Homestyle Renovation June 2008

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Copyright © 2008 Fannie Mae. All Rights Reserved. 1

Introduction to HomeStyle® RenovationLeverage future home value

in a single-close loan

June 2008

Hello, and welcome to Introduction to HomeStyle® Renovation. I’m Mary Wise, your narrator for this recorded web seminar. HomeStyle Renovation is a mortgage product from Fannie Mae that enables you, the lender, to combine a traditional first mortgage with the funds necessary for renovating, repairing, or improving a home in a single-close loan. In this 30-minute seminar, you’ll learn about the features of this mortgage, how it benefits both borrowers and lenders, and how to underwrite, commit, deliver, and service these mortgages.

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3Copyright © 2007 Fannie Mae. All Rights Reserved.

What Will You Learn Today?

At the end of this seminar, you will be able to:• Define the HomeStyle® Renovation mortgage.• Describe the Homestyle Renovation process.• Identify eligibility requirements for Homestyle Renovation

mortgages.• Look up pricing, enter into a commitment, and deliver

HomeStyle Renovation mortgages to Fannie Mae. • Describe the requirements for managing renovation

funds.

At the end of today’s seminar, you will be able to:• Define the HomeStyle Renovation mortgage.• Describe the approval and management process for Homestyle Renovation

mortgages.• Identify Fannie Mae’s eligibility requirements for these mortgages.• Look up live pricing, enter into a commitment, and deliver HomeStyle Renovation

mortgages to Fannie Mae.• Describe the requirements for managing renovation funds.

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What’s Covered in This Seminar?

Introduction to HomeStyle Renovation

Eligibility Parameters and Underwriting Guidelines

Pricing, Committing, and Delivery

Servicing HomeStyle Renovation Mortgages

Resources and Tools

Here’s our agenda for the seminar:We’ll begin by looking at what a HomeStyle Renovation mortgage is, and how it can benefit borrowers who want to purchase a home that needs some TLC or who want to improve the home that they already own. We’ll also talk about how this mortgage can benefit you, the lender. Then we’ll discuss some of the unique features of the HomeStyle Renovation mortgage. In the next section, we’ll cover some important information about underwriting HomeStyle Renovation mortgages, both in Desktop Underwriter® and outside of DU®. Then, you will learn about committing and delivering HomeStyle Renovation loans, as well as your responsibility to manage the renovation funds. Finally, we’ll list some resources that you can use to find out more details on how to underwrite, commit, and deliver HomeStyle Renovation mortgages.We recommend that you listen to the entire presentation. However, if you want, you can go directly to a specific topic by clicking the appropriate topic in this agenda.To continue with the next section, simply click the forward arrow on the player.

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What Is the Homestyle Renovation Mortgage?

The HomeStyle Renovation mortgage enables a borrower to purchase a home or refinance an existing mortgage on a home, and to finance repairs and improvements in a single loan with one closing.

So what is a HomeStyle Renovation mortgage? HomeStyle Renovation is a single-close loan that enables borrowers to purchase a home that may need repairs, or refinance the mortgage on their existing home, and include the necessary funds for the renovation into the loan balance. The loan amount is based on the “as-completed” value of the home rather than the present value.

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Why Offer Homestyle Renovation?

Benefits for Lenders• Enhance profitability by closing

loans with higher balances• Capture additional market share for

renovation of 1- to 4-unit primary residences and 1-unit second homes or investor properties

• Build a long-term client base by providing a value-added niche product

• Save deals that have repair contingencies

• Obtain faster recommendations and streamlined documentation by using Desktop Underwriter®

Benefits for Borrowers• Cost-effective way to renovate or

improve a home• One mortgage closing means lower

interest rate on first mortgage and lower costs

• With DU® submission, borrowers can qualify with higher LTVs and Expanded Approval® options

• Borrowers can qualify for CLTV of up to 105% with eligible Community Seconds® subordinate financing

• Loan amount based on “as-completed” value of the home or the cost basis, whichever is less

Both lenders and borrowers benefit from HomeStyle Renovation.As a lender, you can increase your profitability. Because HomeStyle Renovation loans are based on the as-completed value of the home, they typically have higher balances.And, you can capture additional market share by offering loans to help repair and renovate 1- to 4-unit primary residences and 1-unit second homes and investor properties. This can help you build a long-term client base. In addition, you can save deals that may have repair contingencies.And, because Desktop Underwriter® is set up to handle HomeStyle Renovation mortgages, using it can help you obtain faster recommendations with streamlined documentation.Your borrowers benefit too.The single-close HomeStyle Renovation loan is a cost-effective way to improve or repair a home, even if a borrower has little equity in the home, because one closing means a lower interest rate and costs. By getting approved through DU®, borrowers can qualify for loans with higher loan-to-value ratios and take advantage of our Expanded Approval®recommendations. With subordinate financing through Community Seconds®, borrowers can even qualify with a CLTV of 105%. Finally, because the loan is based on the as-completed value after the renovation, your borrowers can borrow more than the current value of their home.

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Loan Prep

1. Borrower works with contractor, who submits work plans and specifications to Lender.

6. Lender performs inspection to confirm work is completed, and gets lien waivers and title endorsements.

5. Contractor begins work and requests funding.2. Appraiser reviews plans

and specifications, and determines “as completed value” after improvements.

8. Once construction is completed, final inspection, title policy update, and completion certificate are completed.

3. Lender uses Maximum Mortgage Worksheet to determine mortgage amount.

4. Loan is closed and sold to Fannie Mae. Funds for renovation are placed in custodial account.

Renovation

7. Lender funds draw request with two-party check or direct funding.

Homestyle Renovation: The Process

Lenders must review plans and manage renovation funds

Work Complete

Here is an overview of the process for the HomeStyle Renovation mortgage.As you can see, there are three phases: loan preparation, renovation, and completion.During the loan prep state, the borrower must identify and work with a contractor to draw up plans and specifications for the repair and improvement work. The borrower then submits these plans to the lender.An appraiser then reviews the plans and determines the as-completed value of the home, which is used to calculate the loan amount. Fannie Mae provides the HomeStyle Renovation Maximum Mortgage Worksheet – Form 1035 – to help lenders calculate this amount.Once the loan closes, we move into the renovation stage. During this stage the work is performed and funds are drawn as needed. The renovation funds are placed in a custodial account after closing. As the contractor works, he or she requests funds. Before the lender can fund the work, he or she must inspect the work, ensure that it’s properly completed, and get the appropriate lien waivers and title endorsements. Once that’s done, the lender can issue funds either directly or with a two-party check drawn on the custodial account.When the renovation is completely finished, the final inspection takes place, the title policy is updated, and the completion certificate (Form 1036) is issued.

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Lenders Must Meet Eligibility RequirementsApproved Seller/Servicers in good standing (special approval required; use Form 1000A to apply)

Two years direct experience originating and servicing renovation mortgages in the past five-year period

Sufficient net worth to cover lender’s obligations during construction period

Brokers’ fees and compensation must be reasonably related to the value of the loan

If You Are a Broker…

To become a HomeStyle Renovation lender, you must meet some Fannie Mae requirements.First, you must be an approved Fannie Mae Seller/Servicer in good standing, and you must be approved to deliver HomeStyle loans.You must have two years of direct experience originating and servicing renovation mortgages within the last five years.Your net worth must cover your obligations as the lender during the construction and renovation period.If you meet these requirements, complete Form 1000A, the HomeStyle Approval Form, to begin the approval process. The approval is documented in your Master Agreement with Fannie Mae.If you are a broker, your fees and compensation must be reasonably related to the value of the loan.

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What Is the Lender’s Role?

• Set up custodial account for renovation funds

• Review renovation plans and documents• Confirm that required insurance is in place• Estimate the “as-completed” value• Disburse funds during the renovation,

based on completed work• Ensure that the lien waivers and title

endorsements are in place• Disburse remaining funds and interest to

the borrower when the renovation is complete

Lender maintains full recourse during the renovation

As a HomeStyle Renovation lender, you have several roles and responsibilities.You must set up and maintain the custodial account that holds the renovation funds. You must review the renovation plans and documents to ensure that they are reasonable, complete, and accurate. Insurance, including hazard insurance, title insurance, and mortgage insurance, must be in place when required. In order to determine the appropriate loan amount, you must be able to estimate the “as-completed” value of the renovated home.Once the renovation is underway, you must manage the renovation funds, disbursing funds to the contractor after ensuring that the work is completed properly. Finally, when the home renovation is complete, you must disburse any remaining funds and interest to the borrower. Keep in mind that you, the lender, maintain full recourse on the loan during the renovation phase.

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Eligibility Parameters and Underwriting Guidelines

Now we will begin discussing some of the eligibility features of HomeStyle Renovation mortgages.

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Homestyle Renovation Eligibility Parameters

Borrowers • Individual home buyers or homeowners• Investors• Non-profit organizations• Government agencies

Properties Occupancy Type• 1- to 4-unit owner-occupied properties• 1-unit second homes • 1-unit investor propertiesProperty Type• New or existing properties• “Stick-built”, modular, or log homes• Condos, co-ops, and PUDs that meet

Selling Guide requirements• No manufactured housing

Eligible borrowers for HomeStyle Renovation mortgages include individual home buyers or homeowners, investors, nonprofit organizations, and government agencies. Nonprofit organizations have special requirements: they must provide documentation of their track record in raising funds, background information on board members, copies of their 501(c)(3) status, IRS Form 990, bylaws, and purpose and resolution from the Board of Directors.Eligible properties include 1- to 4-unit primary residences, 1-unit second homes, and 1-unit investor properties. The properties can be new or existing homes that are stick built, modular, or log homes. Condos, co-ops, and PUDs that meet Selling Guide requirements are also eligible, but manufactured housing is not.

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Loan Products • FRM: 15-, and 30-year terms• ARM: 3/1, 5/1, 7/1, 10/1

Underwriting • DU: Approve/Eligible, EA-I, and EA-II recommendations

• Manual: eligibility guidelines apply

Mortgage Insurance • Standard MI coverage applies• Must cover as-completed value• Must be in effect at closing

Subordinate Financing • With eligible Community Seconds, CLTV can be 105%

• Subject to pricing adjustment

Loan Purpose • Purchase and limited cash-out refinance• Cash-out refinance not permitted

Eligible loan products include fixed- and adjustable-rate mortgages. Fixed-rate mortgages can have 15- or 30-year terms, while eligible ARMs include 3/1, 5/1, and 7/1 products. Both purchase and limited cash-out refinance loans are eligible, but cash-out refinances are not.HomeStyle Renovation loans can be underwritten in DU or manually. Fannie Mae will buy HomeStyle Renovation loans that receive Approve/Eligible, EA-I/Eligible, and EA-II/Eligible recommendations. If you underwrite these loans manually, refer to the Selling Guide for details on the eligibility guidelines.Standard mortgage insurance pricing applies to HomeStyle Renovation loans, but the MI must cover the as-completed value and be in effect at closing.Subordinate financing is allowed. If that subordinate financing is an eligible Community Seconds, the CLTV can be up to 105%. Note, though, that HomeStyle Renovation loans with non-Community Seconds subordinate financing are subject to a price adjustment.

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CLTVLTVProperty Type

80801-unit investor property

N/A90 (purchase)80 (LCOR)

1-unit co-op second home

95951-unit second home

N/A95 (purchase)90 (LCOR)

1-unit co-op owner-occupied

80803- and 4-unit owner-occupied

95951- and 2-unit owner-occupiedLTV/CLTV(DU 7.0 submission)

The charts in the slide show the allowable LTV/CLTVs for HomeStyle Renovation mortgages that are submitted through DU. With the exception of 1-unit owner-occupied residences, the LTV/CLTVs are higher for loans submitted through DU than for loans underwritten manually using our standard eligibility guidelines. Note that the limited cash-out refinance does not allow the lower of 2% or $2,000 cash to the borrower. For a complete listing of the LTV/CLTVs for HomeStyle Renovation mortgages submitted through DU, refer to Announcement 08-10, Attachment 4. A link to it is in the Attachments section of this presentation.

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90

90

N/A

7595

CLTV

680

660

660

640660

Credit Score


LTVProperty Type

751-unit investor property

901-unit second home

901-unit co-op owner-occupied


MaximumLTV/CLTV(Manual Underwriting)

This chart shows the allowable LTV/CLTVs and required credit scores for HomeStyleRenovation mortgages that are underwritten manually. Note that the limited cash-out refinance does not allow the lower of 2% or $2,000 cash to the borrower. For a complete listing of the maximum LTV/CLTVs for HomeStyle Renovation mortgages, refer to Announcement 08-10, Attachment 2. A link to it is in the Attachments section of this presentation.

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Renovations Must Add Value to The Property

Renovations must:• Be permanently

affixed to the property

• Add value to the property

For example:• Interior renovation or

improvements• Fences• Decks• Landscaping• In-ground swimming pools

Fannie Mae has few limits on the type of work it covers with the HomeStyle Renovation mortgage. The only requirements are that renovations must be permanently affixed to the property and add value to it. We do not otherwise specify the types of improvements that can be financed. For example, fences, decks, landscaping, in-ground pools, and any interior renovations or improvements qualify.

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• Renovation should be completed by a registered, licensed, and reputable general contractor

• General contractor must submit itemized plans and specifications.

• Itemized plans and specifications should describe the work, time frame, and detailed cost breakdown

• Appraiser should estimate “as-completed” value of the home after renovations, based on a review of market data, and the plans and specifications.

Contractors Must Meet Some Requirements

The renovation work should be performed by a registered, licensed, and reputable contractor. Contractors must submit all plans and specfications to you, the lender, for approval. The plans and specs should describe the work and include the time frame for completion and a detailed breakdown of all the costs. When determining the as-completed value of the home, the appraiser should use uniform appraisal forms, review the market data for similar homes, and use the plans and specs to estimate the value.

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D-I-Y Work Has Special Requirements

If borrower does D-I-Y work, financing is available for up to 10% of as-completed

value of the home

• 1-unit, owner-occupied homes only• Materials costs are reimbursed; labor

costs are not• Borrower must provide itemized bills or

receipts for materials. If not available prior to closing, borrower must document planned improvements and estimate costs

• All work over $5,000 requires inspections

There are special requirements for do-it-yourself work.First, the financing available for D-I-Y work is only 10% of the as-completed value of the home, as opposed to 50% when the work is done by a licensed, third-party contractor.D-I-Y financing is only available for 1-unit, owner-occupied homes. Material costs are reimbursed, but labor costs are not. In order to be reimbursed for materials, Do-it-yourself’ers must provide itemized bills or receipts for them. If these are not available prior to closing, then the borrower must document the planned improvements and provide cost estimates. And, if the estimated work costs more than $5,000, the work must be inspected.

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Determine a Purchase Money Loan Amount

Renovation costs can be up to 50% of as-completed value

LTV based on the lesser of:• As-completed value• Purchase price + renovation cost

Labor and materials

Soft costs (fees, permits, licenses)

Contingency reserve• Up to 10%• Mandatory for 2- to 4-unit properties• Optional for 1-unit, owner-occupied

properties

Monthly PITI payments • (up to six months)

Use Form 1035, the HomeStyleRenovation Maximum Mortgage Worksheet, to calculate the maximum mortgage amount available.

Available ateFannieMae.com.

As we’ve said, you can offer purchase-money mortgages and limited cash-out refinance mortgages under HomeStyle Renovation. Let’s discuss how to determine a loan amount for a purchase money mortgage.First, add up the renovation costs. These costs can be a maximum 50% of the as-completed value (for D-I-Y work, the maximum is 10%). The costs include: labor and materials, soft costs (such as architect fees, permits, and licenses), a contingency reserve of up to 10%, and monthly PITI payments for up to six months, if the borrower must move out of the home during renovation. The contingency reserve is used to cover unplanned expenses occurring during the renovation. It is required for 2- to 4-unit properties, but is optional for 1-unit, owner-occupied properties. The monthly PITI payments cover living expenses if the borrower has to vacate the home during renovation.The LTV for the loan is based on the lesser of the as-completed value or the sum of the purchase price and renovation costs. Fannie Mae provides Form 1035, the HomeStyle Renovation Maximum Mortgage Worksheet, to help you determine the maximum loan amount. You can download this form from eFannieMae.com.

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Here is an example of a purchase money HomeStyle Renovation transaction.In this example, we’re using an LTV of 95%. The purchase price is $190,000, and the renovation costs are $45,870, including $2,200 of soft costs, such as the architect’s fee, license fees, and permits. The contingency reserve can be up to 10% of the labor, material, and soft costs. While this is optional for 1-unit properties, we’re showing it here for illustration.If the borrower has to move out of the property during the renovation, you can add in up to six months of PITI payments to cover living expenses. So, the total cost is $235,870. The as-completed value of the home is $250,000, so we use the purchase plus renovation costs in our calculation.With a 95% LTV, the maximum loan amount is $224,076.


LTV: 95%

Purchase/Renovation CostsSales Price $ 190,000Labor/Material $ 39,500Soft Costs $ 2,200Contingency $ 4,170 Monthly PITI $ 0

Total $ 235,870

“As-Completed” Value $ 250,000235,870 < 250,000

Maximum loan amount = $224,076

Let’s Look at a Purchase Example

Determine LTV

Add up costs of purchase/renovation

Compare costs with “as-completed” value

Multiply the lower amount by the LTV

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Determine a Limited Cash-out Refinance Loan Amount

Renovation costs can be up to 50% of as-completed value

Labor and materials

Soft costs (fees, permits, licenses)

Contingency reserve• Up to 10%• Optional for 1-unit, owner-

occupied properties

Monthly PITI payments • (up to six months)

Closing costs

LTV based on the lesser of:• Payoff + liens + renovation cost• As-completed value

Use Form 1035, HomeStyleRenovation Maximum Mortgage Worksheet, to calculate maximum mortgage amount.

Available ateFannieMae.com.

Note: Cash-out refinances arenot permitted

Now let’s assume that the borrowers want to renovate a home they already own. They can use a HomeStyle Renovation loan to refinance their existing mortgage based on the as-completed value of the home rather its current appraised value. The calculations are similar for a limited cash-out refinance loan. Here, the LTV is based on the lesser of the as-completed value or the total amount of the first mortgage payoff, plus other eligible liens, and the renovation costs. As with purchase-money loans, the renovation costs can be up to 50% of the as-completed value.And, you can use Form 1035 to calculate the maximum loan amount, just as you can with purchase-money mortgages.

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In this example, we’re using an LTV of 95% for our limited cash-out refinance loan. The mortgage balance is $190,000, the eligible liens – such as a second mortgage – are $4,950, and the renovation costs are $45,870. The renovation costs include $2,200 of soft costs, such as the architect’s fee, license fees, and permits. The contingency reserve can be up to 10% of the labor, material, and soft costs. While this is optional for 1-unit properties, we’re showing it here for illustration. As you can see, we also include closing costs in this example. If the borrower has to move out of the property during the renovation, you can add in up to six months of PITI payments to cover living expenses. So, our total refinance plus renovation costs total $242,720. The as-completed value of the home is $250,000, so we use the refinance plus renovation costs in our calculation.With a 95% LTV, the maximum loan amount is $230,584.


LTV: 95%

Refinance/Renovation CostsFirst mortgage UPB $ 190,000Eligible liens $ 4,950Labor/Material $ 39,500Soft costs $ 2,200Contingency $ 4,170Closing costs $ 1,900 Monthly PITI $ 0

Total $ 242,720

“As-Completed” Value $ 250,000242,720 < 250,000

Maximum loan amount = $230,584

Let’s Look at an LCOR Example

Determine LTV

Add up costs of purchase/renovation

Compare costs with “as-completed” value

Multiply the lower amount by the LTV

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Submit HomeStyle Renovation Loans through DU

Enter the amount of the renovation on Line b.

Enter the appraised value after the improvements.

When you use DU to submit a HomeStyle Renovation loan, you enter the specific costs on the Details of Transaction screen of the Quick 1003. On Line b, enter the total amount of the renovation costs, not to exceed 50% of the “as-completed” value, or 10% if the borrower does D-I-Y work. On Line m, enter the total loan amount, which is the as-completed value of the home. Then continue entering the loan data as you normally do.

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Pricing, Committing, and Delivering HomeStyle Renovation Loans

In this section, we’ll discuss pricing, committing, and delivering HomeStyle Renovation loans.

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Use Standard Practices for Pricing and Committing

Pricing• Whole loan and MBS pricing

are the same as regular core business pricing

• View whole loan pricing with eCommitting™

• For MBS pricing, contact the Capital Markets Sales Desk

Committing• Must have a Master

Agreement• Use your main lender number

for committing• For whole loan commitments,

use eCommitting or contact the Capital Markets Sales Desk

Note: Adverse Market Delivery Charge of 0.25% applies to all loans.

First, let’s talk about pricing and committing.Both whole loan and MBS executions are available for HomeStyle Renovation. The pricing is the same as regular core business pricing. You can view live pricing for whole loan commitments with eCommitting™, but you must call the Capital Markets Sales Desk for MBS pricing.To enter into a commitment, you must have a Master Agreement that specifies HomeStyleRenovation mortgages as one of the mortgages that you are approved to sell to Fannie Mae. Use your main lender number; no branch numbers are required. You can use eCommittingor call the Capital Markets Sales Desk.Note that the Adverse Market Delivery Charge of 0.25% applies to all loans.

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Deliver HomeStyle Renovation as Whole Loan or MBS

Deliver mortgages through Loan

Delivery

• Title insurance policy dated concurrently with the recording of the mortgage

• Title insurance coverage must equal the principal amount

• Title insurance must show HomeStyleRenovation mortgage as first lien

• Hazard insurance coverage must equal or exceed as-completed value

• MI coverage must be in place before closing and cover as-completed value

You can deliver Homestyle Renovation as soon as the loan closes, before renovation has begun or is complete.

With HomeStyle Renovation, you can deliver the loan to Fannie Mae as soon as you close it. You need not wait for the renovation to begin or be completed.To deliver whole loans to Fannie Mae, use our Loan Delivery web-based application. When you deliver the loan, remember the following requirements with regard to title, hazard, and mortgage insurance.The title insurance policy must be dated concurrently with the recording of the mortgage and be equal to the principal amount.The title insurance policy must show the HomeStyle Renovation mortgage as the first lien.Hazard insurance coverage must be in place, in amounts equal or greater than the as-completed value of the property.Mortgage insurance coverage must be in place before closing and must cover the as-completed value.

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Use the Correct Special Feature Codes

118Delivered with Community Seconds®

01Recourse to lender on 120-day delinquencies where improvements are not complete

215Mortgage is HomeStyle Renovation

Use this Special Feature CodeIf this condition exists…

When you deliver a HomeStyle Renovation mortgage to Fannie Mae, be sure to use the correct special feature codes, shown in the this chart. All deliveries require special feature code 215, which identifies the mortgage as a HomeStyle Renovation mortgage.

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Include the Right Loan Delivery Documents

Mortgage Note

Assignment of Mortgage to Fannie Mae

Construction documents and addendums

Fannie Mae will purchase the loan when delivery is completeand documents have been received.

Model documents and forms are available on eFannieMae.com.

There are several documents the you need to deliver with the HomeStyle Renovation mortgage. In addition to the mortgage note and the assignment of mortgage to Fannie Mae, you must include the any construction addendums that amend the note, the construction contract, and the construction loan agreement. Keep the originals or certified copies in the loan file. You can find models for these forms on eFannieMae.com: Form 3734 is a model construction contract; Form 3735 is a model construction loan agreement, and Form 3736 is a model construction loan addendum.

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In this section, we’ll discuss the servicing requirements for HomeStyle Renovation mortgages.

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Lenders Manage Renovation Funds

Funding the Work• The full loan amount includes the renovation funds.• Renovation and contingency funds must be placed in an

interest-bearing custodial account.• All interest from the account should be paid to the borrower.

As Work Progresses• Confirm that work is being completed, and that required lien

waivers and title endorsements are completed. You may withhold a percentage of the reimbursements until completion.

• Advance funds to the contractor (two-party checks or draw advances).

• The borrower must pay for any changes not covered by the financing.

With the HomeStyle Renovation mortgage, the lender must manage the renovation funds as the work progresses. Let’s take a look at these responsibilities and how you must fulfill them.First, the full loan amount includes the renovation funds – remember, up to 50% of the loan amount can be renovation funds. The renovation funds and the contigency reserve (if any) must be placed in an interest-bearing custodial account. This escrow account must meet FDIC or NCUA standards. You may commingle funds from different borrowers in the same account.All interest from the account attributable to the renovation funds and the contingency reserve must be paid or credited to the borrower.As the work progresses, you must ensure that the work is being completed as specified. You must inspect the property and prepare a summary report. Once you verify that the work is complete, you may advance funds to the contractor with a draw advance or with a two-party check made out to the borrower and the contractor. You must have a draw request from the contractor to advance funds. If there is any default, you may withhold funds. And, you may withhold a percentage of each disbursement until the entire project is complete.Remember, once you disburse funds to the contractor, you are warranting to Fannie Mae that the specified work is complete.

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Lenders Manage Renovation Funds

When the Renovation Is Complete• The borrower and contractor complete and sign a

Completion Certificate (Form 1036 –eFannieMae.com).• Borrower provides evidence of title insurance through

completion date, showing the HomeStyle Renovation mortgage in first lien position.

• Any remaining funds in the custodial account can be used to pay down the principal or finance elective improvements.

When the renovation is completed, you and the borrower must sign a Completion Certificate. This is Form 1036 on eFannieMae.com. The borrower must provide evidence of title insurance through the completion date, showing the HomeStyle Renovation mortgage in the first lien position.If any funds remain in the custodial account, the borrower can use them to pay down the principal balance or to finance additional improvements. If the borrower chooses to do additional work, you must review and approve the additional improvements and ensure that all the extra funds are used for them.It’s important to remember, though, that the borrower must pay for any changes to the renovation that are not covered by the financing.

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Follow Fannie Mae standard servicing

guidelines

• No special servicing branch code is required.

• Minimum servicing fee: 25 bpsMaximum servicing fee: 50 bps

• The borrower must make payments, even if the renovation has problems or issues.

Servicing cannot be sold or transferred until the renovation is complete.

To service HomeStyle Renovation loans, follow the standard guidelines in the Servicing Guide for servicing conventional first mortgages. No special branch code is required. The minimum servicing fee is 25 basis points; the maximum is 50.Remember, the borrower must continue to make payments even if there are problems or issues with the renovation work.And, you cannot sell or transfer the servicing until the renovation work is complete.

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Lenders: Contact your Customer Account TeamBrokers: Contact your sponsoring lender

Find More Resources and Tools on eFannieMae.com

HomeStyleRenovation page on

eFannieMae.com

Fannie Mae Selling and Servicing Guides

Announcement 08-10

We’ve covered a lot of material today, but you will find even more detailed information on the HomeStyle Renovation page on eFannieMae.com. Some of the resources and tools you will find helpful are shown here. If you need additional information before you’re ready to begin originating HomeStyleRenovation loans, contact us. Lenders should contact their Customer Account Teams, while brokers should contact their sponsoring lenders.And remember, we’ve provided helpful links and downloadable documents in the “Attachments” section.

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Thank You for Attending!

We hope you found this recorded web seminar informative and useful in your plans to offer the HomeStyle Renovation mortgage.

We would like to hear your suggestions so that we can improve this and other web seminars.

Please complete and submit the Evaluation Form on the next slide.

•This web seminar is offered for informational purposes only. Use of some of the products or services or implementation of procedures mentioned in this web seminar are subject to, and governed by the Fannie Mae Selling and Servicing Guides, certain license agreements or other contracts with Fannie Mae. In the event of a conflict between such agreements or sources and the content of this web seminar, such agreements and sources shall govern.

Thanks for attending our recorded web seminar on HomeStyle Renovation! We hope you’ve found it informative and useful. We’re always working to improve our web seminars, and your feedback is critical to that process. Please help us provide you with the best customer education in the market by completing the course evaluation form.

Once again, thank you for attending Introduction to HomeStyle Renovation!

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