Credit Suisse sellers guide (secondary market) August 2006

Correspondent Underwriting Guidelines August 2006 Version 2.1

Version 2.1 (August 2006) Credit Suisse page 2

Table of Contents Page

Chapter I: 1st and 2nd Liens........................................................................................................ 5 A. Underwriting Philosophy ...........................................................................................5

100 Exceptions ........................................................................................................ 5 200 Predatory Lending Policy.................................................................................. 5

B. Borrower Eligibility ....................................................................................................6 300 Borrower�s Age ................................................................................................. 6 301 First Time Homebuyer ...................................................................................... 6 302 Residency and Immigration Status ................................................................... 6

302.1 U.S. Citizens ...................................................................................................6 302.2 Permanent Resident Alien ..............................................................................6 302.3 Non-Permanent Resident Alien ......................................................................7 302.4 Foreign Nationals ............................................................................................7 302.5 Diplomatic Immunity........................................................................................8 302.6 Trust Estates ...................................................................................................8 302.7 ITIN � Tax ID Number ...................................................................................10

303 Co-Borrower, Guarantors or Co-Signers ........................................................ 11 303.1 Non-Occupant Co-borrower..........................................................................11 303.2 Non-purchasing Spouse................................................................................12

304 Non-Arms Length Transactions ...................................................................... 15 304.1 Acceptable Non-Arms Length Transactions .................................................15 304.2 Unacceptable Non-Arms Length Transactions .............................................15

305 Number of Properties Financed...................................................................... 16 306 Occupancy...................................................................................................... 16

306.1 Primary Residence........................................................................................16 306.2 Second Home ...............................................................................................16 306.3 Investment Property ......................................................................................17

C. Transaction/Loan Purpose......................................................................................18 400 Purchase Transactions ................................................................................... 18

400.1 Lease/Purchase Options...............................................................................18 400.2 Land Contracts and Contract for Deed .........................................................18 400.3 Construction-to-Permanent Loans ................................................................19 400.4 Inherited Properties.......................................................................................19 400.5 Subordinate Financing ..................................................................................20

401 Refinance........................................................................................................ 20 401.1 Rate/Term Refinance....................................................................................21 401.2 Cash-Out Refinance......................................................................................21 401.3 Texas Cash-Out Refinance...........................................................................21

402 Seasoning Requirements ............................................................................... 22 D. Documentation Options ..........................................................................................23

500 Age of Documentation .................................................................................... 23 500.1 Credit Documentation ...................................................................................23 500.2 Appraisal Documentation..............................................................................23

501 Acceptable Loan Documentation Types ......................................................... 23 501.1 Full, Alternative and Lite Documentation Types ...........................................24 501.2 Reduced Documentation Types....................................................................27

502 Documentation Table...................................................................................... 30 503 Fannie Mae Automated Decisions.................................................................. 31

503.1 Desktop Underwriter Guidelines: Conforming Loans...................................31 503.2 Desktop Underwriter Guidelines: Non-Conforming Loans...........................31

E. Underwriting the Borrower ......................................................................................33 600 Credit Standards............................................................................................. 33


600.1 Minimum Credit Profile..................................................................................33 600.2 Credit Reports ...............................................................................................33 600.3 Credit Scores ................................................................................................33 600.4 Alternative Credit History (Alt-A products only).............................................34 600.5 Credit Analysis ..............................................................................................34

601 Liabilities ......................................................................................................... 37 601.1 Housing Expenses ........................................................................................37 601.2 Installment Debt ............................................................................................38 601.3 Revolving Debt and HELOCs .......................................................................38 601.4 Other Real Estate..........................................................................................39 601.5 Bridge Loans .................................................................................................39 601.6 Business Debt ...............................................................................................40 601.7 Other Debts...................................................................................................40

602 Employment and Income ................................................................................ 41 602.1 Employment Income .....................................................................................41 602.2 Self-Employed Income..................................................................................44 602.3 Fixed Income.................................................................................................44 602.4 Other Income ................................................................................................45 602.5 Trailing (Relocating) Co-borrower Income....................................................47 602.6 Unacceptable Income....................................................................................47

603 Assets and Sources of Funds......................................................................... 48 603.1 Borrower Contributions .................................................................................48 603.2 Depository Accounts .....................................................................................48 603.3 Proceeds from Sale of Real Estate...............................................................48 603.4 Earnest Money Deposit.................................................................................49 603.5 Land Equity ...................................................................................................49 603.6 Marketable Securities....................................................................................49 603.7 IRA/Keogh, 401Ks and Other Retirement Accounts.....................................49 603.8 Seller Contributions/Concessions .................................................................50 603.9 Gift Funds......................................................................................................50 603.10 Gift of Equity ..................................................................................................51 603.11 Borrowed Funds Secured by an Asset..........................................................51 603.12 Unacceptable Sources of Funds ...................................................................51 603.13 Reserves .......................................................................................................52

F. Underwriting the Property .......................................................................................53 700 Property Types ............................................................................................... 53

700.1 Property Type Eligibility.................................................................................53 700.2 Definition and Requirements.........................................................................54 700.3 Other Property Eligibility Issues ....................................................................58

G. Appraisal Standards................................................................................................61 800 Acceptable Appraisal Firms ............................................................................ 61 801 Appraisal Requirements ................................................................................. 61 802 Required Forms/Disclosures .......................................................................... 62 803 Required Appraisal Exhibits............................................................................ 62

H. Mortgage Insurance ................................................................................................64 900 Premium Payment Options............................................................................. 64 901 Coverage Requirements for Conforming, Alt-A or Prime A Products ............. 64

Chapter 2: HELOC 1st and 2nd Liens & Stand Alone 2nd Liens (Supplement) ..................... 65 A. Introduction .............................................................................................................65 B. Senior Lien Eligibility...............................................................................................65 C. Underwriting the Borrower ......................................................................................65

100 Credit Requirements....................................................................................... 65 100.1 Credit Grades for HELOCs ...........................................................................65


100.2 Other Requirements......................................................................................66 200 Residual / Disposable Income Requirements................................................. 66

D. Underwriting the Property .......................................................................................66 300 Property Type Eligibility .................................................................................. 66 400 Appraisal Requirements ................................................................................. 67

400.1 Automated Valuation Models ........................................................................67 400.2 Approved AVM Vendors and Products .........................................................68

500 Other Documentation Requirements .............................................................. 69 500.1 Title Requirements ........................................................................................69 500.2 Documentation Related to 1st Lien................................................................69


Chapter I: 1st and 2nd Liens

A. Underwriting Philosophy Credit Suisse (USA), Inc. (�Credit Suisse�) purchases an array of residential mortgage loans through its wholly owned subsidiary, DLJ Mortgage Capital, Inc. (�DLJMC�). While many of the products are not of a conventional nature, the loans must be sound and prudent for the associated risk. In order to assist our Sellers in determining if the underlying risk of the loan is consistent with the performance expectations for which they are priced, Credit Suisse has created these underwriting and product guidelines. The underwriting guidelines set forth in this Correspondent Underwriting Guideline (the �Guide�) should be met for all Alt-A, Prime A (formerly named Jumbo A), 2nd Lien, and HELOC loans submitted to Credit Suisse. Subprime loans are addressed in a separate stand alone guide. Credit Suisse will revise and amend the Guide from time to time as necessary. Any revisions become effective on the date stated in the written communication or posted on the Credit Suisse website.

100 Exceptions

Loans that do not meet all the applicable guidelines are not necessarily excluded from purchase by Credit Suisse. Credit Suisse will review exceptions to the guidelines on a case-by-case basis. Underwriting exceptions may be requested on www.credit-suisse.com/connect under �Rate Lock.�

200 Predatory Lending Policy

Credit Suisse believes that all home lenders should adhere to high ethical standards and practices. Accordingly, Credit Suisse neither condones nor knowingly engages in predatory lending or abusive lending practices. Credit Suisse is committed to providing mortgage lending products that are designed to meet a variety of consumers� financing needs, and takes steps to work with parties who do not participate in predatory lending. Credit Suisse endorses Fannie Mae�s Predatory Lending Policy as specified in the Fannie Mae Selling Guide Part I, Chapter 3, Section 310 (6/30/02). The Seller must do business in a manner which is consistent with this philosophy.

http://www.credit-suisse.com/connect


B. Borrower Eligibility Credit Suisse will purchase mortgages that have been made to natural persons who are citizens and/or legal residents of the United States, including permanent and non-permanent residents. Title to the property must be in the name of the individual borrowers. Inter vivo revocable trusts are also considered eligible borrowers. On an exception basis and in select states, Credit Suisse may also consider a land trust as an eligible borrower.

Other types of legal entities, including corporations, general partnerships, limited partnerships, and real estate syndicates, are not eligible borrowers.

300 Borrower�s Age

Credit Suisse requires that all 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.

301 First Time Homebuyer

Loans to First Time Homebuyers are available without restrictions on all products except for the Stand Alone 2nd Liens described in Chapter 2.

302 Residency and Immigration Status

Credit Suisse will purchase loans made to United States citizens, Permanent Resident Aliens, Non-Permanent Resident Aliens, Foreign Nationals, and ITIN borrowers. Borrowers must meet underwriting guidelines as set forth in this Guide and on the individual product matrices.

302.1 U.S. Citizens

A United States citizen is a native or naturalized person entitled to all rights and privileges of the United States. Unless otherwise noted, loan product requirements are based on the assumption that the borrower is a U.S. citizen. All loan products may not be available to non-U.S. citizens, or may be available subject to adjustment as set forth in this Guide and on individual product matrices.

302.2 Permanent Resident Alien

Credit Suisse will fund loans made to lawful permanent residents of the United States under the same terms available to United States Citizens, provided the following requirements are met:

• Certification is provided to confirm the existence of the borrower�s Alien Registration Card (also called a �Green Card�) with a 10-year expiration date on the front, and no expiration date on the back. For borrowers who do not yet possess a Green Card, an Alien Registration Receipt Card (I-551), Conditional Residential Alien Card) with an expiration date and a receipt showing that he/she has filed an application (NS Form I-90) for a Form I-55 �green card� are acceptable.

• Borrower has resided in the United States for the past two years.


• Borrower has been employed in the United States for the past two years. • Where applicable, funds needed for closing must be verified from US assets.

302.3 Non-Permanent Resident Alien

Non-Permanent Resident Aliens are individuals who seek temporary entry to the United States for a specific purpose. Generally referred to as �non-immigrants,� examples of non-permanent resident aliens include foreign officials, students, international representatives, temporary workers and trainees, fiancée of a US citizen, and NATO officials.

A minimum time frame left on the visa is not required. However, if less than six months remains, a letter from the borrower verifying his or her intention to remain in the country and a copy of the approved application for the extension of the visa must be included in the file.

Non-permanent resident aliens are non-U.S. citizens who have no valid evidence of permanent residency but have valid visas and social security numbers. Acceptable visas are as follows:

• H-1, H-2A, H-3 (Temporary Worker) • L-1 (Intra-Company Transferee) • E-1 (Treaty Trader) • G series (G-1, G-2, G-3, G-4) provided it does not include diplomatic

immunity, TN NAFTA Worker�s Visa or TC NAFTA Worker�s Visa (Issued to Mexican or Canadian citizens for professional or business purposes under the terms of the North American Free Trade Agreement)

• Any other acceptable evidence of permanent residency issued by the INS

Credit Suisse requires the following:

• Two year verified work history in the United States, regardless of documentation type

• Employment must have a likelihood of continuance • Two year residency in the United States • Two year credit history in the United States (alternative credit is acceptable) • Credit Score requirement or acceptable alternative credit for product chosen

must be met (refer to Section 600.4 for alternative credit) • Foreign documentation must satisfy the same basic standards for

authenticity, accuracy, and completeness as does domestic documentation • Foreign documentation must be translated to English by an acceptable

source. Currency must also be translated to US dollars within a reasonable period prior to closing and documented by an acceptable source.

Refer to Product Matrices for eligibility requirements.

302.4 Foreign Nationals

Foreign Nationals are non-U.S. citizens who are not Permanent or Non-Permanent Resident Aliens and do not have full or partial diplomatic immunity. A Foreign National periodically visits the U.S. and uses the home for residency during those visits.


A determination of the Foreign National�s residency status for underwriting purposes may be made based on the circumstances of the individual case, using whatever documentation is deemed appropriate. Visas or other documentation must indicate that a borrower has legally entered the United States. A borrower who does not have a visa, as outlined above for Non-permanent Resident Alien, may be treated as a Non-permanent Resident Alien if work history and employment criteria are met as defined above. A visa is not the sole determinant of residency status for underwriting purposes.

Foreign Nationals must provide the following:

• Residency visa to visit or live in the U.S. for a limited amount of time. Eligible visas are: B-1, B-2, E-1, E-2, G1 through G5, I, J-1, J-2 and K-1.

• Copy of the borrower�s unexpired passport • Proof of Social Security Number, Tax ID Number or filed Certificate of

Foreign Status (IRS form W-8) • A domestic Residential Mortgage Credit Report or Tri-Merged Credit Report

is required. If sufficient credit is not available from this report, a foreign credit report may be obtained. When a Foreign National does not have a credit profile, documented evidence that an attempt was made to obtain a credit report must be contained in the loan file.

• Alternative Credit may be provided in the form of three (3) original bank reference letters from financial institutions in the borrower�s country of origin or one (1) original credit reference letter from a large internationally recognized banking institution.

• Twelve (12) months cancelled checks showing a maximum of 0x60 pay history over the past twelve (12) months for each alternative trade line is also acceptable.

• Alternative credit resources may also include: telephone bills, utility bills, cable television bills, insurance bills (if paid monthly), etc.

• Foreign documentation must satisfy the same basic standards for authenticity, accuracy, and completeness as does domestic documentation.

• Foreign documentation must be translated to English by an acceptable source. Currency must also be translated to US dollars within a reasonable period prior to closing and documented by an acceptable source.

• Escrows for real estate taxes are required, unless prohibited by state law. • Foreign nationals are not eligible to close in trust. • Credit Suisse will finance a maximum of one (1) property as the borrower�s

second home.

Foreign National borrowers are eligible for Alt-A products only. Refer to Product Matrices for eligibility requirements.

302.5 Diplomatic Immunity

Borrowers who have diplomatic immunity are not eligible for any products offered by Credit Suisse.

302.6 Trust Estates

Trusts are legal instruments created by individuals and are commonly used as an estate planning tool. Trusts may assume many different forms, but these guidelines are limited to inter vivos revocable trusts (a.k.a. family trust, living


trust, or revocable living trust) which can serve as instruments of property ownership.

Additionally, on a case-by-case basis, title may be held in an Illinois Land Trust. The beneficiary must be an individual.

302.6a Underwriting Requirements The following is required for inter vivos revocable trusts:

• The borrower and co-borrower(s) must qualify as individuals. Multiple individuals and one trust may be co-borrowers on the same loan. No more than one trust, however, may be on an individual loan.

• The trust must have been created by a written document during the lifetime of the individual creating the trust, and must have been effective during their lifetime. If the trust originally fulfilled this criteria but the creator is now deceased, the loan would still be acceptable to Credit Suisse if the trust was executed by the new, or successor, grantor/trustor/settlor.

• The individual establishing the trust must be the primary beneficiary. If the trust is created jointly by more than one person, there may be more than one primary beneficiary provided: o Income or assets of at least one of the grantor/trustor/settlor will

be used to qualify for the loan, and o Individual occupies the subject property or owns it as an

investment property and signs the loan documents. • The trust document must name one or more trustees to hold legal title

and manage the subject property. o The trustee(s) must include an individual or at least one of the

individuals, who created the trust, or o The trustee(s) must include an institutional trustee that customarily

performs trust functions and is empowered to act as trustee under applicable jurisdictional laws (such as the trust department of a commercial bank).

o The trustee(s) must have the authority to mortgage the property in trust for the purpose of securing a loan to the party/parties who is/are the �borrower(s).�

• Eligible properties include: 1-4 unit family residence, condominiums, and PUDs.

• Foreign Nationals are ineligible for closing in trust.

302.6b Copies of Trust A full copy of the trust is not required. However, the borrower must furnish all relevant portions of the trust, as required by the title company, clearly stipulating:

• The identities of the grantor/trustor/settlor, beneficiaries, and trustee(s);

• Enumerated powers and authority of the trustee(s); • That the property is held as part of the trust; • That the trust is revocable; and • That the trust was established and became operative during the

lifetime of the original grantor/trustor/settlor.


302.6c Executing Loan Documents The following documents are required for borrower execution of loans pledged by an inter vivos trust:

• Inter Vivos Revocable Trust Rider to the Deed of Trust (�DOT�)/Mortgage

• Inter Vivos Trust as Borrower Acknowledgment • Inter Vivos Trust Signature Page Attachment

Given the diversity of potential parties to a trust (i.e. creator, trustee, beneficiary), the loan documents must be executed by all required parties and in a prescribed manner, per the following outline. (Note: No other documents need to be signed by the trust). Loan documents for loans pledged by an inter vivos trust cannot be executed through the use of a power of attorney

Document Signature Requirements

Note

• Each trustee as trustee of the trust, whether individual or corporate

• Each trustor whose income or assets were used to qualify for the loan, as an individual

• Each individual, not a trustee, whose income or assets were used to qualify for the loan

DOT/Mortgage and all other DOT/Mortgage Riders


• Each individual who has an interest in the property

Inter Vivos Revocable Trust Rider to the DOT/Security

Agreement


• Each individual who has an interest in the property

• Each trustor whose income or assets were used to qualify for the loan, as an individual (shown as �Settlor� for the second signature block)

Inter Vivos Trust as Borrower

Acknowledgement

• Each trustor whose income or assets were used to qualify for the loan, as an individual (shown as �Settlor�)

302.7 ITIN � Tax ID Number

Loans made to borrowers with a valid Individual Taxpayer Identification Number (�ITIN�) are eligible for purchase by Credit Suisse. ITINs are available for certain nonresident and resident aliens, their spouses, and dependents and are used only for federal income tax purposes. The ITIN is a nine (9) digit number, beginning with the number �9� and is formatted like a Social Security Number (NNN-NN-NNNN). Individuals with an ITIN do not have a Social Security Number. The issuance of an ITIN does not: a) entitle the recipient to Social Security benefits or the Earned Income Tax Credit (EITC), b) create an inference regarding the individual�s immigration status, or c) give the individual the right to work in the U.S.


Credit Suisse will purchase ITIN Borrowers� loans provided the following criteria are met:

• Borrowers must provide evidence that they reside legally in the United States. Typically, the evidence would be in the form of an unexpired VISA.

• No late payments on housing history and no more than 1x30 on any other trade lines in the past twelve (12) months.

• If alternative credit is required, at least four (4) trade lines with a satisfactory twelve (12) month history.

• No secondary financing. • Loans over 80% LTV require mortgage insurance,

Note: ITIN borrowers are not eligible for Prime A products.

303 Co-Borrower, Guarantors or Co-Signers

Credit Suisse requires the following for co-borrowers:

• Co-borrowers do not have to take title to the property. If income is to be used for qualification purposes, however, the co-borrower(s) must sign the Note at closing with applicable disclosures, but will not be required to sign the Mortgage. In this case, the co-borrower�s credit history, credit score, assets and liabilities must be fully considered in rendering a credit decision.

• Co-borrowers may not be an interested party (e.g. the property seller, the builder, or real estate broker) to the property sales transaction.

• Co-borrowers must sign the Mortgage in order to take title to the property. • Co-borrower who takes title must sign any document required by law in order

to take title.

In addition to the above requirements for a co-borrower, the following restrictions are applicable for different types of co-borrowers:

303.1 Non-Occupant Co-borrower

• Credit Suisse allows non-occupant co-borrowers. The non-occupant co-borrower does not need to be a family member; however, a proven established relationship between the borrowers must be evident.

• The occupant borrower(s) must qualify with maximum total debt-to-income ratios of ten (10) above the maximum ratios for the loan program. For example, if maximum allowable DTI is 50%, the occupant borrowers must qualify with total DTI of 60% or less; while all borrowers combined must qualify at 50% or less. Should the occupant borrower not meet this requirement, the loan will be considered an investment property for eligibility and pricing purposes.

• For LTVs of 80.01% - 95.0%, a down payment is required when there is a non-occupant co-borrower. The owner-occupant must contribute at least 5% of the purchase price from their own funds.

• If the LTV is less than or equal to 80%, the entire down payment may be in the form of a gift.

Note: See Section 603 of this chapter for additional information regarding borrower assets and source of funds.


303.2 Non-purchasing Spouse

A non-purchasing spouse is a borrower�s spouse whose credit and income is not considered for qualifying. A non-purchasing spouse may or may not be currently vested on title.

To perfect a lien under governing state law when a married applicant purchases a property without involving their spouse, Credit Suisse requires the spouse to sign the security instrument or other applicable documentation (e.g. Quit Claim Deed) to confirm they are relinquishing all rights to the property. As required by state jurisdiction, Credit Suisse will accept different state specific documentation provided Credit Suisse is guaranteed a lien position that is superior to that of the non-purchasing spouse. Dependent upon state requirements, the appropriate documentation may also have to be executed for refinances.

303.2a Community Property States In community property states, as well as in some states with homestead laws such as Illinois, couples must both sign loan documents, even if not on title, to perfect the lien on the property. Currently, community property states are:

• Arizona • New Mexico • California • Texas • Idaho • Washington • Louisiana • Wisconsin • Nevada

303.2b Sole and Separate Property In cases where a married individual obtains a loan as �sole and separate property� in a community property or homestead state, Credit Suisse requirements are as follows:

• The non-borrowing spouse (�Spouse�) MUST execute the security instrument (e.g. Mortgage, Deed of Trust, etc.)

• The following recitation above the Spouse�s signature is required: �The Undersigned enters into the execution of this document solely for the purpose of perfecting Note Holder�s security interest in subject property.�

• The Spouse MUST sign the Notice of Right to Cancel, TIL, and Section 32 disclosures.

• The Spouse does not need to execute the Note. • If the Spouse executes a Quit Claim Deed, but the borrower and

Spouse reside together in the property, the above requirements will not be waived. If the Quit Claim Deed signed by the Spouse was filed as part of a divorce settlement and the divorce decree stipulates that the borrower retains ownership and occupancy, certified copies of the Quit Claim Deed and the divorce decree will be allowed in lieu of the Spouse�s signature on the documents noted above.

303.2c Signature Requirements The requirements governing which individuals execute specific legal documents depend on 1) title to property, 2) occupancy, and 3) income utilized.


• Every individual whose income is utilized to qualify for the loan must sign the Note and all loan and legal documents.

• Every individual on title must sign the Mortgage (security instrument) and Notice of Right to Cancel, Truth-in-Lending, and Section 32 Disclosures.

• If an individual resides in the property but is not on title and is not qualifying as a borrower, that individual does not need to sign any loan documents UNLESS he/she is the spouse of the borrower. See Section 303.2b above for requirements related to a non-borrowing spouse.


Signature Examples NOTE Mortgage, TIL, Section 32 and Right to Cancel

Community Property State

• Lucy owns the property sole and separate

• Husband Ricky is not on title. His income may or may not be used to quality

Lucy only

Ricky must sign note if his income is used for qualification purposes

Ricky and Lucy must execute the Mortgage and Disclosures.

Non-Community Property State

• Lucy owns the property sole and separate

• Husband Ricky is not on title. His income may or may not be used to quality

Lucy only

Ricky must sign note if his income is used for qualification purposes

Lucy must execute the Mortgage and Disclosures.

Credit Suisse prefers but does not require Ricky to execute any documents.

• Jerry and Elaine own the property and are not married

• They are tenants in common with each having 50% interest

• Jerry is the borrower and only his income is used to qualify

Jerry only Jerry and Elaine must execute the Mortgage and Disclosures.

• Bob, Carol, Ted & Alice all own the property, each couple = HW/JT as to their undivided ½ interest, all as couple = HW/JT as to their undivided ½ interests, all as tenants in common.

• Bob & Carol are the borrowers and are the only occupants. Only their income is used to qualify.

Bob and Carol

Bob, Carol, Ted & Alice must execute the Mortgage and Disclosures as well as be on the title.

• Bob and Carol own the property

• Ted and Alice have no title interest but reside in the property. They will be co-signers on the note but have no ownership interest so their income is used to qualify. All four (4) borrowers reside in the property.

Bob, Carol, Ted and Alice

Bob and Carol must execute the Mortgage and Disclosures.

Credit Suisse prefers but does not require Ted and Alice to execute any documents.

• Lucy and Ricky are married, own and reside in the property, and both are qualifying.

Lucy and Ricky

Lucy and Ricky must execute all documents.

Sole and Separate (CA and AZ)

• Lucy and Ricky are married and Ricky is purchasing and designates the property to be �sole and separate.�

Ricky

Seller will execute a grant deed to Ricky as �a married man as his sole and separate property.�

Ricky

Lucy executes a Quit Claim Deed stating that she, as a �married woman, hereby quit claims to Ricky, a married man, as his sole and separate property.�


304 Non-Arms Length Transactions

A non-arms length transaction is defined as a personal or business relationship between the borrower(s) and/or any parties in the transaction. An arms length transaction occurs when the parties involved are entirely independent of one another. That is, all parties deal with one another as strangers. If a direct relationship exists between any of the parties to a transaction, including the borrower/buyer, seller (if applicable), employer, lender, broker or appraiser, then the transaction will be considered non-arms length.

304.1 Acceptable Non-Arms Length Transactions

Examples of acceptable non-arms length transactions include:

• Family sales or transfers (either with or without consideration) • Corporate sales or transfers (from business to personal ownership) • Borrowers employed in the real estate or construction trades who are not

involved in the construction, financing, or sale (i.e. listing agent) of the subject property

• Borrower commission earnings on the subject property may not be used as funds for the mortgage transaction. LTV or CLTV need not be adjusted by commissions earned provided the earnings are in line with what is customary for the region.

Loans made to principals or employees of vendors or service providers (such as an appraiser, settlement agent, title company, etc.) cannot have these services directly or indirectly provided by such individuals on their own loan or property. National third party providers must provide all services including but not limited to the appraisal, the settlement, and the title search/commitment.

Credit Suisse loan products are eligible for acceptable non-arms length transactions. However, these transactions may require additional appraisal, income and asset documentation depending upon the Credit Suisse underwriter�s assessment of risk. In the case of a family transfer, a 12-month history of mortgage payments is required to ensure the loan is not a foreclosure bail-out. The down payment must be fully sourced and satisfactorily documented. The appraiser must address the affect the non-arms length transaction has on the market value of the subject property.

304.2 Unacceptable Non-Arms Length Transactions

Examples of unacceptable non-arms length transactions include, but are not limited to:

• Borrower(s) purchasing a property from a builder who, in turn, is purchasing the borrowers� existing residence

• Refinance of a builder spec home where the builder is still the titled owner or the builder has a vested ownership interest in the property (i.e. owns the company that is titled owner of the subject property)

• Employer to employee sales or transfers • Borrowers or co-borrowers employed in the real estate or construction trades

who are involved in the construction, financing, or sale (i.e. listing agent) of the subject property


• Transactions that involve a principal or employee of a Credit Suisse Seller or the Seller�s vendor or other service provider (such as an appraiser, settlement agent, title company, etc.) who is involved in the lending process of the subject property. In the case of a Credit Suisse Seller, someone else in the same firm may take the application and process the loan for Credit Suisse consideration; however, caution must be exercised to ensure that the borrower has not had any influence on the loan process or the ultimate underwriting decision.

305 Number of Properties Financed

Credit Suisse will purchase a maximum of twelve (12) loans for a maximum of six (6) properties (two (2) loans per property � 1st and 2nd Lien combinations) made to a single borrower or borrower group. A total of eight (8) loans (1st and 2nd Lien combinations) from four (4) investor properties per borrower may be sold to Credit Suisse.

• Credit Suisse will consider the number of properties owned and the length of time that the properties have been owned. Loans where borrowers demonstrate a rapid acquisition of investment properties in the prior twenty four (24) months will be reviewed for factors to offset the additional risk associated with potentially limited investor experience.

• Credit Suisse reserves the right to limit the number of properties purchased within one building, within one neighborhood, and/or to one borrower.

• The appraisal may not include comparable sales from other properties owned by the borrower(s).

• Multiple loans to one borrower must be delivered concurrently for review by Credit Suisse.

Refer to Product Matrices for additional product specific limitations.

306 Occupancy

Occupancy of the property will determine the availability of loan products. There are generally three occupancy types as follows:

306.1 Primary Residence

A primary residence (owner occupied) is a one-to-four family property that is occupied by the borrower as a primary residence. At least one of the borrowers must occupy and take title to the property and execute the note and the mortgage. A property will also be classified as a primary residence if a parent wants to provide housing for a physically handicapped or developmentally disabled adult child who is unable to work.

306.2 Second Home

A second homes is a property suitable for year-round use that may or may not be occupied by the borrower from time-to-time, including vacation and non-vacation homes. A non-vacation home that is regularly occupied by the borrower, in addition to the primary residence, is considered a second home.

Note: 2-4 unit properties are not eligible for second home status.


306.3 Investment Property

An investment property (non-owner occupied) is owned, but not occupied, by the borrower that does not qualify as a second home.


C. Transaction/Loan Purpose

400 Purchase Transactions

Purchase money transactions include the following:

• A loan in which the proceeds are used to finance the purchase of the property.

• A mortgage transaction in which all of the proceeds are used to pay off an outstanding balance on an installment land contract, including any costs the borrower incurred for rehabilitation, renovation, or energy conservation improvements.

• A mortgage created by modifying an interim construction loan or term note into permanent financing if the borrower receives no cash-out from the settlement.

400.1 Lease/Purchase Options

A lease-purchase option is a contract for sale of property in which the purchaser leases the property for a prescribed period of time. During this period, an agreed upon percentage of the rental payment is held by the seller for use as the down payment on the property. Credit Suisse will consider these loans as follows:

• If the original agreement is less than twelve (12) months old at the time of application, the lower of the option price at the time of the contract or the appraised value will be used to calculate the LTV.

• If the original agreement is at least twelve (12) months old at the time of application, the current appraised value will be used to calculate the LTV.

• Copies of the cancelled rent checks are required to verify the length of the contract. The borrower�s rental payment history is required for the length of the contract and will be treated as a prior housing payment history.

• If the agreement specifies that rent credits are to be applied toward the down payment, Credit Suisse will consider this, provided the appraiser documents the fair market rent with a market rent survey (Form 1007 SFR Comparable Rent Schedule). The portion of rent that exceeds the market rent survey will be used to calculate the additional down payment. If a down payment was made, a copy of the cancelled check is required.

400.2 Land Contracts and Contract for Deed

A Land Contract or Contract for Deed is a contract in which the purchaser agrees to pay the seller specified amounts at defined intervals until the total purchase price is paid, at which time the seller transfers interest in the property to the purchaser.

Land contract transactions are acceptable to Credit Suisse within certain parameters:

• If the contract has been in place for less than twelve (12) months at the time of application, the transaction will be considered a purchase. The LTV ratio will be based on the lesser of the purchase price on the contract or the current appraised value.


• If the contract has been in place for twelve (12) months or more at the time of application, the transaction will be considered a refinance. The LTV ratio will be based on the current appraised value.

• The following document(s) are required for these transactions: o A copy of the notarized land contract o For a refinance transaction, copies of the most recent twelve (12) months

cancelled checks must be provided o For a cash-out refinance transaction, borrower must document

improvements made to the property o For a purchase transaction, the HUD-I Settlement Statement must show

the transaction as a purchase and the borrower may not receive cash back

400.3 Construction-to-Permanent Loans

A construction-to-permanent loan may be handled as either a purchase or refinance. The entire loan file, however, must be consistent in the documentation for the chosen transaction type.

400.3a Purchase Loan Transaction Conditions Purchase loan transactions must meet the following conditions:

• The borrower may not receive cash back • The LTV will be based on the lower of the following:

o Appraised value as improved o Builder contract price plus the cost of the land o Builder contract price plus the market value of the land if owned

for > twelve (12) months o Construction/acquisition costs (with documentation) plus the cost

of the land

400.3b Refinance Loan Transaction Conditions Refinance loan transactions must meet the following conditions:

• A rate and term transaction must have the LTV based on the appraised value of the property at the time that the permanent loan is closed, regardless of the seasoning.

• The construction loan must be paid off as part of the closing. • The construction contract is not required for rate/term refinances. • Cash-out refinances are allowed provided that the acquisition costs

are fully documented. The cash-out amount is limited to the dollar amount of amenities that have been paid in excess of the construction contract.

• The cost of construction must be documented by adding the amount shown on the construction contract plus amounts verified by receipts for borrower paid items. The overall cost must be supported by the final appraisal.

400.4 Inherited Properties For properties acquired by inheritance (out of Probate) and the applicant has clear title, the LTV will be based on the current appraised value. All heirs must be paid through proceeds of the loan at closing. Proof of inheritance must be on file in the form of a will, final decree and or distribution of estate.


400.5 Subordinate Financing Subordinate financing is allowed and must conform to the following guidelines:

• The CLTV is based on the sum of the unpaid principal balance of the first mortgage, the full line amount of any home equity lines of credit, and the unpaid principal balances of all other subordinate financing.

• The terms of the subordinate lien must be evident in the file. • A copy of the commitment, if closing simultaneously, or the existing

subordinate lien note must be included in the file. • The subordinated lien must be a valid lien at a current market interest rate. • The subordinated lien must be recorded and clearly subordinate to the new

first mortgage or deed of trust. • The repayment terms must provide for regular monthly payments of at least

the amount of interest due (negative amortization is not acceptable). • The repayment terms may not be subject to a temporary buydown. • The subordinate lien may not be subject to wraparound terms. • Subordinate financing terms must be disclosed to the appraiser. • If the subordinate financing does not provide for level monthly payments, it

may not have a maturity or balloon payment of less than five years. • If the subordinate financing is subject to variable interest rates, the

payments must remain constant for twelve (12)-month periods with maximum interest rate increases of 1% (this does not apply to HELOCs).

If there is a �Seller Carry Back� subordinate lien, the following requirements must be met in all cases:

• Credit Suisse must have a copy of the �seller carry back� note and security instrument in the loan package.

• The Contract of Sale and final HUD-I Settlement Statement must reflect the seller carry back, including both the amount and to whom the carry back is payable.

• The monthly payment must be equal to or greater than the monthly interest due, and the interest rate must be at a reasonable or market rate.

• Interest rates more than 2% below market rate will be treated as sales concessions.

• The minimum carry back term is five (5) years. • All stated Credit Suisse subordinate lien requirements apply. • The maximum allowed seller contribution is 2% of the purchase price.

401 Refinance

A refinance is a mortgage transaction on a property for which the borrower already has ownership. The proceeds of the loan closing are used for the repayment of an existing debt that has the same borrower and same security property, unless the property is owned free and clear of any liens. Swing, bridge, or gap loans that are short-term and are expected to be paid off rapidly are not eligible for purchase.

Credit Suisse purchases two types of refinance transactions:

• Rate/Term Refinance • Cash-Out Refinance


401.1 Rate/Term Refinance

Rate/term refinances may include funds for any or all of the following:

• Payoff of the outstanding principal balance of an existing first mortgage, • Payoff of the outstanding principal balance of any existing subordinate

mortgage subject to the following: o Only if used in whole to acquire the subject property � if new loan amount

is within conforming loan amount limits, or o Only if the lien is seasoned for at least one year as of the date of the new

mortgage � if new loan balance is non-conforming. • The financing of closing costs (including prepaid expenses), and • Cash back to the borrower(s) in an amount not exceeding the lesser of 2% of

the new mortgage balance or $2,000

Note: Any refinance transaction that does not meet the above definition will be considered a cash-out refinance.

401.2 Cash-Out Refinance

Cash-out refinances may include funds for any or all of the items listed in 301.1, with additional funds for the borrower subject to maximum cash back limitations indicated on the Product Matrices.

401.3 Texas Cash-Out Refinance

For the Alt-A product, Credit Suisse will purchase both fixed-rate mortgages and adjustable-rate mortgages that are originated as Texas Section 50(a)(6) mortgages. The Seller should reference the Fannie Mae Sellers Guide for all underwriting, closing and closing documentation guidelines.

Under Texas law, a new Texas Section 50(a)(6) mortgage is an equity take-out mortgage (a cash-out refinance transaction). An existing Texas Section 50(a)(6) mortgage may be refinanced as either a limited cash-out refinance transaction or a cash-out refinance transaction. However, under the provisions of the Texas Constitution, �once a Section 50(a)(6) mortgage, always a Section 50(a)(6) mortgage.� Therefore, once a borrower obtains a Texas Section 50(a)(6) mortgage (either a first lien or a subordinate lien), any subsequent refinancing of the homestead property will be subject to all of the provisions of Section 50(a)(6) if any of the proceeds are used to pay off the Section 50(a)(6) mortgage. This provision applies even if the borrower does not receive cash-out of the refinance proceeds.

Note, a Seller delivering a Texas Section 50(a)(6) mortgage to Credit Suisse must have a representation and warranty in their Mortgage Loan Purchase Agreement allowing for such loans and must be in compliance with such representation and warranty.

Restrictions in the Texas Constitution impose substantial additional legal risks and uncertainties that a lender does not face when it originates (and services) equity take-out mortgages in other states. For example, if any of the specific requirements that relate to Texas Section 50(a)(6) mortgages�such as limitations on fees charged to the borrower, disclosures to the borrower, matters to be addressed in the closing documents, etc.�are not satisfied, the lien may


be invalid. A Texas Section 50(a)(6) mortgage cannot be closed until after a twelve (12) day �cooling off� period in which the borrower is allowed to change his or her mind about obtaining the mortgage. This �cooling off� period runs from the later of the date of the loan application or the date that the borrower receives the required notice about the extension of credit. The borrower must also be allowed to rescind the loan (without incurring a penalty or charge) within three (3) days after the extension of credit is made.

402 Seasoning Requirements

Credit Suisse does not require a borrower to have owned the subject property for any specified amount of time prior to a refinance. Credit Suisse does, however, provide for seasoning requirements as it relates to the property value in the determination of the LTV/CLTV. The following criteria apply:

• Purchase transactions: The lesser of the purchase price or appraised value will be used to calculate the LTV/CLTV.

• Rate/Term Refinance transactions: The current appraised valued will be used.

• Cash-Out Refinance transactions: o If the property has been owned < six (6) months, the lesser of the original

purchase price plus documented improvements, if applicable (and warranted), and the current appraised value will be used to determine the LTV/CLTV.

• If the property has been owned > six (6) months, the current appraised value may be used to determine LTV/CLTV.

The appraisal should address appreciation in value.


D. Documentation Options Credit Suisse is an industry leader in providing many loan documentation options to meet borrower needs. The different loan documentation processing options for use with the applicable Credit Suisse Mortgage Products are defined in this section.

500 Age of Documentation

500.1 Credit Documentation Any documentation verifying credit, employment, income, mortgage/rent payments and/or assets that are used for qualifying the borrower(s) must be dated:

• Within 120 days of the loan closing, or • For new construction, within 180 days of closing

If the documentation originally provided expires prior to closing, then updated documentation must be obtained prior to the closing.

Refer to Chapter 2 for HELOC requirements.

500.2 Appraisal Documentation The original appraisal report(s) may not be older than twelve (12) months at loan closing. If the original report will be older than four (4) months at closing, whether the property is proposed, new or existing construction, a recertification of value from the original appraiser must be obtained. Refer to Chapter 2 for HELOC requirements.

501 Acceptable Loan Documentation Types

The following documentation types are acceptable to Credit Suisse:

• Full Documentation • Bank Statements/Full Documentation (HELOC only) • Alternative Documentation • Lite Documentation • Bank Statements/Lite Documentation (HELOC only) • Easy Documentation (HELOC only) • No Income Verification (NIV/Stated Income) • No Asset Verification (NAV/Stated Asset) • No Ratio • Stated Income/Stated Asset (Stated/Stated) • No Income, No Asset (NINA) • No Doc

Each loan must conform to the documentation requirements listed below.

Credit report and appraisal requirements do not change with the documentation types. See 500.1 above and Section G in this chapter for the credit report and appraisal requirements, respectively.


All documents must be legible originals containing no alterations, erasures, or �white-outs.� If the borrower provides documents and requests to have the originals returned, photocopies of the originals must be made by the originator and must be certified as �true and exact copy of the original document� by the originator. An original, signed certification from the originator encompassing all copies in the individual file will be acceptable.

All verification forms must be fully completed and signed by an authorized party to be acceptable.

Verbal Verifications of Employment (VVOE) should be completed within five (5) business days of closing for all documentation types where employment is disclosed. Evidence of the completed VVOE must be included in the file. The VVOE will document the following:

• Date of verification • Status of borrower�s employment • Name of employer representative verifying status of the borrower�s

employment • Source utilized to obtain contact information (e.g. directory assistance, phone

book, etc.) • Name and title of employee performing verification

Signed IRS form 4506T is required anytime the borrower provides tax returns to verify employment and income.

501.1 Full, Alternative and Lite Documentation Types

501.1a Full Documentation

Also known as �Full Doc�, these loans require the use of standard forms approved by Fannie Mae/Freddie Mac for verification of income, employment, assets and certain payment histories as follows:

• For purposes of verifying income and employment for salaried borrowers, a written Verification of Employment (VOE) is required and must document the most recent two years of the borrower�s employment.

• For purposes of verifying income for self-employed borrowers, the most recent two years tax returns (including all schedules) are required. These documents must be signed and dated by the borrowers.

• For purposes of verifying assets, a written Verification of Deposit (VOD), completed by the depository institution, should be provided. The VOD should detail holdings and the average balance held in all accounts for the most recent two months.

• In order to verify the borrower�s ability to manage housing debt, ONE of the following may be submitted: o Verification of Mortgage (VOM) covering the most recent twelve

(12) months history o Verification of Rent (VOR) verifying most recent twelve (12)

months history


o Copies of twelve (12) months cancelled checks (front and back) evidencing total obligation of mortgage or rental debt are required if the mortgagee or landlord is a relative or seller of the property. o Residential Mortgage Credit Report (RMCR) or tri-merged in-

file may be used to verify a mortgage payment history o A Verbal Verification of Employment (VVOE) completed by the

originator

501.1b Bank Statements/Full Documentation (HELOC only)

The Bank Statement/Full Documentation option is available for HELOC products. Twenty four (24) months of bank statements are utilized to support income:

• Income is calculated using the last twenty-four (24) month average of gross deposits from personal bank statements, or for self-employed borrowers, 75% of the last twenty-four (24) month average of gross deposits from business bank statements.

• For personal bank statements, the account must be solely in the name of the borrower(s). If additional names are on the statement, only a percentage of the deposits will be used.

• NSF checks, wire transfers, negative balances and different account transfers must be addressed. Transfers from another account should be deducted from deposits.

• Rental income reflected on bank statements should be �backed out� and calculated following the guidelines for rental income.

Verbal Verification of Employment (VVOE) verifying two (2) years of employment, prepared within five (5) days prior to closing is required. A VVOE should document the following: • Date of verification • Status of borrower�s employment • Name of employer representative verifying employment status • Name of title of lender�s employee performing verification • Source utilized to obtain contact information (e.g. directory assistance,

phone book, etc.) • A signed 4506-T will be required on all loans utilizing pay stubs or tax

returns to verify income

501.1c Alternative Documentation

Also known as �Alt Doc�, these loans are documented with alternative forms of standard verifications as follows:

• For purposes of verifying income and employment for salaried borrowers, the borrower�s pay stub covering the most recent thirty day period and reflecting year-to-date earnings (including bonus, overtime, tips, incentives, etc); AND o Most recent two (2) years W-2s

OR o Most recent two (2) years 1040s


• For purposes of verifying income for self-employed borrowers: o Most recent two (2) years tax returns (including all schedules) are

required. These documents must be signed and dated by the borrowers; OR

o For Schedule C (sole-proprietor) borrowers only, most recent twenty-four (24) months consecutive bank statements.

• For purposes of verifying assets, most recent two (2) months asset statements may be provided.

• In order to verify the borrower�s ability to manage housing debt, ONE of the following may be submitted: o Verification of Mortgage (VOM) covering the most recent twelve

(12) months history o Verification of Rent (VOR) verifying the most recent twelve (12)

months history o Copies of 12 months cancelled checks (front and back) evidencing

total obligation of mortgage or rental debt are required if the mortgagee or landlord is a relative or seller of the property

o Residential Mortgage Credit Report (RMCR) or tri-merged in-file may be used to verify a mortgage payment history

• A Verbal Verification of Employment (VVOE) completed by the originator.

501.1d Lite Documentation

Also known as �Lite Doc,� these loans are documented with alternative forms of verification identical to �Alt Doc� loans (see 501.1c above), except that the documentation period is limited to twelve (12) months.

501.1e Bank Statements Lite Documentation (HELOC only)

These loans are documented with bank statements with verification requirements identical to �Bank Statements/Full Documentation� loans (see 501.1b above), except that the documentation period is limited to twelve (12) months.

501.1f Easy Documentation (HELOC Only)

Easy income documentation, also known as �Easy Doc,� is defined as six months bank statements for W-2, self-employed, and 1099 borrowers.

Easy documentation income is calculated using 100% of average deposits over the most recent and consecutive six (6) months personal bank statements. All pages for each statement must be provided.

• Business demand/savings accounts are not acceptable. • Bank statements with non-sufficient funds indicators are not eligible. • All account holders must be borrowers. If funds are co-mingled with

non-borrowers, a percentage of the deposits will be used. For example, if the borrower is one of two account holders, 50% of the average deposits will be used.

• Declining balances for the last four (4) months will disqualify borrower for this program.

• NSF checks, wire transfers and negative balances must be addressed o Transfers from other accounts will be deducted from deposits


o Employment must be stated for two continuous years and will be verified with a Credit Suisse verbal verification

o Assets are verified by one (1) month Bank Statement o The housing payment history is verified according to full or

alternative documentation requirements

501.2 Reduced Documentation Types

Credit Suisse allows the Seller to streamline and/or waive the documentation requirements for processing loans through certain loan programs. Reduced documentation eliminates the need for income, employment, and/or asset verification as applicable under the various processing options.

Reduced Documentation options offered by Credit Suisse are available for those borrowers with complex income scenarios and with appropriate credit scores. These programs are not available under the following circumstances:

• Borrowers with fixed income - social security, pension, etc. are not eligible, except for No Asset Verification (Stated Asset)

• Borrowers who do not have credit/credit scores are not eligible • Educational benefits (stipends, grants, loans) are not eligible sources of

qualifying income • If information regarding the borrower�s income is found in the file,

Credit Suisse reserves the right to utilize that income verification to determine the loan�s eligibility for purchase.

The following Reduced Documentation options are available depending upon the mortgage product:

501.2a No Income Verification (NIV)

For No Income Verification, also known as �NIV,� the borrower�s qualifying ratios are calculated on the basis of the income as stated on the loan application. Income stated must be reasonable for the position.

• Employment must be stated for two (2) continuous years and should be verified with a verbal verification.

• Verification of a borrower�s self-employment for two (2) continuous years may include a copy of the business license, a copy of the yellow pages, or a letter from an accountant.

• Assets are verified according to full or alternative documentation requirements.

• The housing payment history is verified according to full or alternative documentation requirements.

501.2b No Asset Verification (NAV)

For No Asset verification, also known as �NAV,� the borrower�s assets needed for the down payment, closing costs, and reserves are calculated on the basis of the assets as stated on the loan application.


• Employment and income are verified according to full or alternative documentation requirements.

• Employment will be verified with a verbal verification. Verification of a borrower�s self-employment may include a copy of the business license, a copy of the yellow pages or a verbal verification using directory assistance.


501.2c No Ratio

This documentation option requires the borrower to complete the asset and employment sections of the loan application only. However, the application must still be complete with respect to liabilities, schedule of REO and all other required documentation. The borrower�s income must not be disclosed anywhere within the loan application or the credit file. A debt ratio (DTI), therefore, is not calculated and must not be included anywhere within the loan application or credit file. The transaction must be prudent for the borrower.

• Employment must be stated for two continuous years and should be verified with a verbal verification.

• Verification of a borrower�s self-employment for two continuous years may include a copy of the business license, a copy of the yellow pages, or a letter from an accountant.

• Assets are verified according to full or alternative documentation requirements.


501.2d Stated Income/Stated Assets (Stated/Stated)

This option does not require the verification of income or assets. The borrower�s qualifying ratios are calculated on the basis of the income as stated on the loan application. Income stated must be reasonable for the position.

• The borrower�s assets needed for the down payment, closing costs, and reserves are also calculated on the basis of the assets as stated on the loan application.




501.2e No Income/No Asset Disclosure

Also known as �NINA,� this option does not require the calculation of debt ratios (DTI). The borrower�s income and assets should not be disclosed anywhere within the loan application or the credit file. The application must


be complete with respect to liabilities, employment, schedule of REO, and all other required documentation. The credit decision relies heavily on the property appraisal. The transaction must be prudent for the borrower.




501.2f No Doc

This option is similar to the NINA option, as it does not require the calculation of debt ratios (DTI). The borrower�s income, employment and assets should not be disclosed anywhere within the loan application or the credit file. The application must be complete with respect to liabilities, schedule of REO, and all other required documentation. The credit decision relies heavily on the property appraisal. The transaction must be prudent for the borrower.



502 Documentation Table

Document Types Wage-earner Self-Employed VVOE Required Assets

See Product Matrices for product specific documentation requirements

Full Documentation

(Full Doc) VOE 2 years

(not available for Sub-Prime) Tax returns 2 years Yes VOD with 2 months average balance

Bank Statements (Full Doc)

(HELOC Only)

Verified employment Bank Statements (24 months)

Avg. 100% of Personal Deposits

Verified self-employment Bank Statements (24 months)

Avg. 75% of Business Deposits Yes VOD with 2 months

average balance

Alternative Documentation

(Alt Doc)

Pay stub AND

2 years W-2s OR

2 years 1040s

Tax returns 2 years OR

Bank statements (24 months) Schedule C filing only

(75% of avg. personal deposits)

Yes

Bank statements for most recent

(consecutive) 2 months

Lite Documentation

(Lite Doc)

Stated employment for 2 yrs Pay stub

AND 1 year W-2

OR 1 year 1040

Stated employment for 2 yrs AND

Most recent year 1040 OR


(75% of avg. personal deposits)

Yes Bank statement(s) for most recent 30 day

period

Bank Statements (Lite Doc)

(HELOC Only)

Stated employment 2 yrs Bank Statements (12 months)


Stated self-employment 2 yrs Bank Statements (12 months)

Avg. 75% of Business Deposits Yes

Bank statement(s) for most recent 30 day

period Easy

Documentation (Easy Doc)

(HELOC Only)

Stated employment 2 yrs Bank Statements (6 months)


Stated self-employment 2 yrs Bank Statements (6 months)

Avg. 75% of Business Deposits Yes

Bank statement(s) for most recent 30 day

period

NIV (Stated income)

Stated employment 2 yrs AND

Stated monthly income

Stated self-employment 2 yr AND

Stated monthly income Yes

VOD with 2 months average balance

OR Bank statements for

most recent (consecutive) 2

months

NAV (Stated assets)

VOE 2 yrs OR

Pay stub AND

2 years W-2s OR

2 years 1040s

Tax returns 2 years OR


(use 75% of average deposits)

Yes Stated assets

No Ratio Stated employment 2 yrs

AND Income is not disclosed

Stated self-employment 2 yrs AND

Income is not disclosed Yes

VOD with 2 months average balance

OR Bank statements for

most recent (consecutive) 2

months

Stated/Stated Stated employment 2 yrs

AND Stated monthly income


Stated monthly income Yes Stated assets

NINA (No income No assets)

Stated employment 2 yrs AND

Income is not disclosed


Income is not disclosed Yes Assets are not

disclosed

No Doc Employment not disclosed

AND Income is not disclosed

Employment not disclosed AND

Income is not disclosed No Assets are not

disclosed

Signed IRS form 4506T is required anytime tax returns are used to verify employment and income


503 Fannie Mae Automated Decisions

503.1 Desktop Underwriter Guidelines: Conforming Loans

For the purpose of underwriting conforming loan amounts via an automated underwriting system, Credit Suisse currently recognizes Fannie Mae�s Desktop Underwriter (DU) and Freddie Mac�s Loan Prospector (LP). The decision and documentation requirements determined by DU or LP will be accepted provided that the data entered into the DU or LP system is accurate. All Sellers utilizing DU or LP must have received training and have been certified by the appropriate agency. Note: Documentation type codes reflected in the data provided to Credit Suisse by the Seller must be consistent with the documentation contained in the loan file. Credit Suisse may consider the purchase of loans, which were approved utilizing DU or LP, provided the following is the case:

• Underwriters reviewing loan package submissions for which a DU/LP response was indicated will ensure that the file contains the complete DU/LP decision output report, DU/LP generated application and DU/LP generated credit report

• Loans underwritten utilizing DU/LP require the underwriter to review the underwriting response received and its eligibility. Loans receiving a Fannie Mae �Approve/Eligible� decision or Freddie Mac �Accept� or �Accept Plus� response are eligible for purchase by Credit Suisse and will be underwritten by verifying the integrity of the data input into the DU/LP system. Also, the underwriter must verify that all DU/LP required conditions were obtained and properly documented in the file. In those cases when the integrity of the data inputted into DU/LP cannot be verified or when a �Refer/Eligible� response is received, then the loan may still be eligible for delivery to Credit Suisse, but must be underwritten to standard Credit Suisse guidelines. All risk factors identified by DU/LP must also be addressed and/or documented in the loan file.

• Loans underwritten utilizing DU/LP and for which an �Approve (or Accept)/Ineligible� response was received may be underwritten to the �Credit Suisse AU Underwriting Guidelines,� as set forth below (Automated Underwriting Guidelines: Non-Conforming Loans).

• �EA� responses not eligible.

• Appraisal waivers are not eligible.

• Reduced MI is not eligible.

503.2 Desktop Underwriter Guidelines: Non-Conforming Loans

For the purpose of underwriting non-conforming loan amounts via an automated underwriting system, Credit Suisse currently recognizes Fannie Mae�s Desktop Underwriter and Freddie Mac�s Loan Prospector. The decision and documentation requirements as determined by DU or LP will be accepted provided that the data entered into the DU or LP system is accurate. All Sellers utilizing an automated underwriting system must have received the appropriate training and have been certified by the appropriate agency. Additional Credit Suisse processing requirements relating to this section are as follows:


• AU Documentation: All loans must be submitted through Fannie Mae�s Desktop Underwriter (DU) or Freddie Mac�s Loan Prospector (LP). The DU/LP decision output report as well as the credit report and application that was utilized by DU/LP when making its decision must be included in the loan file. The Seller must provide adequate documentation to comply with the DU/LP requirements. Documentation type codes reflected in the data provided to Credit Suisse by the Seller must be consistent with the documentation contained in the loan file.

• Other Requirements:

Requirement DU LP Required AU Decision

Approve/Ineligible (Ineligible due to loan amount)

Accept or Accept Plus

Minimum FICO Score

Refer to Credit Suisse Product Matrix


Maximum DTI Refer to Credit Suisse Product Matrix


Maximum Loan Amount $650,000 $650,000

Appraisal Requirement Full Appraisal (1004) Full Appraisal (1004)

Eligible Property Types 1-4 Family, Condo, PUD 1-4 Family, Condo, PUD

Required Mortgage Insurance

See Section H See Section H

• Appraisal waivers are not eligible.


E. Underwriting the Borrower Credit Suisse has created guidelines for underwriting borrowers that it believes is prudent and sound for its current mortgage products. In underwriting the borrower, Credit Suisse will consider the borrower�s willingness to repay the debt, the borrower�s ability to repay the debt, and whether the property has sufficient security for the mortgage.

600 Credit Standards

Every loan submitted to Credit Suisse must have the appropriate credit documentation in order to evaluate the borrower�s creditworthiness and their ability and willingness to repay the loan.

600.1 Minimum Credit Profile

Alt-A products only: All borrowers must have a twelve (12)-month credit history documented in their credit report with a minimum of two (2) open trades that have been active for at least twelve (12) months. If the credit report does not meet these minimums, borrowers must meet the alternative credit history requirements shown below.

Prime A products only: All borrowers must have a twenty-four (24)-month credit history documented in their credit report with a minimum of two (2) open trades that have been active for at least twelve (12) months.

Loan amounts > $1 million require a minimum of five (5) open/active trade lines with at least three (3) having a forty-eight (48) month history.

Refer to Product Matrices for requirements related to all other products.

600.2 Credit Reports

The loan file must contain either a Residential Mortgage Credit Report (RMCR) or a tri-merged in-file credit report for each borrower from an independent credit vendor. In addition, the credit report and supplements must:

• For Alt-A products, contain a minimum of one (1) credit score resulting from the three credit repositories run for each borrower. All other products require a minimum of two (2) credit scores resulting from the three credit repositories run for each borrower.

• Include a thorough check and reporting of all available public records for each borrower.

600.3 Credit Scores

Credit or FICO scores are provided by Experian (Fair, Isaac Model Score), Trans Union (Empirica Score), and Equifax (Beacon Score) and will be utilized to help determine the credit risk of the borrowers.

Each borrower�s representative score is determined as follows:

• When two (2) scores are reported, the lower score is utilized. • When three (3) scores are reported, the middle score is utilized.


o If two of the three scores reported are identical, one of the identical scores is utilized.

• If more than one Credit Score is supplied from the same repository, the first score will be used in all cases.

The representative credit score for the transaction can then be determined as follows:

• Each borrower�s representative score must meet the minimum score requirement for the selected product.

• Full, Alt, Lite, NAV, NIV and Stated/Stated Documentation: The primary income borrower�s representative score will be utilized. The primary income borrower is defined as the borrower who earns > 50% of qualifying income. If no borrower earns > 50% of the total qualifying income, the lowest representative score of all borrowers must be used. o Note: For primary residences, the primary income borrower must be an

occupant. If the occupant does not have > 50% of the total qualifying income, the lowest representative score of all borrowers will be utilized.

• No Ratio and NINA Documentation: The lowest representative score of all borrowers will be utilized.

600.4 Alternative Credit History (Alt-A products only)

If a borrower does not have at least one FICO score, resulting from requests to all three repositories (no scores), and/or does not meet the minimum credit profile (stated above), alternative credit histories may be utilized. In these cases, a minimum of three (3) alternative trade lines must be verified directly with the creditor, or with twelve (12) months consecutive canceled checks, showing a maximum of 0 x 60 payment history over the past twelve (12) months for each alternative trade line.

Alternative trade lines include: rent (as evidenced by a management VOR or twelve (12) months cancelled checks), telephone bills, gas and/or electric utility bills, cable television bills, auto insurance bills (if paid monthly), etc.


600.5 Credit Analysis

The following factors are among those taken into consideration by Credit Suisse in order to determine a borrower�s credit worthiness:

600.5a Housing Payment History

The housing payment history is based on the borrower�s current payments for his/her present residence. This may be owned or rented housing.

Allowances for mortgage and/or housing late payments are product specific.



600.5b Mortgage History

For borrowers who currently own their residence or investment properties, twelve (12) consecutive months of mortgage payment history is required. Acceptable verification of the most recent twelve (12) months payment history includes:

• A twelve (12) month rating stated on an RMCR or merged in-file credit report. The most recent twelve (12) months reported at the time of approval will be evaluated.

• A standard Verification of Mortgage (VOM) form completed by the holder of the mortgage.

• Copies (front & back) of twelve (12) consecutive months� canceled mortgage payment checks.

• If a mortgage is held by a non-traditional third party, copies of canceled checks are required.

Note: Credit Suisse will consider all mortgage debt (owner occupied, investment, and second homes) in evaluating allowances for late payments.

600.5c Rental History

For borrowers that currently rent their residence, twelve (12) consecutive months of rental payment history is required. Acceptable rental verification would be any one of the following:

• A standard Verification of Rent (VOR) (Fannie Mae form or equivalent) completed by a representative of a professional management company.

• A rental letter written by the non-related landlord or the landlord�s agent which must include the rental payment status, payment amount, length of rental, and the name, address and telephone number of the landlord.

• Copies (front & back) of twelve (12) consecutive months� canceled rent payment checks or bank statements. Canceled checks are the only acceptable form of rental verification where the landlord is the borrower�s relative, a private party or a party to the transaction.

• Direct rental verification provided by the credit bureau.

600.5d Payment Shock / No Housing Payment History

One of the strongest indicators of a borrower�s ability to pay is their past record of handling housing expenses. The current level of housing expense should be compared to the proposed obligation. This figure along with other indicative factors should be analyzed to determine the likelihood of the borrower to repay.

Borrowers that currently live rent free or with family members, including first time homebuyers, and do not have a recent twelve (12) month payment history will be considered as long as they have the appropriate additional and/or alternative credit history to verify their ability to meet their payment obligations.


600.5e Consumer Credit

Consumer credit is based on any revolving and/or installment debt payment histories. All revolving and consumer installment trade line payment histories, as rated on the borrower�s credit report, will be accepted as already factored into the borrower�s credit score for rating purposes.

600.5f Judgments and Liens, Collections, Charge-offs on Title

All judgments and liens appearing as a matter of record on title must be paid off and discharged prior to, or at closing.

600.5g Non-title Judgments and Liens, Collections, Charge-offs

All federal and/or state tax liens must be paid in full prior to or at closing, even if they are not listed on title. For Alt-A products, other judgments or liens not appearing on title and collection accounts or charge-offs may not be required to be paid off unless the borrower has shown a history of such derogatory credit or the accounts exceed $1,000 individually or in aggregate.

Refer to Product Matrices for product specific requirements.

600.5h Medical Collections and Charge-offs

Unless affecting title, the payoff of medical collection accounts and medical charge-offs will generally not be required.

Refer to Product Matrices for product specific requirements.

600.5i Bankruptcy

An applicant who has experienced a Chapter 7 or Chapter 13 bankruptcy will be considered for Credit Suisse financing. Bankruptcies must be discharged and proof of the discharge is required. The age of the bankruptcy will be calculated from the date of the Discharge.

Refer to the Product Matrices for product specific requirements.

600.5j Foreclosure/Deed in Lieu/120 day NOD

An applicant who has been named a defendant in a foreclosure proceeding (foreclosure notification, filing or completion) or who gave a deed in lieu of foreclosure on a previously owned property will be considered for Credit Suisse financing. A mortgage with a previous 120 day NOD must meet the same seasoning requirement as a previous foreclosure. The seasoning of a foreclosure will be based on the completion date, which is calculated from the month and year of settlement, release, redemption or completion of sales.

Obligations associated with time share units is considered installment debt; thus a time share unit delinquency or foreclosure is not considered to be a mortgage delinquency or foreclosure.



600.5k Consumer Credit Counseling (CCC)

Alt-A, Prime A, and Second Liens Products

The following criteria apply for borrowers who are currently enrolled or who have participated in a CCC plan:

• For borrowers currently enrolled in CCC, a letter of explanation from the borrower and the counseling agreement are required to identify applicable debts.

• Borrowers who have entered CCC within the past twelve (12) months are not eligible.

• Borrowers who have entered CCC more than twelve (12) months prior to the application date, but less than twenty-four (24) months, are eligible for Full, Alt or Lite documentation types only.

• Borrowers not currently enrolled in CCC or who entered CCC over two (2) years prior to the application date are not restricted in any way. However, their CCC history should be considered as a layer of risk when determining the overall risk associated with a particular loan.

HELOC Products

The following criteria apply for borrowers who have participated in a CCC plan:

• Borrowers currently enrolled in CCC are not eligible. • Plan has been paid as agreed and proof of completion is required.

The CCC Plan must have been completed for at least three (3) years with re-established trades. The age of the CCC Plan will be calculated from the date of completion.

• Re-established trades must meet the minimum credit profile: borrower must have a twenty-four (24)-month credit history with a minimum of four (4) open trades (revolving or installment), open and active in the last twelve (12) months.


601 Liabilities

The debt-to-income (DTI) ratio is based on the total of the monthly liabilities divided by the calculated gross monthly income. The maximum allowable DTI ratios are stated on the Product Matrices. Liabilities include all housing expenses, revolving debts, installment debts, real estate loans, rent, stock pledges, alimony, child support, and other consistent and recurring expenses.

601.1 Housing Expenses

Housing expense consists of the amount the borrower will be paying to live in his or her primary residence after loan closing. In most cases this would include:

• Principal and interest � with qualifying interest rate determined as follows:


Type of Mortgage Use Fixed-rate, fully-amortizing Note rate Adjustable-rate, fully-amortizing with an initial adjustment period of more than one year Note rate

Adjustable-rate, fully-amortizing with an initial adjustment period of one year

Maximum rate in effect following the first adjustment

6-month LIBOR uncapped Adjustable Rate Greater of Note rate plus 2% or FIAR plus 2%

Interest Only loans Determine the qualifying rate and use the interest portion only

• Property taxes (expressed monthly and including all special tax assessments) • Hazard insurance • Flood insurance • Mortgage insurance • Association dues or maintenance fees • Principal and interest payments on junior liens/senior liens, as applicable

In some instances, however, the housing payment may not be the PITI of the subject property. In those cases where the subject loan is for a second home or investment property, the primary residence housing expense is used to calculate the housing ratio.

601.2 Installment Debt

Consumer installment debt accounts are loans that have fixed payment amounts and terms. Installment debts appearing on the credit report or those verified directly with the creditor are to be included in the calculation of the total debt-to-income ratio.

If the payment shown on the credit report is disputed, evidence of a lower payment may be obtained via direct verification with the creditor, or with acceptable documentation provided by the borrower.

If the scheduled payment is not shown, the high credit is divided by the listed term to determine the payment. Alternatively, a credit supplement may be obtained to verify the payment.

Installment debts, where the term of debt will be ten (10) months or less at closing, will not be considered in the debt-to-income ratio. It is also acceptable to �pay down� the debt enough to cause the term to be ten months or less.

Auto lease payments are included in the debt-to-income ratio regardless of the remaining months indicated on the credit report.

601.3 Revolving Debt and HELOCs

601.3a Revolving Debt


Revolving debt accounts have variable payments and no fixed term. The payment listed on the credit report is used to calculate the total debt-to-income ratio.

• If no payment is listed, 3% of the balance listed must be used to calculate the debt ratio unless statements can be provided to show a lower payment. Alternatively, a credit supplement may be obtained to verify the payment.

• Revolving debt payments are included in the debt-to-income ratio regardless of the remaining months indicated on the credit report. Revolving debt may be paid off to qualify, but may not be paid down to qualify.

601.3b HELOCs

Home Equity Lines of Credit (HELOC) accounts have variable payments.

• For qualification purposes and inclusion in the debt-to-income ratio, the monthly payment on an existing HELOC should be calculated using 0.75% of the total line amount for any HELOC still in the draw period. If the draw period has expired, the monthly payment should be calculated using the higher of the stated monthly payment or 0.75% of the outstanding balance on the line. The HELOC may be excluded from the debt ratio calculation if the balance is zero and the line is frozen to future advances.

• HELOC payments must be included in the debt ratio calculation regardless of the remaining number of months in the term. HELOCs may be paid off in order to qualify, but they may not be paid down unless the draw period has expired.

601.4 Other Real Estate

Real estate debt for investment properties that is not offset by calculations of net rental income will be counted as monthly debt.

If a property is owned free and clear, the current real estate taxes, hazard insurance premiums and HOA fees must be included in the applicant�s monthly expenses. The applicant must supply a copy of the homeowners insurance policy declaration page to evidence the property is free and clear.

If a property is vacant and there is no verifiable income or history, the full principal, interest, taxes, hazard insurance, mortgage insurance and homeowners association dues will be counted as part of the total monthly debt. If a signed lease is available, income per the lease may be utilized.

601.5 Bridge Loans

Bridge loans are used by borrowers if their current residence will not be sold before the subject loan�s closing and funds from the sale are needed. The bridge loan debt will not be counted in the borrower�s total debt-to-income ratio if it is to be used towards the down payment and/or settlement charges for the purchase of the subject property and ALL of the following criteria are met:


• A valid, unexpired multiple listing agreement with a licensed Realtor on the prior residence with a remaining term of at least three months must be submitted.

• The borrower�s prior residence must currently be under agreement to be sold. • A copy of the sales contract must be submitted with the borrower�s loan

application.

In the case of employer-assisted transactions where the employer pledges to pay or reimburse the applicant for payments on the bridge loan, the above two items should be met. If these are not met, the underwriter must analyze the terms of the employer�s agreement to determine whether the bridge loan payment may be excluded from the applicant�s total monthly debt.

601.6 Business Debt

Business debt which has been personally guaranteed by the borrower must be included in the total debts for qualifying purposes. The business debt may be excluded from the borrower�s obligation if all of the following criteria are met:

• The account does not have a history of delinquent payments. • Six (6) months canceled checks are required to show that the obligation is

paid from company funds. • Cash flow analysis of the business verifies payment of the obligation by the

business.

601.7 Other Debts

There are several other debts that may not appear on a standard credit report, but should be included in the total debts for qualification. These debts may include the following:

• Secured Loans through payroll deductions • Co-Signed Obligations • Alimony and Child Support • Student Loans, unless deferred for at least twelve (12) months • Wage Garnishments

Documentation to verify these debts should be obtained. If the payments are to be excluded, documentation to support the exclusion must be in the file. When the account in question has a history of delinquency, the full monthly obligation must be considered as part of the borrower�s individual recurring monthly obligations.


602 Employment and Income

For loans where the income and/or employment are being verified, the Seller must carefully evaluate each borrower's employment and income stability and continuity. Income may come from many different sources, although salary and wage income is the easiest to determine and verify. Income from most other sources can be considered as qualifying income as long as it is properly documented.

Income Sources Employment Self-employed Fixed Other

Bonus ● Overtime ● Commission ● Family Employers ● Clergy ● Car Allowance ● Second Jobs ● Military Pay ● Subsidized Income ● Raises ● Sole Proprietor ● Partnership ● Corporation ● "S" Corporation ● Retirement Income ● Social Security Income ● VA Income Benefits ● Non-Taxable Income ● Foster Care Income ● Rental Income ● Installment Sales and Land Contracts ●

Alimony, Child support and Maintenance ●

Note Receivable Income ● Interest and Dividends ● Trust Income ● Unemployment and State or Agency Benefits ●

Foreign Source ●

602.1 Employment Income

Stable monthly income may be income from primary and secondary employment, including base earnings plus recognizable secondary income, such as bonuses, commissions, overtime, or additional part-time employment. Required


documentation should be used to determine the amount and breakdown of the acceptable income amounts.

Acceptable forms of documentation for employed borrowers (wage earners) are discussed in Section 501 of this chapter.

The amount of the borrower's consistent monthly income is determined by using the gross monthly income from the borrower's primary income source and any stable secondary income and overtime, if applicable. Secondary income is generally considered stable if it can be documented as being received in a timely manner over the previous twelve (12) months and it is likely to continue.

Some additional issues for employed borrowers that should be considered are:

602.1a Frequent Job Changes

Frequent job changes to advance a borrower's career within the same field are acceptable, but changes without advancement or between fields may indicate employment/income instability. The borrower should explain any gaps between jobs of more than 60 days.

602.1b Bonus, Overtime, Commission and Tips

Bonus, overtime and commission income may be included as monthly income, provided the income has been consistent for the past year and the employer verifies the likelihood of continuance. Bonus, overtime and commission income that has not been consistent for the past year may require a letter from the employer stating the income will continue to be paid.

• Bonus income must be averaged. Year-to-date bonus income may be included, if such bonus income is consistent with bonus income received during the prior year. Bonus income may be used for down payment and income qualifications provided it is documented as required.

• Overtime income must be averaged. The borrower's employer must indicate the average hours of overtime per pay period. If the overtime pay rate is not provided, 1½ times the hourly rate may be used.

• Commissions are subject to fluctuation from year to year; therefore, federal tax return for the prior year with all schedules is required for proper verification. Commissioned employees usually have expenses associated with the generation of income. The net commission income (gross minus expenses) for the year will be calculated. Commissions must have been paid (not just earned) to be considered income. Commission income may be used for both down payment and income qualification if the income has been consistent for the past year. If there is less than a one-year history, there must be significant compensating factors for the income to be used. Commissions paid for less than six months will not be eligible for inclusion in qualifying income.

• Tip or gratuity income is compensation in addition to an employee�s straight salary or hourly wage. Tips or gratuity income must have a verified two (2) year history. This income will be averaged over the


past two (2) years unless it has been declining. In that case, the past twelve (12) months will be averaged.

602.1c Family Employers

If a borrower is employed by a relative or a closely-held family business, complete signed federal tax returns with all attachments and schedules are required for the previous two (2) years in addition to the verification of employment.

602.1d Clergy

If a borrower is a member of the clergy, signed federal tax returns with all attachments and schedules for the past two (2) years are required.

602.1e Car Allowance

A car allowance may be included as income to qualify the borrower if it is typical for the occupation. The car allowance must be verified by the employer and must be shown on the borrower's federal income tax returns. Only the amount of the auto allowance that exceeds actual expenses may be considered as income. Depreciation on the car may be added back to income.

602.1f Second Jobs

Income from a second job may be used to qualify the borrower even if the job is part-time or seasonal provided the employer verifies a twelve (12) month history and the likelihood of continuance. The second job need not be related to the borrower's primary occupation.

602.1g Military Pay

For borrowers in the military, flight or hazard pay, rations, clothing allowance, quarters allowance and hardship pay may all be added to base income to qualify the borrower provided the military verifies continuance.

602.1h Subsidized Income

An employer may subsidize an employee's mortgage payment by paying the differential between the employee's present interest rate and the proposed interest rate. The exact amount and duration of the subsidy should be verified by a signed contract between the employer and the borrower. If the subsidy continues for three (3) years or more from the date of closing, it may be added to the borrower's gross monthly income (not used to offset the mortgage payment).

602.1i Raises

An anticipated raise may be included in the borrower's qualifying income if the raise is verified by the employer and the effective date of the raise will not be later than the first payment due date on the mortgage loan.


602.2 Self-Employed Income

A borrower who owns 25% or more of the company from which he receives his primary source of income will be considered self-employed. The business may be a sole proprietorship, a partnership (limited or general) or a corporation.

• Generally, self-employed borrowers should be in business for at least two (2) consecutive years. For loans with full or alternative income documentation, the income of the self-employed borrower will be averaged over the two (2) years immediately preceding the date of the application.

• For self-employed borrowers who have been in business for less than two (2) years, Full or Alternative documentation is required. Newly formed businesses must have been in operation for more than one (1) year and the financial statements for such businesses must cover at least one year of operation. In addition, the borrower�s previous employment history and income should be documented to show prior employment in the same or a related field.

• Acceptable forms of documentation for self-employed borrowers are discussed in Section 501 of this chapter.

• When calculating a borrower�s self-employment income, some form of analysis worksheet should generally be used. This will clearly show the calculation method used for determining the income. Often when analyzing a Borrower�s federal tax returns, non-cash items such as depletion, depreciation and amortization may be added back to the adjusted gross income.

• For �S� Corporations, the borrower's available net income plus the viability of the business must be determined. Income is calculated as the total of the adjusted gross income from the individual federal tax return, plus any items that may be added back. Items that may be added back include depreciation of real property, depletion, amortization, alimony paid, married couple deduction, a one-time capital loss, and dividends excluded from income. Since stable sources of income are being determined, state/local tax refunds, un-allowed losses and non-recurring capital gains cannot be included as income.

• Financial statements and business tax returns are used as supporting documentation for income continuation at the same level as shown on the individual federal tax returns. Projected income may not be used to qualify a borrower.

602.3 Fixed Income

There are additional types of income considered to be �fixed� that may be used as the sole source of qualifying income or in conjunction with employment income. The following documentation limitations apply:

• Borrowers who derive > 50% of their income from a fixed source are eligible for Full, Alt, Lite, and NAV documentation types.

• Borrowers who derive ≤ 50% of their income from a fixed source are eligible for all documentation types except No Ratio and NINA/No Doc provided the fixed income portion is verified.

Some types of fixed income include the following:

602.3a Retirement Income


Retirement income must be verified by one of the following:

• Letters from the organization providing the income or copies of the retirement award letter with one month�s bank statement evidencing the deposit; or

• W-2 forms for the past year; or • Signed copies of federal tax returns for the past year. If income is

from a lump sum distribution, the credit package must include an income stream projection provided by the borrower's financial advisor.

602.3b Social Security Income

Social Security income must be verified by one of the following: • A copy of the most current award letter • One month�s bank statement evidencing automatic deposit • W-2P form for the past year • A signed copy of federal tax returns for the past year. Note: If other

than age-related social security income is used, there must be at least three years of benefits remaining to be considered as qualifying income.

602.3c VA Income Benefits

VA benefit income must be verified by a letter or distribution form from the VA. These benefits must have a remaining duration of three years to be eligible. Not all VA benefits are eligible to be used as income (i.e. education benefits).

602.3d Non-Taxable Income

There are types of qualifying income that may be grossed up 125% (increased by 25%). These types of income may include certain military pay, social security and/or disability income, or workmen's compensation. Documentation of the base income amounts must be obtained and included in the credit file. The grossed up amount may be used for qualifying purposes, but not for residual income calculation purposes.

602.4 Other Income

If a borrower indicates income from other sources (such as alimony, child support or unemployment), these sources may be considered stable income based on the likelihood of the consistent continuance. Some forms of these other sources are as follows:

602.4a Foster Care Income Borrowers may have a history of receiving regular income from a state or county-sponsored organization for the temporary care of one or more foster children. This income may be considered as stable monthly income and used for qualifying if the borrower has a two-year history of providing foster care services under a recognized program and is likely in the foreseeable future to continue to provide such services at a level that supports the amount of income needed to qualify.


602.4b Rental Income � Other Real Estate Owned Verification of net real estate income requires copies of all current, fully executed leases for all rental units or the last year�s tax returns including Schedule E indicating all units. For qualifying purposes, 75% of the verified rental income, net of mortgage payments (if any), monthly taxes and insurance(s), made by the borrower with respect to the rental property, may be added to the borrower�s net income or long term debt payments. If the cash flow is positive, it may be added to the borrower�s income. If the cash flow is negative, it must be added to the borrower�s long term debt payment.

602.4c Rental Income � Subject Property Rental Income for an owner-occupied 2-4 family property is calculated by adding 75% of the lower of actual or projected rent to the borrower�s income. The full PITI for the subject property is used to calculate the borrower�s housing debt ratio.

When the subject is an investment property, rental income is calculated following the method described above for �other real estate owned,� except that the lower of actual or projected rent should be used for qualification.

602.4d Installment Sales and Land Contracts Income from an installment sale or land contract may be included in the borrower�s income for qualifying purposes if evidence of timely receipt of payments in the past twelve (12) months is provided and payments will continue for more than three (3) years from the date of closing. Complete documentation on any installment sale or land contract must be provided.

602.4e Alimony, Child Support and Maintenance A copy of the divorce decree and/or separation agreement must be submitted to verify the amount and its continuance for three (3) years from the date of closing for any child support, alimony or maintenance income. Evidence that such amount has been received for a minimum of three (3) months is required. Evidence is also required showing the payments for the past three (3) months (or since the beginning of receipt) have been received in a timely manner in order to use the income to qualify the borrower.

602.4f Note Receivable Income Income received from the repayment of a note must be verified by a copy of the note that sets forth the amount and length of payment. Income must have been received for the past twelve (12) months and be verified by twelve (12) months of bank statements, deposit slips or signed copies of federal tax returns with Schedule B attached. Payments must continue for at least three (3) years after the first payment date of the proposed mortgage loan.

602.4g Interest and Dividend Income Interest and dividend income must be verified by copies of the account statements received from financial institutions, stockbrokers, etc., evidencing that the interest and dividends are still on deposit with such


institutions. In addition, signed copies of federal tax returns for the past two (2) years must be included in the credit package. Two (2) years of interest and dividend income will be averaged to determine the amount to be included in qualifying income. If any funds that earn interest or dividend income are to be used for the down payment or closing costs, the interest and dividends related to such funds must be deducted before the income is calculated.

602.4h Trust Income Trust income must be verified by a copy of the Trust Agreement or the trustee�s statement confirming the amount, frequency and duration of payments. Trust income must have a remaining duration of at least three (3) years to be eligible.

602.4i Unemployment and State or Agency Benefits Unemployment and state or agency benefits must be verified by letters from the paying agency with the amount, frequency and duration of payment specified. If the borrower receives unemployment as regular income (i.e., seasonal profession), signed copies of the last two years� federal income tax returns are required.

602.4j Foreign Sources Income that purchases from a source outside of the United States will be considered for qualification at the Credit Suisse underwriter�s discretion. This type of income will only be approved for qualifying purposes when the source of the income is clearly verified and continuance of the income is certain. Any income not verified in U.S. dollars must include an acceptable statement of conversion.

602.5 Trailing (Relocating) Co-borrower Income

Often, when an employer relocates an employee with a working spouse/co-borrower, the co-borrower will experience an initial period of unemployment following relocation. Credit Suisse will include 100% of current income of the "trailing co-borrower� in qualifying income as long as all of the following conditions are met:

• The trailing co-borrower has been employed in the same profession for the two (2) years preceding the mortgage loan

• The trailing co-borrower has provided a written statement of his/her intent to obtain employment in the new location and a description of the occupation

• Cost-of-living between the two locations is comparable • Borrowers have six (6) months PITI reserves after closing

602.6 Unacceptable Income

Deferred income that is not currently available, retained earnings in a corporation, education benefits, illegal income sources, rent from the borrower's primary residence or second home and any income that cannot be verified (for processing options that require verification of income) will not be allowed as income for qualifying purposes.


603 Assets and Sources of Funds

603.1 Borrower Contributions

For loans where the assets are being verified and a down payment is required, the borrowers must contribute a minimum percentage of the down payment from their own liquid assets.

CLTV Ratio Borrower Contribution 80.01% - 95% minimum 5% own funds 95.01% - 97% minimum 3% own funds 97.01% - 100% no minimum required 80% or less no minimum required 80/20 Piggyback no minimum required

See Product Matrices for product specific down payment requirements.

603.2 Depository Accounts

Borrower assets may come from several different sources, although the most common sources are bank depository accounts. These accounts include checking, savings, money market and certificates of deposit.

When funds for down payment or closing costs are coming from a borrower�s business account, assets must be verified and a letter from an accountant must be provided which states the following:

1. The funds are not a loan 2. The borrower has access to the funds 3. The borrower is 100% owner of business (or all borrowers combined own

100%) 4. Withdrawal of funds will not have a negative impact on the business

Note: Acceptable forms of documentation for depository accounts are discussed in Section 501 of this chapter.

603.3 Proceeds f om Sale of Real Estate r

603.3a Cash Proceeds

Net cash proceeds from the sale of the applicant�s current home is an acceptable source of down payment, settlement charges and/or cash reserves. A copy of the final HUD-I Settlement Statement and/or bill of sale is required to verify the sale and amount of net cash proceeds.

603.3b IRS 1031 Exchanges

Proceeds from an IRS 1031 Exchange are acceptable. An IRS 1031 Exchange allows a borrower to place proceeds from the sale of a property into an escrow account to be held and used toward the purchase of another like-kind property. The following documentation must be provided in order to verify funds from a 1031 exchange:

• Copy of the closing statement


• Copy of the exchange agreement

• Statement from the Accommodator verifying available funds

603.4 Earnest Money Deposit

The applicant�s earnest money deposit to escrow must be verified by a copy of the canceled check when the total deposit amount exceeds 2% of the sales price. Verification of the source of funds exceeding 2% of the sales price must also be verified. If the canceled check is not available, a letter from the escrow agent verifying the amount of the earnest money deposit and when it was tendered is acceptable.

603.5 Land Equity

Land equity is an acceptable source of funds. If the land is owned less than one year, then the lesser of the acquisition price or the current appraised value will be used to determine the property value. If the land has been owned for more than one year, then the current appraised value may be used as long as the value is supported by comparable sales.

603.6 Marketable Securities

Marketable securities including stocks and bonds may be an acceptable source of a borrower�s funds. Bonds should be valued at their purchase price, unless the redemption value can be determined and verified. A current statement or a copy of the stock certificate accompanied by a dated newspaper stock list may verify the value of stocks. Evidence of liquidation is required when funds are used for down payment and/or closing costs.

603.7 IRA/Keogh, 401Ks and Other Retirement Accounts

Funds from retirement accounts may be used as the borrower�s source of funds, to the extent the borrower is vested. When funds from these sources are used for the down payment, closing costs or reserves, any applicable penalties or income tax must be taken into consideration. As a general rule, 70% of the vested amount is considered to be available to the borrower. These types of accounts should be properly verified according to the documentation type for the loan program.


603.8 Seller Contributions/Concessions

Contributions by interested parties to the transaction towards closing costs (both recurring and non-recurring) are permissible. Interested parties include, but are not limited to, the builder, developer, seller of the property, and the real estate agent. Credit Suisse will allow these interested parties to contribute funds as follows, with the maximum contribution based on the lesser of the property�s sale price or appraised value. Type

CLTV Maximum

Contribution > 90% 3% 75.01 � 90% 6%

Primary/Second

≤ 75% 9% Investment All 2% Seller Carry Back All 2%

For underwriting purposes, the lender must make a downward adjustment to the sales price of the property to reflect the amount of the contribution that exceeds the above stated limitations. In addition, the cost of any contributions that are in the form of personal property (such as furniture, decorator items, automobiles, or other �giveaways�) must be deducted from the sales price of the property. The LTV must then be based on the lesser of the reduced sales price or the appraised value.

Credit Suisse considers the following to be acceptable non-recurring closing costs:

• Fees to third parties • Loan discount/origination fees • Buy down fees, loan fees, commitment fees and/or administrative fees • Attorney/Settlement Agent fees

603.9 Gift Funds

Gifts may be used toward down payment and closing costs provided the borrower contributes the minimum amount of own funds required (see 603.1 above, Borrower Contributions). For those cases where borrowers are eligible to use gift funds, the gift must be verified and documented as follows:

• Gifts must come from a relative, domestic partner, fiancé or fiancée. • No portion of the down payment may be donated by interested parties to the

transaction including sellers, realtors, brokers, sales associates or any other third party involved in the transaction.

• In all cases, the donor must execute a gift letter stating: o Donor�s name and address o Donor�s relationship to the applicant o Date the gift was or will be given o Amount of the gift o No repayment is expected or implied


• Either verification of sufficient funds to cover the gift in the donor�s account, or verification of the transfer of funds from the donor to the borrower is required with one of the following: o Donor�s cancelled check o A copy of the check and accompanying deposit slip o A copy of the check and a bank statement reflecting the deposit of the

check into the borrower�s account

603.10 Gift of Equity

A gift of equity in the subject property from a family member is an acceptable source of funds. If a gift of equity occurs, the donor must execute a gift letter stating the donor�s name, the donor�s relationship to the applicant, the amount of the gift of equity, and that no repayment is expected or implied. In addition, the HUD-I Settlement Statement at closing must identify the gift of equity. If the transaction is completed as a purchase, the contract of sale must indicate the gift of equity. For LTVs > 80%, the Seller must submit the loan with mortgage insurance in place.

603.11 Borrowed Funds Secured by an Asset

Borrowed funds that are secured by an asset represent a return of equity and may be used as a source of funds for the down payment, closing costs, and financial reserves. Assets that may be used to secure funds include automobiles, artwork, collectibles, or financial assets (such as savings accounts, certificates of deposit, stocks, bonds and 401k accounts). The terms of the secured loan must be documented and verified that the party providing the secured loan is not a party to the sale or financing of the property, and confirmed that the funds have been transferred to the borrower. Except for a loan secured by the borrower�s financial assets, the monthly payments for the loan will be considered as debt when qualifying the borrower (and, if the loan does not require monthly payments, the lender should calculate an equivalent amount and consider it as debt). When the loan is secured by the borrower�s financial assets, (e.g. 401k) monthly payments for the loan are not considered as long-term debt when qualifying the borrower. If the same financial asset is also used as part of the borrower�s financial reserves, the adequacy of the borrower�s reserves must take into consideration that the value of the asset has been reduced by the proceeds from the secured loan (and any related fees).

603.12 Unacceptable Sources of Funds

Unacceptable sources of funds include, but are not limited to, the following:

• Cash on Hand • Sweat equity • Unsecured Loans (i.e. credit cards, unsecured installment loans, unsecured

lines of credit) • Funds from Illegal Sources • Trade equity • Commission earnings from sale of the subject property may not be

considered as assets to complete the transaction

If the borrower is a licensed real estate broker and is due a commission from the sale of the subject property on which he/she is either the listing broker or selling


broker, the contract of sale must disclose this in total and the HUD-I Settlement Statement must reflect the commission in the space provided. Any commission due to the borrower may not be reflected on the HUD-I Settlement Statement as a credit to the borrower from the seller.

603.13 Reserves

In addition to the down payment and closing costs, the borrower should have sufficient cash reserves available that are appropriate considering credit risk. For documentation types that require asset documentation, owner occupied and second homes should have at least two (2) months PITI as reserves, and investment properties should have at least six (6) months PITI as reserves. Additional reserves may be required based on product eligibility.

The following items can be counted as reserves:

• Cash from the borrower�s checking, savings, money market or other depository account,

• Stocks and bonds, mutual funds, U.S. Government securities and other securities that are traded on an U.S. based exchange,

• Cash value of a life insurance policy. The borrower must be the owner of the policy and a copy of the policy is required for verification,

• Individual retirement account (70% vested amount), • Funds from a business account may be used for down payment and reserves

provided that the applicant is the sole owner of the company AND the company�s CPA provides a statement indicating withdrawal of the funds will not negatively impact the business.

The following items may not be counted as reserves: • Proceeds from a cash-out refinance transaction

Refer to the Product Matrices for additional reserve requirements.


F. Underwriting the Property Credit Suisse will purchase loans secured by residential real property provided that the property represents reasonable collateral for the loan. The type of property and its current condition are important factors in the qualification of a loan application.

700 Property Types

Credit Suisse will purchase loans secured by various types of properties. All eligible property types are not available for every program offered.

Refer to the individual Product Matrices to determine eligibility.

700.1 Property Type Eligibility

Property Type Eligible Ineligible

Single Family Residence ● Modular Homes ● Units in Planned Unit Developments (PUD) ● Condominiums ● Two, Three or Four-Unit Properties ● Cooperatives ● Condo-Hotels ● Leaseholds ● Mixed-Use ● Manufactured Homes ● Mobile Homes (single-wide or double-wide) ● Working Farms ● Commercial Properties ● Zoned as Agricultural (working farm) ● Zoned as Agricultural (non-working farm) ● Zoned as Industrial ● Zoned as Legal Non-conforming ● Properties located in Hawaii in Lava Flow Zones 1 or 2 ●

Vacant Land ● Properties with More Than 4 Units ● Earth/Dome Homes/Unique ● Timeshares ● Houseboats ● Properties that are utilized as a Place of Worship ● Properties located on Tribal land ●


700.2 Definition and Requirements

700.2a Single Family Residence

A single family residence is a property that consists of one (1) single unit structure. This includes attached and detached properties. In addition to the standard site-built homes, modular homes are acceptable as described below.

700.2b Modular Homes

A modular home is constructed in two or more sections. The sections or components are transported to the property site for final assembly. Although a modular home may be transported on a steel undercarriage, the undercarriage is not a permanent structural component and is removed when the home is placed on a foundation. These types of homes have never been licensed as personal property and are always considered real property.

Requirements for Modular Homes include the following physical characteristics, as applicable:

• The property must have the general appearance and functional utility of a site-built home.

• The home must be permanently attached and anchored per manufacturer specifications and/or state building codes. The home must also have acceptable full perimeter walls that include brick, block, poured concrete or treated wood.

• The home must have a pitched roof with overhang. The roof covering must be standard composition shingle (asphalt or fiberglass) or better.

• The unit must have permanent steps and stoops on proper footings. • On-site parking must be available and/or provided.

700.2c PUD (Planned Unit Development)

A PUD is a property where each unit owner has title to a residential lot and building and generally a non-exclusive easement on the common areas of the project. The owner often pays monthly homeowners association (HOA) fees as part of the project. These are typically Single Family Attached Townhomes.

Requirements for PUD properties include the following:

• The unit owner owns the parcel of land improved by the dwelling. • The homeowner�s association manages the development. • There are mandatory HOA fees associated with this property type. • The PUD must meet standard agency (FNMA/FHLMC) guidelines.

700.2d Condominiums

Condos are properties in which common ownership of land and facilities are included with the individual ownership of the interior space of the


subject property. A condominium building that has greater than four (4) stories is considered a high-rise. A condominium building that has four (4) or less stories is considered a low-rise.

Requirements for Condominiums include the following:

• The Condominium must meet standard agency (FNMA/FHLMC) guidelines, including Type A, B, Limited Warranty, or 1028 (1027s are not acceptable). Credit Suisse will not purchase more than 10% of the units in any one project.

• Credit Suisse will purchase a maximum of two (2) units in a condo project to the same borrower. One unit must be occupied as the borrower�s primary residence.

• Condo projects with six (6) units or less will require an arbitration agreement.

• The condo project cannot be involved in any current litigation. • Condo projects containing mixed-use units may be acceptable if the

style is common and customary to the area and there are no negative effects on marketability.

700.2e Non-Warrantable Condominiums/PUDs

Credit Suisse will purchase loans secured by units in projects that meet the following criteria:

• Presale � Project must have sold 40% or more of the total units. For projects subject to phasing that are more than 40% complete and are experiencing acceptable absorption rates, pre-sale requirements may be applied to individual phases. For two-unit projects completed less than six months, pre-sale requirements are waived. An appraisal prepared by a nationally recognized review appraisal firm will be required.

• Investor concentration � A maximum of 50% of the total number of units sold to date can be non-owner occupied. If Presale (sold / closed) requirements exceed 50% or an existing project is complete, investor concentration may be increased to 70% on a case by case basis following the project approval procedures noted below.

• Condominium/PUD Association Management � The association may be in control of the developer or the homeowners. If the association is in control of the homeowners, it must be managed by an independent professional management firm and operated in a prudent and professional manner with insurance coverage that meets or exceeds standard agency (FNMA/FHLMC) requirements. The association bylaws must contain a binding arbitration agreement.

• Other concentrations � A single individual or entity may own no more than 10% of the units. The units within the project must have separate and individual gas and water meters.

• Condominium/PUD Association letter � A letter from the condominium association should verify the above information.

• Insurance � A statement of insurance or insurance declaration page must specify 100% guaranteed replacement cost with liability coverage of at least $1 million per occurrence.

• Delinquency on HOA Dues � A maximum of 15% of the total units may be up to 30 days delinquent.


• Ineligible Properties � Leasehold Condos, Timeshares, Own-your-Own, Kiddie Condos and Condo Projects in Litigation are ineligible for non-warrantable consideration.

• Condo Conversions / Project approval � In order to approve a particular project that allows Credit Suisse to be the first lender to lend in a particular project, the following items must be submitted to Credit Suisse�s Credit Policy group:

o Complete Condo Questionnaire ! Must be dated within 90 days of closing

o Complete Project Insurance Information o Region/State Market Analysis for the most recent

quarter o Appraisal of a Unit

! May be done subject to completion per plans and specs

! Median value must be in-line with final market value ! Must be at least 25% built up ! Values must be stable or increasing ! Zoning must be legal/conforming

700.2f Multi-Family Properties (2-4 Units)

Acceptable multi-family properties are single structures that consist of two, three or four separate dwellings/units. The ownership of the structure is evidenced by a single deed and the structure must be situated on one lot.

700.2g Cooperatives

A Cooperative is a residential property in which a corporation or trust holds the title and sells shares of stock which represents the value of a single unit to the purchaser. A purchaser receives a proprietary lease that allows the purchaser to occupy the property, in addition to all other rights, privileges and/or restrictions.

Requirements for Cooperatives include the following:

• Stock or share ownership and the accompanying occupancy rights that represent at least 70% of the total number of units in the project must have been sold and conveyed to principal residence purchasers.

• The verified monthly dues are included in the total housing and debt ratios.

• Cooperative transactions that are subject to a �flip tax� are acceptable up to 2% of the purchase price. For flip tax transactions where the flip tax is > 2% of the purchase price, the amount in excess of the allowable 2% will be deducted from the purchase price, and the value for LTV/CLTV calculations will be based on the adjusted sales price.

• The expiration of the proprietary lease is materially beyond the expiration date of the mortgage term.

• The underlying mortgage on the cooperative project must have a remaining term of at least three (3) years.

• The pro rata portion of the underlying mortgage applicable to the individual cooperative unit must be less than 35% of the lesser of the subject�s sale price or appraised value.


• The property is located in the metropolitan areas of New York, Washington DC, New Jersey, Pennsylvania, Maryland, Virginia, California, Hawaii, Massachusetts, Connecticut and Washington.

• No more than 10% of the total number of units may be owned by one entity, with the exception of the sponsor. If the sponsor owns more than 10% of the units, then the attorney general�s amendments to the offering plan must be reviewed to ensure that the sponsor is current on all monthly maintenance and that none of the sponsor owned shares have been pledged as collateral.

• The most recent financial statement of the cooperative corporation must be reviewed to ensure that the corporation is financially solvent. Any adverse issue (i.e. lawsuits, building condition, excessive uncollected dues, etc.) must be satisfactorily addressed and/or documented.

• Evidence that a Master insurance policy is in effect is required. The insurance requirements will be that as outlined in Fannie Mae/Freddie Mac guidelines.

700.2h Condo-Hotels

An acceptable condo-hotel project should be completed and an established condominium or it must be experiencing acceptable absorption rates.

Requirements for condo-hotels include the following:

• The project must have a minimum of twenty (20) units and the construction and use must be of a residential nature.

• 40% of the units must be pre-sold • Credit Suisse will purchase no more than two (2) units in any given

complex to any given borrower. • Credit Suisse will not purchase more than 10% of the units in any one

project. • The minimum liability insurance coverage maintained per project must

be $1 million. • The minimum amount maintained in reserves per project must be at

least 10% of the total project budget. • Voluntary rental pools are acceptable for second homes and

investment properties. (A voluntary rental pool will allow a mortgagor to occupy the property and, on occasion to rent the property without using the project�s management.)

• Projects with mandatory rental pools are not eligible. • Project rentals must be managed by a professional leasing agent. The

leasing agreement must be delivered as part of the loan file. • Commercial space (for example � a restaurant) within the project is

limited to a maximum 15% of total square footage • The following documentation must be provided.

o Completed Condo Warranty Letter (Questionnaire) o Complete appraisal (with extensive interior photos) o Project master insurance policy o Credit Suisse will accept condo-hotel projects that meet the

requirements described herein. Projects that do not meet Credit Suisse's published guidelines may be acceptable with prior approval from Credit Suisse on an exception basis.


Requirements for condo-hotel units include the following: • The subject unit may be a second home or investment property. • The unit must contain a minimum of 400 square feet. • The property must have a full kitchen (stove, oven, full-size

refrigerator). Units with less than the required kitchen facilities (counter-top burners or less than full size refrigerator) may be permitted at a 10% LTV/CLTV reduction from the program maximum. Properties with only a micro-wave oven as a cooking appliance are not acceptable.

• Common charges must be included in the DTI calculation. • Limited to one second lien loan per borrower per complex.

700.2i Model Home Lease Back

A model home lease back is a model home in a new development purchased by a borrower and then �leased back� to the builder for continued use as a model home. Non-Owner Occupied financing is available for model home lease backs under the following conditions: • Borrower may not be affiliated with the builder. • Subject must be a single family, newly constructed home. • Term of the lease not to exceed twelve (12) months. • Lease must provide that the builder will convert any part of the

structure which has been modified to serve as a model home to its original intended floor plan in equivalent or better condition at the end of the lease period.

• An itemization of any feature/upgrade other than personal property, which is not included in the purchase price, and will be removed at the end of the lease period.

700.3 Other Property Eligibility Issues

700.3a Standard Property Requirements

• All properties must be designed for year-round residential use. • The property must be greater than 500 square feet of living area.

Exceptions may be granted for certain condos or cooperatives. Condo-hotel units must contain a minimum 400 square feet of living area.

• Log Homes are acceptable, if proven common and customary to the area.

• A permanent heat source is required (unless typical for climate and at least 2 comparables demonstrate the same feature/marketability).

• The utilities serving the subject must meet community standards. • The improvements must conform to all applicable zoning

requirements • The property must be taxed as real estate by the jurisdiction where it

is located. • The property and improvements must represent the highest and best

use of the property.


• The property is complete with no deferred maintenance affecting market value. Deferred maintenance not affecting market value not to exceed 2% or $2,000, whichever is less, and does not pose health or safety issues.

• All properties located on a private road require a maintenance agreement.

• Properties with security bars on windows or doors must comply with all state and local requirements for such bars or quick release latches must be present. For rooms that are not to code, at least one window must have a quick lease latch or the property must be brought to code.

700.3b Leasehold Properties

If the property is subject to a lease, the terms must be typical and customary for the market. For each home mortgage on a leasehold estate, the following criteria must be met:

• The leasehold mortgage constitutes an interest in real estate. • The mortgaged premises are insured by a title policy. • The lease and any sublease (including all amendments) are recorded

in the appropriate public land records. • The lease is in full force and effect and will not impair the first lien

status of the mortgage. • The term of the lease must be at least fifteen (15) years, with no more

than minimal CPI based adjustments to the rent or lease payments during the lease term. The lease must extend or be automatically renewable for a period of ten (10) years beyond the mortgage.

• The ground lease does not provide for termination of the lease in the event of the lessee�s default without the mortgagee being entitled to receive written notice of and a reasonable opportunity to cure the default.

• The lease does not contain provisions for termination in the event of damage to or destruction of the mortgaged premises so long as the leasehold mortgage exists.

• All ground lease rents, other payments, or assessments that have become due have been paid.

700.3c Rural Properties/Excess Acreage

For rural properties, the area should be stable and/or appreciating in market value and at least 25% developed. The property should be readily salable in six (6) months or less. The property must be owner-occupied or a second home and all comparables are to be within ten (10) miles of the subject property. Properties consisting of ten (10) acres or less are acceptable to Credit Suisse. Properties with greater than ten acres will be considered, but the valuation will be limited to ten (10) acres.

700.3d Mixed-Use with Retail/Commercial

Single Family (Alt-A and Prime A only)

Mixed-use properties are eligible if the primary use of the property is residential in nature. The �highest and best use� must be as a residential


property. There should be no significant structural changes to the home and the footprint of the home should be typical for the area. In addition:

• The property must include an owner-occupied, primary residence. • The mixed use of the property must represent a legal, permissible use

of the property under the local zoning requirements. • The borrower must be both the owner and the operator of the

business. • The market value of the property must be primarily a function of its

residential characteristics, rather than the business or any special business-use modifications that were made.

Refer to Product Matrices for Mixed-Use eligibility guidelines.

700.3e Zoning

Residential is the appropriate zoning classification for most properties to be purchased. Additional acceptable zoning classifications are as follows:

• Non-conforming Zoning � Legal non-conforming zoning is allowed, provided that a 100% rebuild letter has been obtained from the municipality or verification from the appraiser has been obtained which states that the property can be rebuilt to its current status on its existing footprint in the event of total or partial destruction.

• Agricultural Zoning � Agriculturally zoned properties are acceptable if they are typical for the area, there are supporting comparable sales and the property is not used predominately for agricultural purposes. .

700.3f Multiple Parcels

Loans secured by multiple contiguous legal parcels are acceptable for purchase by Credit Suisse if certain criteria are met. The parcels should have a consistent use, the total subject property must conform to the area in which it is located and the encumbrance of the multiple parcels may not compromise the properties� highest and best use.

700.3g Incomplete Properties

All properties must be 100% complete and appraised �as is.� If a property is not complete at the time of the appraisal, the original appraiser must complete a Completion Certificate or Final Inspection indicating the construction and/or repairs are 100% complete prior to the loan closing.

700.3h Listed Properties

Refinance loans for properties listed on the real estate market within the previous three (3) months of the appraisal are ineligible.

700.3i Lava Flow Zones

In the State of Hawaii, properties in Lava Flow Zones 1 and 2 are not acceptable.


G. Appraisal Standards Credit Suisse will only accept mortgage loans that contain the appropriate appraisal report(s) for the program and property type. Each appraisal report provided must comply with all applicable appraisal requirements and fully verify the existence, condition and current market value of the subject property.

800 Acceptable Appraisal Firms

Credit Suisse does not maintain an approved appraiser list. Credit Suisse does, however, reserve the right to refuse to accept appraisals prepared by specific appraisers.

Each appraiser must meet the following requirements:

• Be a licensed or certified appraiser by the state in which the property is located.

• Meet the independent appraiser requirements for staff appraisers or, as appropriate, fee appraisers by FNMA/FHLMC, the OCC, FRS, FDIC and OTS with their respective real estate appraisal regulations adopted in accordance with Title XI of FIRREA of 1989, regardless of whether the mortgage broker/banker is subject to those regulations.

• Be experienced in the appraisal of properties similar to the type being appraised and be actively engaged in appraisal work.

• Subscribe to a code of ethics that is at least as strict as the code of the American Institute of Real Estate Appraisers or the Society of Real Estate Appraisers.

801 Appraisal Requirements

• All appraisal reports must be computer generated/typewritten on the current Fannie Mae or Freddie Mac form applicable to the property being appraised.

• All information must be complete without any blanks, alterations or omissions. • All appropriate attachments and addenda must be included. • The report should present a complete and accurate evaluation of the property

so that the appraised value is supported. • The inspecting appraiser, indicating their license or certification number, must

sign each report.

Additional requirements include the following:

• The appraisal report may never be older than twelve (12) months, or 360 days, at closing.

• If the report is older than four (4) months, or 120 days, at closing, then a re-certification of value from the original appraiser must be in the file.

• Interior photographs are required for loan amounts that exceed $1 million. • For loan amounts > $650,000, one of the following is required:

° Two (2) full appraisals from a licensed appraiser; Appraisal form 2055 with an interior inspection may be utilized for the second appraisal. Both appraisals (full URAR and 2055) must be included in the loan file. Credit Suisse will require a reconciliation of the values if there is a 10% or greater variance between the appraisals. A nationally recognized appraisal firm must perform this reconciliation.


° One full appraisal from a licensed appraiser and one BPO or Field Review from Residential Real Estate Review (�RRR�), or

° One full appraisal from RRR. • Electronic transmission of appraisal reports is acceptable; however, the

report must identify the appraiser and include a reproduced signature of the same appraiser, the report is certified that it is complete and unaltered, and clear color photos are required. Electronic transmission includes internet connections and wireless transmissions.

• All transactions with title transfers within the past thirty-six (36) month period (purchase or refinance) must have the transfers addressed and documented. The appraiser must specify the date of each transfer and the transfer value.

802 Required Forms/Disclosures

The following appraisal forms are acceptable by Credit Suisse; however, the types of appraisal forms used will depend upon the product and property type:

Property Type Fannie Mae

Form Freddie Mac

Form 1 Unit SFR 1004 70 2-4 Unit SFR & Mixed Use 1025 & 216 72 & 998 Condo 1073 465 Cooperative 1075 466 Field Review 2000 1032 Completion Certificate/Final 1004D 442 Operating Income Statement 216 998 Comparable Rent Schedule 1007 1000 Exterior-Only Inspection 2055 2055

803 Required Appraisal Exhibits

The following exhibits must be attached to the appropriate appraisal form:

• A street map that shows the location of the subject property and each comparable property that the appraiser used.

• A sketch of the building�s exterior, indicating dimensions. (Sketches of condominium units must indicate interior perimeter unit dimensions rather than exterior building dimensions).

• For properties with functionally obsolete floor plans, a floor plan sketch indicating it�s dimensions is required, rather than a sketch of the exterior of the building or unit. Such properties have limited market appeal compared with more competitive properties in the neighborhood.

• Clear color photographs that show the front and back of the subject property and a street scene. All photographs must be appropriately identified. (Photographs must be originals that are produced either by photography or electronic imaging).

• Clear color photographs that show the front of each comparable property and are appropriately identified. Generally photographs should be originals, however, color photographs produced by electronic imaging or color copies of


photographs from a multiple listing service or from the appraisers files are acceptable if they are clear and descriptive.

• Satisfactory completion certificate (RE-307; Freddie Mac 442), if applicable. • Operating Income Statement 2-4 family property (RE-225, Fannie Mae 216),

for income properties (both non-owner-occupied 1-4 unit properties and owner-occupied 2-4 unit properties).

• Certification and statement of limiting conditions (Fannie Mae 1004B). • Any other data necessary to provide a complete appraisal report.


H. Mortgage Insurance

900 Premium Payment Options

The following premium payment options are acceptable:

• A single, upfront premium paid by the borrower, in cash, at closing (financed premiums are not acceptable)

• An annual premium paid by the borrower, in cash, at closing with monthly deposits to an escrow account to pay future annual premiums.

• Constant monthly premium payments (declining renewals are not acceptable)

901 Coverage Requirements for Conforming, Alt-A or Prime A Products

Product Type LTV % MI Coverage % > 80 to 85 12

> 85 to 90 25> 90 to 95 30

ARM, Balloons,

Fixed > 20 Yr Term > 95 to 100 35 > 80 to 85 12

Fixed ≤ 20 Yr Term > 85 to 90 25 > 90 to 95 30 > 95 to 100 35


Chapter 2: HELOC 1st and 2nd Liens & Stand Alone 2nd Liens (Supplement) A. Introduction

This Chapter provides supplemental guidelines for originating Home Equity Lines of Credit (�HELOC�) and Stand Alone 2nd Liens that are eligible for sale to Credit Suisse. These guidelines should be used in addition to those provided in Chapter 1 of this Guide.

B. Senior Lien Eligibility The following lien types are eligible first liens:

• Fixed Rate Mortgage

• Adjustable Rate Mortgage (ARM): For qualifying purposes, 1st Lien ARM payments will be based on the fully indexed rate.

• Interest Only: The fully amortizing payment must be used for qualifying purposes

• Balloon: The balloon term must have at least 36 months remaining

• Mortgage held by a private party (copy of the note, most recent 12 months cancelled checks, and statement of balance from the note holder are required)

The following lien types are ineligible first liens:

• ARM/Negative Amortization

• All Inclusive Trust Deed

• Bonds with Recapture Taxes

• California Veteran Loans

• Open-Ended (HELOC)

• Land Contracts

• Reverse Mortgages/Loans with Future Advances

• Recapture Lien

• Loans secured by properties in Texas

C. Underwriting the Borrower

100 Credit Requirements

100.1 Credit Grades for HELOCs

The HELOC Product Matrix should be used to determine the borrower�s credit grade. Eligible credit grades for HELOCs include Platinum, Gold, Silver and Bronze.


Credit Suisse will determine the applicant�s level of risk by assigning a credit grade to each loan based on the following criteria:

• Mortgage/Rental History • FICO Credit Score • Bankruptcy • Foreclosure / NOD / Deed-in-Lieu

Once the appropriate credit grade has been identified, the maximum LTV/CLTV, loan amount, eligible property types, and eligible documentation options for that respective credit grade can be determined on the HELOC Product Matrix.

100.2 Other Requirements

Please refer to the product matrices for other credit and trade line requirements.

200 Residual / Disposable Income Requirements

Credit Suisse requires that borrowers have a minimum disposable income remaining after meeting all monthly housing and consumer-related expenses to cover various other living expenses. The disposable income requirement is dependent on the number of persons living in the borrower�s primary household. To calculate a borrower�s residual income, all debts utilized in the calculating the DTI should be deducted from the borrower�s qualifying income. The residual income must meet the following thresholds:

Number in Household Required Residual Income

One person ≥ $600 Each additional person ≥ $200 Maximum Residual Income required (except for below) $1600 Minimum required for CLTV > 90% and DTI > 45% ≥ $2500

D. Underwriting the Property

300 Property Type Eligibility


Single Family Residence ● Modular Homes ● Units in Planned Unit Developments (PUD) ● Condominiums ● Two, Three or Four-Unit Properties (HELOC only) ● Cooperatives ● Condo-Hotels ● Leaseholds ● Mixed-Use ● Manufactured Homes ●



Mobile Homes (single-wide or double-wide) ● Working Farms ● Commercial Properties ● Zoned as Agricultural (working farm) ● Zoned as Agricultural (non-working farm) ● Zoned as Industrial ● Zoned as Legal Non-conforming ● Properties located in Hawaii in Lava Flow Zones 1 or 2 ●

Vacant Land ● Properties with More Than 4 Units ● Properties with > 10 acres ● Earth/Dome Homes/Unique ● Timeshares ● Houseboats ● Properties that are utilized as a Place of Worship ● Properties located on Tribal land ●

400 Appraisal Requirements

All Piggyback and 1st Lien HELOCs require a full appraisal. For a Stand Alone HELOC, appraisal requirements are based on the loan amount and credit grade as shown in the table below. The appraisal report may never be dated more than 180 days from the date of closing.

Stand Alone HELOC Loan Amount

Credit Grade ≤$100,000 $100,001-200,000 > $200,000

Platinum AVM Drive-by/2055 Drive-by/2055 Gold AVM Drive-by/2055 Drive-by/2055 Silver AVM Drive-by/2055 Drive-by/2055 Bronze Drive-by/2055 Drive-by/2055 Full Appraisal

For Stand Alone 2nd Liens, the following appraisals will be accepted: AVM, Drive-by, and Full Appraisal.

400.1 Automated Valuation Models

Automated Valuation Models are an acceptable method of valuing a property with the following criteria:

• AVMs must be an approved product provided by a Credit Suisse AVM Approved Vendor. See Section below.


• AVM models must be the original product supplied by the vendor and unaltered in any respect. The AVM client may not input any property date other than the property address.

400.2 Approved AVM Vendors and Products

Vendor Product Required Confidence

C&S Marketing 9309 La Riviera Drive, Suite E Sacramento, CA 95826 (916) 457-2009 www.csmarketing.net

HVE

PASS

HPA 2000

Value Finder

CASA

ValueSure

ValuePoint

H or M (high or medium)

≥ 50

≥ 50

≤ 15

≥ 50 (safety score)

A,B,C (letter grade)

Strong, Good, Medium

≥ 50

FINIS Market Intelligence 37 Birch Street Milford, MA 01757 (800) 577-6602 www.mivalue.com

HVE

PASS

ValueSure


≥ 50


Solimar/Basis 100 4 Park Plaza, Suite 800 Irvine, CA 92614 www.solimar.net

PASS

HPA 2000

≥ 50

≥ 50

CSW Fiserv 1698 Massachusetts Ave Cambridge, MA 02138 (617) 354-1400 www.cswcasa.com

HVE

CASA


≥ 50 (safety score)

A,B,C (letter grade)

Hansen Quality 2204 Gamet Avenue San Diego, CA 92109 (800) 282-1104 www.hanqual.com

HVE

PASS

ValueSure


≥ 50


First American 5601 East La Palma Ave Anaheim, CA 92807 (800) 345-7334 www.firstamres.com

ValuePoint ≥ 50

http://www.csmarketing.net/

http://www.mivalue.com/

http://www.solimar.net/

http://www.solimar.net/

http://www.hanqual.com/

http://www.firstamres.com/


500 Other Documentation Requirements

500.1 Title Requirements

• A full title policy is required for all Piggyback and 1st Lien HELOCs. Stand Alone HELOCs and Closed-End 2nd may use a Property Report, a Short Form Title Policy, or a Title Search.

• Title ownership and lien verification is required prior to closing. Title/lien searches may not be more than 60 days old from the closing date. Lien searches must indicate a clear and marketable title. Any issues affecting title must be resolved prior to closing.

• A tax search is required to verify that real estate taxes are current under the following circumstances:

o Subject loan is a 1st Lien HELOC.

o The first lien mortgage holder does not escrow real estate taxes in the monthly mortgage payment.

500.2 Documentation Related to 1st Lien

• Copy of the 1st Lien note.

• Copy of the year-end mortgage statement from the servicer for the 1st mortgage loan.

Economy & Finance

Credit Suisse sellers guide (secondary market) August 2006