LPS Mortgage Monitor

March 2011 Mortgage Performance Observations

Data as of February, 2011 Month-end

 March 2011 Mortgage Performance Package
Data as of February 28, 2011
Released March 16, 2011
Outline / Agenda

• Overall Market Rates / Trends: Delinquency and Foreclosure “Dashboard” performance statistics and
time-series analysis with product comparisons.

• New problem loans and seriously delinquent loan resolutions over time.

• Cure rates by loan status.

• Detailed foreclosure start analysis with “first-time” tracking and relative volumes vs. foreclosure sales.

• Process review impact on foreclosure inventories and sales.

• Loan origination volumes and refinance activity.

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Mortgage Monitor: February 2011 “Dashboard”

Refer to slides 22-24 in the Appendix for historical counts and state detail
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Delinquencies remain about twice the 1995-2005 average,
foreclosure inventories are 7.8 times historical “norms”.

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Option ARM foreclosures have increased dramatically over the last six months.
Non-agency prime is the only area where delinquency increases were observed.

Refer to slides 25 and 26 in the Appendix for time series by product

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New problem loans have declined for the last four months.

Refer to slide 27 in the Appendix for more detailed roll rate information
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22% of loans that were 90+ delinquent 12 months ago are now current.

Refer to slide 28 in the Appendix for 90+ inventories by days delinquent

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Delinquencies of less than six months displayed improved cure rates in February.

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Foreclosure starts hit the lowest monthly level since November 2008. On a “per
business day” basis, 2010 had several months lower than current levels.

Refer to slides 29 and 30 in the Appendix for foreclosure starts by investor and delinquency status
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Month over month changes display differences between monthly and average daily
foreclosure volume.

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Serious delinquent deterioration remained relatively stable month over month while
foreclosure starts declined, bringing the ratio back above three to one.

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The majority of the decline in foreclosure starts is the result of a reduction in first-time
foreclosures.

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Loans continue to be removed from foreclosure at elevated levels due to process
reviews.

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Involuntary liquidations on loans that were in foreclosure 18 months prior have
dropped significantly as loans spend more time in the foreclosure process.

Refer to slides 31 and 32 in the Appendix for foreclosure aging and timelines
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Loans in foreclosure outnumber monthly foreclosure sales by a factor of over 30:1.
Foreclosure starts are over 3 times the level of foreclosure sales.

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Recent declines in foreclosure sales have been most pronounced within the agency
product.

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Change in Foreclosure Sales by County compared to September 2010. National average
shows a decline of 46% (red is a larger drop than average, green is lower).

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GSE and FHA volume in Q4 2010 represented approximately 87% of the total
originations.

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Prepayment speeds decreased again in February as refinance opportunities diminish.

Refer to slide 29 and 30 in the Appendix for origination volumes and attributes
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 February Month-End Data: Conclusions

• Delinquency rates resumed their decline after an increase in January and foreclosure
inventories remain stable, slightly below historic highs.

• Delinquencies continue to improve as new problem loan rates decline and cure rates
increase.

• Foreclosure start declines and foreclosure suspensions are reducing the upward pressure
on inventories caused by foreclosure sale moratoria.

• An enormous backlog of foreclosures still exists with overhang at every level:

– There are three times the number of loans deteriorating greater than 90+ days
delinquent as compared to foreclosure starts.
– There are also three times the number foreclosure starts vs. foreclosure sales.
– Foreclosure inventory levels are over 30 times monthly foreclosure sale volume.

• 2010 originations peaked in Q4 2010, with government loans still making up the vast
majority. Prepayment rates (an indicator of refinance activity) have dropped sharply since,
indicating that this is unlikely to continue into 2011.

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LPS Applied Analytics:
Mortgage Monitor Appendix

Contains additional supporting detail related to

the preceding slides.

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Early stage delinquency volumes have dropped to below 2008 levels. Late stage
delinquencies and foreclosures remain elevated.

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LPS Servicing Database 1st liens – Non-Performing Loan Counts

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Delinquency and Foreclosure Rate Table
Ranked based on Non-Current %

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Delinquencies increased for Jumbo Prime and Alt-A in February.

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Foreclosure inventories increased significantly in the Option ARM categories over the
last six months.

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Delinquent roll volumes are at three year lows.

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Ninety plus delinquencies remain above December 2010 levels as loans continue to be
removed from pre-sale foreclosure due to process reviews.

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GSE foreclosure starts have dropped back to 2009 levels as HAMP backlog inventory is
reduced.

Refer to slide 25 in the Appendix for foreclosure starts by delinquency status

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After increasing in late 2010, early stage delinquent foreclosure starts have begun to
drop over the last 2-3 months.

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30% of loans in foreclosure have not made a payment in over 2 years.

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 The foreclosure process continues to drag out as the days to foreclosure start,
inventory and sale continue to extend (foreclosure sale figures remain artificially low
due to moratoria).

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LPS Applied Analytics:
Mortgage Monitor Disclosures

Includes product definition and extrapolation

methodology updates implemented with the
June month-end data

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Disclosure Page: Product Definitions as of June month-end Data

*Conforming limits do not account for temporary or high-cost area

increases.

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 Disclosure Page: Metrics Definitions

• Total Active Count: All active loans as of month-end including loans in any state of delinquency or
foreclosure. Post-sale loans and loans in REO are excluded from the total active count.
• Delinquency Statuses (30, 60, 90+, etc): All delinquency statuses are calculated using the MBA
methodology based on the payment due date provided by the servicer. Loans in foreclosure are
reported separately and are not included in the MBA days delinquent.
• 90 Day Defaults: Loans that were less than 90 days delinquent in the prior month and were 90 days
delinquent, but not in foreclosure, in the current month.
• Foreclosure Inventory: The servicer has referred the loan to an attorney for foreclosure. Loans remain
in foreclosure inventory from referral to sale.
• Foreclosure Starts – Any active loan that was not in foreclosure in the prior month that moves into
foreclosure inventory in the current month.
• Non-Current: Loans in any stage of delinquency or foreclosure.
• Foreclosure Sale / New REO: Any loan that was in foreclosure in the prior month that moves into post-
sale status or is flagged as a foreclosure liquidation.
• REO: The loan is in post-sale foreclosure status. Listing status is not a consideration, this includes all
properties on and off the market.
• Deterioration Ratio: The ratio of the percentage of loans deteriorating in delinquency status vs. those
improving.

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 Disclosure Page: Product Shifts pre and post-June 2010 Report

The table below contains the counts using the definitions implemented with the
June 2010 and the change in count and percentage from those used prior.

Counts are based on May 2010 Data – Active Loans (excludes post-sale and paid in
full)

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 Disclosure Page: Product Shift Matrix, pre and post-June 2010 Report

Counts are based on May 2010 Data – Active Loans (excludes post-sale and paid in
full)

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 Disclosure Page: Industry Extrapolations pre and post-June 2010 Report

• Mortgage metrics reports produced prior to June 2010 used the following
extrapolation method when estimating full industry numbers:
– Active loans (non-REO) are extrapolated based on a 70% market-share assumption.
– REO loans prior to March 2009 are extrapolated based on a 40% market-share assumption
– REO loans from March 2009 on contain an additional adjustment for under-reporting by a specific
client.
• Mortgage metrics reports produced from June 2010 on extrapolate based on
vintage and product. Product coverage is highlighted below. Loan counts and
extrapolation are based on May 2010 active loan counts (excludes post-sale and
paid in full):

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 Performance Statistics Changes – MBA Delinquency
Before = Unextrapolated Values from prior to June 2010 Month-end data
After Unextrapolated = Actual values from servicing data reflecting removal of 2nds
After Extrapolated = Changes with June 2010 data; new products and extrapolations

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 Performance Statistics Changes – Foreclosure Inventory
Before = Unextrapolated Values from prior to June 2010 Month-end data
After Unextrapolated = Actual values from servicing data reflecting removal of 2nds
After Extrapolated = Changes with June 2010 data; new products and extrapolations

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Performance Statistics Changes: Foreclosure Starts

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 Performance Statistics Changes: Database Counts
New Extrapolation and Product Definitions implemented with the June 2010 month-end
data.

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