Offered through First Mortgage Corporation

1. Offered through First Mortgage Corporation FHA “ARM” TRAINING Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation is a summary and is not complete. This information is for mortgage professionals only and should not be distributed to or used by consumers or other third-parties. Information is accurate as of the date shown below and is subject to change without notice. 05/20/2010

2. Introduction Understanding ARMS Available FHA Programs at FMC Program Eligibility Guidelines Interest Rate, Fees, Closing Costs FMC Support AGENDA

3. First Mortgage Corporation is an independent residential Mortgage Banking firm with branch offices located throughout the west. Founded in 1975, FMC is a direct-lending mortgage banker approved as a lender and/or loan servicer by the Federal Housing Administration (FHA); the Veterans Administration (VA); the Federal National Mortgage Association (Fannie Mae); the Federal Home Loan Mortgage Corporation (Freddie Mac); the Government National Mortgage Association (Ginnie Mae); National Homebuyers Fund (NHF); the California Public Employees’ Retirement System (CalPERS); the California Teachers’ Retirement System (CalSTRS); the California Housing Finance Agency (CalHFA); the Nevada Housing Division (NHD); and many other major secondary market institutions. First Mortgage is currently rated the #5 FHA Lender in CA! Having funded in excess of $12 billion in residential real estate loans, FMC has assisted more than sixty thousand families with their mortgage needs.  FMC enables families to enjoy the American Dream of Homeownership…“it’s the only thing we do.” FMC has a longstanding tradition of providing unparalleled customer service and a reputation built on adding value to the home loan process.  That’s why FMC should be considered…“YOUR FIRST LENDING RESOURCE”. INTRODUCTION

4. What is an ARM? UNDERSTANDING ARMS First Mortgage Corporation has been around since 1975. Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters!

5. An Adjustable-Rate Mortgage (ARM) is a mortgage loan that allows a lender to adjust the interest rate in accordance with a specified index periodically, and as agreed to at the inception of the loan. Also referred to as a Variable Rate Mortgage (VRM). Adjustable Rate Mortgages (ARM) have the following related terms: Index Margin Initial Interest Rate (Note Rate) Calculated Interest Rate or Fully Indexed Rate (Index plus Margin) Adjusted Interest Rate (New Interest Rate charged to the borrower) Change Date (Effective date of an adjustment to the interest rate) Adjustment Caps (1st, Subsequent, Lifetime) What is an ARM?

6. ARM Index UNDERSTANDING ARMS First Mortgage Corporation has been around since 1975. Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters!

7. Available Indices CMT (Constant Maturity Treasury) LIBOR (London Interbank Offered Rate) MTA (Monthly Treasury Average) COFI (Cost of Funds Index) CODI (Cost of Deposit Index) FHA uses two types of index and cannot be commingled: 1-Year LIBOR 1-Year CMT FMC FHA ARM Programs uses: 1-Year CMT – The most popular and commonly known index (Monthly 1-Yr CMT). This index is based on the 1-YR Constant Maturity Treasury and changes once a month. This use to be called 1-YR T-Bill or Treasury Bill; 1-Yr T-Bill is no longer issued by the Treasury. Index Comparison - See attached pages Available Index & Comparison

8. Available Index & Comparison

9. 1-YR CMT Index

10. ARM Features Caps, Margins, Adjustment Periods UNDERSTANDING ARMS First Mortgage Corporation has been around since 1975. Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters!

11. HYBRID Arms & Frequency of Rate Changes • Fixed Period FHA ARMS (Hybrid ARMS) provide a low initial rate with a security of a fixed payment for the first 1 year, 3 years, 5, 7 or 10 years before the loan converts to an adjustable rate mortgage. • After the initial fixed period, rate adjustments occurs on an annual basis.

12. Calculating annual adjustments • Originator (Lender/Broker) negotiates the initial interest rate and margin with the borrower. See rate sheet for available rates. • The margin, remains constant for the entire term of the mortgage. • Fixed Period ARMS (Hybrid ARMS): • Interest Rate remains constant for the initial period only (1,3,5,7 or 10); and then it changes annually. Slide 11 • To calculate the annual adjustments: • Determine the current Index value (CMT) • Determine the calculated interest rate (Fully Indexed Rate), and • Compare the calculated interest rate (FIR) to the existing interest rate to determine the new adjusted interest rate, subject to the annual and lifetime caps.

13. Determining the Calculated Interest Rate aka “FULLY INDEXED RATE” • The calculated interest rate (aka Fully Indexed Rate) is the current index, plus the margin, rounded to the nearest 1/8th of one percentage point. • Margin is the “fixed” component of the ARM with a fixed value for the life of the loan. • Index is the “variable” component of the ARM and can change on a monthly basis. • FULLY INDEXED RATE = INDEX + MARGIN • Example 1: If margin is 2.75% and index is 1.50% • Fully Indexed rate is: ______________ • Example 2: If margin is 2.250% and index is .40% • Fully Indexed rate is: ______________ 4.25% 2.65%

14. Caps • 1st Adjustment Cap – Adjustment to the interest rate during the 1st adjustment may not change (up/down) by more than… • Subsequent Caps – Adjustment to the interest rate after the 1st adjustment may not change (up/down) by more than… • Lifetime Cap – Adjustments to the interest rate over the entire term of the mortgage may not exceed…

15. Example of Calculating New Interest Rate 1st Adjustment: • Program: 5/1 ARM • Start Rate: 5.00% • 1st Adjustment Cap: 1% • Subsequent Caps: 1% • Lifetime Cap: 5% • Margin: 2.25% After 5 years • Current Index: .45% Calculate Fully Indexed Rate: • Index: .45% • + Margin: 2.25% • = Fully Indexed Rate: 2.70% Compare FIR to Current Rate: • Current Interest Rate 5.00% • - Fully Indexed Rate: 2.70% • Diff (exceeds 1% cap) 2.30% Calculate New Interest Rate • Current Interest Rate: 5.00% • Less max Cap: 1.00% New Interest Rate Yr 6: 4.00% 2nd Adjustment (after Yr 6) New Index Rate after Yr 6: 3.50% Calculate Fully Indexed Rate: • Current Index: 3.50% • + Margin: 2.25% • = Fully Indexed Rate: 5.75% Compare FIR to Current Rate: • Current Interest Rate: 4.00% • - Fully Indexed Rate: 5.75% • Diff (exceeds 1% subs cap) 1.75% Calculate New Interest Rate • Current Interest Rate: 4.00% • Plus difference: 1.00% New Interest Rate Yr 7: 5.00%

16. Fixed minimum payment at low teaser interest rate for up to 10 years. Lower monthly payments means more cash available each month. Gain financial control and flexibility. Low initial rates allow borrowers to purchase larger homes. (Hint: Ideal for self-employed borrowers, professionals and commissioned sales people) Advantages of an ARM loan

17. Standard FHA ARM Program – Conforming or Jumbo Available FHA ARM Programs First Mortgage Corporation has been around since 1975. Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters!

18. Available FHA ARM Programs • 1 Yr ARM – Program 07, 72 • 3/1 ARM – Program 07, 72 • 5/1 ARM – Program 07, 72 • 7/1 ARM – Program 07 • 10/1 ARM – Program 07

19. FHA ARM Program

20. FHA ARM Program Highlights

21. FHA Program Matrix FHA Matrix First Mortgage Corporation has been around since 1975. Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters!

23. FMC FHA Overlays Non-Traditional Credit First Mortgage Corporation has been around since 1975. Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters!

24. FMC - FHA Overlays

25. FMC - FHA Manufactured Homes Overlays

26. Resources • HUD Website – www.hud.gov • 4155.1 – Mortgage Credit Analysis • 4000.2 – Application through Process • Mortgagee Letters • FHA Loan Limits – http://entp.hud.gov/idapp/html/hicostlook.cfm • FHA Approved Condos- https://entp.hud.gov/idapp/html/condlook.cfm • FHA Connection - https://entp.hud.gov/clas/index.cfm

27. Interest Rates Origination Points & Fees Closing Costs PRICING, FEES, SUPPORT First Mortgage Corporation has been around since 1975. Since then, FMC has been opening doors to the American Dream. It’s all we do and we do it well. Discover today why First Mortgage Corporation is your First Time Home Buyer and Down Payment Assistance Headquarters!

28. Interest Rates for the FHA programs are available on the FMC rate sheet – Page 1: Retail Division – From Retail website or Secondary Marketing Wholesale Division – Contact your AE or go to your AE’s website Interest Rates

30. Fees

31. Marketing, Tools & Training • WEB SITE • Go to our FMC websites for: • RATE SHEET • TRAINING MATERIALS • GUIDELINES • FORMS • CALCULATORS • TOOLS • MARKETING • TRAININGS • First Mortgage offers FREE Weekly ONLINE Trainings • See current Training Schedule for upcoming trainings • Upcoming Trainings: • Property Flipping • FHA Program • FHA Streamline • FHA ARMS • SUPPORT • Retail: • Contact Loan Help • Wholesale: • Contact your A/E • For help with your: • Scenarios • Pricing • Program Guidelines • Loan Submissions • Fees

32. On behalf of First Mortgage, we thank you for joining our training today and hope the information provided was informative and will help you… Build Your Business!