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152 South Harvard Street Hemet, California 92543 (951) 925-3808 Fax (951) 925-3239

July 18, 2011 Cathy Knecht, Esq. Barry, Gardner & Kincannon 2214 Faraday Avenue Carlsbad, CA 92008 Via facsimile and by U.S. mail


Bradley v. Federal National Mortgage, et al. (Wells Fargo) RIC 10010779

Dear Ms. Knecht: I have received your letter dated July 13, 2011. I think it would be a good thing for all if this case were to settle. Therefore, I will reconsider and agree to move the discovery motion set on calendar for July 29, 2011 to August 5, 2011, as you requested. Perhaps this will give everyone some time to evaluate all the factors in the case and determine if settlement is possible. Please forward a stipulation for the continuance on the Motion to Compel Further Responses to Special Interrogatories, Set No. One, propounded on HSBC Bank, National Association. I have discussed the situation recently with my clients. I am authorized to propose a settlement as follows: 1. Sale of the property on Saddle Ridge Road to Leanna Bradley and Henry Munoz at $229,000. This is the price paid by HSBC at the foreclosure sale. 2. Loan financing offered by a lender of your choice for a term of thirty (30) years at the going fixed rate, which we believe to be 4.25%. This should be a purchase money loan. 3. Payment of $25,000 to contribute to the amount owing for Bradleys attorneys fees. 4. Letter agreeing to retract negative credit information for use with consumer credit agencies, concerning late payments during the modification trial payment period and the foreclosure.

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I know that my client and Mr. Munoz (also my client at this point) would be glad to pursue their own financing if that were possible. It is not possible, as both clients have major issues with their credit reports at this time due to the trial modification and foreclosure. The proposed agreement would require that HSBC Bank or Wells Fargo Bank carry the loan or arrange for it to be made. My clients suggested a consumer loan. Frankly, I am unclear as to regulatory requirements for these and do not know if a thirty (30) year amortization of a consumer loan could even be done. If the price of the property were lower than $229,000, then a shorter amortization would likely work for Ms. Bradley and Mr. Munoz. As far as the merits of the case are concerned, you understand that Royal Crown Bancorp did not exist on the date it allegedly assigned an interest in the property to HSBC, 9/28/09. So, the complaint is not merely that some procedural irregularity in the foreclosure process occurred, but that there was no valid assignment of any property rights to HSBC, and HSBC had no right to foreclose. Technically, it may have been that property rights passed to Blue Saphire Investments (California) Inc. when Royal Crown Bancorp merged with Blue Saphire. I suppose that depends on technical details which are unknown to me. However, Blue Saphire did not assign any property rights to HSBC, and Blue Saphire cannot assign them because Blue Saphire does not exist either at this time. Technically, Leanna Bradley simply got lucky and does not owe any money because her creditor and its possible successor-in-interest [Blue Saphire Investments (California), Inc. ] both went out of business. And, because HSBC did not have a right to foreclose, Ms. Bradley is also entitled to the property. Legally, the situation is quite bizarre. Although on some loans MERS can claim the right to foreclose due to language found in the trust deeds, such is not the case with the trust deed which was connected with Leanna Bradleys loan. Further, any transfer of any beneficial interests to MERS in this situation was not coupled with an interest, so any agency authority MERS may have once possessed died along with the principals. We are quite certain that HSBC has recouped any paper losses it might have sustained due to the $229,000 purchase price of the property and the alleged outstanding loan balance of $566,468. We are informed and believe that the HAMP Program is helping out the lenders in this regard. Therefore, we are merely asking that HSBC transfer the property back to Leanna Bradley (and Henry Munoz) at HSBCs purchase price and assist in financing the agreement so that all parties can truly benefit. Finally, I need to bring the following items to your attention: Ms. Bradleys loan was a refinance. HSBC and/or ASC has reported debt forgiveness to the Internal Revenue Service, and this creates tax obligations for Ms. Bradley. A CPA has estimated that this tax liability might range from $60,000 to $80,000. The tax situation has been considered when requesting a sale price of $229,000 on a sale from HSBC to Ms. Bradley and Mr. Munoz. It certainly appears that the payments made by Ms. Bradley during the trial payment period for the loan modification were never credited to the loan, either for taxes or for interest payments. As you know, we initially requested an accounting but were unable to get this due to your demurrer. Page 2 of 3

In December, 2008, Ms. Bradley paid $12,596.79 to ASC. We believe that some of this money, but not all of it, went for past due taxes. This money was paid prior to the beginning of the trial payment program period, but the funds application is questioned. Additionally, Ms. Bradley paid eight (8) payments of $1,604.40, or $12,835.20, which seem to have disappeared. We believe this $12,835.20, which was paid pursuant to the TPP Agreement was not credited to the loan balance.

I look forward to your clients response on this proposal. Sincerely,

Linda J. DeVore

cc: Leanna Bradley, Henry Munoz, Trent Thompson, Christopher Nelson

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