion date as reported on the credit report

3 years (36 months) from the completion date as reported on the credit report, and Additional Requirements after 3 years up to 7 years: ▪ 85% max LTV ▪ Purchase Primary

Residence ▪ No Cash-out Refi

- All occupancy types

Whenever a Borrower has had a previous foreclosure, deed- in-lieu of foreclosure, short sale, or charge-off or mortgage within the last seven years, the Mortgage must either be: ▪ A purchase transaction Mortgage

secured by a Primary residence with a maximum LTV/TLTV/HTLTV ratio of the lesser of 85% or the maximum LTV/TLTV/HTLTV ratio for the transaction, or

▪ A No Cash-out Refinance Mortgage that meets the requirements for refinances

Additionally, the Mortgage file must contain evidence of the completion of the foreclosure, deed-in-lieu of foreclosure, short sale, or charge-off of a mortgage account.

Deed-in-Lieu of Foreclosure and Charge-off of a Mortgage Account

4 years (48 months) from the execution date

2 years (24 months) from execution date

Short Sale 4 years (48 months) from the completion date

2 years (24 months) from completion date

Other Significant Adverse or Derogatory Credit Information

4 years (48 months) from the most recent significant adverse or derogatory credit information

2 years (24 months) from the most recent significant adverse or derogatory credit information

N/A

Restructured Mortgages

A restructured loan occurs when the terms of the original transaction have been changed resulting in absolute forgiveness of debt or a restructure of debt through modification or the origination of a new loan that results in:

Forgiveness of a portion of principal and/or interest on either the first or second mortgage, OR Application of a principal curtailment by or on behalf of the investor to stimulate principal forgiveness, OR Conversion of any portion of the original mortgage debt to a “soft” subordinate mortgage, OR Conversion of any portion of the original mortgage debt from secure to unsecured. Not allowed for subject property currently owned by borrower.

If one or more of the borrowers on the loan has entered into a restructured mortgage loan transaction for a property other than the subject property in the past, the loan is ineligible for delivery to BB&T.

Past Due, Collections and Charge-Offs of Non-mortgage Debt

Past due accounts (not collections) must be brought current. Entire credit history must be evaluated to determine if derogatory credit is significant. If it is determined the derogatory credit is not significant, the file must be documented supporting the determination. If the derogatory credit is significant, determine whether the problems were due to extenuating circumstances or to financial mismanagement.

Judgments, Garnishments and Liens

Open judgments, garnishments, and all outstanding liens that are in the Public Records section of the credit report must be paid off at or prior to closing. Documentation of the satisfaction of these liabilities, along with verification of funds sufficient to satisfy these obligations, must also be maintained in the permanent loan file.



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Extenuating Circumstances Nonrecurring or isolated circumstances, or set of circumstances, which are beyond the Borrower’s control. The underwriter is to clarify on the Uniform Underwriting and Transmittal Summary, the Borrower’s explanation to the Mortgage file documentation that leads to a reasonable conclusion that the events causing the financial difficulties were beyond the Borrower’s control, are not ongoing and unlikely to recur, and the Borrower has reestablished an acceptable credit reputation. The mortgage file must contain all of the following:

• Written statement from the Borrower attributing the cause of the financial difficulties to outside factors beyond the Borrower’s control and are not ongoing and unlikely to recur,

• Third-party documentation confirming that the events related by the Borrower in the explanation were an isolated occurrence and significantly reduced the Borrower’s income, and

• Evidence on the credit report and other credit documentation in the Mortgage file of the length of time since completion of the significant derogatory event to the date of the application, and of completion of the recovery time period requirement.

Financial Mismanagement If unable to document extenuating circumstances, the conclusion is problems due to financial mismanagement. The underwriter is to explain on the Uniform Underwriting and Transmittal Summary, the rationale supporting the determination that the financial mismanagement is unlikely to recur and the Borrower’s credit reputation is acceptable. The mortgage file must contain all of the following:

• Evidence that the Borrower has reestablished an acceptable credit reputation, and • Evidence on the credit report and other credit documentation in the Mortgage file of the length

of time since completion of the significant derogatory event to the date of the application, and of completion of the recovery time period requirement.

Re-establishing Credit After a significant derogatory event, the Borrower’s credit will be considered reestablished if all of the following are met:

• The waiting period and the related additional requirements are met; and • All credit reviewed must be reestablished traditional credit. Nontraditional credit files are not

acceptable.



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4:7 EMPLOYMENT AND INCOME UNDERWRITING STANDARDS INTRODUCTION It is the intent of BB&T to primarily purchase Qualified Mortgage loans as defined by Regulation Z and federally-related insurers and investors. For each loan, BB&T makes a reasonable and good faith determination that the Consumer(s)* will have a reasonable ability to repay the loan according to its terms. There are many factors that should be considered when reviewing a Consumer’s employment and income, such as income stability, occupation, employment, tenure, opportunities for future income, educational background, and occupational training. The following standards explain the requirements for considering and verifying a Consumer’s income and employment information, the types of income BB&T considers acceptable, and the methods for calculating certain types of income. Standards for the consideration and verification of the Consumer’s current and expected debt obligations and other liabilities (including the monthly payments for this loan, any known simultaneous loans, and mortgage-related obligations) are provided in BB&T’s Liability Assessment Underwriting Standards. *Hence forward references to “Consumer” and “Borrower” are interchangeable for purposes of this guide. GENERAL DOCUMENTATION REQUIREMENT Information relied on by BB&T during the qualification process generally must be verified using third-party records, which are records prepared or reviewed by someone other than the consumer or BB&T. Specific documents required and exceptions are listed below. Income relied on in qualifying the consumer must be verified pursuant to the Documentation requirements for each income source, as detailed in the following pages. STABILITY OF INCOME Stable effective income is the Consumer’s verified gross monthly income from all acceptable and verifiable sources where there is no indication the income will not continue. For each income source used to qualify the Consumer, you must determine that both the source and the amount of the income are stable. In most instances, a two-year history of receiving income is required in order for the income to be considered stable and used for qualifying. When the Consumer has less than a two-year history of receiving income, a written analysis is required to justify the determination that the income that is used to qualify the Consumer is stable. Income may not be used in calculating the Consumer’s income ratios if it comes from any source that cannot be verified, is not stable, or will not continue. A Consumer who has had different types of employment in the past may be considered to have stable income if the income amount has remained at a consistent or increasing level. When evaluating a Consumer who has changed jobs frequently, focus on whether the changes have affected the Consumer’s ability to pay their obligations. For each income source used for qualifying, there should be a reasonable expectation that the income will continue for at least three years. DETERMINING THE NEED FOR FEDERAL INCOME TAX RETURNS Signed IRS Federal Tax Returns for the past two years are required for sources of income if the Consumer derives:

• Income from employment by a family member • Rental income from an investment property • Income from employment by interested parties to the property sale or purchase • Income from temporary or seasonal employment or unemployment benefits • Income from Capital Gains, royalties, real estate, or other IRS Form 1099 reported income • Foreign income • Interest and dividend income • Income from sole proprietorships, limited liability partnerships, corporations, or any type of business

structure that the Consumer has 25% or more ownership



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Tax Return Requirements Tax Returns filed by the consumer or a licensed CPA are acceptable. • Base salaried consumers who have income other than salary income, i.e. rental income, royalties, etc.:

The last two years’ personal tax returns including all schedules are required. Loans delivered to BB&T on or before April 15th are required to contain tax returns from the previous two calendar years.

• Self-Employed consumers: The last two years’ personal and business tax returns including all schedules are required. Loans delivered to BB&T after April 15th are required to contain tax returns from the previous two calendar years.

• Amortization may be added back when calculating income for the Self-Employed Consumer pursuant to the calculations on Income Analysis Form 91.

• If ANY income is from sources that must be documented by tax returns (i.e. rental income, pension income, interest income, trust income, dividend income, etc.), the most recent calendar year federal tax return is required.

• Federal tax return extensions are not allowed. • Amended tax returns may require additional due diligence.

IRS Form 4506-T IRS 4506-T and Official Tax Returns Transcripts are important tools for not only income qualification, but also fraud deterrence, documentation validation, and data integrity confirmation. By requiring this earlier in the process, BB&T hopes this will protect our valued clients, as well as BB&T’s interest, by identifying issues prior to closing. IRS 4506-T Requirement

• The requirement for a completed, signed, and dated IRS 4506-T form applies to ALL loans. • The 4506-T form is to be dated as of the date of loan application and at loan closing. • The 4506-T form is required whether or not the consumers are employed. • The 4506-T form is required whether or not the loan is income qualifying.

Tax Transcripts

• The most recent available IRS tax return transcript requirement applies to every loan, regardless of the loan type or consumer’s income source.

• The official tax return transcript is required on each consumer. • The official tax return transcript is required even if tax returns are NOT required for loan qualification.

In the absence of tax transcripts, the following documentation is required: Note: A licensed CPA must have filed the tax returns to be eligible for delivery to BB&T. If the Consumer filed the tax return but tax transcripts are not yet available, the loan is not eligible for delivery to BB&T.

• Salaried Consumers who have income relied on sources reported on tax returns - If the licensed CPA has filed tax return but tax transcripts are not yet available and underwriting date before April 15th:

o Copy of tax transcript showing “no record of return filed”, o Previous 2 years’ tax returns and tax transcripts, AND o The filed tax return verified in one of the following ways: Officially stamped by the IRS as received Evidence that the return was electronically received, OR Evidence of a refund check or payment made.

(Continued next page)



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• Self-Employed Consumer - If the licensed CPA has filed tax return but tax transcripts are not yet available and underwriting date before August 31st: o Copy of tax transcript showing “no record of return filed”, o Previous 2 years’ tax transcripts, o Previous years’ tax return, AND o The filed tax return verified in one of the following ways:


WAGE EARNER / EMPLOYED INCOME Stable monthly income may be income from primary and secondary employment, including base earnings plus consistent and documented secondary income, such as bonuses, commissions, overtime, additional part time employment, or seasonal employment. Salary and Hourly Income Salaried Wage Earners are defined as individuals who have less than a 25% ownership interest in the business from which they derive their salary. When a Consumer’s primary employment is less than a typical 40-hour work week, evaluate the stability of that income when treating the income as regular, on-going primary employment (as opposed to part-time employment, which is discussed below). Gaps of employment that span one or more months must be explained. In particular:

• Indicate if Consumer was in school or the military for the recent two full years, providing evidence supporting this claim, such as college transcripts, or discharge papers.

• Allowances can be made for seasonal employment, if documented. Effective income for Consumers who disclose that they are planning to retire during the first three-year period must include the amount of

• Documented retirement benefits; • Social Security payments; or • Other payments expected to be received in retirement.

A Consumer cannot be questioned about possible, future medical or maternity leave. In order to arrive at an accurate calculation of gross monthly income, the frequency of the payment must be determined:

• Weekly – once per week • Bi-weekly – every other week • Semi-Monthly – twice per month • Monthly – once per month • Annually – one time per year • Some Consumers annual salaries may be received over a time period of less than 12 months. It is

important to determine how the Consumer is paid in order to accurately calculate income. Determine how often and how long the Consumer is paid and then determine monthly income based on the calculation above. For example, if a Consumer is paid 10 months of the year, multiply their monthly salary by 10 months and divide by 12.




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Documentation Obtain all of the following:

• Most recent year-to-date paystub or salary voucher documenting at least 30 days of income • W-2’s for most recent two years • Verbal Verification of Employment obtained no more than 10 Business Days prior to the Note Date or

after the Note Date but prior to delivery to BB&T and recorded in the loan file • Signed 4506-T and IRS Transcripts

OR, obtain all of the following:

• Written Verification of Employment (VOE) form covering the most recent two years, which shows income and pay information

• Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but prior to delivery to BB&T and recorded in the loan file

• Signed 4506-T and IRS Transcripts Consumers Employed by a Family-Owned Business In addition to normal employment verification, a Consumer employed by a family-owned business is required to provide evidence that he/she does not own 25% or more of the business. Documentation Obtain one of the following:

• Copies of signed personal tax returns for the most recent two years; or • A signed copy of the business tax returns for the most recent two years showing ownership

percentage If it is determined that the Consumer owns 25% or more of the business, refer to the Self-Employed Income section. Newly Employed For a Consumer who has less than a two-year employment and income history, the Consumer’s income may be used if documentation to support that the Consumer was either attending school or in a training program immediately prior to their current employment history is provided. Consumers Returning to Work after an Extended Absence Income may be considered when the Consumer is recently returning to work after an extended absence if the Consumer is employed in the current job for six or more months. Documentation Obtaining one of the following to document a work history prior to an absence from employment:

• W-2’s and Paystubs, or • Written VOE form

Current and previous employment documentation must support a two year work history. Note: Extended absence is defined as 6 or more months.



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Projected Income from Current Job Projected income is permitted from the following sources:

• Cost of Living adjustment • Performance raises • Bonus (refer to the bonus income section below)

Documentation Written verification from the employer must be obtained, and income must be scheduled to begin within 60 days of loan closing. Projected Income from a New Job Projected income is acceptable for a Consumer scheduled to start a new job within 60 days of loan closing if there is a fully executed employment contract, or accepted offer letter, and verification that the Consumer will have sufficient income or cash reserves to support the mortgage payment and any other obligation between loan closing and the start of employment.

Overtime/Bonus Income Overtime/bonus income can be used for qualification if the Consumer has received the income for the past two years and there is no indication it will not continue. An earnings trend must be established. If the earnings are stable or increasing, an average of the income is used for qualifying purposes. If the trend was declining, but has since stabilized and there is no indication that overtime/bonus will not continue, the income must be based on the current stable earnings. If the trend is declining, the overtime/bonus income should not be considered for qualifying purposes unless there are significant documented compensating factors. Overtime/bonus income received for less than two years may be considered provided the income is received a minimum of 18 months and is stable or increasing. A 24-month average must be used for qualifying purposes. There must be no indication that overtime/bonus income is unlikely to continue.


• Most recent year-to-date paystub or salary voucher documenting at least 30 days of income • W-2’s for most recent two years • Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but

prior to delivery to BB&T and recorded in the loan file • Signed 4506-T and IRS Transcripts

OR, obtain all of the following: • Written VOE form covering the most recent two years • Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but

prior to delivery to BB&T and recorded in the loan file • Signed 4506-T and IRS Transcripts



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Commission Income Commission income can be used for qualification if the Consumer has received the income for the past two years and there is no indication it will not continue. An earnings trend must be established. If the earnings are stable or increasing, an average of the income is used for qualifying purposes. If the trend was declining, but has since stabilized and there is no indication that commission income will not continue, the income must be based on the current stable earnings. If the trend is declining, the commission income should not be considered for qualifying purposes unless there are significant documented compensating factors. Commission income received for more than one year, but less than two years may be considered provided there are significant documented compensating factors. Employee-paid business expenses reflected on the Consumer’s tax returns must be deducted from the Consumer’s gross commission income when calculating income.


• Most recent year-to-date paystub or salary voucher documenting at least 30 days of income • W-2’s and/or 1099’s for most recent two years • Signed individual federal tax returns for the most recent two years • Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but

prior to delivery to BB&T and recorded in loan file • Signed 4506-T and IRS Transcripts

Or, obtain all of the following: • Written VOE form covering the most recent two years • Signed individual federal tax returns for the most recent two years • Verbal VOE obtained no more than 10 Business days prior to the Note Date or after the Note Date but

prior to delivery to BB&T and recorded in loan file • Most recent paystub • Signed 4506-T and IRS Transcripts

Part-time / Second Job Income Part-time / second job income refers to employment taken to supplement the Consumer’s income from regular employment. Part-time / second job employment is not a primary job and it is worked less than 40 hours per week. Part-time / second job income may be used if it can be verified as having been uninterrupted for the previous two years and is likely to continue. Consideration of the income trend should be determined by reviewing the hourly rate, and the number of hours worked. An earnings trend must be established. If the earnings are stable or increasing, an average of the income is used for qualifying purposes. If the trend was declining, but has since stabilized, the income must be based on the current stable earnings. If the trend is declining, the income should not be considered for qualifying purposes unless there are significant documented compensating factors. Part-time income received for less than two years may be considered provided the income is received a minimum of 18 months and is stable or increasing.




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• Most recent year-to-date paystub or salary voucher documenting at least 30 days of income • W-2’s for the most recent two years • Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but



• Written VOE form covering two full years • Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but


Seasonal Employment Seasonal income is considered uninterrupted and may be used to qualify the Consumer if it is documented that the Consumer has worked the same job for the past two years and expects to be rehired the next season. Unemployment compensation associated with seasonal employment may be considered qualifying income if the Consumer has a two year history of receipt and the unemployment compensation is likely to continue. Seasonal employment income and unemployment compensation must be reported on the Consumer’s two most recent year’s federal tax returns. Examples of seasonal employment include umpiring baseball games in the summer or working in a department store during the holiday shopping season. Note: The two year history need not be with the same employer. Documentation Obtain all of the following:


prior to delivery to BB&T and recorded in loan file • Proof of receipt of unemployment compensation for the most recent two years (if applicable) • Signed 4506-T and IRS Transcripts


• Written VOE form covering the most recent two full years for the seasonal employment • Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but

prior to delivery to BB&T and recorded in loan file • Proof of receipt of unemployment compensation for the most recent two years (if applicable) • Signed 4506-T and IRS Transcripts



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Tip Income Tips and gratuities may be used to qualify the Consumer if it is documented that the Consumer has received it for the past two years and there is no indication it will not continue. An earnings trend must be established. If the earnings are stable or increasing, an average of the income is used for qualifying purposes. If the trend was declining, but has since stabilized, the income must be based on the current stable earnings. If the trend is declining, the tip / gratuity income should not be considered for qualifying purposes unless there are significant documented compensating factors. Tip income received for less than two years may be considered provided the income is received a minimum of 18 months and is stable or increasing. Documentation Obtain all of the following:




• Written VOE form covering the most recent two years • Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but


Income while on Temporary Leave Temporary leave from an employer may encompass various circumstances. For example short-term disability, family medical, maternity, and other temporary leaves with or without pay. Temporary leave is generally short in duration. Leave is no longer considered temporary when the Consumer does not intend to return to the current employer, or does not have a commitment from the current employer to return to employment. ♦ For the Consumer who is returning to their current employer after the first mortgage payment, use the

income the Consumer is receiving for the duration of the temporary leave. In the event the income has been reduced or interrupted, use the monthly reduced income amount (may be zero) for the duration of the leave. Total qualifying income may not exceed the gross monthly income that will be received upon the Consumers return to current employer.


• The Consumer must provide written confirmation of his or her intent to return to work and the agreed upon date of return as evidenced by documentation provided by the employer or a designee of the employer (e.g. third party administrator).

• Last year-to-date paystub or salary voucher received prior to temporary leave documenting at least 30 days of income

• W-2’s for most recent two years (Continued next page) • Evidence of the amount, duration and consistency of all sources of temporary leave income being

used to qualify the Consumer that are being received during the temporary leave • Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but

prior to delivery to BB&T and recorded in loan file. The employer’s confirmation that the Consumer is on temporary leave is considered as employed.

• Signed 4506-T and IRS Transcripts (Continued next page)



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OR, obtain all of the following: • The Consumer must provide written confirmation of his or her intent to return to work and the agreed

upon date of return as evidenced by documentation provided by the employer or a designee of the employer (e.g. third party administrator).

• Written VOE form(s) covering the most recent two years • Evidence of the amount, duration and consistency of all sources of temporary leave income being

used to qualify the Consumer that are being received during the temporary leave • Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but

prior to delivery to BB&T and recorded in loan file. The employer’s confirmation that the Consumer is on temporary leave is considered as employed.

• Signed 4506-T and IRS Transcripts ♦ For the Consumer who is returning to their current employer prior to loan closing, verify the Consumer’s

gross monthly income that will be received upon the Consumer’s return to current employer. Note: Verification must confirm whether the consumer is returning to the same income level prior to the temporary leave. If the income will reduce, use the monthly reduced income amount. If the income is consistent or increasing, use the income received prior to the temporary leave. Documentation Obtain all of the following:

• Last year-to-date paystub or salary voucher received prior to temporary leave documenting at least 30 days of income

• W-2’s for most recent two years • Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but

prior to delivery to BB&T confirming the Consumer’s return to current employer and recorded in loan file • Signed 4506-T and IRS Transcripts


• Written VOE form(s) covering the most recent two years • Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but

prior to delivery to BB&T confirming the Consumer’s return to current employer and recorded in loan file • Signed 4506-T and IRS Transcripts



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SELF-EMPLOYED INCOME A Consumer who has an ownership interest of 25% or more in a business is considered to be self-employed. Income from self-employment is considered stable and effective if the Consumer has been self-employed for two or more years. An earnings trend must be established based on the previous two years tax returns. If the earnings are stable or increasing, an average of the income is used for qualifying purposes. If the trend was declining, but has since stabilized and there is no indication that the income will not continue, the income must be based on the current stable earnings. If the trend is declining, the income should not be considered for qualifying purposes unless there are significant documented compensating factors. If self-employed between one and two years, document that the Consumer has a two-year history of receipt of income at the same or greater level in the same or similar occupation in order to consider the income for qualifying purposes. The Consumer’s tax returns must reflect at least one year of self-employment income. If self-employed less than one year the income from the Consumer may not be considered for qualifying purposes. The business’s annual earnings must also be considered for the past two years. If the business shows a significant decline in income, then income earned by the Consumer from that business may not be considered. Documentation Obtain all of the following:

• Signed, dated individual tax returns, with all applicable tax schedules for the most recent two years • For a Corporation, S-corporation, or Partnership, signed copies of business tax returns, with all

applicable tax schedules (including K-1’s) for the most recent two years • Year to date profit and loss (P & L) statement and balance sheet signed by the preparer. • Year to date profit and loss statement and balance sheet are required documentation for all self-

employed borrowers regardless of whether or not the income is used to qualify. • Verification of existence of the business through a third party source obtained no more than 30

Calendar Days prior to the Note Date or after the Note Date but prior to delivery to BB&T • Completed Income Analysis Form 91, or comparable form. • Signed 4506-T and IRS Transcripts

Types of Business Structure Sole Proprietor A Sole Proprietorship is an unincorporated business that is individually owned and managed. The individual owner is personally liable for all debts of the business and has unlimited liability. There is no distinction between the owner’s personal assets and the assets used in the business. The financial success or failure of this type of business depends solely on the owner’s ability to obtain capital and to manage the various aspect of the business. The income, expenses, and taxable profits are reported on Schedule C of the Consumers individual IRS Form 1040 tax returns. Note: Loans subject to Schedule F Income will be considered on a case-by-case basis. If Schedule F Income is reflected on the IRS tax transcripts, the actual Schedule F must be reviewed for the existence of leases and true gross income. Schedule F income on the subject property indicates there may be non-residential use of the subject property and represents higher risk. Therefore, both the property and the income will be analyzed for acceptability. Any Schedule F income reflected on tax returns is not allowed as qualifying income if it is a gain. A loss will be deducted from qualifying income.




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S-Corporation An S-Corporation is a legal entity that has a limited number of stockholders and elects not be taxed as a regular corporation. Business gains and losses are passed on to the stockholders, but the corporation’s stockholders may not be held personally or financially liable for the activities of the corporation. Income is reported on IRS Form 1120S, with each stockholder’s share of the income reported on IRS Schedule K-1 (Form 1120) and reflected on Schedule E of the individual 1040 tax return. Review of the business tax returns is required to assess the viability of the business. Partnership A Partnership is a business owned by two or more individuals who share in profits, losses, and the responsibility for running the company. Each partner pays taxes on their proportionate share of the partnership’s net income. Income is reported on IRS Form 1065 with the partner’s share of the income reported on IRS Schedule K-1 (Form 1065) and reflected on Schedule E of the individual 1040 tax return. Review of the business tax returns is required to access the viability of the business. Corporation A Corporation is a State-chartered business owned by its stockholders. Ownership in a corporation is through shares of stock, but a corporation’s stockholders may not be held personally or financially liable for the activities of the corporation. Income is reported on IRS Form 1120 and individual 1040 tax returns. Review of the business tax returns is required to access the viability of the business. Corporate compensation to officers, generally in proportion to the percentage of ownership, is shown on the IRS Form 1120. RENTAL INCOME Rental income may be used for qualification provided the Consumer has a 24-month history of managing rental properties within the last five (5) years and subject to the requirements below. Rental Income from Roommates or Boarders in a Single-Family Property Income from roommates in a single family property occupied as the Consumer’s primary residence is not acceptable. Rental income from boarders, however, is acceptable, when a Consumer with disabilities receives rental income from a live-in personal assistant. There must be no indication that boarder rental income is unlikely to continue. The rental payments can be considered in an amount up to 30% of the total gross income that is used to qualify the Consumer. Documentation Obtain all of the following:

• Documentation of the boarder’s history of shared residency (e.g., copy of driver’s license, bills, bank statements, or W-2 forms) that shows the boarder’s address as being the same as the Consumer’s address

• Documentation of the boarder’s rental payments for the most recent 12 months • The Consumer’s most recent tax return showing the rental income • Signed 4506-T and IRS Transcripts



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Rental Income from Subject Property If rental income is derived from the subject property, the property must be a two- unit principal residence in which the Consumer occupies one of the units. Documentation Obtain all of the following:

• Operating Income Statement (Form 998) • Single-Family Comparable Rent Schedule (Form 1007/Form 1000) or Small Residential Income

Property Appraisal Report (Form 1025/Form 72) • Signed, dated individual tax return including Schedule E for the most recent two years • Copies of the current lease agreement(s) to substantiate the reported income • Signed 4506-T and IRS Transcripts

If the property was out of service for an extended period, the Schedule E will reflect the costs for renovation or rehabilitation as repair expenses and the Schedule E will confirm the number of days that the rental unit was in service. Copies of the current lease agreement(s) may be used for qualifying purposes. Note: The following scenarios do not require the tax return to validate the subject property rental income:

• Consumer is purchasing the property; or • Consumer purchased the rental property during or subsequent to the last tax return filing

Rental Income from Other Properties If rental income is derived from a property that is not the subject property, there are no restrictions on the property type. Documentation Obtain all of the following:

• Signed, dated individual tax return including Schedule E for the most recent two years • Copies of the current lease agreement(s) to substantiate the reported income

If the property was out of service for an extended period, the Schedule E will reflect the costs for renovation or rehabilitation as repair expenses and the Schedule E will confirm the number of days that the rental unit was in service. Copies of the current lease agreement(s) may be used for qualifying purposes. Note: The following scenario does not require the tax return to validate the subject property rental income:

• Consumer purchased the rental property during or subsequent to the last tax return filing Calculating Rental Income (or Loss) Individual Tax Return / Schedule E When Schedule E is used to calculate qualifying rental income on the Consumer’s principal residence, add back any listed depreciation, interest, taxes, or insurance expenses to the net rental income / loss and divide the total by 12. If the figure is positive, this amount must be added monthly income; if the figure is negative, the amount must be included as a liability. The full amount of the mortgage payment (PITI) must be included in the total monthly obligations. When Schedule E is used to calculate qualifying rental income on a property other than the Consumer’s principal residence, add back any listed depreciation to the net rental income / loss and divide the total by 12. If the figure is positive, this amount must be added to the Consumer’s total monthly income; if the figure is negative, the amount must be included as a liability. The mortgage payment for the rental property should not be included as a monthly obligation.




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Lease Agreements When current lease agreements are used to calculate qualifying rental income on the Consumer’s principal residence, reduce the gross rental amount by 25% for vacancies and maintenance. This amount must be added to the Consumer’s total monthly income. The full amount of the mortgage payment (PITI) must be included in the total monthly obligations. When current lease agreements are used to calculate qualifying rental income on a property other than the Consumer’s principal residence, reduce the gross rental amount by 25% for vacancies and maintenance. The full amount of the mortgage payment (PITI) must be subtracted from this amount. If the figure is positive, this amount must be added to the Consumer’s total monthly income; if the figure is negative, the amount must be included as a liability. The mortgage payment for the rental property should not be included as a monthly obligation. OTHER INCOME Alimony, Child Support, and Separate Maintenance Alimony, Child Support or Separate Maintenance may be considered effective income if payments are likely to be received consistently for at least three years. Check for limitation on the continuance of the payment, such as the age of the children (age must be < 15 years) from whom the support is being paid or the duration over which alimony is required to be paid. Note: Child support may be grossed up under the same provisions as non-taxable income sources.

Documentation Obtain one of the following documenting the payment terms:

• Final divorce decree; or • Legal separation agreement; or • Court order or Voluntary payment agreement

AND, obtain one of the following as evidence that payments have been received during the last 12 months*: • Cancelled checks; or • Deposit slips; or • Bank or other account statements; or • Tax Returns; or • Court records

* Periods less than 12 months may be considered provided timely payments have been received a minimum of 6 months, which indicates the likelihood and willingness to pay.



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Assets used as Qualifying Income (Employment-related) Employment-related assets may be used as qualifying income, provided the Consumer is not currently using the employment-related asset as a source of income. The asset must be owned individually by the Consumer and the asset must be immediately accessible in its entirety and not subject to a penalty. The following employment-related assets may be considered: • Retirement assets in a retirement account recognized by the IRS (e.g. 401(k), RIA, SEP, or Keogh

retirement account), or • A lump-sum distribution (non-self-employed severance package or non-self-employed lump sum

retirement package) deposited into an eligible retirement account, or • A lump-sum distribution (non-self-employed severance package or non-self-employed lump sum

retirement package) deposited into a non-retirement brokerage or depository account. The Consumer must be the sole recipient.

• To calculate asset sources, use 70% of the balance of the eligible asset less any funds required to complete the transaction (e.g., down payment, closing costs, etc.) divided by 360 months, regardless of loan term or account balance.

The following mortgage eligibility restrictions apply: • The loan purpose must be for the Purchase or No-cash-out refinance of a 1-unit Primary residence or

Second home • The Maximum LTV / TLTV / HTLV must be less than or equal to 70% • The Minimum credit score required is the greater of 740 or as required within the BB&T Price Adjustments

& LTV Charts Documentation Obtain the following to document an eligible retirement asset:

• Most recent account statement (monthly, quarterly or annual statement) Obtain all of the following to document a lump sum distribution into an eligible retirement account:

• Distribution letter from the employer (1099R) • Most recent account statement

Obtain all of the following to document a lump sum distribution into a non-retirement account: • Distribution letter from the employer (1099R) • Three most recent consecutive months personal depository or brokerage account statements

Automobile Allowances For an automobile allowance to be considered as acceptable stable income, the Consumer must have received payment for at least two years. There must be no indication that the allowance is unlikely to continue for the next three years. Only the amount by which the Consumers’ automobile allowance or expense account payments exceed actual expenditures may be considered income.

Documentation Obtain all of the following to establish the amount to add back to gross income:

• IRS Form 2106, Employee Business Expense, for the previous two years • Employer’s verification that the payments will continue.

If the Consumer uses the standard per-mile rate in calculating automobile expenses, as opposed to the actual cost method, the portion that the IRS considers depreciation may be added back to income. Expenses that must be treated as recurring debt include:

• The Consumer’s monthly car payment, and • Any loss resulting from the calculations of the difference between the actual expenditures and the

expense account allowance. Include all associated business expenditures in the calculation of the Consumers total DTI ratio.



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Boarder Income Rental income from boarders is acceptable when a Consumer with disabilities receives rental income from a live-in personal assistant. The rental payments can be considered in an amount up to 30% of the total gross income that is used to qualify the Consumer. There must be no indication that Boarder income is unlikely to continue. Obtain all of the following:

• Documentation of the boarder’s history of shared residency (e.g., copy of driver’s license, bills, bank statements, or W-2 forms) that shows the boarder’s address as being the same as the Consumer’s address

• Documentation of the boarder’s rental payments for the most recent 12 months • The Consumer’s most recent tax return showing the rental income • Signed 4506-T and IRS Transcripts

Capital Gains Capital gains or losses generally occur only one time, and should not be considered when determining income. However, if the consumer has a constant turnover of assets resulting in gains or losses, the capital gain or loss must be considered when determining income. Income from capital gains may be considered if the capital gains are from the same source (e.g. securities), tax returns reflect a three year history of consistent gains, and documentation supports that there are sufficient assets remaining after closing to support continuance of the capital gain income for at least the next three years. If the trend results in a gain, it may be included as qualifying income. If the trend consistently shows a loss, it must be deducted from total income. Documentation Obtain all of the following:

• Signed, dated individual tax returns including Schedule D for the most recent three years • Evidence of sufficient assets to generate ongoing capital gains • Signed 4506-T and IRS Transcripts

Foreign Income All U.S. Citizens using foreign income to qualify must document income. Documentation Obtain the following:

• Signed, dated individual tax returns, with all applicable tax schedules for the most recent two years • Standard income documentation (YTD paystubs, 2 years W-2’s. etc.) • All income translated into U.S. Dollars (i.e. paystubs). • Signed 4506-T and IRS Transcripts

Foster Care Foster care income may be considered if the income is received from a state- or county-sponsored organization and the Consumer has a two-year history of providing foster-care services. There must be no indication that the foster care income is unlikely to continue for the next three years at a level that supports the income needed to qualify. Documentation Obtain the following:

• Letters of verification from the organizations providing the income documenting a two-year history of receipt

• Signed 4506-T and IRS Transcripts



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Housing or Parsonage Income Housing or parsonage income may be considered if the Consumer has a 12-month history of receipt. There must be no indication that the allowance is unlikely to continue for the next three years. The housing or parsonage allowance must be added to income instead of offsetting the monthly housing payment. Documentation Obtain all of the following:

• Written VOE form or letter from the employer reflecting the amount of the housing or parsonage allowance and the terms under which it is paid

• 12-months receipt of the housing allowance • Signed 4506-T and IRS Transcripts

Interest and Dividend Income Interest and Dividend income may be used as long as the income has been received for the past two years and is expected to continue to be received for the next three years. Subtract any funds required to complete the transaction (e.g., down payment, closing costs, etc.) before calculating the projected interest or dividend income. An earnings trend must be established and compared to the projected income when considering interest and dividend income. If the earnings are stable or increasing, an average of the income is compared to the projected interest or dividend income to determine qualifying income. If the trend was declining, but current assets support that the income has since stabilized, the current stable earnings are compared to the projected interest or dividend income to determine qualifying income. If the trend is declining, the income should not be considered for qualifying purposes unless there are significant documented compensating factors. Documentation Obtain one of the following:

• Signed, dated individual tax returns including Schedule B for the most recent two years; or • Account statements for the most recent 24 months

AND, obtain the following:

• Evidence of sufficient assets to support continuance of dividend and interest income • Signed 4506-T and IRS Transcripts

Long Term Disability Generally, long-term disability will not have a defined expiration date and must be expected to continue. The requirement for re-evaluation of benefits is not considered a defined expiration date. Documentation Obtain all of the following

• Copy of the Consumer’s disability policy or benefits statement from the benefits payer to determine the current eligibility for the disability benefits, the amount and frequency of the payments and if there is a contractually established termination or modification date

• Two most recent months bank statements or equivalent documentation evidencing current receipt • Signed 4506-T and IRS Transcripts

Note: If the Consumer is currently receiving short-term disability payments that will decrease to a lesser amount within the next three years due to being converted to long-term benefits, the amount of the long-term benefits must be used as qualifying income.



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Military Income – Additional Pay Military personnel may be entitled to special pay or allowances in addition to basic / base pay. These types of additional pay are acceptable when analyzing income, provided there is no evidence in the loan file that it will not continue. Standard acceptable sources of additional pay include:

• Basic Allowance for Subsistence (BAS) • Basic Allowance for Housing (BAH)


• Two current LES statements reflecting consistent receipt of the special pay or allowance reflecting at least 30 days of income

• W-2’s for most recent two years • Signed 4506-T and IRS Transcripts


• Written VOE form(s) covering the most recent two years • Verbal VOE obtained no more than 10 Business Days prior to the Note Date or after the Note Date but

prior to delivery to BB&T. • Signed 4506-T and IRS Transcripts

Mortgage Credit Certificate (MCC) Income States and municipalities can issue mortgage credit certificates (MCC) in place of, or as part of, their authority to issue mortgage revenue bonds. MCC’s enable an eligible first-time home buyer to obtain a mortgage secured by his or her principal residence and to claim a federal tax credit for a specified percentage of the mortgage interest payments. There should be a reasonable expectation that the income will continue for at least three years. The amount used as qualifying income must be calculated as follows: ((Mortgage Amount) X (Note Rate) x (MCC %)) / 12 = Amount added to the Consumer’s monthly income. When calculating the DTI ratio, add the amount to the Consumer’s monthly income, rather than as a reduction to the amount of the Consumer’s mortgage payment. For refinance transactions, the MCC can remain in place as long as the MCC provider confirms, prior to closing that the MCC remains in effect for the new mortgage loan. Documentation Obtain the following:

• Copies of the MCC documents, including the reissue certification Mortgage Differential A payment from the Consumer’s employer for all or part of the interest differential between the Consumer’s present and proposed mortgage payment may be considered as qualifying income if the documentation shows that the payments are pursuant to an establish, ongoing documented employer program. There should be a reasonable expectation that the income will continue for at least three years. If the employer subsidizes a Consumer’s mortgage payment through direct payments, the amount of payments is considered gross income, and cannot be used to offset the mortgage payment directly. Documentation Obtain the following:

• Copy of the agreement from the employer stating the amount and duration of the payments.



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Notes Receivable Income Notes Receivable income may be used if the income can be expected to continue for a minimum of three years. Documentation Obtain all of the following:

• Copy of the note to establish the amount and length of payment • Evidence the payments have been consistently received for the last 12 months as evidenced through

deposit slips, cancelled checks, bank or other account statements, or tax returns • Signed 4506-T and IRS Transcripts

Retirement Income If any retirement income will cease within the first full three years of the mortgage loan, such income may not be used in qualifying. Documentation For the Consumer receiving pension or annuity income, obtain the following:

• Retirement awards letter or letter from the former employer; or • Signed, dated individual tax return for the most recent year; or • Form 1099

AND, obtain the following:

• Two most recent months bank statements or equivalent documentation evidencing current receipt • Signed 4506-T and IRS Transcripts

For the Consumer receiving income from an IRA, 401(k) or Keogh, obtain all of the following:

• Signed, dated individual tax return for the most recent year • Evidence of sufficient assets to support continuance • Two most recent months bank statements or equivalent documentation evidencing current receipt • Signed 4506-T and IRS Transcripts

Royalty Income Royalty payments may be used as income as long as the Consumer has received the payments on a regular basis for two years provided the income is likely to continue for the next three years. Documentation Obtain all of the following:

• Royalty contract, agreement, or statement confirming amount, frequency and duration of the income • Signed, dated individual tax return for the most recent two years, including Supplemental Income and

Loss and Schedule E • Signed 4506-T and IRS Transcripts

Homeownership Voucher Program – formerly referred to as Section 8 Income Homeownership Voucher Program payments (formerly referred to Section 8 homeownership assistance payments) paid directly to the Borrower are an acceptable source of qualifying income. Homeownership Voucher Program payments paid directly to the servicing lender can be used to offset the monthly housing payment amount used for qualification. Homeownership Voucher Program payments must be likely to continue for the next three years.

Documentation Obtain the following:

• The correspondent must provide documentation showing the amount and terms of the monthly payment received from the public housing agency that issued the voucher.



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Social Security Income (Retirement, Disability, Survivor Benefits, Supplemental Security) Benefits that have a defined expiration date may be used as long as the income will continue to be received for at least the next three years. If the benefit does not indicate a defined expiration date, the income should be considered likely to continue. Pending or current re-evaluation of medical eligibility for benefits payments is not considered an indication the payments are not likely to continue. Survivor benefits received on behalf of the dependent may only be included as qualifying income if the age of the dependent is less than 15 years. Some portion of Social Security income may be “grossed up” if deemed non-taxable by the IRS. Refer to non-taxable income sources.


• Copy of the award letter or other equivalent documentation showing income type and amount • Two most recent months bank statements or equivalent documentation evidencing current receipt • Signed 4506-T and IRS Transcripts

Trust Income Trust income may be used if constant payments will continue to be received for at least the next three years. The Consumer may use funds from the trust account for any funds required to complete the transaction (e.g. down payment, closing costs, etc.) if the Consumer provides adequate documentation that the withdrawal of funds will not negatively affect the trust income.

Documentation Obtain the following:

• Copy of the trust agreement or trustee’s statement confirming the amount of the trust, the frequency of the distribution, and the duration of payments

• Signed 4506-T and IRS Transcripts Non-Taxable Income Sources Certain types of regular income may not be subject to Federal Tax:

• Some portion of Social Security • Some Federal government Employee retirement income • Some State government retirement • Railroad retirement benefits • Certain types of disability and public assistance payments • Other income – documented as being exempt from Federal income taxes

The amount of continuing tax savings attributed to regular income not subject to Federal taxes may be added to the Consumer’s gross income. The percentage of non-taxable income that may be added cannot exceed the appropriate tax rate for the income amount. Additional allowances for dependents are not acceptable. Tax exempt income may be grossed up if documented the income is likely to continue and will remain untaxed. In order to gross up income, obtain the most recent year’s tax return to verify the non-taxable portion. The tax exempt portion may be grossed up by 25%. The following sources of income are considered non-taxable:

• Child Support • Basic Allowance for Subsistence (BAS) • Basic Allowance for Housing (BAH)



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4:8 LIABILITY ASSESSMENT UNDERWRITING STANDARDS

INTRODUCTION It is the intent of BB&T to primarily purchase Qualified Mortgage loans as defined by Regulation Z and federally-related insurers and investors. For each loan, BB&T makes a reasonable and good faith determination that the Consumer(s)* will have a reasonable ability to repay the loan according to its terms. Among other factors, BB&T considers and verifies a Consumer’s monthly payments for this loan, any known simultaneous loans, and mortgage-related obligations as well as the Consumer’s current debt obligations, alimony, and child support. A thorough review of the mortgage application, credit report, the Consumer’s paystubs (if provided), and other file documentation must be performed in order to properly identify and assess all liabilities. All of the Consumer’s debts incurred through the Note Date must be reflected on the mortgage application and considered when qualifying the Consumer. The following standards explain the requirements for considering and verifying a Consumer’s monthly payments, debt obligations, alimony, child support, and other current and expected liabilities. Standards for the consideration and verification of the Consumer’s income and employment are provided in BB&T’s Employment and Income Underwriting Standards. *Hence forward references to “Consumer” and “Borrower” are interchangeable for purposes of this guide. DEBT-TO-INCOME RATIO

Maximum DTI is 43%. RESIDENCY HISTORY DOCUMENTATION A satisfactory residency history payment record covering the most recent 24 month period is required. Satisfactory is defined as no delinquent payments in the last 24 months. Consumers who own their current residence free and clear and have a satisfactory past mortgage payment history on the credit report, whether an open mortgage from another REO property or a closed mortgage, are not subject to the satisfactory 24-month residency history noted above. For consumers who rent from a rental management company, provide direct written Verification of Rental or verification on a Residential Mortgage Credit Report that includes rental amount, payment history, length of payment history, and landlord’s contact information. For consumers who rent from a private landlord, provide direct written Verification of Rental, verification on a Residential Mortgage Credit Report, or copy of lease; AND most recent 12 months canceled checks (front and back) or bank statements verifying rental amount. NOTE: It is at BB&T’s discretion to determine if past mortgage histories are acceptable and meet guideline requirements. The following are considered in the liability assessment: MONTHLY HOUSING EXPENSE The monthly housing expense is the sum of the following monthly charges for an individual property: • Principal and interest (P&I) payment • Property hazard, flood, and mortgage insurance premiums (as applicable) • Real estate taxes • When applicable: Leasehold payments / ground rent Special assessments Homeowner’s association dues (excluding unit utility charges) Any subordinate financing payments on mortgages secured by the property



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Qualifying Considerations All components of the monthly housing expense must be considered for each property owned. The monthly housing expense associated with the Consumer’s primary residence is considered in the monthly housing expense-to-income ratio, which is also known as the front-end ratio. The monthly housing expense associated with a second home or an investment property must be considered part of the Consumer’s recurring monthly debt obligations when calculating the debt-to-income (DTI) ratio, which is also known as the back-end ratio. Refer to the Rental Income section of Employment and Income Underwriting Standards to determine whether rental income can be considered to offset the monthly housing expense on a rental property. The monthly housing expense associated with a current principal residence that is 1) a pending sale but will not sell prior to loan closing, or 2) being converted to an investment property or second home, must be considered part of the Consumer’s recurring monthly debt obligations when calculating the debt-to-income ratio. Refer to the applicable Product Description for the Qualifying Rate to be used for the subject property. For any simultaneous loan on the subject property, a copy of the promissory note or other written verification must be obtained to determine the qualifying payment. Adjustable-rate mortgages must be qualified using the maximum interest rate in the first five years of the loan. Documentation Obtain the following: • For property taxes, information provided in the title report (if applicable) or records provided by a

governmental organization (such as a taxing authority or local government) • Billing statements from the condominium, cooperative, or homeowners association • Contracts or agreements for ground rent or leaseholds • For insurance premiums or similar insurance changes, declarations page or other acceptable

documentation from the insurance company OTHER LIABILITIES The Consumer’s credit history must be reviewed using credit bureau reports. Except as otherwise stated, the following liabilities are verified using credit reports and information provided on the Consumer’s application. Alimony / Child Support / Separate Maintenance Payments When the Consumer is required to pay alimony, child support, or maintenance payments under a divorce decree, separation agreement, or any other written legal agreement, the payments must be considered part of the Consumer’s recurring monthly debt obligations regardless of number of months remaining. However, voluntary payments do not need to be taken into consideration. Business Debt in Consumer’s Name When a self-employed Consumer claims that a monthly obligation that appears on the credit report is being paid by the Consumer’s business, documentation must be obtained to verify that the obligation was actually paid out of company funds and that the obligation was considered in the cash flow analysis of the Consumer’s business. The account payment does not need to be considered as part of the Consumer’s individual recurring monthly debt obligations if: • the account in question does not have a history of delinquency • the business provides acceptable evidence that the obligation was paid out of company funds for the prior

12 months (such as 12 months of canceled company checks), and • the cash flow analysis of the business took payment of the obligation into consideration

If all requirements listed above are not met, the payment must be considered part of the Consumer’s recurring monthly debt obligations.



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Credit Report Inquiries

All credit inquires reported on the credit report where the Consumer has had a credit inquiry within the past 120 days must be evaluated to determine if any credit was granted. If credit was granted, the Correspondent must verify the debt and include the monthly payments in qualifying the Consumer. In addition, with the exception of those inquiries generated as a result of the subject mortgage, Consumers must provide a signed statement explaining all inquiries, as well as other credit obtained and not yet reported by the credit bureau. Inquiries generated as a result of the subject mortgage do not require a signed statement from the Consumer; however, the Correspondent must address the subject mortgage inquiry on the Transmittal Summary (1008). Information obtained through the use of a third-party vendor is not acceptable as an alternative to the Consumers’ letter of explanation.

Home Equity Lines of Credit (HELOC) If the HELOC has no outstanding balance, a payment does not need to be included in qualifying. Only the actual payments (whether principal and interest or interest only) that are due on an outstanding or drawn portion of a HELOC must be included in the monthly debt calculation. If the credit report does not show a required minimum payment amount and there is no supplemental documentation from the creditor reflecting the monthly payment, the payment must be calculated as 5% of the outstanding balance or $10, whichever is greater. Installment Debt All installment debt that is not secured by a financial asset, including student loans, automobile loans, and home equity loans, must be considered part of the Consumer’s recurring monthly debt obligations if there are 10 or more monthly payments remaining. However, an installment debt with less than 10 monthly payments remaining must be considered part of the Consumer’s recurring monthly debt obligations if the amount of the debt affects the Consumer’s ability to pay the mortgage during the months immediately after loan closing, especially if the Consumer will have limited or no liquid assets after closing. Deferred Installment Debt / Loans in Forbearance Deferred installment debt, such as deferred student loans, must be included as part of the Consumer’s recurring monthly debt obligations. If the Consumer’s credit report does not indicate the required minimum monthly payment for a student loan that is deferred or is in forbearance, a monthly debt payment must be determined. To determine the Consumer’s monthly debt payment for purposes of calculating the monthly debt payment-to-income ratio, 1% of the outstanding balance of the student loan may be used as the monthly payment instead of obtaining documentation to support the payment amount. However, if any documentation is provided by the Consumer that indicates the actual monthly payment, that figure must be used in qualifying the Consumer. Lease Payments Lease payments must be included as part of the Consumer’s recurring monthly debt obligations regardless of the number of months remaining on the lease. This is because the expiration of a lease agreement for rental housing or an automobile typically leads to either a new lease agreement, the buyout of the existing lease, or the purchase of a new vehicle or house.



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Open 30-Day Charge Accounts Open 30–day charge accounts require the balance to be paid in full every month. A 30-day charge account that is listed with an unpaid balance does not need to be included as part of the Consumer’s recurring monthly debt obligations provided the Consumer demonstrates that they have sufficient personal liquid assets to cover the unpaid balance or will receive reimbursement of the charges from his or her employer. If the Consumer does not have sufficient personal liquid assets to cover the unpaid balance or does not receive reimbursement of the charges from his or her employer, the account must be included as part of the Consumer’s recurring monthly debt obligations. The payment must be calculated as the greater of 5% of the outstanding balance or $10. Revolving Charge Accounts Monthly payments on revolving charge accounts and unsecured lines of credit, regardless of balance, must be included as part of the Consumer’s recurring monthly debt obligations. These tradelines include credit cards, department store charge cards, and personal lines of credit. If the credit report does not show a required minimum payment amount and there is no supplemental documentation from the creditor reflecting the monthly payment, the payment must be calculated as the greater of 5% of the outstanding balance or $10. CONTINGENT LIABILITIES A contingent liability is one that may or may not have to be paid by the Consumer. Not all contingent liabilities will have to be taken into consideration when determining the amount of a Consumer’s recurring monthly debt obligations. Court-Ordered Assignment of Debt / Property Settlement Buyout When a Consumer has outstanding debt that was assigned to another party by court order or is bought out by another co-owner of the property (such as under a divorce decree or separation agreement) and the creditor does not release the Consumer from liability, the Consumer has a contingent liability. This contingent liability does not need to be considered as part of the Consumer’s recurring monthly debt obligations provided the Consumer can provide evidence of the transfer of ownership (if applicable) and court order or settlement agreement assigning the debt. Co-signed Loans When a Consumer co-signs for a loan (exclusive of a mortgage loan) to enable another party (the primary obligor) to obtain credit, but is not the party who is actually repaying the debt, the Consumer has a contingent liability. This contingent liability does not need to be considered as part of the Consumer’s recurring monthly debt obligations provided the Consumer can provide evidence that the primary obligor has been making regular payments for the last 12 months, and there is not a history of delinquency on the debt. The liability must be considered the Consumer’s obligation when calculating the DTI ratio if: • payment by the primary obligor cannot be sufficiently documented, • a 12-month payment history has not been established for the debt, or • the primary obligor has a history of being delinquent in making payments on the debt

Loans Secured by Financial Assets When a Consumer uses his or her financial assets, life insurance policies, 401(k) accounts, individual retirement accounts, certificates of deposit, stocks, bonds, etc., as security for a loan, the liability does not need to be considered as part of the Consumer’s recurring monthly debt obligations. The Consumer must provide a copy of the applicable loan instrument that shows the Consumer’s financial asset as collateral for the loan. Note: If the Consumer intends to use the same asset to satisfy a cash reserve requirement, the value of the asset must be reduced by the amount of the outstanding loan and any related fees to determine whether the Consumer has sufficient reserves.



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Mortgage Assumption When a Consumer sells a mortgaged property and the property purchaser assumes the outstanding mortgage debt without a release of liability, the Consumer has a contingent liability. This contingent liability does not need to be considered as part of the Consumer’s recurring monthly debt obligations provided the property purchaser has been making regular payments for the last 12 months. The following must be documented: • evidence of the transfer of ownership • copy of the formal, executed assumption agreement • payment history from servicer showing that the mortgage has been current during the previous 12 months

If the requirements above cannot be met, the liability must be included as part of the Consumer’s recurring monthly debt obligations.



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4:9 ASSETS UNDERWRITING STANDARDS

INTRODUCTION It is the intent of BB&T to primarily purchase Qualified Mortgage loans as defined by Regulation Z and federally-related insurers and investors. BB&T makes a reasonable and good faith determination that the Consumer* will have a reasonable ability to repay the loan according to its terms. The following standards explain the requirements for considering and verifying a Consumer’s assets, which may be required for closing costs, down payment, and/or financial reserves. Standards for the consideration and verification of the Consumer’s current and expected debt obligations and other liabilities (including the monthly payments for any newly originated mortgage loan, any known simultaneous loans, and mortgage-related obligations) are provided in BB&T’s Liability Assessment Underwriting Standards. Standards for the consideration and verification of the Consumer’s income and employment are provided in BB&T’s Employment and Income Underwriting Standards. *Hence forward references to “Consumer” and “Borrower” are interchangeable for purposes of this guide.

GENERAL DOCUMENTATION REQUIREMENT Information relied on by BB&T during the qualification process generally must be verified using third-party records, which are records prepared or reviewed by someone other than the consumer or BB&T. Specific documents required and exceptions are listed below. STANDARD RESERVE REQUIREMENTS See Price Adjustments and LTV Chart Reserves are calculated on the full monthly payment amount for the property which is the sum of the following: • Principal and interest (P&I) payment • Property hazard, flood, and mortgage insurance premiums (as applicable) • Real estate taxes • When applicable: Leasehold payments / ground rent Special assessments Homeowner’s association dues (excluding unit utility charges) Any subordinate financing payments on mortgages secured by the property

MINIMUM CONSUMER CONTRIBUTION REQUIREMENT At minimum, 5% of the consumer’s required down payment must be liquid assets from the consumer’s personal funds and not derived from recent undocumented, unsecured or unstable sources. Property seller's prorated taxes are allowed as part of the consumer's required down payment. Business funds may be eligible, see requirements included within this section of the guide.




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VERIFICATION OF DEPOSITS AND ASSETS BB&T can use any of the following types of documentation to verify that a consumer has sufficient funds for closing costs, down payment, and/or financial reserves:

Request for Verification of Deposit The information must be requested directly from the depository institution, and the complete signed and dated document must be sent directly from the depository institution. Copies of Bank Statements or Investment Portfolio Statements The statements must cover account activity for the most recent two-month period (or, if account information is reported on a quarterly basis, for the most recent quarter). The statement must:

• clearly identify the consumer as the account holder • include the account number • include the time period covered by the statement • include all deposits and withdrawal transactions (for depository accounts) • include all purchase and sale transactions

If BB&T is the holder of the consumer’s account, BB&T may produce a printout or other alternative verification of the asset(s) directly from BB&T’s system. The printout or alternative verification is acceptable as long as all required data (above) is supplied and documented. Documents received by fax or downloaded from the Internet must clearly identify the name of the depository or investment institution and the source of information- for example, by including that information in the Internet or fax banner at the top of the document. Copies of Retirement Account Statements The Consumer must provide the most recent statements that identify the consumer’s vested amount and the terms. SOURCES OF DEPOSITORY ASSETS Depository Accounts Depository assets include checking (personal and business) and savings accounts, money market funds and certificates of deposit and may be used for closing costs, down payment, and financial reserves. When verifying assets and reserves, any indications of borrowed funds including recently opened accounts, recent large deposits, or account balances that are considerably greater than the average balance over the previous few months must be investigated. A written explanation of the source of funds must be obtained from the consumer, and verification of the source of funds must be obtained. BB&T reserves the right to request documentation supporting source of funds, if asset statements show a history of frequent non-payroll deposits. Large deposits are defined as a single deposit that exceeds 50% of the total gross monthly qualifying income for the loan. This requirement is for all transactions where the deposit is needed to meet the requirements for Borrower Funds and/or required reserves. When a deposit that meets the definition for large deposits is not documented and is not needed for Borrower Funds and/or required reserves, the funds used for qualifying purposes by the amount of the unverified deposit must be reduced. Any borrowed funds including any related liability must be considered, including undisclosed debt. Therefore, a signed statement from the borrower explaining the origin of unverified deposits is required and must be included in the loan file. When a single deposit consists of both verified and unverified funds, the unverified funds are used when determining whether the deposit exceeds the 50% requirement.



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The use of business funds is eligible under the following conditions: • Borrower must be 100% owner of the business. • Business average annual cash flow is greater than the amount to be withdrawn and/or used towards

reserves. • Cash on company year-end balance sheet for each of the previous three years is greater than the amount

to be withdrawn and/or used towards reserves. This information is found on line 1 of the Schedule L for the Partnership, S-Corporation and the Corporation. Two years of the Schedule L will show three years of cash on hand for the company.

• Full analysis of the business must consider the effect of the withdrawal of the assets and how it will impact the strength and viability of the business in the future.

• Documentation required for analysis: ♦ Business financials, and ♦ Three months of most recent business asset statements

Documentation Obtain one of the following: • Two most recent consecutive monthly bank statements • Most recent quarterly statement • Verification of Deposit

Note: If the latest statement is more than 45 days earlier than the date of the loan application, BB&T requires the consumer to provide a more recent, supplemental, bank-generated form that shows the account number, balance, and date. The statements may be computer-generated forms, including online account or portfolio statements downloaded by the consumer from the internet. Assets for Non-U.S. Citizens (Recently Deposited) Funds recently deposited in a U.S. depository institution by a non-U.S. citizen consumer are an acceptable source of funds and may be used for closing costs, down payment, and financial reserves provided funds can be properly documented. Documentation Obtain all of the following: • Documented evidence of funds transfer from the country from which the consumer immigrated. • Documented evidence that the funds belonged to the consumer prior to the date of the transfer.

Note: The sources of all funds must be verified just as they would for a client who is a U.S. citizen. Individual Development Accounts Some nonprofit agencies will match the funds a consumer regularly deposits into a savings account that has been designated as an account that is used solely for the accumulation of funds to purchase a home. Such accounts are referred to as individual development accounts (IDAs). Non-profit agencies that offer IDA programs have options with respect to accumulating and holding the matching funds, which include: • The use of an account that is separate from the home buyer’s savings account. • Separately designated matching funds within a single agency. • The use of a trustee account that contains both the home buyer’s funds and the agency’s matching funds.

The funds are disbursed from the non-profit agency account to the closing agent via either a single check or multiple checks. It is acceptable to allow the separate disbursement of funds from the agency and from the home buyer, as long as the terms of the IDA program are met. Funds that the consumer deposited into an IDA may be used for closing costs and down payment.



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IDA Repayment Terms Allowable Use of Matching Funds

The nonprofit agency: • Requires repayment of the matching

funds. • Agrees to defer or forgive repayment

provided that certain conditions are met;

Or

• Files a lien against the property.

The consumer may use the matching funds to supplement the down payment, provided he or she has met the minimum consumer contribution requirements, located within this section of the guide.

The nonprofit agency: • Does not require repayment of the

matching funds; And • Does not file a lien against the

property.

The consumer may use the matching funds to supplement the down payment, provided he or she has met the minimum consumer contribution requirements, located within this section of the guide.

Documentation Obtain all of the following: • Document how the nonprofit agency’s IDA program operates. • Verify the rate at which the agency matches consumer deposits into the account. • Determine the consumer satisfied the program’s vesting requirements. • Document the consumer’s regular payments into the account and the agency’s regular deposits of

matching funds into the account. Pooled Savings (Community Savings accounts) Funds from a community savings account or any other type of pooled savings may be used for down payment if the consumer can document regular contributions to the fund. The consumer’s obligation to continue making contributions to the fund must be considered as part of the consumer’s debt when calculating the total debt-to-income ratio. Documentation Obtain all of the following: • Written confirmation from the party managing the pooled savings fund and documentation of regular

consumer contributions. • The documentation for the pooled savings fund must:

▪ Identify the issuing institution or administrator, as applicable ▪ Identify the account owner(s) ▪ Identify the account number ▪ Show all transactions ▪ Show the period covered and ending balance ▪ Show any outstanding loans



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SOURCES OF NON-DEPOSITORY ASSETS Stocks, Stock Options, Bonds, and Mutual Funds Stocks, government bonds, and mutual funds are acceptable sources of funds and may be used for closing costs, down payment, and financial reserves provided their value can be verified. Stock options may also be an acceptable source of funds, but only for closing and down payment, if they are immediately available to the consumer. The value of government bonds must be based on their purchase price unless the redemption value can be documented. The consumer’s ownership of the account or asset must be verified. When used for closing costs or down payment, the following must also be verified: • Value of the asset at the time of sale or liquidation • Consumer’s actual receipt of funds realized from the sale or liquidation of the assets if the stocks, stock

options, bonds and mutual funds will be used for the down payment or closing cost

Documentation for stocks, bonds and mutual funds Obtain one of the following when used for closing costs or down payment: • Most recent monthly or quarterly statement from the depository or investment firm • Verification of Deposit • Copy of the stock certificate and the current stock prices from a published source

AND, obtain the following: • Evidence of liquidation

Obtain one of the following when used for reserves: • Most recent monthly or quarterly statement from the depository or investment firm • Verification of Deposit • Copy of the stock certificate and the current stock prices from a published source

Note: When used for reserves, the value of stocks, bonds and mutual funds must be discounted by 30%. Also, non-vested restricted stock is not an acceptable source of reserves.

Documentation for stock options (closing costs and down payment only) Obtain the following: • Most recent monthly or quarterly statement that lists the number of options and the option price • Current stock prices from a published source

Use the current stock price to determine the gain that would be realized from exercise of an option and the sale of the optioned stock. Non-vested stock options are not an acceptable source of funds. Note: Stock options are not an acceptable source for reserves.

U.S. Savings Bond U.S. savings bonds are acceptable sources of funds and may be used for closing costs, down payment, and financial reserves provided their value can be verified. Documentation Obtain the following: • Verification of the U.S. Savings Bonds, which includes a statement from a financial institution confirming:

The bonds and listing the serial numbers of the bond(s) that have been reviewed Date of maturity Type and amount of bond The borrower as the owner

• Proof of bond value from the appropriate U.S. Treasury Table

AND, obtain the following: • Evidence of liquidation if used for closing costs or down payment



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Trust Accounts Funds disbursed from a consumer’s trust account are an acceptable source for closing costs, down payment and financial reserves provided the consumer has immediate access to the funds. Documentation Obtain the following: • Written documentation of the value of the trust account from either the trust manager or the trustee. This

documentation must identify the trustee including name, address, telephone number and an individual contact.

• Documentation supporting the conditions under which the consumer has access to the funds. This documentation must reflect that the impact that withdrawal of funds will have on trust income used for qualifying.

And, obtain the following when used for closing costs or down payment: • Evidence of receipt of the disbursed funds from the trust

Retirement Accounts Vested funds from individual retirement accounts (IRA/SEP/Keogh accounts) and tax-favored retirement savings accounts (401(K) accounts) are acceptable sources of funds for closing costs, down payment and financial reserves. Verify the ownership of the accounts and the consumer’s actual receipt of the funds realized from the liquidation of the asset if needed to complete the transaction. When funds from retirement accounts are used for reserves, BB&T does not require the funds to be withdrawn from the account(s). However, BB&T must exercise caution when considering retirement accounts as effective reserves because these accounts often • Are in the form of stocks, bonds or mutual funds; • Feature significant penalties for early withdrawals; • Allow limited access; or • Have vesting requirements

If the retirement assets are to be considered for reserves, the account must be discounted by 30% to account for market volatility minus any outstanding loans against the asset. In addition, if the consumer is not at retirement age (typically 59 1/2) and will be assessed an early withdrawal penalty, that penalty (10% unless confirmed otherwise) must be added to the discount for a total of 40%. If the consumer is at or above retirement age, the additional 10% penalty does not need to be applied. In order to be considered as effective reserves, retirement accounts must be vested and allow withdrawals regardless of current employment status. Documentation Obtaining one of the following: • Two most recent consecutive monthly retirement statements • Most recent quarterly statement • Verification of Deposit

AND, obtain the following: • Evidence of liquidation if used for closing costs or down payment, or • Evidence that the borrower is permitted to make withdrawals regardless of current employment status if

used for reserves



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Gift Funds Gift funds must be from a related family member, and are allowed on transactions secured by primary residences or second homes. Gift funds may fund all or part of the down payment, closing costs or financial reserves subject to the minimum consumer contribution requirements, located within this section of the guide. Gift letters must be obtained on all loans. Acceptable related family members include: • A relative, defined as the consumer’s spouse, child, or other dependent, or by any other individual who is

related to the consumer by blood, marriage, adoption, or legal guardianship, or • A fiancé, fiancée, or domestic partner

The related family member may not be, or have any affiliation with, the builder, the developer, the real estate agent, or any other interested party to the transaction. The gift letter must: • Specify the dollar amount of the gift • Specify the date the funds were transferred • Include the donor’s statement that no repayment is expected • Identify the mortgaged premises and • Indicate the donor’s name, address, telephone number, and relationship to the consumer

Documentation must be obtained to verify that sufficient funds to cover the gift are either in the related family member’s account or have been transferred to the borrower’s account. When funds from a relative or domestic partner are being pooled with the consumer’s funds to make up the required minimum cash down payment, the following items must also be included: • A certification from the donor stating that he or she has lived with the consumer for the past 12 months and

will continue to do so in the new residence. • Documents that demonstrate a history of consumer and donor shared residency. The donor’s address must

be the same as the consumer’s address.

Documentation Obtain the following: • Fully executed gift letter

AND, obtain one of the following: • Copy of the donor’s check and the consumer’s deposit slip • Copy of the donor’s withdrawal slip and the consumer’s deposit slip • Copy of the donor’s check to the closing agent • Settlement statement showing receipt of the donor’s check

Gifts of Equity A “gift of equity” refers to a gift provided by the seller of a property to the buyer. The gift represents a portion of the seller’s equity in the property, and is transferred to the buyer as a credit in the transaction. A gift of equity is permitted for principal residence and second home purchase transactions. Refer to the Gift Funds section above for acceptable donor requirements and to the minimum consumer contribution requirements located within this section of the guide. Documentation Obtain the following: • Fully executed gift letter and • The Settlement/Loan Closing Statement listing the gift of equity



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Donations from Entities A Consumer applying for a mortgage loan secured by a principal residence may use donated gift or grant funds from acceptable entities to fund all or part of the down payment, closing costs, or financial reserves subject to the minimum consumer contribution requirements, located within this section of the guide. Donated gifts and grants are not allowed on a second home. Acceptable entities include churches, municipalities, nonprofit organizations (excluding credit unions), and public agencies.

Documentation Obtain the following: • Copy of the letter awarding the gift or grant to the consumer • Copy of the legal agreement that specifies the terms and conditions

Note: The documents must include language indicating that repayment of the gift or grant is not expected, and how the funds will be transferred. AND, obtain one of the following: • Copy of the donor’s canceled check (or similar evidence) • Copy of the settlement statement showing receipt of the check

Employer Assistance A consumer applying for a mortgage loan secured by a principal residence may use funds provided by an employer to fund all or part of the down payment or closing costs subject to the minimum consumer contribution requirements, located within this section of the guide. Employer assistance can also be used for financial reserves for all types of assistance with the exception of unsecured loans, which may only be used for the down payment and closing costs. The employer assistance may be in the form of one of the following: • A grant • A direct, fully repayable second mortgage • A forgivable second mortgage • A deferred-payment second mortgage

Funds must come directly from the employer, including through an employer-affiliated credit union. When employer assistance is extended as a secured second mortgage, it must satisfy criteria for mortgages that are subject to subordinate financing. If the secured second mortgage does not require regular payments of either principal and interest or interest only, no payment is required to be calculated in the qualifying ratios. Regular payments are required to be included in the calculation of the debt-to income ratio. Documentation Obtain all of the following: • Evidence the program is an established company program, not just an accommodation developed for an

individual employee. • Verification of the dollar amount of the employer’s assistance. • Verification of the terms of any other employee assistance being offered to the consumer (such as

relocation benefits or gifts). • Evidence that the consumer received the employer assistance funds directly from the employer (or through

the employer-affiliated credit union).



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Earnest Money Deposit (Sales Contract Deposit) A consumer applying for a mortgage loan for the purchase of a property may use the deposit on the sales contract (earnest money) to fund all or part of the down payment and closing costs. A Verification of Deposit or bank statements must indicate that the average balance for the past two months was large enough to support the amount of the deposit. The documentation must cover the period up to (and including) the date the check cleared the bank account. If it cannot be determined that these funds were withdrawn from the consumer’s account, additional verification of the source and evidence that the funds have actually changed hands from the consumer must be provided. Large earnest money deposits and deposits that exceed the amount customary for the area should be closely evaluated. Documentation Obtain one of the following to verify receipt of the deposit: • Copy of the consumer’s canceled check • Written statement from the holder of the deposit-such as receipt from the title company

Proceeds from the Sale of Real Property Proceeds from the sale of real property may be used to fund all or part of the down payment, closing costs, or financial reserves. Proceeds from properties that have already been sold should be included in a depository account, such as a checking or savings account Proceeds from properties that are selling prior to, or simultaneously with, the settlement on the subject property, must be documented to show sufficient net cash proceeds to consummate the purchase of the new home. Documentation Obtain one of the following: • Copy of the fully executed Settlement/Loan Closing Statement, or other equivalent closing statement. The

documentation must identify the property sold, show the proceeds to the property seller, show the disposition of all liens against the property, and be signed by the seller/ authorized agent(s).

• Executed buy-out agreement accompanying a settlement statement that is part of an employer relocation plan where the employer/relocation company takes responsibility for the outstanding mortgage(s)

Proceeds from the Sale of a Personal Asset Proceeds from the sale of a personal asset other than real property or exchange-traded securities may be used to fund all or part of the down payment, closing costs, or financial reserves provided the individual purchasing the asset is not a party to the property sale transaction or the mortgage financing transaction. Documentation Obtain the following: • Evidence of the consumer’s ownership of the asset • Evidence of the value of the asset, as determined by an independent and reputable source • Bill of sale or statement from the purchaser • Evidence of receipt of the sale proceeds, such as deposit slips, bank statements or copies of the purchaser’s canceled check.



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Trade Equity Trade equity is an acceptable source of funds to supplement the consumer’s minimum required contribution requirement. The seller’s equity contribution for the traded property must be a true-value consideration supported by a current appraisal. The consumer must make the minimum required contribution from his or her own funds unless one of the following conditions is met: • The LTV or TLTV ratio is less than or equal to 80% • The consumer is purchasing a one-unit principal residence and meets the requirements to use gifts,

donated grant funds, or funds received from an employer to pay for some or all of the consumer’s minimum contribution.

The trade should be evidenced by two separate contracts that have the buyer and the seller on one contract reversing roles on the second contract. The equity contribution is determined by subtracting the outstanding mortgage balance of the property being traded, plus any transfer costs, from the lesser of either the property’s appraised value or the trade-in value agreed to by both parties. Documentation Obtain the following: • Verification of the ownership of the property and whether there are any existing liens on the property

through a search of the land records. • Proof of title transfer and satisfaction of any existing mortgage liens for which the consumer was liable.

Note: The transfer deed must be recorded. Rent Credit for Option to Purchase Rent credit for option to purchase is an acceptable source of funds and may be used for down payment or to meet the minimum contribution requirement. Consumers are not required to make a minimum borrower contribution from their own funds in order for the rental payments to be credited toward the down payment. Credit for the down payment is determined by calculating the difference between the market rent and the actual rent paid for the last 12 months. The market rent is determined by the appraiser in the appraisal for the subject property. Documentation Obtain the following: • Copy of the rental/purchase agreement evidencing a minimum original term of at least 12 months which

states the monthly rental amount and the terms of the lease with option to purchase. • Copies of the consumer’s canceled checks or equivalent documentation evidencing the rental payments

for the last 12 months. • Market rent as determined by the subject property appraisal.

Sweat Equity Sweat equity is not an acceptable source of funds for the down payment, closing costs, or financial reserves. Bridge/Swing Loans A bridge (or swing) loan may be used to fund all or part of the down payment, closing costs, or financial reserves provided the bridge loan is not cross-collateralized against the new property. Bridge loans should be considered in the Net Equity calculation for properties that are pending sale. The amount of the bridge loan should be subtracted from the net proceeds to avoid counting this asset twice. The bridge loan must be considered part of the Consumer’s recurring monthly debt obligations.



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Borrowed Funds Secured by an Asset Borrowed funds secured by an asset are an acceptable source of funds for closing costs, down payment and financial reserves since borrowed funds secured by an asset represent a return of equity. Assets that may be used to secure funds include: • Automobiles • Artwork • Collectibles • Real Estate • Financial assets, such as:

Savings accounts Certificates of deposit Stocks Bonds 401(k) accounts

If the consumer uses the same financial asset as part of his or her financial reserves, the value of the asset must be reduced by the amount of proceeds and related fees for the secured loan. Documentation Obtain the following: • Terms of the secured loan. • Evidence that the party providing the secured loan is not a party to the sale. • Evidence that the funds have been transferred to the consumer.

Note: Refer to BB&T’s Liability Assessment Underwriting Standards for consideration of the monthly payment on the secured loan. Credit Card Financing Under no circumstances may credit card financing be used for the down payment or financial reserves. Instead, the consumer may use credit card financing for the payment of common and customary fees paid outside of closing. The maximum amount charged or advanced may not exceed the greater of 2% of the Mortgage amount provided: • the consumer has sufficient liquid funds to cover these charges in addition to funds needed for other

closing costs and the down payment; or • the credit card payment is recalculated to account for the new charges and the updated payment is

included in the qualifying ratio calculation. Personal Unsecured Loans Personal unsecured loans are not an acceptable source of funds for the down payment, closing costs, or financial reserves.



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Cash Value of Life Insurance Net proceeds from a loan against the cash value or from the surrender of a life insurance policy are an acceptable source of funds for the down payment, closing costs, and financial reserves. If penalties for failure to repay the loan include additional obligations beyond the surrender of the policy, the additional obligation amount must be factored into the total debt-to-income ratio, or subtracted from the borrower’s financial reserves. Documentation Obtain one of the following: • Copy of the check from the insurer • Copy of the payout statement issued by the insurer

College Savings Plans (e.g. 529 Plan) or Custodial Accounts College savings plans or custodial accounts are not an acceptable source of funds for the down payment, closing costs, or financial reserves. Anticipated Savings Anticipated savings is not an acceptable source of funds for the down payment, closing costs, or financial reserves. Cash-on-Hand Cash-on-hand is not an acceptable source of funds for the down payment, closing costs, or financial reserves. 1031 Tax Deferred Exchange Not eligible under the Non-Conforming products. Interested Party Contributions (IPCs) IPCs are costs that are normally the responsibility of the property purchaser that are paid by another party who has a financial interest in, or can influence the terms and the sale or transfer of, the subject property. Interested parties to a transaction include, but are not limited to: • Property seller • Builder/developer • Real estate agent or broker • An affiliate who may benefit from the sale of the property and/or the sale of the property at the highest

price possible

Refer to the applicable Product Description maximum Interested Party Contributions. IPCs are not an acceptable source of funds for the down payment, financial reserves, or to meet minimum contribution requirements.



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4:10 OCCUPANCY PROPERTIES SOLD AT AUCTION, FORECLOSURES, DEED IN LIEU, REO, BANK-OWNED, OR SHORT

SALE Eligible for financing as Primary Residence or Second Home. PRIMARY RESIDENCES

If the subject property is a primary residence, there is no limit to the number of financed properties the borrower may own and/or be obligated.

SECOND HOME A second home is defined as a 1-unit property (not a 2-4 unit property) owned by an individual and occupied

by the Borrower for some portion of the year and not subject to any timesharing ownership or agreement. The property must be in a location so as to reasonably function as a second home. Typically, it should be remote in distance or time of travel from the Borrower’s primary residence. The Borrower may not own other residential property in the same geographic location as the subject property. The property must also be suitable for year round occupancy, must be available for the Borrower’s exclusive use and enjoyment and is not subject to any rental pools or agreements that require the Borrower to either rent the property or give a management firm control over the occupancy of the property. The property cannot be occupied by tenants or other family members as their primary residence. The property must not be located in a project that allows for short-term (daily or weekly) rentals. (This definition of a second home should make it clear that location is a factor in determining whether a property is a second home). BB&T may, in its discretion, determine that a property is not a Second Home.

Any property that is not a true second home must be considered an investment property and is not eligible for delivery to BB&T under the Non-Conforming guidelines.

ADDITIONAL REQUIREMENTS: • No rental income is allowed to offset the debt. • A gift of equity is permitted provided it is reflected on the Settlement/Closing Disclosure Statement and the

appraised value is supported. • For qualifying purposes, the PITI on the subject property should be used in the second ratio. The

Borrower’s PITI on the primary residence should be used in calculating the first ratio. • See “Non-Arms Length Transactions” for additional details. • The sales contract and gift letter are executed agreeing to the price, dollar amount of the gift, and

relationship. • If the subject property is a second home, each borrower individually and all borrowers collectively must not

own and/or be obligated on more than four 1-4 unit financed properties, including the subject property. NOTE: 1-4 unit financed properties titled as a LLC must be included when determining borrower eligibility and the maximum allowable number of financed properties.


SECOND HOMES NOT SUITABLE FOR YEAR-ROUND OCCUPANCY Ineligible for delivery to BB&T under the Non-Conforming guidelines. INVESTMENT PROPERTY Ineligible for delivery to BB&T under the Non-Conforming guidelines.



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MULTIPLE MORTGAGES TO SAME BORROWER Borrowers may own more than one financed property provided. The following apply: • If the subject property is a primary residence, there is no limit to the number of financed properties the

borrower may own and/or be obligated. • If the subject property is a second home, each Borrower individually and all Borrowers collectively must

not own and/or be obligated on more than four 1 to 4 unit financed properties, including the subject property. Note: 1-4 unit financed properties titled as a LLC must be included when determining borrower eligibility and the maximum allowable number of financed properties.


4:11 REFINANCES All refinances, including No Cash Out and Cash Out, must comply as follows:

When the current mortgage will be satisfied as the result of the refinance transaction, ONE of the following three numbered requirements must be met relating to the borrowers on the new mortgage; (1) At least one borrower on the new refinance was a borrower on the mortgage being refinanced, OR

(2) At least one borrower on the new refinance held title to and resided in the subject property as their

primary residence for the most recent twelve month period AND the documentation provided that the borrower EITHER:

a. has been making timely mortgage payments, including the payments for any secondary financing, for the most recent twelve month period; OR

b. is a Related Person to a borrower on the mortgage being refinanced; OR (3) At least one borrower on the new refinance has inherited or was legally awarded the mortgaged premises

by a court in the case of divorce, separation or dissolution of a domestic partnership. BB&T Correspondent Lending has imposed the following restrictions on all refinances:

Marital/Spousal rights are not acceptable as proof of legal title to the property. Loans may not be refinanced in which a Life Estate exists on the current title.

Residential loans must be titled in the name of individuals only. Loans may not be titled in the name of a

business, Corporation, S-Corp, Partnership, LLC or other non-living business entity.

Transfer of ownership from an LLC, Corporation, S-Corp, Partnership, or any other non-living business entity for the purpose of refinancing the loan into the prospective borrower’s name is unacceptable. See Section 4:5 for additional information.

Verification of funds for refinance transactions is required. All funds listed on the application must match those verified in the loan file. This includes any funds required to complete the refinance transaction including reserves, funds to cover either or both the balance of the first and pay the closing costs of the new loan or to payoff any subordinate financing.



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NO CASH OUT REFINANCES Recently Acquired Properties Primary Residences: When the mortgage being refinanced was a purchase money transaction, the new refinance mortgage must be seasoned for at least 120 days to be eligible for a No Cash Out refinance transaction. This requirement is based upon the Note Date of the mortgage being refinanced (purchase money) being at least 120 days prior to the Note Date of the new “No Cash Out” refinance transaction. Second Homes: Six month seasoning required for No Cash Out Refinances. Properties Listed For Sale The subject property must not be currently listed for sale. It must be taken off the market on or before the disbursement date of the new mortgage loan, and the Borrowers must confirm their intent to occupy the subject property (for primary residence transactions). CASH OUT REFINANCES Primary Residences: • Primary residences only • Maximum $250,000 cash out • Six month seasoning requirement for recently acquired, recently listed or recently refinanced properties. • Cash out on new construction is not allowed. • Statement regarding the purpose of the cash out is required from borrower. • Cash out proceeds may not be used to pay down debt for qualifying. • Cash out proceeds may not be used to meet reserve requirements.

If none of the Borrowers have been on the title to the subject property for at least six months prior to the Note Date on a cash out refinance, the following requirements must be met: The executed Settlement/Closing Disclosure Statement from the purchase transaction must reflect that no

financing secured by the subject property was used to purchase the subject property The preliminary title report for the refinance transaction must reflect the Borrower as the owner of the

subject property and must reflect that there are no liens on the property The source of funds used to purchase the subject property must be fully documented If funds were borrowed to purchase the subject property, those funds must be repaid and reflected on the

Settlement/Closing Disclosure Statement for the refinance transaction The amount of the cash-out refinance mortgage must not exceed the sum of the original purchase price

and related Closing Costs, Financing Costs and Prepaids/Escrows as documented by the Settlement/Closing Disclosure Statement for the purchase transaction

There must have been no affiliation or relationship between the buyer and seller of the purchase transaction.

The cash-out refinance must comply with the applicable LTV/TLTV/HTLTV ratio limits and all other BB&T Non-Conforming/Jumbo guideline requirements

Second Homes: Second homes are not eligible for cash-out refinances under Non-Conforming guidelines.



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Properties Listed For Sale Properties listed for sale in the six (6) months preceding the disbursement date of the new mortgage loan are limited to 70% LTV/TLTV/HTLTV ratios (or less if mandated by the specific product, occupancy, or property type). Properties that were listed for sale must be taken off the market on or before the disbursement date of the new mortgage loan, otherwise, they are ineligible for delivery to BB&T. RECENTLY REFINANCED PROPERTIES • Any loan application to pay off an existing mortgage loan that was closed within six months of the new

application must be priced and evaluated as a “Cash Out Refinance, UNLESS the prior mortgage was not a “Cash Out”, as evidenced by a copy of the Settlement/Loan Closing Statement from that closing. Clear evidence is required to submit the new loan as a “No Cash Out”.

• IF A LOAN THAT WAS EVALUATED AS A “NO CASH OUT” IS DETERMINED TO BE A “CASH OUT”, ANY PRICING ADJUSTMENTS THAT MAY APPLY WILL BE ASSESSED TO THE CORRESPONDENT AT FUNDING.

PRIVATELY FINANCED FIRST AND/OR SECOND MORTGAGES A refinance transaction with a mortgage being paid off which is currently held by a non-financial institution is eligible for delivery to BB&T Correspondent Lending. Secondary financing is permitted if provided by a financial institution, private non-financial institution or builder. SECOND MORTGAGES INCLUDED IN REFINANCE Loan refinance request, regardless of loan size, which includes the payoff of a second lien, can be considered as a No Cash Out Refinance provided: Any subordinate liens secured by the subject property were used in their entirety to acquire the subject

property. The subordinate lien must be seasoned for at least 12 months. Total amount of draws cannot exceed $2,000 in the last 12 months. Cash back to the borrower cannot exceed 2% of the new refinance loan amount or $2,000, whichever is

less. STREAMLINE REFINANCES Streamline refinances are not permitted through Correspondent Lending. CEMA LOANS (New York STATE) - See the Funding Procedure section for more information.



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4:12 TEXAS EQUITY SECTION 50(a)(6) TRANSACTIONS Texas Equity section 50(a)(6) laws/guidelines must be followed when refinancing an existing Texas Equity

section 50(a)(6) mortgages (regardless of any new Cash Out) or providing any cash back to the borrower on a Primary residence refinance.

Schedule C of the title commitment must be reviewed to determine if the loan being refinanced is a Texas

Equity loan.

Correspondents must indicate that the loan being delivered for funding is a Texas Equity section 50(a)(6) at the top of the BB&T Mortgage Correspondent Lending Document Checklist.

Eligible Loan Programs:

• Fixed Rate programs with 10-30 Year Amortizations

• 7 Year and 10 Year Fully Amortizing ARMs Product Purpose: No Cash-Out Refinance and Cash-Out Refinances • Please note that the Standard Agency (Freddie Mac/Fannie Mae) classifications of No Cash Out and Cash

Out Refinances differ from the manner in which Texas Law classifies these mortgages.

• Under Texas Law, if the borrower receives any cash back at closing the loan must follow the Texas Equity section 50(a)(6) laws/guidelines. Closing costs, Prepaids and Taxes may be rolled into the loan amount: however, no cash back is allowed at closing. A principal curtailment is allowed to eliminate any cash back at closing. Additionally, if an existing Texas Equity section 50(a)(6) mortgage is being refinanced, the new mortgage must conform to Texas Equity laws/guidelines.

Loan Term/Amortization: 30, 20, 25, 15 and 10 Year Amortization. Assumption: Varies- Please refer to the Product Description for specific product/program chosen. Mortgage Insurance: Loan-to-Value over 80% is not allowed. Temporary Buydowns: Not allowed Escrows: Not required




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4:13 TEXAS EQUITY SECTION 50(a) (6) UNDERWRITING GUIDELINES Underwriting: All loans must be submitted to BB&T Correspondent Lending for manual underwriting. Borrower Eligibility: U.S. Citizen, Permanent Resident Alien, and Non-Permanent Resident Alien. Additional

requirements apply for Non-Permanent Resident Aliens. See Section 4:5 “Borrower Eligibility/Non-U.S. Citizens” for details.

Occupancy: Owner Occupied, Primary residence only. Property Types: 1-unit Single Family Dwelling, Condominium and PUD classification as the borrower’s

Homestead located in the State of Texas. Documentation: Follow BB&T Non-Conforming/Jumbo documentation requirements herein. Credit Requirements: Please refer to the “borrower eligibility” section of the Non-Conforming/Jumbo

guidelines for additional information. Credit Score: Refer to the Minimum credit score requirements located within the Price Adjustments & LTV

Charts. LTV/TLTV: Refer to the Price Adjustments and LTV Charts. Maximum LTV/TLTV for Non-Permanent Resident

Aliens may not exceed 75%.

Ineligibles: • Property designated as agricultural use, unless property is used primarily for the production of milk. Minimal

farm type animals are acceptable as long as it is clear they are being kept as pets.

• Properties subject to roll back taxes (i.e. properties where the Agricultural use exemption was removed and subjected to roll back taxes)

• 2 unit dwellings and Second Homes. • Properties with more than one Texas Equity section 50(a)(6) loans.

• Texas Equity section 50(a)(6) loans may not be closed in a trust.

• The utilization of a Power of Attorney is unacceptable on Texas Equity section 50(a)(6) transactions. • Loans with closing costs that exceed 3% of the loan amount. Includes third party, attorney, title company

fees and discount points, but excludes prepaid interest and escrows. Closing cost over the 3% limitations cannot be cured by a lender credit, they must be waived or Paid outside of Closing by the Lender.

Secondary Financing: • No new secondary financing allowed, regardless of LTV/TLTV.

• Existing, purchase money second mortgages may be resubordinated provided the TLTV is less than or

equal to 80%. Qualifying Ratios: Maximum DTI is 43%.



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Reserves: Please refer to “reserves” section of the Non-Conforming/Jumbo guidelines for additional information. Appraisal Requirements: Please refer to “appraisal” section of the Non-Conforming/Jumbo guidelines for additional information. Seasoning Requirement: 12 months (Note Date of the mortgage being refinanced to Note Date of the new refinance transaction). Title Requirements and Additional Disclosures: • Every borrower must be on title prior to Closing. Properties held in a Trust are not eligible.

• Every borrower and his/her spouse must sign the following documents twelve days prior to closing. • Loan application (1003) • Notice concerning extensions of credit defined by section 50(a)(6), Article XVI, Texas Constitution.

• Mortgage Policy of Title Insurance (Form T-2) supplement by an Equity Loan Mortgage Endorsement

(Form T-42) and a Supplemental Coverage Equity Loan Mortgage Endorsement (Form T-42.1). • Schedule C of the title commitment

• The following documents must be signed at Closing: Notice of right to cancel Acknowledgement of Fair Market Value of Homestead Property

Special Considerations: • All loans must close at a title company, bank branch or Attorney’s office.

• In the event, that an internal review or customer notification uncovers that a loan was originated out of

compliance with Texas Equity section 50(a)(6) statues, the closing attorney should be contacted within 24 hours.

• BB&T cannot require that the borrower pay off any BB&T-owned debt that is not tied to the subject

property, in order to qualify. This includes debt that may be owned by one of BB&T’s affiliates. Internal Use By BB&T • The business type of “Texas Equity” must be selected on the Loan Data screen of Unifi.

*END OF TEXAS EQUITY SECTION*



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4:14 NON-CONFORMING NEW CONSTRUCTION: PRE-APPROVAL AND CONVERSION

The following information will outline BB&T Correspondent Lending provisions for Non-Conforming New Construction. New Construction financing is the purchase and/or development of unimproved land into a residential property, or the substantial renovation of an existing eligible residence. The construction financing is in the name of the Borrower. Upon completion of the property, the Borrower refinances the construction loan into a new permanent mortgage . Definitions: • New Construction Financing: The purchase and/or development of unimproved land into a residential

property, or the substantial renovation of an existing eligible residence. The financing of the land and/or construction is in the name of the occupant/borrower(s). A single disbursement to a builder is not considered new construction financing.

• New Construction Conversion: A Conversion replaces the interim construction loan with a permanent

loan that pays off the original construction Note and releases the original Security Instrument. • New Construction Modification: A Modification amends the provisions of the original construction Note

and Security Instrument with a Loan Modification Agreement that defines the terms of the permanent loan. Loan Modifications are not currently eligible for delivery to BB&T Correspondent Lending.

• New Construction Pre-Approval: A Pre-Approval is a credit only review prior to permanent financing. Full

credit verification, disclosures and the identified property are required. A Pre-Approval Fee is collected when submitted for review. This fee, published on the SRP Schedule, is refundable only if loan is denied. A Pre-Approval is subject to full re-verification and documentation at permanent financing. A Pre-Approval is not a guarantee of Permanent Financing.

• Purchase Defined: Borrower does not have recorded ownership of the lot prior to the closing of the

Interim Construction loan. Lot Cost plus Construction Costs must be documented. LTV is based on the lesser of Total Acquisition Cost vs. Final Appraised Value.

• Refinance Defined: Borrower does have recorded ownership of the lot prior to the closing of the interim

construction loan. Final Appraised Value of 100% completed property is used to determine LTV. However, Total Acquisition Cost is still documented to support reasonable cost of completed construction.

• Total Acquisition Cost: Lot cost or site value plus construction costs.




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• Calculation of Value:

New Construction: ▪ If the lot is owned 12 months or more prior to the close of the construction loan, then the value

used to calculate LTV is based on the Appraised Value, as 100% completed. ▪ If the lot is owned less than 12 months prior to the close of the construction loan, then the value

used to calculate LTV is based on the lesser of 1) the Appraised Value, as 100% completed, or 2) the lot cost plus the construction costs.

Renovation: ▪ If the loan is a Renovation and Borrower purchased the home 12 months or more prior to the

close of the construction loan, the value is based on the Appraised Value, as 100% completed. ▪ If the loan is for a Renovation and the Borrower purchased the home less than 12 months prior

to the close of the construction loan, the value is based on the lesser of: 1) the Appraised Value, as 100% completed, or 2) the Purchase Price prior to the renovation plus the total Renovation Cost.

Lot Acquisition by Gift or Inheritance: ▪ Whether a new construction or a renovation, if the lot is acquired by the Borrower as a gift or by

inheritance, the value of the lot (regardless of the date of acquisition) is the Site Value of the lot as reported on the appraisal.

General Requirements: • QM/ATR Compliance Required: Yes

• Declining Market Policy Applies: Yes

• Eligible Occupancy: Owner occupied primary residence or true second home only. Investment property

not allowed. Borrower ownership of other property will be a factor when validating intent to occupy. • Eligible Loan Purpose Classifications: Purchase and no cash out refinance. Cash out refinance is not

allowed. For the purpose of new construction financing, any amount above the original recorded construction lien is considered cash out.

• Documentation Requirements regardless of classification as a Purchase or a Refinance: Proof of

recorded lot ownership in Borrower’s name and evidence of costs of construction/renovation are required prior to permanent financing. Items included in the calculation of cost to construct or renovate the home must be commonly and customarily included in the cost to construct other homes in the area where the property is located. Acceptable documentation includes but is not limited to:

▪ Lot: recorded deed; tax value card; title policy/commitment ▪ Construction Costs: construction contract; description of materials; permits, inspections and

fees associated with property improvement (Continued next page)



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• Examples of costs that cannot be included:

▪ Furniture ▪ Electronics and built-ins that are easily removable ▪ Personal property ▪ Maintenance fees

• Maximum Loan Amount: Up to $2,000,000, based on LTV and occupancy

• Maximum Total Loan to Value: Up to 80%, based on loan size and occupancy

• Minimum and Maximum Loan Terms: 15 to 30 years

• Eligible Permanent Loan Products: BB&T Non-Conforming Fixed Rate and Non-Conforming ARMs.

Conventional, Government, and Affordable Housing loans are not eligible. Interest-only permanent financing is not eligible. Temporary Buydowns are not eligible.

• Eligible Property Types: Detached, site-built, single unit dwellings only. Attached dwellings

(condominiums or townhomes,) multi-unit residences (2-4 family properties,) modular homes, manufactured homes and log homes are not eligible.

• Evidence of Lot Ownership: The recorded lot ownership must be in the name of the Borrower prior to

construction loan closing if the permanent loan is a Refinance, or prior to Permanent Loan closing, if a Purchase. If borrower is acquiring the property at the close of the interim financing, a lot contract, gift letter or proof of inheritance is acceptable evidence. The title policy/commitment should be reviewed for conclusive proof of lot ownership.

• Right of Rescission Requirement: At permanent financing, the Borrower must execute a right of

rescission if the completed property is owner-occupied as the primary residence at the time of permanent financing. If the new refinance mortgage replaces the interim construction mortgage more than 180 days after the property completion, a Right to Cancel would be required.

Underwriting:

• LP/DU Feedback required or allowed: No • Delegated Underwriting by Correspondent allowed: No • BB&T Credit-Only Pre-Approval : Yes • Appraisal required for Pre-Approval: No • BB&T credit and appraisal underwrite required prior to permanent financing: Yes

• QM Required Documentation and Disclosures: Separate applications and disclosures for both the interim

financing loan and the permanent financing loan are required. • Credit Document Age: Up to 120 Days prior to permanent financing.

• Appraisal Age: Up to 120 days prior to permanent financing. A new full URAR is required after 120 days

if the permanent loan has not closed. A Recertification of Value is not accepted for an expired appraisal. • Underwriting Documentation for Credit Pre-Approval: Current income, employment, assets, and credit

documents are required. An identified property along with an estimate of the final construction value is required. An appraisal is not required for a Credit Pre-Approval; however, a “To Be Determined” property address is not acceptable.




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• Underwriting Documentation for Permanent Financing Approval: Current income, employment, assets, and credit documents are required. Lot ownership, total construction costs, and a full standard “As Is” or “Subject to Completion” appraisal is required.

• Appraisal Documentation:

▪ $1,000,000 or less Loan Amount: One (1) Full URAR at submission for permanent financing ▪ $1,000,001 or greater Loan Amount: Two (2) Full URARs at submission for permanent financing

Interim Financing Requirements: • Construction Loan Note and Security Instrument: Occupant Borrower only. Construction loan may not be

in the name of the Builder or any party other than the permanent loan applicant.

• Construction Loan Term: The period allotted for construction or renovation should not exceed a maximum of 12 months.

• Construction Loan Proceeds: Proof of the fully disbursed construction loan is required as a condition of

permanent financing closing. • Future/Additional Proceeds Allowed: Only the original recorded construction loan amount is eligible for

permanent financing. If additional loan funds are requested at the time of permanent financing the permanent loan must meet BB&T requirements for a no cash out refinance in order to be eligible.

• Subordinate Financing: Subordinate financing may not be added as a condition of permanent financing.

Any requests for additional funds above the original construction loan amount must meet BB&T requirements for a no cash out refinance in order to be eligible.

• Evidence of Ownership: Occupant Borrower must show evidence of property ownership in Borrower’s

name prior to permanent financing, with either recorded deed or title policy/commitment proof.

Permanent Financing Requirements: • Borrower Condition: A material or adverse change to Borrower income, employment, credit, or asset

conditions may require full requalification by BB&T prior to permanent financing.

• Property Conditions: 100% Complete Appraisal is required. A “Subject to Completion” appraisal is allowed, with appraiser providing a final inspection with photos certifying 100% completion. Due to QM Compliance, escrows for completion of the property are not allowed. A new appraisal is required if the permanent financing has not closed within 120 days of the original appraisal. A Recertification of Value is not accepted for appraisals dated outside of 120 days. Declining Market policy applies.

• Pre-Approval Conditions: Full credit verification, disclosures and an identified property are required. A

Pre-Approval Fee is collected when the Pre-Approval package is submitted for review and is refundable only if loan is denied. Pre-Approval is subject to full re-verification and documentation. Borrowers who received a Pre-Approval must comply fully with all program and product requirements in effect at the time of the permanent financing. A written Pre-Approval from BB&T is not a guarantee of permanent financing.

• (Continued next page)



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• Common Permanent Loan Conditions: 1. Final Inspection with Photos, if applicable 2. Certificate of Occupancy from governing authority, if applicable 3. Utility permits for water and sewer, if applicable 4. Foundation or As-Built Survey 5. Soil Treatment Guarantee or Termite Report, if applicable 6. Homeowner’s Insurance Policy with evidence of paid annual premium 7. Flood Insurance Policy if applicable, with evidence of paid annual premium 8. Final Title Policy with no major impediments to title 9. Fully disbursed construction loan 10. Payoff of fully disbursed construction loan if Loan Modification is not used 11. Right of Rescission, if applicable 12. Executed Loan Modification, if used



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4:15 MORTGAGE INSURANCE OPTIONS Private mortgage insurance is required on all non-government loans with LTV’s that exceed 80%.

Correspondents are responsible for securing private mortgage insurance by submitting the full loan package to one of the approved private mortgage providers utilizing the process described below. The private mortgage insurance must comply with secondary market guidelines for coverage, structure, and qualifying.

Private mortgage insurance companies may impose different credit or property restrictions that can impact the ability to secure their coverage. Correspondents are responsible for being knowledgeable of guideline changes and restrictions implemented by the mortgage insurance companies.

BB&T Correspondent Lending does not self-insure loans that exceed 80% or offer pricing adjustments to offset the inability to secure private mortgage insurance on a particular transaction.

Properties located in the state of California are limited to a maximum 80% LTV.

ACCEPTABLE MORTGAGE INSURANCE OPTIONS

Monthly premium plans only

UNACCEPTABLE MORTGAGE INSURANCE OPTIONS • Single Premium plans • Reduced Premium plans • Financed Premium plans • Lender Paid Mortgage Insurance • Split Premium MI – A portion of the borrower-purchased mortgage insurance premium is paid and the

other portion is financed in the loan amount. • Insured loans with Declining Renewals • Delegated Mortgage Insurance

ELIGIBLE PRIVATE MORTGAGE INSURANCE COMPANIES • ARCH • ESSENT GUARANTY • GENWORTH • MGIC • NATIONAL MORTGAGE INSURANCE CORPORATION • RADIAN • UGIC

MINIMUM COVERAGE REQUIREMENTS LTV STANDARD COVERAGE

80.01% to 85.00% 12%



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PROCESS FOR OBTAINING MORTGAGE INSURANCE Correspondents will: • Originate and process loans according to BB&T Correspondent Lending’s general Non-Conforming

guidelines in the BB&T Correspondent Lending Guide. • Choose one of the approved Mortgage Insurance (MI) companies.

▪ All loans requiring MI must be sent for a Full Underwrite. ▪ Delegated MI is not acceptable. ▪ Eligible programs and coverages are:

♦ Monthly Premium only ♦ 12% Coverage for 80.01% to 85% LTV

• Submit the final mortgage insurance certificate from designated MI Company to the assigned BB&T CL Underwriter for review and approval.

• Transfer the MI to BB&T at the time of delivery. BB&T Correspondent Lending will: • Review and validate that the mortgage insurance certificate issued was subjected to a Full Underwrite. • The terms on the MI certificate:

▪ Meet BB&T CL Non-Conforming Guidelines. ▪ Are consistent with the BB&T CL final approval.

♦ If the terms are not consistent, then a request will be made to correct. • Validate the MI was successfully transferred to BB&T prior to purchase.

MORTGAGE INSURANCE CANCELLATION BB&T follows Homeowner’s Protection Act requirements (minimum 24 month history and current value required prior to PMI deletion; auto termination on the date the loan is first scheduled to reach 78%; this date is provided on the PMI Disclosure.) The Homeowner’s Protection Act defines “residential mortgage transaction” as a transaction…in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against a single-family dwelling that is the principal residence of the mortgagor to finance the acquisition, initial construction, or refinancing of that dwelling. BB&T will continue to require that the Truth-in-Lending disclose life-of-loan PMI for second homes. BB&T is not under any obligation to remove the PMI on any loan prior to the automatic termination date disclosed. A client’s rights as described in the Notice are as follows: Clients have the right to submit a request for PMI deletion once their loan amortizes or is paid down to 80% of the original value. This does not mean the PMI will be removed unconditionally upon receipt of said request. A client has the right to request a PMI deletion review at any time once their loan-to-value ratio reaches 80% of the original value of their home. The 80 % LTV may be achieved ahead of scheduled amortization, but still does not compel the lender to delete the PMI; it is only the benchmark at which the client can submit a request for review. The Act further states that upon receiving any client-initiated request for PMI deletion, the lender can expect certain requirements are met prior to approving the removal of PMI from a loan. Those requirements are shown on the disclosure. Homeowner’s Protection Act Disclosure This disclosure is required on all One-Unit, Single-Family and Owner-Occupied residence transactions that are required to maintain private mortgage insurance. A disclosure must be given to the borrower(s), but is not required to be signed.



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4:16 APPRAISAL POLICY AND PROCEDURES INTRODUCTION

All appraisal reports must establish and support the most probable market value as defined in the Uniform Standards of Professional Appraisal Practice (USPAP). All appraisals must comply with FIRREA (Financial Institutions Reform, Recovery, and Enforcement Act of 1989), applicable regulatory requirements, and the policies outlined below. Since it is the policy of BB&T to sell loans in the secondary market, all appraisal reports must comply in all respects with all appraiser independence requirements, restrictions and guidelines including those contained in the Appraiser Independence Requirements as adopted by Freddie Mac (Bulletin 2010-13) and Fannie Mae (Ann. SEL-2010-14) and the Appraisal Independence Requirements set forth in Title XIV, Subtitle F, Section 1472 of the Dodd-Frank Wall Street Reform and Consumer Protection Act along with the applicable requirements, restrictions and guidelines contained in the BB&T Correspondent Lending Guide.

BB&T does not approve the individual appraisers used by Correspondents. However, BB&T does expect Correspondents to have sound internal procedures for approving and selecting appraisers. These internal procedures should be structured so that the spirit and intent of the appraisal policies and procedures contained herein are included.

Each appraiser must meet legal requirements of the state in which he/she resides and/or practices, and be in

good standing with the licensing agency and the state. A favorable indication of an appraiser’s professionalism is characterized by having an acceptable Errors & Omissions/Professional Liability Policy in an amount commensurate with the appraisal values to be performed for lending institutions, generally an amount of at least $500,000.

All appraisals must be prepared by qualified, state licensed or certified appraisers who have been approved by the Correspondent. In order to maintain sound lending practices, the appraiser must remain independent and unbiased. For this reason, the Correspondent is responsible for selecting the appraiser. The selected appraiser should in no way have direct or indirect interest in the real estate transaction. Appraisers selected by the Correspondent must be qualified by experience, training, competence and knowledge to perform appraisals that will meet the objective of BB&T and secondary market. In addition, they must have a positive reputation, generate quality appraisals, maintain the capacity for independent judgment, and be committed to continuing education and professional development.

APPRAISAL PORTABILITY The Correspondent may accept an appraisal prepared by an appraiser for another federally regulated lender

(FDIC, OTS, FRB or OCC), financial services institution or Mortgage Banker who is a wholly-owned subsidiary of a federally regulated institution. This definition does not include Mortgage Brokers or Mortgage Bankers who are not wholly-owned subsidiaries of a federally regulated institution. A transfer is acceptable if:

(1) The appraiser has been selected and engaged by the transferring lender; (2) The appraisal must be in the name of the transferring lender and be accompanied by a transfer letter from

the lender signed by a corporate officer (included in submission file); and (3) The lender assures it is in compliance with Freddie Mac and Fannie Mae’s Appraiser Independence

Requirements.



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PERFORMANCE REVIEW The appraisal reports prepared by each approved appraiser shall be periodically reviewed by BB&T Correspondent Lending personnel as well as BB&T’s Quality Control Department. The reports will be judged on thoroughness, accuracy and usefulness in the underwriting process, and compliance with Investors requirements. If BB&T determines that an appraiser’s reports are unsatisfactory in relation to BB&T and/or Secondary Market requirements or if an appraiser has been disciplined by the state, or had their license removed by the state, the appraiser must not be used by a Correspondent.

Each person employed as an appraiser should sign a certification that they will abide by USPAP, and comply with all respects of the appraiser independence requirements, restrictions and guidelines including, but not limited to, those contained in the Appraiser Independence Requirements as adopted by Freddie Mac and Fannie Mae.

MINIMUM APPRAISAL REQUIREMENTS Appraisals shall be performed by state licensed or certified appraisers and must meet Freddie Mac and Fannie Mae guidelines as applicable. Refer to the Property Analysis section in this section for appraisal format requirements.

At a minimum, all appraisal reports must comply with the following requirements: • Conform to the USPAP adopted by the Appraisal Standards Board of the Appraisal Foundation;

• Disclose any steps taken that were necessary or appropriate to comply with the Competency Provision of

the USPAP; and

• Be based on the definition of market value as set forth below: “The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus”. Implicit in the definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: Buyer and seller are typically motivated; Both parties are well informed or well advised, and acting in what they consider their best interests; A reasonable time is allowed for exposure in the open market;

• Payment is made in terms of cash in U. S. dollars or terms of financial arrangements comparable thereto;

And

• The price represents the normal considerations for the property sold unaffected by special or creative financing or sale concessions granted by anyone associated with the sale.

• Be sufficiently descriptive to enable the reader to ascertain the estimated market value, the rationale for the

estimate, and provide detail and depth of analysis where appropriate that reflects the complexity of the real estate being appraised.

• Analyze and report in reasonable detail any prior sales for the previous year on the property being appraised.

• Analyze and report a reasonable marketing period for the subject property.

• Analyze and report appropriate deductions and discounts for any proposed construction, or any completed

properties that are partially leased or leased at other than market rents as of the date of the appraisal, or any tract developments with unsold units.

• Contain sufficient supporting documentation with all pertinent information reported so that the appraiser’s

logic, reasoning, judgment, and analysis in arriving at a conclusion indicate to the reader the reasonableness of the market value reported. (Continued next page)



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• Include a legal description of the real estate being appraised, as required by the USPAP.

• Analyze and describe the neighborhood, site, and highest and best use of property.

• Identify and separately value any personal property, fixtures, or intangible items that are not real property

but are included in the appraisal, and discuss the impact of their inclusion or exclusion on the estimate of market value.

• Follow a reasonable valuation method that addresses the direct sales comparison, income, and cost approaches to market value, reconciles those approaches and explains the elimination of each approach not used.

• Identify whether or not any part of the subject is located in a special flood hazard area and disclose both

the source used and method employed to make the determination.

• Locate and give the census tract for the property being appraised.

• If information required or deemed pertinent to the completion of an appraisal report is unavailable, the fact shall be disclosed and explained in the appraisal.

DIGITAL PHOTOS/ELECTRONIC SIGNATURES Electronic imaging is acceptable for the appraiser’s signature provided the appraisal contains the following (or similar language): “The signatures affixed to this report were applied by the original appraiser(s) or supervisory appraiser and represents their acknowledgements of the facts, opinion and conclusion found in the report. Each appraiser may apply their own signature electronically. Electronically applied signatures use password-protected digital methods. They have the same or more safeguards and carry the same validity as the appraiser(s) hand applied signature”.



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4:17 PROPERTY ANALYSIS BB&T Correspondent Lending follows standard appraisal procedures for documentation and disclosure on all

appraisals. Some issues regarding specific areas of appraisals are addressed below. BB&T Correspondent Lending Underwriting is available to discuss or review any unusual circumstances that may apply to a particular property.

APPRAISAL FORMAT • For loan amounts exceeding the Conforming limit up to and including $1,000,000 - a full interior/exterior

URAR (Freddie Mac Form 70/Fannie Mae Form 1004 for 1 unit properties; Freddie Mac Form 72/Fannie Mae Form 1025 for 2 unit properties) with all applicable addendums is required. See “Photographs” section regarding requirements of interior/exterior appraisals.

• For loan amounts greater than $1,000,000 - Two full interior/exterior URAR’s (Freddie Mac Form 70/Fannie Mae Form 1004 for 1 unit properties; Freddie Mac Form 72/Fannie Mae Form 1025 for 2 unit properties) with all applicable addendums are required. BB&T Correspondent Lending review of both appraisals required for loan decision. See “Photographs” section regarding requirements of interior/exterior appraisals.

• The Market Conditions Addendum (Freddie Mac Form 71 and Fannie Mae Form 1004MC) are required for all property types and appraisal types completed on or after 4-1-2009.

• For additional information regarding acceptable appraisal forms, see the “Appraisal Form Matrix” located under “Matrices” in the BB&T Correspondent Lending Library.

Re-Certification of Value If the effective date of the appraisal is more than 120 days before the note, the appraisal is out-dated and a new Full interior/exterior appraisal (Freddie Mac 70/Fannie Mae Form 1004 for 1 unit properties; Freddie Mac Form 72/Fannie Mae Form 1025 for 2 unit properties) is required, and the new appraisal must not incorporate any prior appraisal. Photographs

When an interior and exterior appraisal inspection is performed on the subject property, it is now required that interior photographs of specific rooms and areas be included. At a minimum, pictures of the following rooms are required. This is in addition to the typical exterior inspection pictures, front, rear and street scenes. Additional room pictures are also acceptable. • The kitchen;

• All bathrooms;

• Main living area;

• Examples of physical deterioration, if present;

• Examples of recent updates, such as restoration, remodeling, and renovation, if present; and

• Examples of amenities, conditions and external influences that materially impact market value or

marketability.



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Challenge to Value When the Correspondent Underwriter has reviewed the appraisal and disagrees with the value, the underwriter should seek to resolve its concerns with the appraiser as a normal process; i.e. obtaining additional comps or sales listings to help support the current value. The Correspondent Underwriter should not adjust the value but rather discuss with the appraiser their concerns. After discussion with the appraiser, if the appraisal value is still deemed unacceptable, another appraisal may be obtained from another approved appraiser provided the initial appraisal is found to be flawed or tainted and the basis for such determination is documented in the file or, when written pre-established policies allow for a second appraisal or if required by law. If a second appraisal is obtained, and found acceptable, the lower value of the two appraisals must be used. Any deficiencies to the appraisal that cannot be resolved through normal channels would make the property unacceptable. Files submitted with more than one appraisal which is outside the Correspondent Lending Underwriting and Product guidelines must include an acceptable explanation as to it presence in the loan file. Appraisal Sources Appraisals must list both data sources and verification sources with respect to comparable sales selected by the appraiser. If the Correspondent Underwriters find appraisers are not doing this correctly, then interaction with the appraiser is necessary to receive the complete data required. Comparable Sales for Distressed Properties For a subject property that is the result of a foreclosure, short sale or builder sale, the appraiser is responsible for determining which comparables are most appropriate for the assignment at hand. The appraisal must be reviewed to ensure the comparables are reflective of other foreclosure, short sales or builder sales. Seller Concessions Excessive seller concessions artificially inflate the sale price of the property, thus leading to an inflated market value. In particular, closer scrutiny to unusual sales or financing concessions is necessary to ensure they are properly accounted for in the appraisal report.



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4:18 GENERAL APPRAISAL REQUIREMENTS • Re-use of an existing appraisal for a subsequent refinance is not permitted. A new appraisal must be

ordered for each mortgage transaction. • The appraisal must be requested by the Correspondent and it must be signed by an appraiser approved by

the Correspondent. (BB&T will not accept appraisals made for the borrower).

• For additional information regarding BB&T Correspondent Lending’s appraisal format and/or re-certification of value requirements, see the “Property Analysis” section (4.16).

• The appraisal must include the appraiser’s license/certification number and the license/certification

expiration date. • The appraisal must include the thirty-six month sales history for the subject property. “N/A” is not an

acceptable response.

• At least three of the comparable sales must be: Similar to and located near the subject property Closed sales Recently sold (if the sale of the comparable property occurred more than twelve months before the date

of the appraisal, the appraiser must justify in the appraisal report the use of the comparable property).

Additional comparables are permitted to be used, including listings and pending sales, to support adjustments and conclusions if they are representative of market trends in the area. These additional comparables may contribute significantly to understanding unusual situations, such as limited markets, neighborhoods with little turnover of property, and area with a variety of distinct property values.

For properties located in established subdivisions, or for units established condominium or PUD projects (those that have resale activity) the appraisal report may use three comparable sales from within that subject project or subdivision.

If the subject property is in a controlled market (such as a new subdivision or project, a newly converted

project, or an area where the property seller owns a substantial number of units), at least one comparable sale must be outside the influence of the developer, builder, or property seller.

Careful consideration should be given when lending above predominant value.

Any rating less than average must be explained by the appraiser. “Fair” ratings on properties are below

market standard. Unless corrected/improved prior to closing, are generally ineligible. The neighborhood analysis must contain an accurate description of the subject neighborhood and the

factors which influence market value and marketability in the neighborhood. The information presented in the neighborhood analysis must be complete and must be consistent with, and support, the conclusions reached by the appraiser throughout the appraisal report.

Correspondents are expected to know whether or not a property is subject to any special assessments

and to be aware of the effect of the assessment on the property’s value and marketability. Appraisers are required to reflect the effect of the assessment on the value or marketability of the property, if applicable.

BB&T does require escrow for the payment of special assessments but not limited to front foot

assessments, user benefit fees, water/sewer fees, etc. (Continued next page)



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Unfavorable factors revealed in the neighborhood analysis require the appraiser to address the impact of those factors on the value and marketability. If the appraisal report demonstrates that there is a viable market for housing in the neighborhood or that the neighborhood is undergoing revitalization, the unfavorable factors do not necessarily make the mortgage ineligible for sale to BB&T. An appraiser may use a block-by-block analysis in neighborhoods that have undergone significant deterioration or abandonment in the past, but are now undergoing an evident revitalization effort, to demonstrate that there is viable market for housing.

In this analysis, the appraiser should describe the extent of revitalization efforts under way, the demand evidenced for renovated housing and the boundaries of the revitalized are being used as the subject neighborhood. This analysis must be consistent with the date presented and support the conclusions reached by the appraiser throughout the report. • Unusual floor plans, layouts or equipment should be carefully analyzed. An unusual floor plan, such as a

home with tandem bedrooms, or a bathroom off the kitchen, does not necessarily make the property ineligible for financing. The appraiser should address whether the floor plan or similar obsolescence is also found in other properties in the neighborhood.

• Adjustment calculations should be checked for accuracy.

• Room layout sketch. An interior room layout sketch is acceptable for condominiums and interior attached PUD’s. An exterior room layout sketch is required on all 1-unit detached and end unit attached PUD’s.

• Photographs: When an interior and exterior appraisal inspection is performed on the subject property, it is

required that interior photographs of specific rooms and areas be included. At a minimum, pictures of the following rooms are required: kitchen, all bathrooms, main living area, physical deterioration, if present, restoration, remodeling and renovation, if present and amenities, conditions and external influences that materially impact market value or marketability. This is in addition to the typical exterior inspection pictures, front, rear and street scenes and pictures of comparables. Black and white digitally produced photographs are acceptable provided they are clear, concise, and give a good representation of the subject, comparable, and street scene.

• Statement of limiting conditions signed by the appraiser (Freddie Mac Form 439) must be attached to the appraisal.

• Adjustments to the comparables must be made for special or creative financing or sales concessions. Any

adjustment should not be calculated on a mechanical dollar cost of financing concession. The dollar amount of any adjustment should be approximate the market’s reaction to the financing or on cessions based on the appraiser’s judgment.

Note: If a particular purchase transaction involved the sale from a close family member (i.e., parent to child), the appraiser is required to address the effect on marketability, if any, and indicate any necessary adjustments under “Sales or Financing Concessions” for the subject property and the comparables.



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Personal Property in Transactions The appraiser’s opinion of market value of the subject property must not include any value assigned to personal property, including, but not limited to, items such as boats, any boat docks, boat slips, art work, parking spaces, or anything else that is not considered real property.

• Factors to be considered when determining if a property is residential are: the type of improvements on the subject property and neighborhood properties

the current use of the subject property and neighboring properties

the degree, amount and type of development occurring in the area

pending zoning changes or changes in the use of the properties in the area

whether the subject property and neighboring properties are residential or marketable (the location of

retail and office property in the neighborhood of the subject property does not necessarily make the subject property ineligible.

whether the land size and land-value-to-value ratio are typical

• BB&T will not accept any mortgages supported by an appraisal report that makes reference to the race, color, religion or national origin of any person or the racial composition of the neighborhood.

• The appraiser must complete the flood hazard information (i.e. FEMA Zone, FEMA Map Number, and Map

Date). • The Cost Approach is required only for new properties, properties that are unique because of their styles

or construction methods, or for properties that have functional obsolescence. It is not required for condo units or attached PUD units. Whether or not the cost approach is provided, the estimated site value must always be included for all detached properties. Using the cost approach alone for the market value is unacceptable.

• The property must be habitable as a year-round residence. The improvement analysis must indicate how

the subject property compares to competing properties in the subject neighborhood. An estimate of remaining economic life is not required.



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Appraisal Best Practices Appraiser qualifications • Lenders should review appraisers’ licensing and performance at least once each licensing cycle.

• Lenders should consider membership in a professional appraisal organization as a qualification criterion,

but membership or lack of membership in such an organization should not be the only criterion for or against approving, appraisers, or selecting appraisers for specific assignments.

Lender staff qualifications • Staff must be trained to properly underwrite the appraisal to ensure that the appraiser’s opinion of value

meets the definition of “market value”, and that the appraisal is accurate and fully supported.

• Staff should be familiar with Uniform Standards of Professional Appraisal Practice, applicable laws, and Freddie Mac appraisal requirements.

• Staff must be familiar with Appraiser Independence Requirements. Appraiser selection • Ensure that turn times for appraisers to perform appraisals are reasonable as unreasonable turn times may

adversely affect the quality and accuracy of the appraisals.

• Some markets or properties may require that the appraiser have access to non-traditional data sources in order to provide the Lender with a credible appraisal. In such cases, the Lender should ensure that the appraiser have access to the necessary market data to support any conclusions about the market.

Appraisal reviews • Underwriting and any appraisal reviews should include the following: All appraisal photos.

Maps used to identify the location of comparable sales in relation to the subject property.

Sales history of the mortgage premises to determine consistency with other file documentation.

Current listings and pending sales support any adjustments, (Ensure that if the appraiser determines that

older sales are more representative of the subject property, the appraiser has provided current listings or pending sales to support any time adjustments or lack of adjustments for the differences in the age of the sales.)

Comparison of the original appraisal report or inspection report to the review appraisal report, if one was

obtained for conflicting information; the Lender should have policies and procedures in place to reconcile conflicting information.

Review the appraiser signature, license number, and date of report.

Have processes in place in which the appraisal, loan application and title work are compared for consistency, and comparison of the application and legal documents to the property description is provided by the appraiser.

Perform random and target reviews.

Be aware of market trends in the markets the Lender originated mortgages. (Continued next page)



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• Lenders should also thoroughly review the mortgage file to identify and investigate the following appraisal

red flags: Comparables not independently verified or recorded.

Value not supported by the comparables, and/or the comparables are not appropriate.

Incorrect appraisal report form or inspection type for the type of transaction.

Inconsistencies or unexplained errors.

Typographical and mathematical errors.

Appraiser is not familiar with the market in which the property in located.

Appraisal ordered prior to the sales contract date. Completion certification required and not in the mortgage file.

• The Lender’s due diligence in monitoring the quality and accuracy of appraisals is part of the Lender’s

responsibility for the quality of its lending. Lender’s policies and procedures for valuation should address the following:

The selection of appraisers in compliance with FHFA appraisal requirements, Appraiser Independence

Requirements and Freddie Mac requirements. Monitoring the quality and accuracy of appraisals performed by individual appraisers.

Knowledgeable staff underwriting appraisals and performing quality control for appraisals.

Appraiser’s opinion of value reflects the cash-equivalent price without undue stimulus such as

concessions. Use of automated valuation models and other tools to monitor appraisals quality.



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4:19 CONDOMINIUM REQUIREMENTS BB&T’s Condominium Policy Concerning Classification Certification and Warranties Each condominium loan delivered to BB&T must be classified to secondary market industry standards. BB&T

adopts Freddie Mac guidelines as the benchmark for classifying condominium properties. BB&T Correspondent Lending is now offering the Correspondent more flexibility in classifying condominiums.

This flexibility allows Fannie Mae Approved condos to be delivered to BB&T. Reference tools are available to help the Correspondents meet the requirements for condominium delivery. They are available in the Forms folder located in the BB&T Correspondent Lending Library within the document named “BB&T Condominium Guidelines” as well as the links listed below:

Standard Freddie Mac definitions and minimum requirements are located in the Freddie Mac Seller/Servicer guide: http://www.freddiemac.com/singlefamily/guide/

Condominiums approved under Fannie Mae’s Reciprocal Project Review option are eligible for delivery to BB&T. Requirements are located in the Freddie Mac Seller/Servicer guide.

The following link also provides a quick reference for minimum requirements: http://www.freddiemac.com/learn/pdfs/uw/condo.pdf The Correspondent may choose either of these review options if the situation permits.

The Condominium Classification Certification must be completed and included in each condominium file. This form allows the Correspondent to indicate which classification to apply to the particular property, and also requires the Correspondent to review the current budget and balance sheet for the HOA (or if applicable, Project Reserve Study) and declaration page for the current insurance policies. These documents must be submitted in the loan package. Full Condominium Review: Complete the Condominium Classification Certification. Provide completed Condominium Project Questionnaire – Full Form with all appropriate attachments including current budget and balance sheet for the HOA and declaration page for the current insurance policies. Questionnaire must be completed by the HOA representative.

Allowances and Limitations • BB&T requires the completion of the Condominium Project Questionnaire – Full Form or

comparable form on all classifications except Detached condominiums. The Correspondent is responsible for reviewing the appraisal and all HOA information including the current budget and balance sheet (or if applicable, Project Reserve Study) along with the declaration page for the current insurance policies to determine the appropriate classification. This classification is then noted on the Condominium Classification Certification. The completed and signed Certification, appropriate attachments including current budget and balance sheet for the HOA, and declaration page for the current insurance policies are also required to be submitted with the loan package.

• All condominiums must be classed for delivery to BB&T.

• Non-Conforming loans are not eligible for the Streamlined Review (Freddie Mac).

• BB&T will accept either Fannie Mae approved projects (CPM or PERS) depending whether it’s a new or established condo, or Freddie Mac classed condos.

http://www.freddiemac.com/singlefamily/guide/

http://www.freddiemac.com/learn/pdfs/uw/condo.pdf






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FLORIDA PROPERTIES Florida condominium properties that are new projects or newly converted projects are eligible only if approved through Fannie Mae’s PERS process. New condominium projects for which evidence of PERS approval cannot be provided are not eligible for delivery.

STREAMLINED REVIEW OF UNITS IN ESTABLISHED CONDO PROJECTS Not permitted under Non-Conforming/Jumbo guidelines

4:20 PLANNED UNIT DEVELOPMENT (PUD) REQUIREMENTS GENERAL PROJECT WARRANTIES FOR PLANNED UNIT DEVELOPMENTS (PUDS) All PUDs must meet the following requirements:

• Compliance with the law. The PUD must be in compliance with all applicable state and local laws. BB&T will assume that a PUD meets this requirement unless there is information or reason to believe the project is not in compliance.

• Ineligible Project. The PUD may not be an ineligible project as defined by Freddie Mac. Special attention should be given to projects with resort type amenities.

• Common elements. The HOA must own the common elements including amenities, and property owners must have the right to their use.

• Master Association. If the subject PUD is part of a Master Association, the Master Association must meet PUD requirements.



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4:21 DECLINING MARKET POLICY OVERVIEW Conditions in the real estate industry have resulted in declining value in many markets. BB&T is implementing

the following policy in order to mitigate some of the collateral risk associated with declining markets. A list of declining/at risk markets will be updated periodically and posted on BB&T’s website. BB&T has identified two market conditions which are defined below.

Declining markets are experiencing depreciation of value and home prices are expected to continue trending

downward. Severely Declining markets are experiencing significant depreciation of value which is expected to continue

into the future. Non-Conforming Loans (includes Fixed Rate and ARMs)

• Property located in a Declining market requires 5% LTV/TLTV reduction from maximum allowed financing for the property and transaction type. The LTV/TLTV may not exceed 75%. For example, if the maximum LTV for the application is 80% LTV and 80% TLTV, the maximum allowed in a Declining market is 75% LTV and 75% TLTV. If the maximum LTV for the application is 70% LTV and 70% TLTV, the maximum allowed in a Declining market is 65% LTV and 65% TLTV.

• Property located in a Severely Declining market requires a 10% LTV/TLTV reduction from maximum allowing financing for the property and transaction type. The LTV/TLTV may not exceed 70%. For example, if the maximum LTV for application is 80% LTV and 80% TLTV, the maximum allowed in a Severely Declining market is 70% LTV and 70% TLTV. If the maximum LTV/TLTV for the application is 70% LTV and 70% TLTV, the maximum allowed in a Severely Declining market is 60% LTV & 60% TLTV.

• If property is not on the list and the appraiser indicates a Declining Market, the LTV/TLTV must be reduced

by 5%. The LTV/TLTV may not exceed an 80% LTV/TLTV. • If the appraiser indicates that the Marketing Time is “over 6 months” on a Non-Conforming appraisal,

Management in its discretion will consider acceptable loan risk tolerance. This may result in a reduction in allowable loan amount for LTV maximums.

Construction Conversion and Renovation Mortgages – Non-Conforming If the property is not on the BB&T Correspondent Lending At Risk Markets list and the appraiser indicates declining property values, the market condition will be considered declining. Refer to the LTV Charts for Non-Conforming, Declining and Severely Declining market requirements. Exceptions to this policy will be entertained if the appraisal supports that values and marketability are stable. The requirements listed below in the Exceptions Policy section must be met. (Continued next page)



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Exceptions Policy Exceptions to this policy will be entertained if the appraisal supports that values and marketability are stable.

All of the following must be provided: • The application is not for Non-Conforming loans that involve a Cash Out Refinance or condo. • The appraiser provides days on market for each comparable sale, including expired listings of the

property reflected on the first page of the appraiser’s report.

• The three closed comparable sales must have closed no more than six months from the date of the appraisal report.

• At least two of the comparable sales must have closed no more than three months from the date of the

appraisal report.

• At least one pending sale is provided, as an additional comparable evidencing the market is stable.

• Adjustments to comparables must be in the standard 15% net and 25% gross adjustment range.

• Comparable sales should be located within one mile of the subject for urban and suburban areas and within ten (10) miles of the subject for rural areas.

Additional Information • This revision to our Declining Market Policy is effective with loans registered, locked or relocked with BB&T

on or after August 1, 2013. Loans registered or locked prior to August 1, 2013 may be delivered provided they meet all of our previous Declining Market requirements.

• BB&T’s revised list of At Risk Markets is located on the website in the BB&T Correspondent Lending Library under the Matrices section.

• The registration confirmation will notify Correspondents that the property may be located in a Declining Market. Loans received for funding will be audited for compliance with BB&T Correspondent Lending’s LTV/TLTV guidelines for Declining Markets. Any loan which exceeds our LTV/TLTV guidelines will not be funded.



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4:22 PROPERTY FLIP GUIDELINES A large increase in property value coupled with a short time period between transactions may indicate that the

property is being flipped. Properties targeted for property flips generally include properties that can be acquired at lower prices than other properties in the same neighborhood and often include real estate owned (REO) properties, properties subject to a “short sale”, other distressed properties or newly constructed properties where the builder or developer must liquidate housing inventory quickly. Property flips are not inherently illegal and not all transactions involving a rapid purchase and resale are improper.

Some indications of property flip transactions that may be legitimate include:

• Sales of properties by a Government Sponsored Enterprise, state or federally chartered financial

institution, mortgage insurer, or federal, state or local government agency.

• Property sales by employers or relocation agencies related to employee relocations.

• Sales of properties that are acquired by the property seller through inheritance, divorce, or as a result of legal settlement or proceeding.

• Sales of properties that have been substantially improved by bona fide and verified renovations since the property was acquired by the property seller in which any increase in sales price over the seller’s acquisition cost is representative of the market given the improvements to the home.

• Sales of properties that the property seller acquired at below market value after purchasing as a result of a distress sale (i.e. REO sale, short sale, tax lien sale, bankruptcy trustee’s sales, etc.) where any increase in the sales price over the property seller’s acquisition cost can be clearly shown to be a result of the difference (if any) in the market’s reaction to distress and typical arms-length market sales.

Best Practices for Loans Involving Property Flips or Suspected Property Flips To assist Lenders in their responsibility to ensure that any Mortgage involving a property flip or suspected property flip meets BB&T’s definition of an investment quality Mortgage, Freddie Mac recommends that they consider adopting the following best practices: Appraisals • Be particularly selective in choosing appraisers who are familiar with the subject property’s market area

and are competent to appraise properties involved in complex transactions.

• Use automated valuation models and other collateral risk assessment tools in the origination and pre-funding quality control process to detect fraud and objectively measure the accuracy of the appraisal. Freddie Mac recommends the use of Home Value Explorer (HVE). More information about HVE can be found at http://www.freddiemac.com/hve/

• Make certain that the underwriters or reviewers who evaluate appraisals involving questionable transactions have experience, training and knowledge related to property flip transactions.

• Perform additional due diligence by obtaining either a field or desk review of the appraisal or a second appraisal if the Lender suspects that the increase in sales price/value is unreasonable or unusually large within the context of the property’s market.

http://www.freddiemac.com/hve/



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Miscellaneous Underwriting/Closing/Title Issues • Perform additional due diligence in reviewing the chain of title of the property including a search of the

public land records for any recorded options contracts on the subject property and research any recent title transfer activity. Exercise additional due diligence to reconcile any differences in the owner of record as in the appraisal or any other documentation including the title report.

• Exercise additional due diligence when analyzing sales contracts and other documentation. Carefully analyze sales contracts looking for terms indicating there have been assignments or sale of the seller’s interest in a contract or option to acquire the property.

• Draft additional closing instructions designed to prevent title companies and/or attorneys from conducting two or more closings in quick succession without prior approval.

• Analyze and review estimated and final Settlement/Closing Disclosure Statement for unusual payments to parties not having a recorded interest on the property and abnormal real estate commission payments.

• Include effective provisions within Lender’s quality control programs designed to detect transactions that are property flips and evaluate such transactions to identify transactions that are improper. Report suspected cases of fraud to appropriate agencies.

• Train all employees and personnel involved in the loan production process and the quality control function on the issues regarding property flips including the characteristics associated with improper property flips.

BB&T Correspondent Lending’s policy requires any resale of a property to be no less than six months from the date of the seller’s recorded deed to the new buyer’s initial application date. Credit and collateral documentation must be dated on or after the application date. Exceptions may be for the following reasons: • Resale of property obtained through an inheritance.

• Resale of property acquired as a result of a divorce agreement.

• Resale of property directly from a Federally Chartered Institution or HUD.

• Resale of property from a relocation company.

4:23 MISCELLANEOUS

ESCROW FOR COMPLETION OF CONSTRUCTION OR REPAIRS BB&T does not encourage escrowing for completion or repairs; however, if the improvements or repairs cannot be completed for valid reason, i.e. inclement weather or shortages of materials, funds may be escrowed for 1-1/2 times the required amount to complete the work. Examples of typical items which are commonly escrowed include landscaping, wallpaper, minor trim, minor painting or minor repairs. The appraiser or the party completing the work should notify the Correspondent of the amount required to complete or repair the property. The borrower must have sufficient assets verified on deposit if he will be responsible for the repairs. The items not completed may not adversely affect the habitability or structural integrity of the property, and the incomplete items may not exceed 10% of the value of the completed mortgage premiums. Mortgage insurance and Title Insurance must not take exception to the escrow and completion normally takes two weeks to thirty days. The escrowed funds are to be held by the closing attorney. The Correspondent is required to submit to BB&T a final inspection with pictures, if applicable, to document that the repairs are completed prior to releasing the escrow funds.



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ACREAGE BB&T does not impose maximum limits on acreage. However, the following guidelines should be considered when reviewing properties with acreage: • The comparables must be within a reasonable radius, are recent closed sales and have similar land size

and valuation.

• Properties with excessive acreage are generally not considered to meet residential definition.

• No income-producing activity or potential activity whatsoever is allowed on the acreage (tree farms, orchards, boarding or training facilities, etc.)

• Land valuation should be typical for residential properties in the market. Adjustments for excess acreage for comparables should be minimal and an explanation provided on the effect these differences have on the subject property’s value or marketability.

• Additional residential structures (including homes) or significant/numerous outbuildings are not permitted. PROPERTY ACCESS • Access must be generally acceptable to community standards.

• Recorded maintenance agreement is not required. See additional requirements below for title exceptions. • At least one comparable should exhibit similar access.

• Access to property must have a legally enforceable ingress and egress. This is usually documented on

public record as an access easement and must appear on the final title policy.

• A signed private road maintenance agreement is required when a title exception exists for the subject property being located on a private road.

ZONING Property should be zoned residential. No commercial zoning permitted. INCIDENTAL SECOND UNITS Freddie Mac Appraisal Form 70 is used for properties that have a second unit that is incidental to the overall value and appearance of the subject property, provided rental income is not considered in qualifying. Examples of such properties include a house with a unit above a detached garage or a house with a guest apartment or basement unit. The appraisal must describe the second unit and analyze any effect on the value or marketability of the subject property. Comparables should also include properties with incidental second units.



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4:24 PROPERTY TYPES

LAND CONTRACTS Not permitted under any loan type or program. LOG HOMES Acceptable with the following provisions: • No excessive acreage.

• Must be typical for the area

• Comparable should reflect marketability. At least one comparable must be recent closed sale of a log

home. Rustic-styled properties will be considered as comparables on a case-by-case basis. MANUFACTURED HOUSING Not permitted if the structure meets the following definition: A structure that is built on a permanent chassis and designed to be used as a dwelling affixed to a permanent foundation. The unit is built in compliance with the National Manufactured Housing Construction and Safety Standards promulgated by the Department of Housing and Urban Development. Compliance with these standards is evidenced by a “Certification label” permanently affixed to each transportable section of the Manufactured Home. MIXED-USE PROPERTIES Not permitted. MODULAR HOMES Permitted if the structure meets the following definition: A structure that is built in compliance with the State Building Codes and is built on a steel frame (on-frame) or a wood frame (off-frame). The unit does not have a permanent chassis. It is designed to be used as a dwelling with a permanent foundation. The minimum roof pitch can be 5/12 and the Certification Label (blue & silver label) is located normally in the electrical panel box inside the home. Additionally, Modular homes must be existing construction with a 100% complete “as is” appraisal provided.

Modular homes that meet these requirements are comparable to stick-built homes and can be appraised as stick-built construction.



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4:25 INELIGIBLE TRANSACTIONS Below is a brief summary of loan transactions that are currently ineligible for financing through BB&T

Correspondent Lending. This list is not all inclusive. Refer to specific underwriting guidelines for additional details. Loans with these criteria may be eligible through other channels, including commercial or consumer outlets. This list may be modified at any time based on market conditions or bank credit policy.

AUTOMATED UNDERWRITING Loans approved through LP or DU MISCELLANEOUS Cash Out on new jumbo construction Credit Scores below 720 Loans closed without final underwriting approval from BB&T Mortgages subject to temporary buydowns Recertification of Value for outdated appraisals Resale of properties by an individual, LLC or Investment group obtained through foreclosure, deed-in-lieu and short sale or at auction within 6 months from the sale date 1031 Exchange Transactions on primary residences or second homes PRODUCTS/PROGRAMS Builder/Developer program for the purchase/refinance of current unsold inventory Construction Modification Loans Downpayment Assistance Programs Energy Efficiency Programs Foreign Nationals "High-cost" criteria Interest Only Mortgages Model Home lease back Second Mortgages PROPERTY TYPES/RESTRICTIONS 2 - 4 Unit Properties with LTVs greater than 80% 3 – 4 Unit Properties Actual or Potential Income-Producing Property (i.e. Farms, Boarding and Training of horses, etc.) Condominium Hotels/Condotels Co-ops California properties over 80% LTV/TLTV Ineligible States: Alaska & Hawaii Land Contracts Lot Loans Manufactured Homes Recently Acquired Property Restrictions (see Section 4:10 of Non-Conforming Underwriting Guidelines) Recently Listed Property Restrictions (see Section 4:10 of Non-Conforming Underwriting Guidelines) Recently Refinanced Property Restrictions (see Section 4:10 of Non-Conforming Underwriting Guidelines) Restricted Access properties Unwarrantable Condos

TITLE/DEED RESTRICTIONS Irrevocable Trusts Land Trusts Loans currently or recently titled in the name of a business, Corporation, S-Corp, Partnership, LLC or any other non-living business entity. Transfer of ownership from an LLC, Corporation, S-Corp, Partnership, or any other non-living business entity for the purpose of refinancing the loan into the prospective borrower’s name (see Section 4:5 of Non-Conforming Underwriting Guidelines). Private transfer fee covenants that do not benefit the subject property Unacceptable Title/Deed Restrictions (Marital Rights, Reversion to Seller Clauses, Life Estates).

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