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

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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

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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 postsale 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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