a.

QM or ATR Validation / Review of 8 Key Underwriting Factors

i.

Income / Assets

•

Validate borrower(s) monthly gross income

•

Validate funds required to close, required reserves

•

Review file documentation for required level of income and asset verifications

ii.

Employment Status

•

Review file documentation for required level of employment

iii.

Monthly Mortgage Payment

•

Confirm program, qualifying rate, terms

iv.

Simultaneous Loans

•

Validate all concurrent loans are included in the DTI to properly assess the ability to repay

v.

Mortgage Related Obligations: PITI, HOA, PMI, etc.

•

Validate subject loan monthly payment (PITI) and associated obligations

vi.

Debts / Obligations

•

Validate monthly recurring liabilities

vii.

DTI and/or Residual Income

•

Validate debt-to-income ratio (DTI) based upon income and debt documentation provided in the file

•

Documentation meets Appendix Q requirements for QM Loans

viii.

Credit History

•

Review credit report for credit history and required credit depth including any / all inquiries

•

Determine representative credit score from credit report

b.

Validate loan-to-value (LTV) and combined loan-to-value

c.

Review borrower's occupancy

d.

Validation through third party resource of the subject properties most recent twelve (12) month sales history

e.

Confirm sufficient evidence in loan file, by reviewing the underwriter’s decision to approve the loan based upon the borrows income, debt, and credit history, to support borrower's willingness and ability to repay the debt

f.

Confirm that Final 1003 is sufficiently completed

g.

Provide Audit 1008 with accurate data based on file documentation

h.

Confirm Loan Approval conditions were met

i.

Review condominium questionnaire to verify all information is complete, prepared by an authorized representative, and address any red flags that may deem condominium project ineligible

j.

General QM for any loans originated under the GQM Rule

i.

Pricing Thresholds:

a.

Pricing for First Lien Loans:

i.

2.25% for a first-lien covered transaction with a loan amount greater than or equal to the applicable dollar amount threshold; and

ii.

3.5% for a first-lien covered transaction with a loan amount greater than or equal to the applicable dollar amount threshold; and

iii.

6.5% for a first-lien covered transaction with a loan amount less than the applicable dollar amount threshold.

b.

Pricing for Subordinate Lien Loans:

i.

3.5% for a subordinate-lien covered transaction with a loan amount greater than or equal to the applicable dollar amount threshold; and

ii.

6.5% for a subordinate-lien covered transaction with a loan amount less than the applicable dollar amount threshold.

c.

Pricing for Manufactured Homes:

i.

2.25% for a first-lien covered transaction secured by a manufactured home with a loan amount equal to or greater than the applicable dollar amount threshold; and

ii.

6.5% for a covered transaction secured by a manufactured home with a loan amount less than the applicable dollar amount threshold.

ii.

Consider Income and Assets:

o

Consumer’s current or reasonably expected income or assets (other than the value of the dwelling that secures the loan);

o

The consumer’s debt obligations, alimony, child support; and

o

The monthly DTI or residual income.

iii.

Verification of Income and Assets:

a.

Verification in compliance with one of the “safe harbor” guidelines will meet the QM verification requirement. A creditor is allowed to “mix and match” provisions of the different guidelines rather than only apply one guideline per loan.

i.

Chapters B3-3 through B3-6 of the Fannie Mae Single Family Selling Guide, published June 3, 2020;

ii.

Sections 5102 through 5500 of the Freddie Mac Single-Family Seller/Servicer Guide, published June 10, 2020;

iii.

Sections II.A.1 and II.A.4-5 of the Federal Housing Administration’s Single Family Housing Policy Handbook, issued October 24, 2019;

iv.

Chapter 4 of the U.S. Department of Veterans Affairs’ Lenders Handbook, revised February 22, 2019;

v.

Chapter 4 of the U.S. Department of Agriculture’s Field Office Handbook for the Direct Single Family Housing Program, revised March 15, 2019; and

vi.

Chapters 9 through 11 of the U.S. Department of Agriculture’s Handbook for the Single Family Guaranteed Loan Program, revised March 19, 2020.

a.

Test Loan Estimate(s) for accuracy and completeness as well as timing requirements as required by TRID Regulations

b.

Test Closing Disclosure(s) for accuracy and completeness as well as timing requirements as required by TRID Regulations

c.

Tolerance Testing

i.

Compare Loan Estimate and Closing Disclosures

ii.

Identify Tolerance Violations and applicable cost to cure

d.

Comprehensive review of Closing Disclosure to determine transaction accuracy

e.

Recalculation of APR and Finance Charge

f.

Testing of:

i.

Federal High-Cost Mortgage provisions

ii.

Federal Higher Priced Mortgage Loans provisions

iii.

Local and/or State Anti-predatory and HighCost provisions

iv.

HOEPA Points and Fees

g.

Determine whether specified federal disclosures were provided timely based upon comparison of the application date to the dates on such disclosures

i.

Service Provider List

ii.

Home Ownership Counselling Disclosure

iii.

ARM Disclosure

h.

Compliance with QM as it relates to:

i.

APR Test

ii.

Points & Fees Test

iii.

Prepayment Penalty Test

iv.

Product Eligibility Testing

i.

Notice of Right to Cancel (Rescission) Review

i.

Confirm transaction date, expiration date, and disbursement date

ii.

Confirm document is properly executed by all required parties to the transaction

iii.

Confirm the correct Right of Rescission document was executed for the transaction type

j.

Confirm through NMLS the loan originator and originating firm's license status was active and properly disclosed on appropriate loan documents

k.

Check the Loan participants against the exclusionary list provided by Client or by the purchaser of the Loan(s)

l.

Review closing documents to ensure that the Mortgage Loan information is complete, accurate, and consistent with other documents; Confirm collateral documents have been recorded or sent for recording

a.

Review original appraisal, determination that property is in "average" condition or better, or property requires cosmetic improvements (as defined by the appraiser) that do not affect habitability. Should an area of concern be identified with the condition of the property, Consolidated Analytics will alert Client.

b.

Review appraisal, determination that property is completely constructed and appraisal is on an “as is basis,” or property is identified as not completely constructed by originating appraiser.

c.

Review and determine if the appraisal report was performed on appropriate GSE forms and if the appraiser indicated in the body of the subject appraisal that the appraisal conforms to USPAP standards.

d.

Review and determine the relevance of the comparable properties and ensure that a rational and reliable value was provided and supported as of the effective date of the Origination Appraisal.

e.

Review adjustments (line item, net and gross adjustments) to ensure they are reasonable.

f.

Ensure that the appraisal conforms to the guidelines provided from the Client.

g.

Review appraisal to ensure all required documents were included.

h.

Review location map provided within the appraisal for external obsolescence.

i.

Ensure highest and best use and zoning complies with guidelines.

j.

Confirm there are no marketability issues that affect the subject property.

k.

Ensure subject property does not suffer any functional obsolescence.

l.

Where applicable, determine if the file did not contain the appraisal or other valuation method and a review could not be performed.

m.

Additional valuation products were not required when the CU score provided was 2.5 or below or the appraisal LCA risk score was eligible for Collateral Rep and Warranty relief. In the event the CU score was greater than 2.5 or the LCA score was not eligible for R&W relief, an additional valuation product was obtained to confirm value was supported within 10% tolerance. In some instances, based on guideline from the seller, CDA’s were ordered on loans that had an acceptable CU score or R&W eligibility.

Fields Reviewed	Discrepancy Count	Percentage
Total Qualified Assets Post-Close	79	32.78%
Qualifying CLTV	39	16.18%
Qualifying LTV	39	16.18%
Final Qualifying Property Value	30	12.45%
Qualifying Total Debt Income Ratio	27	11.20%
Escrow Waiver in File	9	3.73%
Loan Purpose	7	2.90%
Property Type	3	1.24%
Percent of Borrower's Funds for Down Payment	2	0.83%
Borrower 2 Self-Employment Flag	1	0.41%
Borrower 1 Self-Employment Flag	1	0.41%
Primary Appraised Property Value	1	0.41%
Loan Amount	1	0.41%
Borrower 1 FTHB	1	0.41%
Borrower 2 SSN	1	0.41%
Grand Total	241	100.00%

Overall Loan Results:
Event Grade	Loan Count	Original Principal Balance	Percent of Sample
Event Grade A	325	$417,621,710.00	94.20%
Event Grade B	20	$31,266,744.00	5.80%
Event Grade C	0	$0.00	0%
Event Grade D	0	$0.00	0%
Total Sample	345	$448,888,454.00	100.00%

Credit Results:
Event Grade	Loan Count	Percent of Sample
Event Grade A	343	99.42%
Event Grade B	2	0.58%
Event Grade C	0	0%
Event Grade D	0	0%
Total Sample	345	100.00%
Compliance Results:
Event Grade	Loan Count	Percent of Sample
Event Grade A	328	95.07%
Event Grade B	17	4.93%
Event Grade C	0	0%
Event Grade D	0	0%
Total Sample	345	100.00%

Valuation Results:
Event Grade	Loan Count	Percent of Sample
Event Grade A	343	99.42%
Event Grade B	2	0.58%
Event Grade C	0	0%
Event Grade D	0	0%
Total Sample	345	100.00%

Exception Type	Exception Level Grade	Exception Category	Total
Credit	A	HMDA Data Tape Not Provided	191
		No Credit Findings	113
		Borrower 1 Credit Report is Incomplete	23
		Missing verification of taxes, insurance, and/or HOA fees for non-subject property	17
		Income and Employment Do Not Meet Guidelines	11
		Missing US Patriot Act Disclosure or ID	7
		Title Coverage is Less than Subject Lien	7
		Audited DTI Exceeds AUS DTI	6
		Borrower 1 3rd Party VOE Prior to Close Missing	5
		AUS Partially Provided	4
		Borrower 2 3rd Party VOE Prior to Close Missing	3
		The Final 1003 is Missing	3
		Housing History Does Not Meet Guideline Requirements	3
		Asset 5 Missing	2
		Hazard Insurance Effective Date is after the Disbursement Date	2
		The Final 1003 is Incomplete	2
		Third Party Fraud Report not Provided	2
		AUS Not Provided	2
		The Total Hazard Coverage is LESS than the Required Coverage Amount	2
		Asset Qualification Does Not Meet Guideline Requirements	2
		Missing Property Tax Cert	2
		HO6 Master Insurance Policy is Missing	2
		HMDA Discrepancy(s) Noted	2
		Asset 5 Does Not Meet Guideline Requirements	1
		Purchase Contract is Incomplete	1
		Title Document is Partially Present	1
		Asset 3 Missing	1
		Flood Insurance Policy Missing	1
		Income/Employment General	1
		Third Party Fraud Report Partially Provided	1
		Missing final HUD-1 from sale of non-subject property	1
		ATR: Reasonable Income or Assets Not Considered	1

		Missing letter of explanation	1
		The Deed of Trust is Incomplete	1
		Borrower 1 IRS Transcripts Missing	1
		Audited Reserves are less than Guideline Required Reserves (Dollar Amount)	1
		Borrower 1 WVOE Missing	1
		Asset 3 Does Not Meet Guideline Requirements	1
		Audited DTI Exceeds Guideline DTI	1
		Assets do not meet guideline requirements	1
		Borrower 2 Credit Report is Incomplete	1
		Verified Liquid Assets Insufficient For Closing	1
		No evidence of required debt payoff	1
		Potential Occupancy/Current Address Issues identified in the file	1
		Total Credit Grade (A) Exceptions:	434
	B	Hazard Insurance Effective Date is after the Disbursement Date	2
		Total Credit Grade (B) Exceptions:	2
Compliance	A	No Compliance Findings	92
		Charges That Cannot Increase Test	33
		eSigned Documents Consent is Missing	15
		Charges That In Total Cannot Increase More Than 10% Test	13
		Initial Loan Estimate Delivery Date Test (from application)	12
		Evidence of Appraisal Delivery to Borrower not Provided or Late (12 CFR  1002.14(a)(1))	11
		Missing Required Affiliated Business Disclosure	11
		Initial Closing Disclosure Delivery Date Test	9
		Revised Loan Estimate Delivery Date Test (prior to consummation)	8
		TRID: Missing Loan Estimate	5
		RESPA Homeownership Counseling Organizations Disclosure Date Test	5
		Lender Credits That Cannot Decrease Test	5
		TRID: Missing Closing Disclosure	3
		Right of Rescission is Missing	2
		Missing Initial Escrow Disclosure	2
		Homeownership Counseling Disclosure Is Missing	2
		TRID Disclosure Dates and Personal Delivery Validation Test	1
		Intent to Proceed is Missing	1
		TRID Post-Consummation Reason for Redisclosure Validation Test	1
		Initial Closing Disclosure Delivery Date and Changed Circumstances Date Test	1
		TRID "Section B. Services You Cannot Shop For / Services Borrower Did Not Shop For" Validation Test	1
		Escrow Waiver is Missing	1
		TRID Disclosure Delivery Date Validation Test	1

		Final CD: Loan Disclosures Assumption incomplete or inaccurate	1
		TRID: Closing disclosure loan terms- Balloon Payment	1
		Missing Service Provider List	1
		TILA Right of Rescission Test	1
		Incorrect rescission model used - RTC form model H-9 used for refinance not with Original Lender or Lender Affiliate	1
		Non-Borrower Title Holder Did Not Receive Right of Rescission Form	1
		Total Compliance Grade (A) Exceptions:	241
	B	Evidence of Appraisal Delivery to Borrower not Provided or Late (12 CFR  1002.14(a)(1))	5
		Lender Credits That Cannot Decrease Test	4
		Charges That Cannot Increase Test	4
		Charges That In Total Cannot Increase More Than 10% Test	2
		RESPA Homeownership Counseling Organizations Disclosure Date Test	1
		Missing Required Affiliated Business Disclosure	1
		eSigned Documents Consent is Missing	1
		Incorrect rescission model used - RTC form model H-8 used for Same Lender or Lender Affiliate Refinance	1
		Total Compliance Grade (B) Exceptions:	19
Property	A	No Property Findings	130
		Property/Appraisal General	9
		Third Party Valuation Product Not Provided within 10% Tolerance	9
		The appraiser was not licensed (Primary Value)	1
		Missing HOA/Condo Certification	1
		FEMA Post Disaster Inspection Report not Provided	1
		Condo Approval Missing	1
		Total Property Grade (A) Exceptions:	152
	B	Third Party Valuation Product Not Provided within 10% Tolerance	1
		Property/Appraisal General	1
		Total Property Grade (B) Exceptions:	2

Final Loan Grade
A	Loan meets Credit, Compliance, and Valuation Guidelines
B	The loan substantially meets published Client/Seller guidelines and/or eligibility in the validation of income, assets, or credit, is in material compliance with all applicable laws and regulations, and the value and valuation methodology is supported and substantially meets published guidelines.
C	The loan does not meet the published guidelines and/or violates one material law or regulation, and/or the value and valuation methodology is not supported or did not meet published guidelines.
D	Loan is missing documentation to perform a sufficient review.

Credit Event Grades
A	The loan meets the published guidelines without any exceptions. The employment, income, assets and occupancy are supported and justifiable.  The borrower’s willingness and ability to repay the loan is documented and reasonable.
B	The loan substantially meets the published guidelines but reasonable compensating factors were considered and documented for exceeding published guidelines.  The employment, income, assets and occupancy are supported and justifiable.  The borrower’s willingness and ability to repay the loan is documented and reasonable.
C	The loan does not substantially meet the published guidelines.  There are not sufficient compensating factors that justify exceeding the published guidelines.  The employment, income, assets or occupancy are not supported and justifiable.  The borrower’s willingness and ability to repay the loan were not documented or are unreasonable.
D	There was not sufficient documentation to perform a review or the credit file was not furnished.

Compliance Event Grades
A	The loan is in compliance with all applicable laws and regulations. The legal documents accurately reflect the agreed upon loan terms and are executed by all applicable parties.
B	The loan is in material compliance with all applicable laws and regulations. The legal documents accurately reflect the agreed upon loan terms and are executed by all applicable parties. Client review required.
C	The loan violates one material law or regulation.  The material disclosures are absent or the legal documents do not accurately reflect the agreed upon loan terms or all required applicants did not execute the documents.
D	There was not sufficient documentation to perform a review or the required legal documents were not furnished.

Valuation Event Grades
A	The value is supported within 10% of the original appraisal by the AVM or there are other supporting documents in the originators loan file package (CDA, Field Review or Second Appraisal). The appraisal was performed on an "as-is" basis and the property is complete and habitable at origination.  The appraiser was appropriately licensed and used GSE approved forms.
B	The value is not supported within 10% of the original appraisal by the AVM and there are no other valuation support documents in the loan file provided by the Seller.  The valuation methodology substantially meets the published guidelines but reasonable compensating factors were considered and documented for exceeding guidelines.  The appraisal was performed on an "as-is" basis and the property is complete and habitable.  The appraiser was appropriately licensed and used GSE approved forms.
C	The value is not supported within 10% of the original appraisal.  The valuation methodology did not meet the published guidelines and there were not sufficient compensating factors for exceeding published guidelines.  The property is in below “average” condition or the property is not complete or requires significant repairs.  The appraisal was not performed on an “as is” basis.  The appraiser was not appropriately licensed or did not use GSE approved forms.
D	The file was missing the appraisal or there was not sufficient valuation documentation to perform a review.