KINECTA FEDERAL CREDIT UNION CORRESPONDENT … · KINECTA FEDERAL CREDIT UNION CORRESPONDENT LENDING SELLERS GUIDE 8677H ... 9.2 MERS as the Nominee ... Kinecta has a dedicated help

1440 Rosecrans Ave.Manhattan Beach, CA 90266800.854.4600 • www.LoanKinection.com CORRESPONDENT LENDING PROGRAM

CORRESPONDENTLENDING

KFCUW8677H-03/121

KINECTA FEDERAL CREDIT UNION

CORRESPONDENT LENDING

SELLERS GUIDE8677H - 03/12



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Contents

1.0 OVERVIEW ................................................................................................................................................. 3

1.1 Key Lending Policies ................................................................................................................................................................4

1.1.b Anti-Predatory Lending Policy .........................................................................................................................................5

1.1.c Fee Policy .......................................................................................................................................................................5

1.1.d Escrow Waivers ..............................................................................................................................................................5

1.1.e Quality Control ...............................................................................................................................................................6

1.1.f Prepayment Penalty Options ...........................................................................................................................................6

1.1.g State Specific Requirements & Licensing .......................................................................................................................6

1.1.h Appraisal Ordering Process ............................................................................................................................................6

1.3 Website Information .................................................................................................................................................................8

1.3.a Using Kinecta Website ...................................................................................................................................................8

1.3.b Kinecta Web Administrative Functions ...........................................................................................................................8

1.3.c User Functions ..........................................................................................................................................................8

1.3.d Loan Status Definitions ..................................................................................................................................................9

2.0 PRICING AND LOCK INFORMATION ...................................................................................................... 10

2.1 Lock Desk and Pricing ..........................................................................................................................................................10

2.2 Rate Lock Programs .............................................................................................................................................................. 11

3.0 PRODUCTS ............................................................................................................................................ 13

3.1 Kinecta Product Matrices ......................................................................................................................................................13

3.2 Fannie Mae Guidelines .........................................................................................................................................................13

4.0 ELIGIBLE TRANSACTIONS ..................................................................................................................... 14

4.1 Borrower(s) Eligibility ............................................................................................................................................................14

4.1.a Borrower Occupancy ....................................................................................................................................................16

4.2 Loan Purpose ........................................................................................................................................................................16

4.3 Loan Amounts .......................................................................................................................................................................17

4.4 Ratios ...................................................................................................................................................................................17

4.5 Documentation Types ............................................................................................................................................................19

4.6 Eligible Properties .................................................................................................................................................................20

4.6.a Rural Properties ...........................................................................................................................................................20

4.6.b Special Housing Types ................................................................................................................................................21

4.6.c Condominium Projects ................................................................................................................................................21

4.6.d PUD Projects ..............................................................................................................................................................23

4.6.e Ineligible Properties ....................................................................................................................................................24

4.6.f Geographic Restrictions ...............................................................................................................................................26



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5.0 UNDERWRITING POLICIES AND PROCEDURES ................................................................................. 27

5.1 Automated Underwriting ........................................................................................................................................................27

5.2 Credit Package Submission Minimum Standards ................................................................................................................27

5.3 Credit Package Submission Process.....................................................................................................................................29

5.4 Tracking Loan Status on Website .........................................................................................................................................29

5.5 Conditional Approvals............................................................................................................................................................30

5.6 Mortgage Insurance ..............................................................................................................................................................30

5.7 Fannie Mae LQI Checks .....................................................................................................................................................30

5.8 Clear to Close ......................................................................................................................................................................30

6.0 CLOSING POLICIES AND PROCEDURES ............................................................................................. 32

6.1 Closed Loan Requirements ...................................................................................................................................................32

6.1.a Membership Requirements ........................................................................................................................................32

6.2 Escrow Holdback Policy ........................................................................................................................................................32

6.4 Impound/Escrow Accounts ....................................................................................................................................................33

6.5 Requirements for Trust Closings ..........................................................................................................................................33

6.6 Insurance Requirements .......................................................................................................................................................34

6.6.a Property Insurance .....................................................................................................................................................34

6.6.b Flood Insurance ...........................................................................................................................................................34

6.6.c Hazard Policy Ratings ..................................................................................................................................................35

6.6.d Title Insurance .............................................................................................................................................................35

6.7 Pest Inspections ....................................................................................................................................................................35

7.0 SUBMISSION OF CLOSED LOAN FILE ................................................................................................... 36

7.1 Submission Process ..............................................................................................................................................................36

7.2 Requirements for Closed Loan File .......................................................................................................................................36

8.0 POST PURCHASE REQUIREMENTS ..................................................................................................... 38

8.1 Seller Document Responsibilities ..........................................................................................................................................38

8.2 Post Purchase Documentation ..............................................................................................................................................38

8.3 Seller Transfer Responsibilities .............................................................................................................................................38

9.0 MORTGAGE ELECTRONIC REGISTRATION SYSTEMS (MERS®) ...................................................... 39

9.1 Creating a Mortgage Identification Number (MIN) ................................................................................................................39

9.2 MERS as the Nominee..........................................................................................................................................................39

9.3 Registering a Loan with MERS .............................................................................................................................................40

9.4 Transfer of Servicing and Beneficial Rights ...........................................................................................................................40

9.5 Assigning a Mortgage to MERS ...........................................................................................................................................40



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1.0 OVERVIEW

Kinecta Federal Credit Union’s Correspondent Lending program is designed specifically for and is open to banks and credit unions. This Sellers Guide is designed to assist Sellers with doing business with Kinecta Federal Credit Union efficiently and profitably.

Throughout this Sellers Guide, the following terms or abbreviations will be used as appropriate. The associated meaning follows each term. When more than one agency is included for loan terms and only one applies, the single agency will be stated in that instance. Otherwise the text applies generically to all.

Kinecta Kinecta Federal Credit Union

Seller Institution delivering loans to Kinecta

Agreement Correspondent Lending Agreement

Agency Fannie Mae and Freddie Mac

Govt FHA loans

USDA Rural Housing, also known as RD, RHS

CSR Kinecta Client Services Rep

AE Kinecta Account Executive for Seller

Website Admin Seller employee responsible for user maintenance

Revision Date and UpdatesAll material in this Sellers Guide reflects the latest information through December 28, 2010.

Subsequent changes will be identified by a newer revision date at the bottom left corner of each page with revised information.

Sellers should always refer to the website and the product matrices for the latest information until such information is included in the revision of the Sellers Guide.

Kinecta’s Correspondent Lending TeamSeller satisfaction is key to Kinecta’s Correspondent Lending program. Kinecta’s support begins with the Account Executive (“AE”) assigned to each institution. The AE is a knowledgeable, experienced representative who will be the primary contact for all questions related to the Seller relationship with Kinecta.

The Client Services Rep (“CSR”) is the support person within the organization for all questions and issues that arise surrounding loans that are submitted to Kinecta for underwriting and purchase. Kinecta CSRs will work directly with Sellers to assure loans are handled quickly and efficiently as they progress through the underwriting and purchase process. CSRs will review the loan documents as they are received and will contact the appropriate person at the Seller with any questions or need for follow-up documents such as underwriting conditions. Kinecta Post-Closing group will receive all trailing documents and will be the contact for those activities.

For questions related to LoanKinection, Kinecta has a dedicated help desk support organization that will provide support to the Seller’s own Website Admin, the individual within the Seller institution who will be the first level of support on all technical issues and questions related to website access.



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Kinecta Contact Information

Correspondent Operations Toll Free: 800.854.4501 option 4

Lock Desk [email protected]

Secure Fax 310.536.3249

Appraiser Approval 310.643.2513 Email: [email protected]

Website Support 800.854.5401 option 3

Mailing Address Kinecta Federal Credit UnionAttn: Correspondent Lending Department2100 Park PlaceEl Segundo, CA 90245Transbox # RD0720

Bailee Letter & Note Delivery Send to Mailing Address above, Attn: Correspondent Operations Manager

Mortgagee Clause Kinecta Federal Credit Union, ISAOAAttn: Loan Servicing DepartmentP.O. Box 25506Fort Worth, TX 76124

Insurance Endorsements Kinecta Federal Credit Union, ISAOAAttn: Loan Servicing DepartmentP.O. Box 25506Fort Worth, TX 76124

ID Numbers MERS Org ID: 1008215

1.1 Key Lending PoliciesThis section of the Sellers Guide provides an overview of Kinecta’s general policies related to the Correspondent Lending program. Sellers will follow Fannie Mae Guidelines and find product-specific requirements and guidelines in the Product Matrices located on the Kinecta Correspondent Lending website.

1.1.a Compliance Policy Kinecta purchases loans eligible for sale in the secondary market, meeting established product guidelines. Product requirements and restrictions, product features, and required documentation apply consistently to all mortgagors. Specifically, Kinecta purchases loans without regard to the borrower’s race, color, national origin, religion, sex, marital



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status, handicap, age (provided the applicant has the legal capacity to enter into a binding contract), the fact that all or part of an applicant’s income is derived from any public assistance program, the applicant has exercised any rights under any federal or state consumer credit protection act, or on the basis of any other consideration prohibited by law or regulation for real estate lending and loan servicing.

The Seller must be aware of, and in full compliance with, all federal, state, and local laws that apply to any use of its origination or selling practices or other business practices (including the use of technology). Among other things, this means that the Seller must comply with any applicable law that addresses fair housing, fair lending, equal credit opportunity, truth-in-lending, wrongful discrimination, appraisals, real estate settlement procedures, borrower privacy, data security, escrow account administration, mortgage insurance cancellation, electronic signatures or transactions, predatory lending, terrorist activity, or the enforcement of any of the terms of the mortgage.

1.1.b Anti-Predatory Lending PolicyKinecta does not purchase mortgage loans that are subject to the Home Ownership and Equity Protection Act of 1994 (HOEPA), as described in Section 32 of Regulation Z, In addition, Kinecta does not purchase loans meeting the definition of “residential mortgage transaction,” as defined under the Truth-in-Lending Act (a purchase-money loan secured by borrower’s principal residence), that have either an annual percentage rate (APR) or total points and fees payable by the borrower that exceed the applicable thresholds under HOEPA.

Kinecta does not purchase mortgage loans that meet the definition of “high cost,” “high risk,” “covered,” “subprime,” or any similar designation under state or local law, regardless of whether any provision of such state law is preempted by federal law with respect to a particular loan or for a particular originator.

Kinecta requires the Seller to provide documentation that each mortgage loan meets applicable Net Tangible Benefit requirements, including disclosures required by the state in which the subject property is located.

1.1.c Fee PolicyThe Seller must provide loan applicants with all required disclosures. Fees charged must be in compliance with all applicable laws and regulations, including those governing permissible fees, maximum fee amounts, timing, and disclosures. Kinecta will charge certain fees to Sellers on all loans purchased. Fees are published on Kinecta’s rate sheet.

Because Kinecta by policy does not purchase loans that are considered to be high-rate or high fee, loans subject to HOEPA or any state or local high cost law, or loans that would be predatory in the jurisdiction where the property is located, as part of the purchase process Kinecta will run an audit of the fees charged on the loan. Kinecta will provide a notification if the fees are in excess of the allowable amounts, but any testing performed by Kinecta does not reduce or eliminate each Seller’s obligations under the agreement should there be a subsequent finding that the loan is a high cost loan.

1.1.d Escrow Waivers Kinecta requires that escrow (impound) accounts be established for each loan, subject to the following state-specific exceptions:

• CA Escrow account required if LTV > 90%. If LTV is less than or equal to 90%, an escrow account is not required.

• IL Escrow account requirement waived if LTV ≥ 65%. If LTV is < 65%, an escrow account is not required.

In all other states, Kinecta will allow a borrower-requested waiver of the escrow account requirements (if permitted by



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the applicable investor) for conventional loans on primary residences with an LTV less than or equal to 80%.

The pricing for loans with borrower-requested escrow waivers may include an increase to rate and/or pricing, as noted on the applicable product matrix.

1.1.e Quality Control Kinecta will apply its Quality Control Policy and Procedures to loans originated by Sellers and will report findings as appropriate to Sellers for their use in prevention of similar occurrences. Kinecta requires that Sellers perform quality control procedures, as specified in the plan submitted to Kinecta, to ensure the quality of the originations submitted to Kinecta for underwriting and purchase.

If any irregularities or discrepancies are discovered during Kinecta’s routine review, Kinecta will expand the scope of the quality control reviews on Seller’s loans to ensure all problem areas are identified.

Kinecta will provide quarterly reports to Sellers. Sellers will be required to respond to any findings of moderate risk or greater or to any indications of trends toward risk findings. Sellers should investigate and respond with their results and what actions will be taken to correct the situations.

Serious issues with quality and/or material findings trends or failure to respond to the report findings can result in termination of the Seller’s approval with Kinecta.

1.1.f Prepayment Penalty OptionsKinecta does not purchase loans with prepayment penalties.

1.1.g State Specific Requirements & LicensingThe Seller and Mortgage Loan Originator must meet all licensing/registration requirements for the state in which the subject property is located, unless exempt from such requirements.

Various states and some local municipalities have passed laws regarding mortgage lending activities. Sellers must follow all the laws in effect where the subject property is located, and are responsible for all required documentation related to state specific requirements.

1.1.h Appraisal Ordering ProcessFannie Mae and Freddie Mac issued Appraiser Independence Requirements (AIR) that were effective on October 15, 2010. Each Seller that sells loans to Kinecta must ensure that its origination appraisal practices are in compliance with the AIR and represents and warrants to Kinecta that any appraisal and all appraisal practices used in origination of a loan (Conventional or Government) conform to the requirements of Fannie Mae and Freddie Mac and comply with AIR.

Sellers must order appraisals using one of three processes. The appraisal must either be ordered thru the Kinecta Appraisal Department, thru an AMC that is AIR compliant, or via the correspondents own AIR compliant process. Loans with appraisals that do not conform to the following guidelines are not eligible for purchase under the Correspondent Lending Program.

Kinecta orders the Appraisal:To facilitate the appraisal ordering process, Kinecta has established the following procedures:

• The Appraisal Request form and fee schedule is available on the Kinecta wholesale / correspondent website.

• An Appraisal Fee Card Authorization form is available on the Kinecta website.



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• Sellers will complete the Appraisal Fee Authorization form for their corporate credit card. NOTE: Payment will not be processed (debited/credited) unless the loan is cancelled, denied or in process 60 days. Otherwise, payment for the appraisal will be included in the purchase transaction of the loan from the correspondent.

• Sellers will complete the Appraisal Request form and email it along with the Appraisal Fee Authorization form to the following email address to request appraisals: [email protected]

• The Kinecta Appraisal Department will reply by e-mail to the requestor within 24 hours, providing a receipt of request and confirmation of appraisal order, fee and turn time.

• The appraisal will be ordered by a designated employee of the Kinecta Appraisal Department upon receipt of payment information and the completed Appraisal Request Form.

• All appraisals will be ordered in Kinecta’s Name, received by Kinecta and forwarded to the Sellers upon receipt.

• All appraisal requests will be tracked by the Kinecta Appraisal Department to ensure timely response and good customer service. Sellers should direct questions on appraisal status to the assigned CSR who can provide immediate updates.

• Once the appraisal has been received and reviewed, the Kinecta Appraisal Department will email the appraisal to Sellers. Sellers are responsible for providing a copy of the appraisal to the borrower(s) no later than three days prior to closing.

• Sellers will be notified by the Appraisal Department that the appraisal and desk review are ready to process and both will be filed in a designated file cabinet for access by the assigned underwriter.

AIR ComplianceThe appraisal will be ordered with an approved appraiser (approved retail, wholesale or via an AMC/Appraisal Management Company). Appraisals will include the required verbiage indicating compliance with the Appraiser Independence Regulations (AIR). Appraisals obtained in compliance with the AIR are portable, that is, it may be transferred from one lender to another. The appraiser will be provided with the Appraisal Request form (contact and property information) but no loan amounts or target values will be provided except in the case of a purchase transaction, when the purchase price and agreement and/or escrow instructions will be provided. The Appraisal Department will direct communication and correspondence with and between the approved appraiser/vendor during the appraisal process to ensure compliance with the AIR. Any adverse findings, including non-compliance with the AIR are subsequently reported to the appropriate State or Federal agency.

Correspondent Orders the Appraisal

AIR Compliant AppraisalsKinecta requires that any appraisal obtained thru a correspondents AIR compliant ordering process meet the following requirements:

1. The appraisers must be certified with at least 5 years experience.

2. The appraiser must be located 30 miles or less from the subject property unless the property is a rural property.

3. The appraisal must contain a property profile and the most recent listing (non- copywrited/non-disclosure states) of the subject and non-copywrited MLS of all comps whenever available.



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Kinecta will accept appraisals that Correspondents order from AMC’s as long as they are AIR compliant. If an AMC is used, the AMC’s must be directed to order the appraisal using the following requirements:

1. Appraisers must be certified with a minimum of 5 years experience

2. Appraiser must be located within a maximum of 30 miles of the subject property when the property is in a suburban area or an area that is built up greater than 25%.

3. Property profile and most recent listing (non-copywrited/non-disclosure states) of subject, and non –copywrited MLS of all comps whenever available.

If an appraisal is submitted to Kinecta that has not been ordered thru the Kinecta Appraisal Department, Kinecta will review the appraisal as part of the underwriting process. If the review is not completed by the time the loan is underwritten, the loan will be conditioned with a UTR PTD condition for an appraisal review. If additional information or a Field Review is required, it will be ordered and coordinated by the Kinecta Appraisal Department. It is highly recommended that appraisals be submitted as early in the loan process as possible. Appraisals can be submitted directly to the Kinecta Appraisal Department via emails at: [email protected].

1.3 Website InformationSellers will have full access to a wide array of information on the Kinecta website. From the main website address below, there are links to product matrices, rate sheets, manuals, forms, vendors, informational documentation, and Correspondent Lending team contact information. Secure login and password will be required to access LoanKinection for registering and locking loans, but other information is readily available to any of the Seller’s employees, including an instruction manual for the use of the Kinecta website functionality.

Website Address http://www.LoanKinection.com

Technical Support: 866.855.1990

1.3.a Using Kinecta WebsiteSellers will find the Kinecta website is a valuable tool to assist in their mortgage origination process. The website also provides a convenient way to do business with The Kinecta Correspondent Lending division. Launching LoanKinection allows users to search for loan programs that fit their borrowers, manage the registration and lock process with appropriate security, upload files, view status and pipeline and access DO directly from the website.

1.3.b Kinecta Web Administrative FunctionsSellers will designate a person to serve as the administrator for the LoanKinection (“Website Admin”). The responsibilities of the Website Admin will be to enter and update login information for the individuals at Seller’s institution who will have access to the website. The Website Admin will also be the primary contact for questions from users and as the first level of problem resolution for users. The Website Admin will contact the assigned CSR for initial assistance in problem resolution or for any questions regarding the website content or navigation.

1.3.c User Functions The LoanKinection User Guide available on the website provides detailed instructions on how to take advantage of the features of Kinecta’s technology, including screen shots to assist users. Below is a list of functions users can perform on the Kinecta Correspondent Lending website:

• Access product and pricing Information



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• Match loan applications to products

• Export the Fannie Mae 3.2 loan file to Kinecta

• Register and lock loans via export or data entry

• Send re-lock-/lock extension requests to the Lock Desk

• View and print lock confirmations

• Obtain updated loan status

• Upload underwriting and closed loan documents to Kinecta

• Review Underwriting conditions and the status of each

• View pipeline of loans

• Access Forms Library for common forms

• Access Product Matrices

1.3.d Loan Status DefinitionsThe following table reflects the loan status and associated definitions used for pipeline reports that are available on the Kinecta Correspondent Website to assist the Seller in tracking progress on submitted loans.

Loan Status Definition

Registration Seller has registered or locked a loan with Kinecta.

Registration Received Kinecta has received Underwriting Submission package in Set-up.

Underwriting Loan has been submitted to Underwriting.

Underwriting Suspense Loan has been reviewed by underwriter and there are pending suspense items that must be cleared before a decision can be made.

Underwriter Conditional Approval Loan has been approved and is subject to one or more conditions.

Underwriting Denied Loan has been underwritten and denied.

Underwriting Clear to Close Loan has been Underwritten, all suspense items have been cleared, conditional approval has been issued and loan is clear to close.

Closed Loan Received Kinecta has received the Closed Loan File.

Purchase Review Loan is being reviewed in Pre-Purchase Audit queue.

Purchase – Suspend Purchase Audit review is complete, and suspense items need to be cleared by Seller.

Purchase – Denied Purchase Audit is complete, but loan has been denied for purchase.

Purchase – Approved Loan is approved for Purchase.

Purchase Wire Prep Loan has been sent for Purchase Wire.

Purchased Kinecta has wired funds to Seller.



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2.0 PRICING AND LOCK INFORMATION

Introduction to Best Efforts Rate Lock Program The Kinecta Correspondent Lending Lock Policy outlines the terms by which Sellers can commit loans for purchase to Kinecta. When Sellers lock a loan with Kinecta, the interest rate, pricing, and terms are protected through lock expiration. Sellers are required to deliver a complete loan package by the expiration of the rate lock.

Kinecta offers only best efforts locks and provides interest rate protection for the purpose of pricing a mortgage application for the borrowers. Once Sellers lock a loan with Kinecta they are obligated to make the best professional effort to close the loan. Once a loan is closed under Kinecta’s best efforts lock program, delivery becomes mandatory.

Kinecta monitors lock pull-through from our Correspondent Lending partners. Consistent lock pull-through is a requirement to remain an approved Kinecta Seller. Kinecta reserves the right to take all measures necessary (including termination of Seller eligibility) to maintain acceptable lock pull-through, as determined by Kinecta management policy.

Registration/Rate Lock and Lock ConfirmationSellers are encouraged to register and lock loans using LoanKinection for immediate availability and convenience in printing the lock confirmation. Rate locks will be priced based on the rates in effect at the time a lock is requested. LoanKinection will display the confirmed lock, which may be printed or downloaded. Sellers may submit lock requests via email, and a confirmation will be issued via email. Sellers must review the confirmation upon receipt and contact the Lock Desk regarding any discrepancies.

NOTE: Confirmation of a rate lock does not constitute loan approval. All loans must meet Kinecta lending criteria and the product matrix eligibility guidelines.

Exceptions or Renegotiations Kinecta strongly encourages loans closing under original lock terms. All exception or renegotiation requests must be made thru the Seller’s AE who will request approval. Each renegotiation or exception will be evaluated by its merits on an individual case-by-case basis based on the Lock Policy.

Cancellations Sellers should notify the Kinecta Lock Desk as soon as possible when a locked loan is cancelled.

Errors and OmissionsThe Secondary Marketing Department is responsible for providing updated loan program information and accurate pricing. Kinecta reserves the right to correct any published pricing or product error.

Preparing to Close LoansAll loans must be registered before Kinecta can order an appraisal or underwrite the file. All loans must have a valid unexpired lock when the closed loan file is delivered for purchase.

2.1 Lock Desk and PricingThe Lock Desk hours of operation are: 7AM to 5 PM (Pacific)

The e-mail address for the Lock Desk is: [email protected]

The phone number for the Lock Desk is: 310.643.2284



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Daily PricingInterest rates are set generally by 8:00 AM (Pacific) each day. Kinecta reserves the right to change rates at any time during the day.

Pricing ProtectionLock-in requests will generally be accepted until 6 PM local Seller time (Pacific Time, Mountain Time, Central Time, and Eastern Time) however this time is published in the lock policy and on rate sheets. Kinecta offers price protection only during these stated hours. Lock requests submitted after that time may be subject to the next day’s pricing.

Intra-Day Price ChangesKinecta reserves the right to change pricing without advance notice at any time. Kinecta Secondary Marketing make its best effort to notify Sellers of new pricing when there is an intraday price change; however, Sellers will receive the pricing in effect when loans are locked on the website. Sellers are responsible for verifying the lock confirmation form as soon as it is received and must contact the Lock Desk immediately if there is a discrepancy.

2.2 Rate Lock ProgramsKinecta offers the Sellers a variety of lock periods for most products on the rate sheet. Specific information regarding rate locks, extensions, renegotiations is provided on the following pages in this Seller Guide and is available on the LoanKinection website. In the event of a discrepancy, the Correspondent Lock Policy supersedes the information in this Seller’s Guide.

Rate Locks• All 15 Day Lock Requests for Purchase Transactions must be in a “Submitted” status indicating Kinecta has

received a complete loan file submission (including appraisal).

• To be eligible for 15 Day Lock Requests for Refinance Transactions loans must be in a “Clear to Close” status indicating Kinecta has signed off on all PTD conditions.

• Loans with 30 Day Lock Requests require receipt of a complete loan file within 10 days of the lock date. Locks will be cancelled if the complete file is not received unless the lock has been extended. Extensions will be subject to additional fees and processing time.

• Loans with 45 Day Lock Requests require receipt of a complete loan file within 20 days of the lock date. Locks will be cancelled if the complete file is not received unless the lock has been extended. Extensions will be subject to additional fees and processing time.

• All files must be delivered and purchased within five (5) business days of the lock expiration date.

Rate ExtensionsExtension fees are posted on the Kinecta Correspondent ratesheet.

• Lock extensions for a minimum of 5 days are available for active locks; expired locks may not be extended.

• Multiple lock extensions may be requested; however, the cumulative lock extension maximum term is 30 days.

• Secondary Marketing approval is required for:

– Lock extensions exceeding the 30 Day maximum

– Lock extensions without a full loan file delivery



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Rate Lock Renegotiations• Only Active, unexpired locks may be eligible for renegotiation if they are at or beyond “Submitted” status.

• Only one lock renegotiation per loan is allowed. Lock expiration terms will not be amended.

– If market pricing for currently locked interest rate is 0.750 – 1.250 better than locked pricing, the interest rate will be reduced by 0.125% and pricing will be reduced by 0.125%.

– If market pricing for currently locked interest rate is > 1.250 better than locked pricing, the interest rate will be reduced by 0.25% and pricing will be reduced by 0.250%.

• Secondary Marketing approval is required for renegotiations on re-locked loans.

Rate Re-Locks• Any lock that has expired may be re-locked as follows:

– The worse of current market 30-day pricing, OR

– Original lock date 30-day pricing less 50 basis points.

• Any lock that has expired or has been cancelled by either the originator or Kinecta will be eligible for current market pricing 45 days after the greater of the lock expiration date or the cancellation date.

Rate Lock Program Changes• Active locks switching loan programs from an Agency FX to Agency FX (e.g., 30yr FX to 20yr FX) or Agency ARM

to Agency ARM (e.g., 10/1 Libor ARM to 5/1 Libor ARM) will be priced using the pricing on the original lock date.

• All other loan program change requests for actively locked loans will be evaluated and repriced by Secondary Marketing (i.e.: Fixed to ARM or ARM to Fixed programs)

Notes• Locks with weekend or holiday expiration dates will expire on the first business day following the stated expiration

date; this will be the effective expiration date.

• If the loan amount changes by more than 10% of the original principal balance, the lock will be subject to the worse of current market or original lock date pricing.

• Extension requests must be submitted as follows:

– Requests must be submitted by 3:00pm Pacific Time/ 5:00pm Central Time

– Requests must be received 48 hours prior to Lock Expiration

– West Coast Operations Center email: [email protected]

– Midwest Operations Center email: [email protected]

• Lock cutoff time is 11:59pm Pacific Time for all Loan Kinection locks

• Secondary Marketing must approve any exception to the Correspondent Lock Policy.



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3.0 PRODUCTS

Sellers will have access to a variety of lending products for their borrowers, and the Kinecta website functionality will include product matching and pricing. Sellers will follow Fannie Mae guidelines for all loans sent to Kinecta for purchase. In addition, the loans must meet the product-specific requirements and guidelines in the product matrices located on the Kinecta Correspondent Lending website.

Files uploaded to LoanKinection will be matched to product matrices for eligibility. LoanKinection will return a listing of the possible programs for the terms requested. Sellers must verify that the loan meets all the specific requirements in the DO findings and product matrices as listed on the website before sending the file to Kinecta for underwriting.

3.1 Kinecta Product MatricesKinecta Product Matrices may be accessed at the following link: http://www.kinectaxchange.org/wholesale/correspondent_mortgage_matrix.pdf

3.2 Fannie Mae GuidelinesSellers with access to ALLRegs can access the entire Fannie Mae Seller Guide. For convenience, specific Fannie Mae Guidelines may be accessed from Fannie Mae’s website at the following links:

Fannie Mae Eligibility Matrix https://www.efanniemae.com/sf/refmaterials/eligibility/

Fannie Mae Conforming Loan Amounts: https://www.efanniemae.com/sf/refmaterials/loanlimits/

Fannie Mae Condo/PUD Approvals: https://www.efanniemae.com/sf/refmaterials/approvedprojects/

Fannie Mae ARM Matrix: https://www.efanniemae.com/sf/refmaterials/armmatrix/pdf/armmatrix.pdf



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4.0 ELIGIBLE TRANSACTIONS

Kinecta will purchase Fannie Mae eligible and non-conforming products that meet the quality standards required by private institutional investors or agencies, including conformity to maximum and minimum loan amounts and loan-to-value (LTV/CLTV) ratios. Must meet Kinecta Product Guidelines/overlays as well. No LP Underwrites accepted.

The information in this section is based on generally accepted guidelines for agency products. Specific products may have more detailed requirements, and Sellers should refer to Kinecta Product Matrix, Fannie Mae guidelines and Fannie Mae DO findings to assure all requirements are met. For information regarding eligibility for a specific loan product, refer to the appropriate product matrix available on the Kinecta website: www.LoanKinection.com

Eligible transactions are defined in more detail in the following sections:

4.1 Borrower Eligibility

4.2 Loan Purpose

4.3 Loan Amounts

4.4 Ratios

4.5 Documentation Types

4.6 Eligible Properties

Sellers are responsible for assuring loans submitted to Kinecta for purchase meet all state-specific requirements.

4.1 Borrower(s) Eligibility

Membership RequirementsBecause credit union regulations restrict the lending of funds to members of the credit union, Sellers must arrange with the borrower(s) to become members of Kinecta Federal Credit Union. The borrowers must be members before the loan is purchased. Membership application information is available on the Kinecta website. The AE can assist with any questions related to becoming a member.

Legal EntityKinecta will purchase mortgages made to natural persons only. If the borrowers are another type of legal entity or hold title in another type of legal entity, the loan is not eligible for the Kinecta Correspondent Lending program.

Ineligible borrowers:• Corporation or S corporation

• General Partnership

• Non-revocable inter vivos trusts

• Life Estate

• Land Trust

• Real Estate Syndication

• Borrowers in Non-Arms Length transactions

• LLCs



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Co-BorrowersCo-borrowers are allowed on mortgages. Refer to specific product matrix for complete information as to occupancy requirements, income used for trailing spouses and other particular situations.

Signing RestrictionsUnless specific product matrices restrict the use, Kinecta will accept a Limited (or Specific) Power of Attorney that references the property and authorizes the attorney-in-fact to enter into a real estate transaction to the mortgage property. Kinecta will not allow loan documents to be signed on the behalf of any borrower, non-borrower spouse, or vested owner by any means other than the Specific Power of Attorney. The POA must be reviewed by Kinecta underwriter prior to closing. POA requirements are outlined in the Underwriting Policy and Procedures section of this Sellers Guide.

Ownership/TitleholdersTitle to the property must generally be in the name of individual borrowers only. Some programs allow ownership by revocable inter vivos trusts. Additional requirements for closing mortgage loans in the name of a Revocable Trust are included in the Closing Policies and Procedures section of this Sellers Guide.

Borrower’s AgeAll borrowers must have reached the age at which the mortgage Note can be legally enforced in the jurisdiction where the property is located. There is no maximum age limit for borrowers. All applicants are evaluated on their ability to meet Kinecta’s underwriting guidelines.

Non-Borrowing SpouseWhen a married applicant qualifies for a mortgage based on his or her own financial capacity (without any assets or income of his or her spouse being taken into consideration), the spouse does not need to sign the security instrument or note. However, if the spouse is on title to the property, the spouse must sign the security instrument, Truth-in-Lending Disclosure Statement, and Notice of Right to Cancel (if applicable). The spouse must also sign these documents in any state that grants community property, dower, curtesy, or homestead rights to the spouse, regardless of whether the spouse is on title. As an alternative for non-title holding spouses, the spouse may sign the documents necessary to waive his or her marital property rights. However, the seller is responsible for meeting all state requirements.

Non-Arm’s Length TransactionsA non-arm’s length transaction occurs when a personal or business relationship exists between the borrowers and the property seller, builder or lender. These may be termed “Borrower is an Interested Party.” These transactions are not eligible for purchase by Kinecta. Suggest the following additional language to this section for Agency loans as sourced from Fannie Mae guidelines: “Non-arms length transactions are purchase transactions in which there is a relationship or business affiliation between the seller and the buyer of the property. Kinecta will allow non-arm’s length transactions for the purchase of existing properties for Agency loans only on a case-by-case basis. For the purchase of newly constructed properties, if the borrower has a relationship or business affiliation (any ownership interest, or employment) with the builder, developer, or seller of the property, we will only allow purchase mortgage loans secured by a primary residence. We will not allow Purchase mortgage loans on newly constructed homes secured by a second home or investment property if the borrower has a relationship or business affiliation with the builder, developer, or seller of the property.”



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Residency and Immigration StatusKinecta will purchase loans only if the borrower and co-borrower are either United States citizens or Permanent Resident Aliens. Documentation will be required according to applicable investor guidelines.

Multiple Mortgages to the Same Borrower(s)The occupancy of the property being financed determines how many other financed one-to-four family properties the borrower may own. For all loans, the borrower’s primary residence, subject property and any properties owned separately by a co-borrower must be included in the total. Joint ownership in residential property is considered the same as total ownership for limitation purposes.

Maximum Liability to the Same Borrower(s) Sellers should refer to agency guidelines and product matrices for the maximum number of mortgages permitted to one borrower.

4.1.a Borrower OccupancyKinecta will purchase loans with collateral that may be a primary residence, second home, or investment property. As a credit union, Kinecta must restrict second homes/vacation homes and investment properties to a 15-year maturity term. If the borrower intends to use the subject property as a “future primary residence” and is willing to attest to this intention, a longer maturity term is permissible, provided the property is a single family residence. Borrower(s) are required to provide a letter of explanation as to their intent to utilize the subject property as a Future Primary Residence. Refer to product matrices for further clarification of the requirements.

4.2 Loan PurposeKinecta will purchase transactions only for the purpose of purchasing property, refinancing rate and term of an existing mortgage, and cash-out refinance transactions.

Purchase TransactionsPurchase money transactions (“purchases”) are transactions with the proceeds used to finance the purchase of the subject property, as defined in a sale and purchase agreement executed by the borrower and property seller.

Second Lien TransactionsKinecta does not purchase second lien loans but will allow concurrent closings of second mortgages or HELOCs with the following restrictions:

A. Second Mortgages – Only one subordinate lien mortgage is allowed, and it must meet the following terms:

• Must be subordinated if already in place at the time of closing of first mortgage

• Must be fixed rate, fully amortizing

• No negative amortization

• Must be a standard market program

• Must be a standard market rate at time of closing

• Must have minimum 5 year term unless the note fully amortizes under a level payment plan

B. HELOCs – Must be subordinated to the first lien in favor of Kinecta. For underwriting purposes, ratios are calculated based on 1% of the maximum line available, regardless of the amount currently owed.



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Refinance TransactionsIn a refinance transaction, the proceeds are used to satisfy the repayment of an existing debt that has, as borrowers, the current legal owners of the property securing the loan. There must be at least one borrower on the new loan who was a borrower on the existing loan being refinanced. The CSR can assist with determining whether the transactions meets Continuity of Obligation requirements for refinance transactions.

A refinance transaction can also include loans where the property owner obtains a mortgage on a property that does not have a mortgage lien against it.

Eligible Refinance TransactionsKinecta will purchase the following refinance transactions which are eligible according to agency guidelines:

• Rate-and-term

• Cash-out

Ineligible Refinance TransactionsKinecta will not purchase the following refinance transactions.

• Restructured Loans

• Short Payoffs

• High-Cost Loans

Special Refinance File RequirementsRegardless of Automated Underwriting System (AUS) approval findings, a payoff demand statement is required in each loan file on all refinance transactions. The payoff demand statement must reflect the following about the loan being paid off:

• Is not more than 30 days delinquent

• Does not contain charges associated with default/forbearance

• Does not indicate a curtailment of principal or interest (for example, a short pay)

• Meets the mortgage derogatory requirements

4.3 Loan AmountsRefer to product matrices for complete details on eligible loan amounts. The maximum loan amount will be the same as the conforming loan limits and high cost limits established by agency guidelines or as reflected on the product matrices for non-agency products.

4.4 Ratios

General LTV/CLTV/HCLTV Ratio GuidelinesKinecta underwriters will apply Fannie Mae’s guidelines for ratios for loans that are underwritten manually. Refer to Eligibility matrices for complete information.

The following calculations apply when determining loan-to-value (LTV) and combined-loan-to-value (CLTV/HCLTV) ratios.



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• LTV: Loan-to-value is determined by dividing the loan amount by the lesser of the purchase price or appraised value.

• * CLTV/HCLTV Ratio: Combined loan-to-value ratio is determined by dividing the sum of the unpaid principal balance of the first mortgage and the unpaid principal balance of all subordinate mortgages by the lesser of the sales price or appraised value For HELOCs, use the maximum line amount to calculate the HCLTV ratio.

Ratios – Housing ExpenseThe maximum monthly housing expense-to-income ratio for mortgages is AUS-driven but must also conform to product matrices. Refer to the specific product matrix for additional requirements.

Housing Ratio CalculationThe monthly housing expense is the sum of the following:

• The fixed installment for the mortgage in the borrowers primary residence

• Escrow deposits for the hazard insurance premium

• Real estate taxes and mortgage insurance premium

• Homeowner’s Association dues, including utility charges that are attributable to the common areas but excluding any master utility charges that apply to the individual units

• Ground rent

• Special assessments

• * Any payments required for subordinate financing

– If the subordinate financing is an interest-only fixed-rate closed-end second, monthly payments must be based on the fully amortized, fully indexed rate to qualify the borrower.

– If the subordinate financing is a HELOC (new or the subordination of an existing HELOC secured by the subject property), monthly payments equal to 1% of the total line amount must be used in qualifying the borrower. For HELOC’s with written evidence of a line modification, the modified limit will be used to calculate the 1% monthly payment.

NOTE: For HELOCs use the fully indexed rate with 20-yr amortization to calculate the payment for use with ratios.

DTI Ratio CalculationThe DTI ratio will be calculated by DU. Generally, the following items are included in the calculations:

• Monthly housing expense

• Payments on all installment debts with more than 10 months of payments remaining. The only exception to this policy is that payments on all automobile and non-automobile leases, regardless of the remaining number of payments, must be included in the calculation of recurring monthly expenses.

• Alimony, child support, or maintenance payments with more than 10 months remaining

• Monthly payments (or 5% of the outstanding balance if a monthly payment is not provided) on revolving accounts, regardless of the balance

• Aggregate negative net rental income from all investment properties owned

• Monthly mortgage payment for second home



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• Payments on all deferred loans (for instance, student loans and loans in forbearance). In all cases, deferred loan payments must be included as a recurring monthly expense. If a payment is not indicated on the borrower’s credit report, a copy of the borrower’s payment letter or forbearance agreement is required to determine the payment amount to use in calculating the borrower’s total monthly obligations.

• Business expenses incurred by the borrower that are not reimbursed by the employer must be included in the debt ratio calculation. A 24-month average of the business expenses reported in Schedule A and IRS Form 2106 attachments to the borrower’s signed tax return is required. This average must be subtracted from the borrower’s monthly income.

4.5 Documentation TypesThe type of loan documentation used to verify the borrower’s employment, income and asset information in the loan application varies depending on the loan product and product requirements. Not all documentation types can be used for all loan products. Always refer to the specific loan product matrix, Fannie Mae guidelines, and the DO findings report to determine documentation eligibility.

Note: Other loan documentation, such as the appraisal and credit report, is generally standard for most loans.

IRS Form 4506-TThe Seller is required to submit an IRS Form 4506-T completed and signed at application, with the transcripts in the credit file submitted for underwriting. A second signed and executed IRS Form 4506T will be required at closing and must be delivered to Kinecta with the closed loan package. Sellers must provide 2 full years of tax returns for each borrower, both personal and business returns; if most recent tax year returns have not been filed, Sellers must obtain returns for the previous 2-year filing periods. (Refer to Loan Product Eligibility Matrices for any additional 4506T processing requirements)

Helpful Hints for completing the 4506T

• Multiple Borrowers: Multiple 4506T must be submitted

• Married Borrowers: If taxes are filed separately, complete two 4506T’s. If taxes are filed jointly, complete on 4506T with both Borrowers listed (items 1 and 2; only one signature is required.

• If the address on the filed tax returns is different from the current address, line 4 must be completed with the address on the tax returns.

• All relevant fields must be completed on the 4506T.

• Don’t forget to specify W-2 and 1040 in line 6.

• If you complete the 4506T by hand, make sure it is complete, accurate and legible. It is recommended that you complete the form electronically using Arial 12pt or larger font.

Documentation for Conforming and Non-Conforming LoansFull documentation is the only eligible document type for Conforming and Non-conforming loan products. Certain loan products may contain criteria that are more restrictive and different from the standard guidelines listed in this section. Always refer to the appropriate product matrix on the website for documentation eligibility and specific requirements for loan documentation. Sellers must provide documentation as required in the AUS findings.

Requirements for self-employed borrowers will generally require personal tax returns, in addition to the IRS transcripts accessed by the IRS Form 4506-T. In addition, some product matrices may call for business tax returns and audited



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Profit & Loss statements. Seller must review product matrices to assure the underwriting requirements are met.

NOTE: The documentation requirements stated in the Kinecta Product Matrix supersede the documentation requirements stated in the DO findings where applicable.

4.6 Eligible PropertiesKinecta will purchase conforming and non-conforming loans for residential properties when the dwelling is described for the use of one-to-four families. For a loan to be eligible under the Kinecta Correspondent Lending product guidelines, the mortgage must be secured by a property that is residential in nature based on the description of the subject property, zoning, and present land use. All properties must meet Fannie Mae guidelines, and some eligible properties may not be acceptable for all products, as specific products may have more restrictive guidelines. Refer to the specific loan product matrix to determine property eligibility

The dwelling may be located in urban and suburban areas:

• On an individual lot

• In a condominium

• Within a PUD project

Note: Restrictions apply for 3-4 unit properties in California. Contact the CSR for additional details.

All properties with lot sizes greater than 10 acres are subject to rural housing guidelines, even if the property is not designated as rural in the appraisal. Rural area properties are eligible unless otherwise stated otherwise on the product matrix.

4.6.a Rural PropertiesKinecta will purchase mortgages secured by residential properties in rural areas when allowed by product matrix. A rural area relates to the country or anything beyond the suburban area. All properties with lot sizes greater than 10 acres are subject to rural housing guidelines, even if the property is not designated as rural in the appraisal.

Eligibility for Conforming LoansA rural property that meets the requirements of this section is eligible for a conforming loan with no specific restrictions on lot size. However, the property must be residential in nature and meet all other eligible property requirements.

Eligibility for Non-Conforming LoansSellers may submit properties identified as rural by the appraiser with lot sizes up to 20 acres under some Non-Conforming products.

Special Limitations and Restrictions:A. Road Maintenance Agreements

Road Maintenance Agreements will be required if the property is on a community-owned or privately owned and maintained street. Kinecta’s underwriter will determine whether a road maintenance agreement is required. When the agreement is required, it must be an adequate, legally enforceable agreement or covenant for maintenance of the street and must include all of the following provisions:

1. Responsibility for payment of repairs, including each party’s representative share,

2. Default remedies in the event a party to the agreement or covenant fails to comply with his or her obligations



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3. The effective term of the agreement or covenant, which in most cases should be perpetual and binding on any future owners.

4. The agreement or covenant must be recorded in the land records of the appropriate jurisdiction.

If a property fronts on a street that is not typical of those found in the community, the appraiser must comment on the effect of that location on the marketability and value of the subject property.

B. Outbuildings

Outbuildings will have restrictions. Properties with significant outbuildings will be reviewed with great care, regardless of whether the appraiser assigns any value to them or not. Their existence may indicate the property may be used for agriculture or other income-producing purposes. Properties with minimal outbuildings, such as a small barn or stable that are of relatively insignificant value in relation to the total appraised value are acceptable if they are typical residential improvements and support the residential use for the location and property type. The buildings must not be used to support commercial or agricultural enterprise. For example, a property that has a small barn or stable is acceptable if the appraiser demonstrates through the use of comparable sales with similar improvements that the improvements are typical of properties for which an active, viable residential market exists.

NOTE: Comparable sales with similar improvements should show they are typical and have an existing market. A property with an atypical minimal outbuilding is still acceptable as long as the appraiser’s analysis reflects little or no value for it.

4.6.b Special Housing TypesSome products may allow special types of housing design or construction, such as log houses or earth houses. Restrictions apply to all types of special housing, and the Seller must follow all the requirements for these properties. Refer to the product matrix for eligibility of special housing types.

4.6.c Condominium Projects

Acceptable Condominium PropertiesKinecta will purchase first mortgage loans on condominium units that meet the eligibility requirements set forth in this section and do not have any of the characteristics listed in this section under the heading Ineligible Condominium Projects or listed in 4.6.e. Ineligible Properties.

In addition, the project must be warrantable. A warrantable condominium is a condominium project that meets Agency eligibility standards. Please refer to specific product matrices for details on required loan characteristics for condominium units.

Condo Review RequirementsSellers should refer to the Fannie Mae guidelines for options for reviews and particular details for each option. Kinecta will review all condominium projects and each loan must have a Kinecta HOA Certification regardless of DU findings or investor requirements. There is no charge for the review of the project. The Limited Review general guidelines are included below.



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Fannie Mae Condo Project Review Type CodesThe table below lists the allowable project classifications:

Review Type Project Review Type Codes

Limited Project Review Q – Limited Review Established Project

Site/Detached Condominiums Q – Limited Review Established ProjectP – Limited Review New Project

Seller Full Delegated Review, Established S – Seller Full Delegated Review, Established

2 to 4 Units Q – Limited Review Established ProjectS – Seller Full Delegated Review, Established

Condo Project Manager – (CPM) Expedited Review or Kinecta CPM Expedited Review

R – CPM Expedited Review New S – CPM Expedited Review Established

Fannie Mae Approved T – Fannie Mae Approved Project

Fannie Mae Project Eligibility Review Service (PERS) T – Fannie Mae Approved Project

Fannie Mae DU Refi Plus V – Fannie Mae Not Reviewed

Limited ReviewKinecta will purchase loans for condominium units only if the DU findings are Approve/Eligible and the findings allow for a Limited Review Process of the condominium project. Refer to Fannie Mae Limited Review Guidelines following:

Limited Review Guidelines

• DU Approved/Eligible Only (Loans with LP findings are not eligible.)

• DU findings must allow for Limited Review Process.

• Eligibility is restricted to established projects; to qualify as an established project, all of the following conditions must be met:

– The project is 100% complete, AND

– 90% or more of the total units have been conveyed to the unit purchasers, AND

– The control of the homeowner’s association has been turned over to the individual unit owners (other than developer) for over 3 years.

– All units, common elements and amenities must be 1005 complete and the project cannot be subject to phasing or annexation.

• No single entity may own more than 10% of the units.

• The project’s budget must provide for adequate reserves.

• Project is not part of a manufactured home project.

• Project must meet the insurance requirements for Hazard, Liability, Flood and Fidelity Bond.

Note: Fidelity bond is not required for 20 units or less.



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FNMA 1028 Project ApprovalNew projects with Fannie Mae 1028 project approval are eligible for purchase if run through DU. Sellers must include a copy of the 1028 Project Approval in the underwriting submission file. The Fannie Mae approval must not have expired and must specify the subject phase.

Projects in LitigationGenerally, Kinecta does not accept loans with condominium projects involved in litigation. However, on a case-by-case basis Kinecta may agree to review required documentation to determine if the loan is eligible for Kinecta Correspondent Lending program.

Ineligible Condominium Projects• Non-Warrantable Projects

• New Projects or Newly Converted Projects:

• Project or legal phase is not fully complete, or

• Less than 90% of the total units have been conveyed to unit purchasers, or

• The control of the homeowner’s association has not been turned over to the individual unit owners.

• Condominium Hotel/Condotels

• New Gut Rehab Projects

• Mixed Use Condominiums

• Combination Units Condominiums

• Hotel/Motel Conversions

4.6.d PUD Projects Kinecta will accept files for purchase only if the project is Type E eligible. The credit file must contain the Uniform Underwriting and Transmittal Summary (1008) with the Type/Class indicated on the form.

Type E Project Summary for Attached PUDsType E projects are an established PUD in which control of the homeowners’ association has been turned over to the unit purchasers. Loans that meet the requirements of a type E PUD should be coded as E-PUD in the Project Classification section of Fannie Mae form 1008. Refer to Fannie Mae guidelines and Kinecta Eligibility Matrices for complete information.

Fannie Mae guidelines are used for all PUD Project descriptions and requirements. A Planned Unit Development (PUD) is a project that consists of common property and improvements that are owned and maintained by the homeowner’s association for the benefit and use of the individual PUD units. The project may consist of attached dwellings or stand-alone detached dwellings. The key difference between condominiums and PUDs is that a condo owner receives title to a unit and a PUD owner receives title to a lot that includes the dwelling.

PUD Classifications• Detached PUDs – No review is required for mortgages secured by a new or established detached PUD dwelling

(regardless of whether the project consists of attached dwellings only or a combination of attached and detached dwellings). No project approval certificate is required for the loan file. A detached PUD is processed the same as a single-family residence.



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• Attached PUDs – Kinecta must perform a review of a PUD project if the mortgage is secured by an attached dwelling. No project approval certificate is required for the loan file.

Requirements for PUDs with Attached 2-4 Unit PropertiesNo single entity may own more than one unit within the project. All but one unit in the project must have been conveyed to an owner-occupied principal residence or second home purchaser. The units in the project must be owned in fee simple ownership and unit owners must be the sole owners of, and have the right to the use of the project facilities, common elements and limited common elements.

4.6.e Ineligible Properties The following properties are ineligible for the Kinecta Correspondent Lending program:

• Specific Condominium Ineligibility

• Multi-dwelling condominiums or PUDs

• Condotels and Hotel Condominiums

• “Live-Work” loft-style condominiums

• Non-warrantable condominium projects

• Condominium projects with pending litigation

• All Cooperatives

• Manufactured housing and mobile homes

• Mixed use properties

• Other Properties

• Timeshare or segmented ownership properties

• Houseboats

• Geodesic domes

• Agricultural properties, such as working farms, ranches, orchards, on undeveloped land, or on land-development-type properties and/or commercial operations

• Unimproved land

• Residences lacking kitchen and full bathroom facilities.

• Properties in less than average condition

• Properties with deed restrictions that limit transferability of title, or contain a “first right of refusal” provision

• Properties Listed for Sale* *Refinances on properties listed for sale are not permitted.

• Properties Sold at Auction by the builder, developer, or construction lender NOTE: Previously approved condo and PUD projects are often no longer acceptable if they have been sold at auction. Kinecta will verify whether the condo and PUD project approvals are still valid.



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• Properties in the Redemption Period are not eligible unless:

– The security instrument, for the loan being foreclosed upon, includes a specific waiver by the owner (and owner’s spouse if applicable) waiving statutory right of redemption, OR

– The title agency has obtained a waiver from the previous owner (and owner’s spouse if applicable) waiving the statutory right of redemption.

Characteristics of Ineligible Condo and Attached PUD ProjectsIf there are any possible issues regarding Condo or PUD eligibility, contact the Kinecta Underwriting Department prior to submitting a loan for underwriting to determine if any potential warrantability or eligibility issues exist. Please e-mail the project name and complete address to the CSR.

ANY of the following characteristics are reason to question eligibility:

• Projects publicly advertised as a condominium hotel or resort or websites are available to determine room availability and reservations can be made online

• Projects with hotel like amenities

• Shares facilities, common elements, or amenities with a hotel, resort, and/or lodge that is owned and managed by the developer or another third-party entity

• Projects allowing short-term and seasonal rentals in CC&R

• HOA budget red flags, i.e., housekeeping or other personnel costs, business income, membership fee income, etc.

• Projects located near water, snow, or recreation area

• Projects with units without full size kitchen appliances, or with efficiency kitchens

• Projects with names “hotel,” “resort,” “motel,” “inn,” or “lodge,” affiliated with a hotel chain or hospitality entity

• Projects located at the same address as a hotel or resort or within a hotel or resort

• Projects with non-incidental businesses operated or owned by the homeowner’s association (for example, restaurant, health club, spa, etc.)

• Projects with revenue sharing between a rental management firm and the HOA

• Projects with mandatory memberships (tennis, golf, health club, etc.)

• Projects with mandatory rental pooling agreements or blackout

• Manufactured housing projects

• Timeshare or segmented ownership

• Houseboat project

• Mixed use condominiums, i.e., artist’s studio, workshops, galleries

• Multi-dwelling unit condominium

• Own Your Own property

• Projects in litigation



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• Any project or building owned by several owners as tenants-in-common or by a HOA in which the individuals have an unidentified interest in a residential apartment building and have the right of exclusive occupancy of a specific unit in the building

• Projects characterized/promoted as an investment opportunity or have documents on file with the SEC

• Projects with commercial space that exceeds 20% of the total space

• Projects in which a single entity owns more than 10% of the units

• New projects in which the property seller offers sales/financing structures in excess of the maximum allowable contributions for individual loans

4.6.f Geographic Restrictions

Soft MarketsKinecta will rely on the appraisal to determine eligibility for mortgage loans secured by properties in all markets across the country. Kinecta may purchase mortgages secured by properties located in declining markets. Kinecta expects that the appraiser will utilize generally accepted appraisal standards and appraisal report forms that require the appraiser to research, analyze, and report on the factors in the neighborhood that may affect the market value or marketability of the properties in the market area.

If the appraisal indicates any of the following indicators, the loan may undergo additional scrutiny by the underwriter:

• Declining property values, and/or

• An oversupply of homes for sale, and/or

• A marketing time over six months

While Kinecta follows Fannie Mae guidance as it pertains to declining markets, soft market areas should be treated conservatively. Kinecta will follow Fannie Mae’s declining market guidelines. For loans that are to be held in Kinecta’s portfolio, however, when the subject property is in an area of declining values, LTV/CLTV/HCLTV’s of firsts and or seconds will be reduced by 5% at the discretion of the CEO or COO.

AppraisalsAll loans are subject to the enhanced appraisal requirements as specified in product matrices. Underwriters will carefully review appraisals to ensure that the appraiser has appropriately analyzed property value trends and overall market conditions to arrive at the value provided. A field review may be required if the underwriter feels that the market value may be overstated. Kinecta may require additional review if there are concerns regarding overstated value, which could result in a reduction of value.

Sellers must demonstrate proof the appraisal meets AIR guidelines and Fannie Mae LQI requirements. In addition, Seller must meet any additional geographic or program restrictions of the MI provider for the loan file.



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5.0 UNDERWRITING POLICIES AND PROCEDURES

5.1 Automated UnderwritingKinecta only purchases loans that have been submitted to Fannie Mae’s Desktop Underwriter AUS risk review. Kinecta will be a DO sponsor, and Sellers are responsible for submitting the loan application to DO and releasing the file to Kinecta. The DO files must be released to Kinecta when the file is submitted for underwriting.

• Complete DO submission using LOS access to Fannie Mae DO.

• Complete the AUS underwriting process and generate a final DO Underwriting Determination and Underwriting Analysis report to be submitted with the Underwriting Submission package to Kinecta for review

• Only Conventional loans that have a Risk Class or eligibility decision of Approved/Eligible from DO are eligible for purchase by Kinecta.

• Loan data contained in the DO Underwriting Determination must match the loan documentation exactly, or the AUS process will need to be re-run by the Seller, thus delaying and/or preventing the approval process.

Loans that have been run through DO, must contain the DO print screen showing the results in final released status.

5.2 Credit Package Submission Minimum Standards

OverviewDocumentation types are discussed in detail in 4.5 Documentation Types. The type of loan documentation used to verify the borrower’s employment, income and asset information in the loan application varies depending on the loan program and program requirements. Not all documentation types can be used on all loan programs. Always refer to the specific loan product matrix and the AUS findings report to determine documentation eligibility.

Sellers must be certain the file is fully processed and documented before uploading the file to Kinecta for underwriting to assure the Fannie Mae 3.2 data file will be accurate and findings will match the documentation.

All loans must be registered with Kinecta and DO findings released to Kinecta before an underwriting review can take place.

NOTE: Refer to Product matrices for any documentation overlays beyond AUS findings.

In addition to any AUS or program requirements, Kinecta also requires the following documentation in each file submitted for underwriting. Missing items will be conditions to be met prior to purchasing the loan.

IRS Form 4506-TCompleted and signed IRS Forms 4506-T with IRS transcripts are required for all borrowers. This documentation must be a part of the underwriting submission package. Sellers must provide 2 full years of tax returns, both personal and business returns; if most recent tax year returns have not been filed, Sellers must obtain returns for the previous 2 year filing periods.

Helpful Hints for completing the 4506T• Multiple Borrowers: Multiple 4506T must be submitted

• Married Borrowers: If taxes are filed separately, complete two 4506T’s. If taxes are filed jointly, complete on 4506T with both Borrowers listed (items 1 and 2; only one signature is required.



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• If the address on the filed tax returns is different from the current address, line 4 must be completed with the address on the tax returns.

• All relevant fields must be completed on the 4506T.

• Don’t forget to specify W-2 and 1040 in line 6.

• If you complete the 4506T by hand, make sure it is complete, accurate and legible. It is recommended that you complete the form electronically using Arial 12pt or larger font.

HOA DocumentationFor all condominium properties, the Seller must submit the required documentation for Kinecta’s underwriter to issue the Kinecta HOA Certification.

POA ClosingsFor any loan closing with a Power of Attorney a copy of the POA must be included in the credit package. In addition, the following requirements must be met:

• POA requirements for ALL loans:

– Specific language to the purpose of the real estate transaction

– Statement that the attorney-in-fact has no financial interest in the transaction (i.e. real estate agent, broker)

– Statement that POA is irrevocable on the physical or mental disability of the Borrower/Co-borrower

– No exceptions to POA and guaranteed first lien position in title commitment

– POA notarized and includes a notary acknowledgement.

Inter Vivos (Revocable) Trust Closings NOTE: Some products restrict the closing of loans in trusts. Review product matrix for eligibility.

Kinecta will purchase loans closing in the name of an inter vivos trust only for primary residences or second homes. A trust certification or trust abstract may be submitted in lieu of the complete trust, but the document must address the same requirements as the trust. More information related to signatories on closing documents is provided in the Closing Policies and Procedures section.

Requirements for all trusts:Refer to the form for signatures in section 6.5 Requirements for Trust Closings in the Closing section of this Sellers Guide.

• Borrower(s) must be creator(s) of the Trust. (The creators are usually called the Grantor(s), Settler(s), or Trustor(s).

• Borrower(s) must be the trustee(s) of the trust and there must be an approved institutional trustee.

• The Trust must be revocable.

• The Borrower(s) must be the primary beneficiaries of the trust.

• The trustee(s) must have the authority to borrow money and pledge the trust property as security.



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For any loan closing in the name of an inter vivos trust, the following documents are required for submission to underwriting:

• Copy of trust or trust certification/abstract *

• Title commitment showing complete 12-month history must identify transfer dates, all sellers, all buyers, and all sales prices.

* If trust certification or abstract does not address all requirements above, Kinecta will require copies of the pertinent pages from the trust itself.

5.3 Credit Package Submission ProcessSellers are responsible for all interaction with the borrower(s) at all times until Kinecta purchases the loan file. Sellers are responsible for delivery of the required disclosures within the mandated timeframes. Sellers will be responsible for input to the AUS for findings and for gathering the documentation as required by the product matrix and AUS findings and for delivery of all disclosures within the mandated timeframes.

Minimum Submission StandardsThe Kinecta Underwriting Loan submission checklist outlining the minimum documentation and stacking order can be found in the Loan Forms and Resource section of the Kinecta Wholesale/Correspondent Website.

Sellers must release DO findings to Kinecta. The CSR will notify the Seller if the DO findings have not been released. The loan will not be released to the underwriting queue and will not be underwritten unless the file contains the following documentation.

1. Release of DO findings to Kinecta.

2. Fully completed and executed 1003

3. All required disclosures, properly executed

4. AUS findings, including credit report

5. All documentation as required by the AUS

6. Appraisal

7. Sales Contract and any required addenda or disclosures on purchases

When the file is ready for underwriting, Sellers will upload the file using LoanKinection. Sellers may not email or fax files or conditions to Kinecta.

The CSR will receive the file and documents, perform the pre-underwriting review and prepare the file for submission to the underwriting queue. In the event that the file does not meet minimum underwriting submission requirements, the CSR will notify the Seller of the deficiencies and withhold the file from the underwriting queue until Seller submits required documents.

5.4 Tracking Loan Status on Website Sellers can view the progress of the loan on LoanKinection, including when a file is received, submitted to underwriting and when the loan receives an underwriting decision. Loans that are underwritten and requiring additional documentation will receive a conditional commitment with a loan status of Underwriting – Conditional Approval.



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5.5 Conditional ApprovalsAn underwriter will review all documentation in the file and underwrite the appraisal. The underwriter will also perform a check for any red flag fraud indicators and may further investigate information within the file to clear any questionable items or information.

Once the underwriter has thoroughly reviewed the file, the underwriter will issue a conditional approval or denial for the file. When the loan is subject to one or more conditions, the underwriter will prepare the Conditional Approval Notice, and email it to Sellers. The loan status will show as Underwriting—Conditional Approval. Sellers are responsible for obtaining additional documentation or information to clear these conditions prior to proceeding to closing.

Sellers will use LoanKinection to upload the documents or information required to meet conditions to a Conditions Receipt Queue ([email protected]), which will be monitored by the CSR. Documentation for clearing Conditions should not be submitted on a piecemeal basis. CSRs will review underwriting conditions submissions to assure they are complete before referring them to the Underwriter. The CSR will communicate with Sellers regarding conditions received and outstanding.

To assure the conditions are handled quickly and efficiently, Sellers will print the most recent Conditional Approval Notice for the loan, indicate on the form the conditions that are being submitted and write on each condition the associated condition number from the most recent Conditional Approval Notice.

5.6 Mortgage InsuranceAs part of the underwriting process, Kinecta will obtain mortgage insurance on files where MI is required. As a credit union, Kinecta receives deeply discounted rates from our MI partners. While significantly beneficial to the borrower, these discounted MI rates are non-transferable to non credit union financial institutions. In the unusual event that a loan is deemed unsaleable, and is not purchased by Kinecta, the MI commitment will likely be voided and the Seller may be responsible for obtaining replacement mortgage insurance at standard market rates.

5.7 Fannie Mae LQI Checks Sellers are responsible for compliance with Fannie Mae’s Lender Quality Initiative, including but not limited to verbal re-verification of employment, updated credit report prior to closing, related parties search, verification on MERS regarding borrower and property liens, third party fraud checks prior to closing, and data integrity check on DO/DU with latest AUS findings. These items will not all be available at the time of Underwriting, but Kinecta underwriter will condition for them and the items must be in the closed loan file.

5.8 Clear to Close Once the Underwriter has cleared all conditions, Sellers will receive a loan approval status of Approved – Clear to Close. Sellers with an Approved – Clear to Close status may proceed to close the loan if it has a valid, unexpired lock. Kinecta recommends that Sellers do not close loans without having all conditions cleared, as the loan may not be acceptable for purchase by Kinecta.

All Kinecta approved correspondents are required to use DocMagic (or other approved vendor) for drawing of closing documents.

Kinecta’s Loan Servicing Department has Four (4) separate lockbox locations that accept monthly payments. These locations are divided geographically by the state where the subject property is located. It is incumbent on the correspondent to input the correct lock box address into the Doc Magic system. This information is input using the drop



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down box located in the General Information Screen under the “Transfer to” line. Failure to input the correct address could result in the suspension of the purchase of the loan. The lockbox addresses and the States/Provinces that are assigned to each address are:

• PO Box 7168, Pasadena, CA 91109-7168

– CA, HI, NV, Alberta, British Columbia

• PO Box 0054, Palatine, IL 60055-0054

– IA, IL, IN, KY, MI, MN, MO, ND, NE, OH, SD, WI, Manitoba, Ontario, Saskatchewan, Puerto Rico, Guam

• PO Box 371306, Pittsburgh, PA 15250-7306

– CT, DC, DE, MA, MD, ME, NH, NJ, NY, PA, RI , VA, VT, WV, Quebec

• PO Box 660592, Dallas, TX 75266-0592

– AK, AL, AZ, AR, CO, FL, GA, ID, KS, LA, MS, MT, NC, NM, OK, OR, SC, TN, TX, UT, WA, WY

Newly-approved Sellers may wish to have Kinecta review closing documents prior to closing to assure that there are no apparent closing errors that would prevent purchase. Sellers who want to have a Kinecta pre-closing review should contact their CSR for details.

As MERS members, Sellers will close all loans using MOM documents, and the Seller is responsible for certain MERS transactions. Refer to the MERS section of this guide.



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6.0 CLOSING POLICIES AND PROCEDURES

6.1 Closed Loan RequirementsKinecta will purchase loans only when all underwriting conditions have been met and cleared by the Kinecta’s underwriter. Loans closed without these specific conditions may be ineligible for purchase by Kinecta. Closed loans submitted for purchase to Kinecta must comply with the standards as described in this section.

6.1.a Membership Requirements Kinecta is a credit union so is membership based. The law requires all borrowers to become members of the credit union prior to funding any credit union loan. Please see the application at www.kinecta.org by clicking on “Become a member.”

In order to complete the membership, process the following and deliver to Kinecta:

1. Copy, signed and completed membership form and co-op applications form.

a. Primary borrower must be primary member. Spouses can be joint on account.

b. All unmarried borrowers must have separate memberships.

2. Legible copy of two (2) acceptable IDs for all borrowers (Refer to Kinecta website for details):

a. State Driver’s license or other US government photo ID

b. Second form of identification

3. Validation of borrower address with one (1) of the following:

a. Driver’s license

b. Utility bill

c. Car registration

d. Insurance bill

e. Voter Registration card

f. Other

4. Check payable to Kinecta in amount of $15.00 for each membership for $10 non-refundable co-op fee and $5 savings deposit.

6.2 Escrow Holdback PolicyKinecta will not purchase loans with outstanding escrow holdbacks. Sellers may close with escrow holdbacks, but Kinecta will review files prior to purchase to assure all documentation for the release of funds is acceptable and all funds have been released. Sellers are responsible for handling all monthly payments from borrowers until the loan is purchased. Kinecta will require a payment history at the time the closed loan is submitted for purchase.

6.3 Policy on Disbursement Date

Kinecta will purchase loans with a disbursement date less than thirty days prior to the first payment due date (generally called “funding into the month”). In such cases, the loan must disburse on or before the 8th of the month. Borrowers must sign a “30-day Letter” acknowledging that there are fewer than 30 days between funding and the first payment



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date. Should the first payment become due prior to the purchase of the loan, the Seller is responsible for collection of any payments due. Sellers who do not have the capacity to accept and post loan payments with appropriate IRS reporting may not close loans that “fund into the month.”

6.4 Impound/Escrow AccountsImpound/escrow accounts will be maintained as a general rule on all loans. Product matrices may allow the waiver of escrows of taxes and insurance in specific instances, however all waivers are subject to underwriting approval. There may also be an additional fee for the waiving of escrow accounts. Refer to product matrices and pricing policy for this information.

For loans with escrow waivers, the Rate Lock Administrator will apply the guidelines for LTV/CLTV and pricing adjustments. Contact the Kinecta Pricing Desk for specific questions regarding pricing adjustments.

6.5 Requirements for Trust Closings Kinecta will purchase loans held in inter vivos “living” trusts, provided the loan was underwritten by Kinecta for closing with title being in the trust. The closed loan file must contain the title commitment with title in the trust, and the title policy must show no exception taken for the trust.

All loans closing in the name of trusts must have been approved to close in the trust by Kinecta underwriter and must meet all the requirements set forth in the Underwriting section of this guide.

Kinecta requires the following for signatures on loans closing in trusts. Failure to have the documents signed correctly will result in the loan not being eligible for purchase, and could require the loan documents to be redone and re-recorded with an endorsement to the title policy. Costs to cure any issues will be the responsibility of the Seller.

Required SignaturesAll Trustees of the Trust in which the loan is closing must sign the Note and Addenda even if they are not borrowers on the Note because the loan is closing in the Trust.

Formats for SignaturesSignatures must include the name and date of the trust as well as the name and title of trustees.

Those individuals on the trust as borrowers must sign both as Trustee and individually:

• Jane Doe, individually, and as Trustee of the Jane Doe revocable Trust under trust instrument dated month, day, year for the benefit of Jane Doe.

Any individual who is a Trustee but NOT a borrower will sign only as a trustee:

• John Doe, Trustee of the Jane Doe Revocable Trust under instrument dated month, day, year for the benefit of Jane Doe, borrower.

If there is a borrower on the Note who is not a trustee or co-trustee of the Trust in which the loan is closing, that Borrower must sign as an individual only.

Example: John Jones (borrower 1) is not a trustee of the Trust that the loan is closing in. Jane Jones (Borrower 2) is the only trustee of the Trust that the loan is closing in. Signature lines should be as follows:

• John Jones, Individually

• Jane Jones, Individually, and as Trustee for the Jane Jones Revocable Trust under trust instrument dated month, day, year for the benefit of Jane Jones.



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Kinecta does not allow the use of a POA for any Trustee.

6.6 Insurance RequirementsThe closed loan file must contain insurance policies with effective dates no later than the closing date on the HUD-1.

6.6.a Property Insurance Refer to Kinecta’s Hazard Insurance Policy on the website for specific types of coverage, coverage amounts, and allowable deductibles.

Kinecta requires property insurance in an amount established in Kinecta’s policy guidelines to ensure Kinecta’s interest in a property is adequately protected. The insurance coverage will include at a minimum Hazard Insurance, Flood Insurance for properties in a designated flood zone, and Wind Insurance if the Hazard policy does not cover wind damage.

For attached condominium and PUD projects, the file must contain a copy of the project master policy (“blanket” policy) and a “walls-in” hazard insurance coverage policy (commonly known as HO-6 policy) unless Seller can document that the master insurance policy of the HOA covers the interior of the unit. The HO-6 policy must provide coverage in the amount of at least 20% of the appraised value with a 5% maximum deductible. Additionally, the “walls-in” policy must be escrowed on any loan where impounds are required.

Escrow RequirementWhen a loan has escrows for taxes, hazard insurance or any other charges, Kinecta will require the escrow of flood insurance premiums and fees. The HO-6 policy must be escrowed as well.

Insurance on Refinance LoansRefinance loans must have a minimum of three months remaining coverage on all policies at the time Kinecta purchases the loan.

6.6.b Flood InsuranceSeller must provide a Standard Flood Hazard Determination (flood certificate) for all loans. Kinecta requires Life of Loan Certificate from Kroll Factual Data Flood Services on all loans purchased. Flood insurance is required if all or part of the property improvements are located in a Special Flood Hazard Area (SFHA). Flood insurance is required even if the mortgaged premises (such as a condominium unit on the fourth floor) are above the 100-year flood boundary. Flood insurance coverage will be the lesser of the loan amount or the maximum allowable coverage.

Special Flood Hazard AreasFlood insurance is required on properties located within the following SFHA zones:

• “A” zones regardless of second designation

• V, V1-V30, and VE

If the Flood Designation Area on the flood certificate indicates “None” because the subject area has not yet been mapped by FEMA, Kinecta does not require flood insurance.



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6.6.c Hazard Policy RatingsPolicies covering 1-4 unit properties must meet one of the following eligibility criteria:

• Coverage must be provided by Lloyd’s of London. OR

• Be covered under a FAIR Plan (Fair Access to Insurance Requirements Plan), if it is the only coverage available at a reasonable cost. FAIR Plan is a program established within a state to provide access to insurance for property owners in designated areas of high risk. OR

• Be issued by a company that meets the rating requirements of one of the following agencies:

Rating Agent Rating

Demotech, Inc. An “A” or better rating in Demotech’s Hazard Insurance Financial Stability Ratings.

A.M. Best Co. A “B” or better general policyholder’s rating or a “6” or better financial performance index rating in Best’s Key Rating Guide.

OR

An “A” or better general policyholder’s rating and a finan-cial size category of “VIII” or better in Best’s Insurance Reports-International Edition.

6.6.d Title InsuranceThe title policy must name Seller, ISAOA, as the insured. Title must be vested in the mortgagors’ names, or in the name of an eligible inter vivos trust, if allowed under the product matrix.

Chain of Title ReviewThe title policy and/or title work must meet Fannie Mae guidelines for minimum history of property ownership from the effective date of the policy or preliminary report. Some programs require 12 or 24 months to be reviewed. Check product matrix for requirements.

Refinance TransactionsIf the history indicates that the property has been vested to the borrower for less than the required number of months, additional documentation may be requested.

Policy UnderwriterA nationally recognized insurer or reinsurer must have underwritten the title insurance policy.

6.7 Pest InspectionsKinecta will require a pest/termite inspection in order to purchase a loan when the appraiser notes damage from wood-destroying insects. Depending on the results of the pest inspection, if there is indication of any structural damage, the Kinecta underwriter may condition for an engineering evaluation. Kinecta will also call for the pest inspection if one is required as part of the sales contract for the property. Sellers should arrange for the inspection(s) before closing the loan to assure it is eligible for purchase. Seller is responsible for collection and payment of the cost of any inspection or engineering evaluation required.



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7.0 SUBMISSION OF CLOSED LOAN FILE

7.1 Submission ProcessSellers must submit the closed loan package including the original Note when the loan is ready to be purchased. Sellers are required to deliver a complete loan package by the expiration of the rate lock. Kinecta will purchase a loan after a payment has been made, but the Seller is responsible for collection of any payments due within 15 days of submitting the file to Kinecta for purchase. Seller must include a current payment history for any loan that had a payment due or for which the Seller is responsible for a payment within 15 days of the date Kinecta purchases the loan. The Seller is also responsible for payment from the escrow account of any insurance or tax payments that were due or will be due within 45 days of submission to Kinecta for purchase. If escrows have been waived and a bill for taxes or insurance is due, Seller is responsible for obtaining proof of payment from the borrower.

7.2 Requirements for Closed Loan File Sellers must deliver the closed loan file with the original Note included unless the original Note is held at a warehouse bank. Sellers who will use a warehouse line for fundings must arrange for prompt delivery of the Bailee Letter with the original Note to the address below:

Kinecta Federal Credit UnionAttn: Correspondent Operations Manager2100 Park PlaceEl Segundo, CA 90245Transbox # RD0720

All loans must show evidence of compliance with Fannie Mae’s Lender Quality Initiative, including but not limited to the following asterisked items below. In addition, the closed loan file must contain the following remaining documentation in Kinecta stacking order below:

• Kinecta Transmittal Form with Wiring Instructions

• HUD-1 and all attachments

• Copy of Closing Instructions to Closing Agent

• Note and any Addenda, OR copy of Note and copy of Bailee Letter

• Security Instrument and any Riders

• POA or Trust documents if applicable

• Title commitment

• Title Policy, if available, with appropriate endorsements

• Proof of MERS registration

• * Proof of MERS check on borrower and property liens prior to closing

• * Proof of Verbal Re-verification of Employment Form 1005 within 3 days prior to closing

• * Proof of updated Credit (soft pull) showing no undisclosed liabilities on final 1003, within 3 days prior to closing

• * Proof of fraud checks using fraud checking service acceptable to Fannie Mae



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• * Proof of verification of all parties against the GSA Excluded Parties List, HUD’s Limited Denial of Participation (“LDP List”) and OFAC list

• * Proof of data integrity checks on Fannie Mae DO

• Copy of MI Application and submission after closing (If Applicable)

• All required at closing disclosures, including but not limited to these:

– Final TIL

– Notice(s) of Right to Cancel on refinances – all titleholders

– Notice(s) of Non-Rescission on refinances – all titleholders

– Initial Escrow Account Disclosure Statement

– Program-specific Disclosures

– State-specific disclosures

– Documentation of applicable state and federal high costs tests

– Documentation of applicable Net Tangible Benefit test

– Copy of Servicing Transfer Letter provided to borrower with loan documents

• All standard at closing notices, including but not limited to these:

– Compliance/Errors & Omissions notice signed by borrowers

– Waiver of Escrow Accounts Notice if applicable

Good Delivery Sellers are required to deliver a complete loan package by the expiration of the rate lock.. Loans that are not cleared for purchase by the expiration date are subject to extension or re-lock policies.

All purchase conditions must be sent to [email protected]. This email queue is monitored throughout the day and conditions documentation will be matched to the proper loan file.

• Purchase conditions must be delivered in a single submission and not on a piecemeal basis.

• Seller should attach a copy of the Kinecta Purchase Audit Review along with required documentation, itemizing the items provided to satisfy purchase conditions.

• Questions regarding the purchase audit decision or conditions should be directed to the assigned CSR.

Purchase AdviceKinecta will issue a separate purchase advice on each loan purchased. The Purchase Advice will be sent to the Seller’s designated contact by email.

It is imperative that the Seller review the Purchase Advice in its entirety and reconcile the wire amount to ensure that the appropriate funds have been received. If a financial discrepancy is identified, the Seller must notify the appropriate CSR within 5 days of the loan purchase. The Seller must provide documentation supporting the discrepancy.



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8.0 POST PURCHASE REQUIREMENTS

8.1 Seller Document ResponsibilitiesSellers are responsible for the submission of final recorded documents and title policies with all endorsements after the loan has been purchased. Kinecta requires the submission of these documents in a timely manner and will notify Seller if documents have not been received within 60 days of the date of purchase.

Kinecta reserves the right to assess fees for documents not received within 90 days of the date of purchase per the Agreement. Such fees may be deducted and held in reserve from proceeds of other loan purchases until the documents have been received.

8.2 Post Purchase DocumentationThe following documents are required on all loans purchased by Kinecta:

• Recorded Security Instrument and all riders.

• Title Policy and all endorsements

Any cost for additional endorsements are the responsibility of the Seller.

8.3 Seller Transfer ResponsibilitiesSeller is also responsible for the following:

• MERS transfer of servicing and beneficial interest transactions (TOSR/TOB). MERS transfer should take place within 2 business days of the funded purchase of the loan.

• Mailing “Goodbye Letter” to borrower within 2 business days if not provided at closing

• Notification to insurance providers of transfer to Kinecta, including but not limited to the following:

– Hazard, including fire, wind, condominium master and HO-6

– Flood

– MI on conventional loans

Insurance Endorsements

Kinecta Federal Credit Union, ISAOAAttn: Loan Servicing DepartmentP.O. Box 25506Fort Worth, TX 76124



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9.0 MORTGAGE ELECTRONIC REGISTRATION SYSTEMS (MERS®)

Loans must be closed using MOM documents, and Sellers are responsible for the following MERS transactions, using the MIN associated with the loan and Kinecta’s MERS Org ID 1008215:

• Registration in MERS within 7 days of closing or prior to delivery of the closed loan file to Kinecta.

• MERS transfer of beneficial rights (TOB) and transfer of servicing rights (TOS) transactions within five (5) business days of purchase by Kinecta.

NOTE: An administrative fee may be applied for any loan not registered and/or transferred accurately within five days of purchase by Kinecta.

As a convenience to Sellers, the following information from the MERS manuals is provided in this Sellers Guide regarding MERS requirements and Kinecta’s requirements for purchase transactions. Additional details about MERS memberships, registering loans and the available connections to MERS are outlined in the MERS Procedures Manual and the MERS Integration Handbook at this address:

http://www.mersinc.org/mersProducts/manuals.aspx?mpid=1

Kinecta requires Sellers to be “MERS Ready” upon registering any loans for purchase transactions.

Sellers may contact MERS by mail, phone, or fax as follows:

MERS1818 Library Street, Suite 300Reston, VA 20190Phone: (800) 646-6377Fax: (703) 748-0183

9.1 Creating a Mortgage Identification Number (MIN)There are several methods available to generate a MIN. Please call the MERS Help Desk at (888) 680-6377 for further information regarding MIN generation.

Note: A MIN is a unique eighteen-digit number which consists of the originator’s MERs Org ID+10 digit loan number+check digit that can only be applied to any one loan. Reuse of an existing MIN will cause additional cost to the Seller.

9.2 MERS as the NomineeThe Security Instrument must follow MERS guidelines and meet MERS requirements.:

• Name Mortgage Electronic Registration Systems, Inc (MERS) as mortgagee/beneficiary in the security instrument in accordance with investor guidelines

• Ensure that the mortgagee/beneficial language includes the MERS address (P.O. Box 2026, Flint Michigan, 48501-2026; except in states that require a physical address: 3300 S.W. 34th Avenue, Suite 101, Ocala, FL 34474; P.O. Box 2026, Flint Michigan 48501-2026; and SIS telephone number (888-679-6377)

• Ensure that MERS is noted as the mortgagee/beneficiary in the transfer/due on sale clause

• Place the Mortgage Identification Number (MIN) in a visible location on the first page of the security instrument, but not in any space reserved for the jurisdiction’s recorder per jurisdictional requirements.



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• Send the security instrument for recording within seven calendar days of the funding/disbursement date (the date on which borrower interest begins to accrue).

NOTE: LOS and document preparation vendors will have MERS-ready documents available.

9.3 Registering a Loan with MERSLoans delivered to Kinecta must be registered by the Seller with MERS at time of delivery. The Seller must be named as the originator, servicer and investor at the time of registration.

9.4 Transfer of Servicing and Beneficial RightsThe Seller must use MERS (Mortgage Electronic Registration Systems, Inc.) when transferring Loans to Kinecta. Sellers must close loans using MERS MOM loan documents. The Seller will be responsible to generate a MIN, register the loan with MERS and transfer the beneficiary and/or servicing rights to Kinecta.

Sellers are responsible for initiating a MERS transfer of beneficial rights (TOB) and transfer of servicing rights (TOS) to Kinecta’s ORG ID 1008215 within five (5) business days of purchase by Kinecta.

Once the Seller receives the purchase advice from Kinecta, the Seller must initiate the MERS transfer of beneficial rights (TOB) and transfer of servicing rights (TOS) to Kinecta using the steps outlined in the MERS Procedures Manual. Sellers may contact Kinecta’s MERS desk for additional assistance at:

Email: [email protected]

Phone: (800) 854-4501, option 3

9.5 Assigning a Mortgage to MERS Sellers may not assign mortgages to MERS using a recorded assignment to MERS. Only loans closed on MOM documents are eligible for purchase by Kinecta.

Documents

KINECTA FEDERAL CREDIT UNION CORRESPONDENT … · KINECTA FEDERAL CREDIT UNION CORRESPONDENT LENDING SELLERS GUIDE 8677H ... 9.2 MERS as the Nominee ... Kinecta has a dedicated help