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Guidance for determining compliance for Mortgage Revenue Bond (MRB) and FirstHomes Tax Credit (MCC) Programs. Guidance applies to compliance only. Lender should continue to underwriteaccording to appropriate Fannie Mae, FHA, VA or RD standards.

First-time Homebuyer requirement applies to anyone on title and all spouses, whether borrowing or non-borrowing. A first-time homebuyer is someone who has not had an ownership interest in their primary residence at any time during the preceding three years ending on the closing, unless purchasing a home in a targeted area as specified in the Program Guide.

Acquisition cost means the cost of acquiring a principal residence as a complete residential unit. All amounts paid, either in cash or in kind, by the purchaser (or a related party for the benefit of the purchaser) to the seller (or a related party for the benefit of the seller) as consideration for the residence, but not including usual and reasonable settlement costs. If a residence is incomplete, the reasonable cost of completing the residence; however, it shall not include the value of services performed by the borrower or members of the borrower’s family in completing the residence. The Maximum Acquisition Cost is $441,176.

Single family or approved condominiums

Existing 2 -4 family homes owner must occupy at least one unit. Must have been built and occupied as a residence at least five (5) years preceding the mortgage loan date not applicable to 2- family homes in a targeted area as published in the Program Guide

Occupancy within 60 (sixty) days following the closing date of the mortgage loan or issuance of MCC Certificate. The residence must be the principal residence of everyone on title.

Commercial. Not more than 15% of the total area of the residence may be used in a trade or business.

Household size is defined as all members of the household, who intend to reside in the subject property and must be accounted for regardless of relationship.

GUIDANCE FOR COMPLIANCE: MRB and MCC PROGRAMS

I. First-Time Homebuyer Requirement

II. Acquisition Cost

III. Household Size

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Household Income Limits may not exceed $93,623 for a 1 or 2-person household; $107,667 for a 3 or more-person household.

Annual Gross Household income is the total of all sources of income from anyone on title and all spouses, whether borrowing or non-borrowing and all other adult individuals 18 years or older who will occupy the residence, regardless of whether they are listed on the deed, mortgage or note. This income calculation methodology is applied to each loan to accurately and completely measure the household’s total gross income for the prospective 12 months from the application date.

Base Income includes income anticipated for the next twelve months including full and part -time employment and seasonal work. Historical data based on the past 12 months or previous fiscal year may be used if determination cannot be logically made.

Overtime, Bonus & Commission includes income greater than the monthly base pay. Average income over the last 12 months.

Social Security Income is the gross amount before deduction for Medicare.

Alimony and/or Child Support payment amounts awarded by the court are considered household income unless the borrower certified that payment are not being received and he or she has taken all reasonable legal action to collect amount due, including filing with the appropriate courts or agencies responsible for enforcing payment.

• Acceptable Documentation: Printout from the court or agency responsible for enforcingsupport payments or other evidence indicating the frequency and amount of the supportpayment received. When no documentation of child support, divorce, or separation isavailable either because there was no marriage of for another reason, the borrower is to signa certification stating the amount of child support received.

Pensions, Annuities, Disability, or Death Benefits or Long-Term Care Insurance is the full amount of payment(s). Withdrawals from retirement savings accounts such as an Individuals Retirement Account and 401K account that are not periodic payments do not fall in this category and are not counted as income.

Recurring Cash Allowances & Gifts are considered income if regularly made.

• Example: Parents have paid the daughter/son’s student loans for the past 12 months totaling$120 each month. The $120 per month must be included as household income.

Business Income is the net income from the operation of a business or profession, as determined from tax returns. If the net income is negative, it must be counted as zero income.

Interest / Dividend Income of any kind from real or personal property and withdrawals of cash as assets from an investment. If assets are owned by more than one person, prorate the assets per the percentage of ownership.

IV. Household Income Limits

V. Annual Gross Household Income

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• If the total cash value of all assets is $5,000 or less, the actual income received from the assets is the amount included in household income. When the assets exceed $5,000 include the actual income from the asset or calculate the interest based upon the current passbook savings rate as established by HUD. The passbook rate as of February 1, 2016 is set at .06% (.06% =0.0006).

Other Income may include tips, unemployment income, seasonal employment, National Guard, supplemental income (coaching etc.).

Payments in lieu of earning, such as unemployment, disability compensation, worker’s compensation, and severance pay, except as listed under Section VI. Income Exclusions.

Welfare Assistance in the amount of the allowance or grant exclusive of the amount specifically designated for shelter or utilities

The following Income Exclusions apply:

• Income from employment of children (including foster children) under the age of 18

• Payment received for the care of foster children or foster adults

• Lump-sum additions to family assets, such as inheritance, insurance payments (including accident insurance and worker’s compensation), capital gains, and settlements for personal or property losses

• Amounts received by the household that are specifically for, or in reimbursement of, the cost of medical expenses for any household member

• Income of a live-in aide

• Amounts of student financial assistance paid directly to the student or to the educational institution

• The special pay to a household member serving in the Armed Forces who is exposed to hostile fire

• Temporary, nonrecurring or sporadic income (including gifts)

• Earnings more than $480 for each full-time student, 18 years of age or older (excluding borrower and spouse)

• Adoption assistance payments more than $480 per adopted child

• Deferred periodic payments from Supplemental Security Income and Social Security benefits that are received in a lump-sum amount or in prospective monthly amounts

• Amounts paid by a state agency to a family with a member who has a developmental disability and is living at home to offset the cost of services and equipment needed to keep the developmentally disabled family member at home

Changes Prior to Closing. MRB and MCC Commitments are issued upon the Lender’s certification that all the requirements necessary to close the mortgage are satisfied. The Lender must notify RIHousing of any changes that affect the conditions under which the commitment was issued.

Changes in the Borrower’s Financial or Marital Status. Eligibility is based upon the Annual Gross Household Income. Changes in the borrower’s financial or marital status occurring during the

VI. Income Exclusions

VII. Changes Prior to Closing

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Commitment period may affect the validity of the Commitment. Changes will require recertification of Annual Gross Housing Income for the purposes of determining eligibility

If the borrower(s) experience a change in marital status after issuance of the commitment and prior to loan closing, the new spouse must satisfy the First-Time Homebuyer requirement and be included in Annual Gross Household Income for the purposes of determining eligibility.

Changes in annual gross income or marital status occurring after the loan closing do not affect program eligibility. Such changes may affect the calculation of the recapture tax if the residence is disposed of within nine years after the closing date.

If the borrower acquires a present ownership interest in a principal residence prior to loan closing, the program commitment will be revoked unless the property to be purchased is in a targeted area.

Required Documentation:

First-time homebuyer is verified by collecting three years of federal tax returns or obtaining IRS transcript covering the last three years.

Annual household income is determined by completing the Income Worksheet (MCC-007) for the MCC program; the MRB Program requires the Income Eligibility section of part IV of the RIHousing Mortgage Purchase Program Recapture Notification and Mortgagor’s Affidavit be completed, executed and provided to RIHousing when file is submitted to underwriting for review. For each household member, include current pay stub or applicable income verification such as a Benefit Statement to verify Social Security Income.

RIHousing reserves the right to request additional documentation, as needed, to determine household compliance.

44 Washington Street, Providence, RI 02903 www.rihousing.com

VIII. Required Documentation