FHA / VA Overview

Dennis GeistVice President - Government Programs

May 19, 2011

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Agenda

FHA Statistics FHA Profile / Benefits Loan limits Recent Changes On The Horizon What’s Hot

VA Demographics VA Profile / Benefits High Balance VA What’s Hot

SummaryQuestions

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

GNMA FRE FNM Non-Agency

MBS Issuance by Program Share (GNMA, FRE, FNM, Non-Agency)

2010 - Conf conv = 69.5%FHA / VA = 26.4%Other (including non-conf conv = 4.1%Source: Inside Mortgage Finance

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FHA Statistics

Fiscal Year 2010*Over 2.2 million FHA loans insured51.7% of fiscal year FHA endorsements are purchase transactions

80% of those are made to First Time Homebuyers30% of those buyers are minority

* Source – FHA Outlook, October 31, 2010

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FHA Profile – A quick review

Geared toward first time homebuyers (as low as 3.5% down payment) but may be a great option for some move-up borrowers

Individuals with limited or no cash for a down payment and/or closing costs May use “gift funds” or have access to a HUD approved Down

Payment Assistance Program Borrowers who may have had previous credit challenges but can

demonstrate the ability and willingness to repay the loan Non traditional credit may be used when traditional credit does

not exist Borrowers who may need assistance from a non-occupant co-

borrower – Unique to FHA Available to permanent and non-permanent resident aliens A consumer who needs a high Loan To Value rate and term

refinance up to 97.75% LTV FHA loans are fully assumable

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FHA Loan Limits

FHA Loan Limits vary market by market National Floor - $271,050 National Temporary High Balance Ceiling - $729,750* National Reverse Mortgage Ceiling - $625,500

Temporary FHA Loan Limits for Los Angeles County

$729,750

* Temporary High Cost loan limits are scheduled to expire September 30, 2011

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2010 FHA Changes

Mortgage Insurance* UFMIP reduced from 2.25% to 1% (can be financed) Annual premiums increased from .55% to

.90% for LTV’s 95% and above .85% for LTV’s below 95%

Minimum Credit Score** Borrowers with credit scores below 500 are ineligible for FHA

financing Borrowers with credit scores between 500 and 579 will be

required to make a down payment of at least 10% Borrowers with credit scores 580 and above are eligible for

maximum LTV financing (96.5%)* FHA will continue to allow maximum LTV financing for borrowers

with non-traditional credit

• HUD Mortgagee Letter 10-28• HUD Mortgagee Letter 10-29

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On the Horizon

Effective with FHA case number assignments received on or after April 18,2011* Annual MI premiums will increase by .25 bps

Loans > 15 Years ≤ 95% - going from 85 bps to 110 bps > 95% - going from 90 bps to 115 bps Loans ≤ 15 years ≤ 90% - going from -0- to 25 bps >90% - going from 25 bps to 50 bps

Increased Lender oversight2011 - HUD will continue to focus on;**

Following their charter supporting First-Time Homebuyer and LMI segments

Meeting statutory insuring pool requirements Supporting the housing recovery*HUD Mortgagee Letter 11-10** FHA Commissioner David Stevens - 2010

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What’s HOT!

FHA Renovation Loans Streamline 203k – allows up to $35,000 in non-structural repairs

Great for REOs and Short Sales Full renovation program

Great for curing structural problems, functional obsolesce, mold remediation

FHA and VA 5/1 Hybrid ARM Annual cap maximum 1% up or down Life cap 5% above start rate* Margin 1.75% * Index 1-Year CMT

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VA Loans - Serving Those Who Serve

Like FHA, the Department of Veteran Affairs is not a lender, they simply insure loans to VA approved lenders

Wells Fargo Home Mortgage is the Nations #1 VA lender

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Military Demographics

30+ million Americans*Veterans Are Everywhere

Approximately 31% of in-service personnel are minority*

Approximately 2.4 million in-service personnel*Over 300 Military Instillations in the US

Online and e-mail savvyFirst Time and Repeat Buyers* Department of Veterans Affairs - 2010

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Benefits of VA Loans

No or low down payment Zero down for purchases up to $417,000* High Balance loans available up to $1.5 Million

Requires a down payment of 25% of the difference between the zero down limit and the sale price*

VA home loan benefits can be used more than once

Seller concessions allowed up to 4%

No mortgage insurance (Funding Fee) VA Funding Fee may be financed

All VA loans are fully assumable – by Veterans and non-veterans…building in financing for the future!

* Based on full veteran entitlement

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VA Loan Limits

Zero or Low Down Payment National Zero down payment loan limit - $417,000

Temporary High Balance zero down loan amounts of up to $1,000,000* available for high cost markets

Temporary VA Loan Limits for Los Angeles County

$700,000

High Balance VA loans (with a down payment) are available in all markets up to $1,500,000 Required down payment = 25% of the difference between the sale price and

the maximum VA Zero down limit

*San Francisco, Contra Costa, San Mateo, Marin, based on full veteran entitlement. Temporary HIGH Balance VA loan limits are scheduled to expire September 30,l 2011

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$1,000,000 Purchase Price

•Maximum VA Zero Down Loan Limit of $700,000•25% of the difference between the sale price and the zero down loan limit

$75,000 = 7.5% Down Payment*

*Based on Full Entitlement

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$1,500,000 Purchase Price

•Maximum VA Zero Down Loan Limit $700,000

•25% of the difference between the sale price and the zero down loan limit

$200,000 = 13.34% Down Payment*

*Based on Full Entitlement

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What’s Hot

Wells Fargo VA Fee Policy On July 24, 2010 Wells Fargo Home Mortgage Retail division

eliminated the following fees on all VA purchase and Refinance transactions Processing Underwriting Commitment

No price adjustors for borrower

What does the competition charge?

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Summary

Have a basic understanding of FHA and VA maximum loan limits and property requirements

You don’t need to be near a military installation to leverage VA loans… Veterans are Everywhere!

FHA and VA loans are fully assumable…leverage the power of government loans to build-in financing for the future

Always ask the question…

Are You A Veteran?

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Questions?