STATEMENT ON SUB-PRIME:

Homeowners Mortgage of America, Inc. DBA Foundation Financial Group, Foundation Financial Group of Georgia embraces responsible lending principles. We support the efforts by the industry to strengthen underwriting standards and to protect borrowers against unfair or deceptive mortgage lending practices.

Homeowners Mortgage of America, Inc. attempts to help current customers with sub-prime¹ loans that are delinquent or in danger of becoming delinquent by offering options to these customers whenever possible through refinancing.

Homeowners Mortgage of America, Inc. only makes home loans to consumers with sub-prime credit when the ability to repay the loans is established based on the information available at the time the loan is made.

Loan terms, features, benefits and risks are clearly disclosed to consumers in ways that enable them to make an educated decision about the loan product they choose. In the event that a customer chooses a loan product with an adjustable rate, the timing and estimated amounts of future payment changes are clearly communicated to consumers in accordance with applicable disclosure laws and good business practices.

Homeowners Mortgage of America’s business processes are designed to prohibit steering borrowers who qualify for a traditional loan into a non-traditional loan² or sub-prime loan. The majority of consumers who come to Homeowners Mortgage of America, Inc. receive a traditional mortgage loan. If a traditional loan is not available to the customer, but a loan designed for sub-prime credit borrowers is available, that loan will only be offered to the customer if the new loan product represents a clear “net tangible benefit” to the borrower. Homeowners Mortgage of America, Inc. does not engage in any type of predatory lending practices.

Homeowners Mortgage of America’s loan originators do not receive higher commissions for sub-prime loans or non traditional loans, and these products are only offered as an absolute last case scenario.

Homeowners Mortgage of America, Inc. practices prudent qualifying standards recognizing the potential effect of payment shock in evaluating a borrower’s ability to service debt. An analysis of a borrower’s repayment capacity includes an evaluation of the borrower’s ability to repay the debt by its final maturity at the fully indexed rate, assuming a fully amortizing repayment schedule.

Many of our secondary market business partners have already tightened underwriting standards to reduce the risk of default on sub-prime loans and we have embraced these new underwriting standards.

Homeowners Mortgage of America, Inc. does not service any mortgage loans, therefore, does not offer loan modification services.

Homeowners Mortgage of America, Inc. engages in consumer protection principles relevant to the underwriting and marketing of mortgage loans which include:

·         Approving loans based on the borrower’s ability to repay the loan according to its terms; and

·         Providing information that enables consumers to understand material terms, costs, and risks of loan products at a time that will help the consumer select a product.

Communications with consumers, including advertisements, oral statements, and promotional materials, provide clear and balanced information about the relative benefits and risks of the products. This information is provided in a timely manner to assist consumers in the product selection process, not just upon submission of an application or at consummation of the loan.

Information provided to consumers clearly explains the risk of payment shock and the ramifications of prepayment penalties, balloon payments, and the lack of escrow for taxes and insurance, as necessary. The applicability of prepayment penalties do not exceed the initial reset period.

Mortgage product descriptions and advertisement provide clear, detailed information about the costs, terms, features, and risks of the loan to the borrower. Consumers should be informed of:

·         Payment Shock. Potential payment increases, including how the new payment will be calculated when the introductory fixed rate expires.

·         Prepayment Penalties. The existence of any prepayment penalty, how it will be calculated, and when it may be imposed.

·         Balloon Payments. The existence of any balloon payment.

·         Cost of Reduced Documentation Loans. Whether there is a pricing premium attached to a reduced documentation or stated income loan program.

·         Responsibility for Taxes and Insurance. The requirement to make payments for real estate taxes and insurance in addition to their loan payments, if not escrowed, and the fact that taxes and insurance costs can be substantial.

Homeowners Mortgage of America, Inc. has procedures and systems in place to monitor compliance with applicable laws and regulations, third-party agreements and internal policies. Also our Compliance and Human Resources Department regulate appropriate corrective actions in the event of failure to comply with applicable laws, regulations, third-party agreements or internal policies. In addition, our Compliance Department reviews consumer complaints to identify potential compliance problems or other negative trends.

¹ In this document the term sub-prime includes the following:

·         Two or more 30-day delinquencies in the last 12 months, or one or more 60-day delinquencies in the last 24 months;

·         Judgment, foreclosure, repossession, or charge-off in the prior 24 months;

·         Bankruptcy in the last 5 years;

·         Relatively high default probability as evidenced by, for example, a credit bureau risk score (FICO) of 660 or below (depending on the product/collateral), or other bureau or proprietary scores with an equivalent default probability likelihood; and/or

·         Debt service-to-income ratio of 50% or greater, or otherwise limited ability to cover family living expenses after deducting total monthly debt-service requirements from monthly income.

² In this document the term non-traditional loan means any loan other than a 30 year fixed.