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Co-Event Sponsors<br />

Gold Sponsor<br />

Silver Sponsor<br />

Bronze Sponsor<br />

October 6-8, 2008<br />

The 4th Annual<br />

<strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Strategic Markets<br />

and Diversity <strong>Conference</strong><br />

Refocus on Consumer Protection & Affordable Housing<br />

Gaylord National Resort & Convention Center<br />

201 Waterfront Street, National Harbor, MD 20745

Fourth Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong> Strategic Markets and<br />

Diversity <strong>Conference</strong><br />

MONDAY OCTOBER 6, 2008<br />

Tab1 Agenda<br />

Tab2 Sponsors<br />

OCTOBER 6-8, 2008<br />


Tab 3 Pre-<strong>Conference</strong> Workshop I<br />

HMDA Data Mining for CRA and Minority Origination Opportunities<br />

Tab 4 Pre-<strong>Conference</strong> Workshop II<br />

Successful Sales Tools for Loan Originators in Today’s Market<br />

TUESDAY OCTOBER 7, 2008<br />

Tab 5 Welcome Address<br />

Tab 6 General Session I: Why Diversity is Important to the <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Tab 7 General Session II: Impact of Housing Legislation on Minority Homeownership<br />

Opportunities<br />

Tab 8 Diversity Luncheon<br />

Tab 9 Concurrent Session I: Market Psychology around Homeownership:<br />

Perceptions versus Realities<br />

Tab10 Concurrent Session II: Trends in Loss Mitigation

Fourth Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong> Strategic Markets and<br />

Diversity <strong>Conference</strong><br />

OCTOBER 6-8, 2008<br />



Tab 11 Concurrent Session III: Non-Profit’s Role in Early Intervention<br />

Foreclosure Prevention<br />

Tab 12 Concurrent Session IV: Responsible Sustainable <strong>Lending</strong> across the Credit<br />

Spectrum<br />

Tab 13 General Session III: Tactics and Strategies to Preserve Minority<br />

Homeownership<br />

Tab 14 Best in <strong>Industry</strong> Dinner<br />


Tab 15 General Session IV: Affordable Housing, CRA & Strategic Markets<br />

Tab 16 Town Hall Meeting: Consumer Protection

TAB<br />


Monday, October 6, 2008<br />

Fourth Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Strategic Markets and Diversity <strong>Conference</strong><br />

AGENDA<br />

1:00 p.m. – 6:00 p.m. Registration<br />

3:00 p.m. – 5:00 p.m. Workshop I: HMDA Data Mining for CRA<br />

and Minority Origination Opportunities<br />

3:00 p.m. – 5:00 p.m. Workshop II: Successful Sales Tools for<br />

Loan Originators in Today’s Market<br />

6:00 p.m. – 7:00 p.m. Opening Reception<br />

Tuesday, October 7, 2008<br />

7:30 a.m. – 5:00 p.m. Registration<br />

7:30 a.m. – 8:30 a.m. Continental Breakfast<br />

7:30 a.m. – 6:00 p.m. Hospitality Room<br />

8:30 a.m. – 9:00 a.m. Welcome Remarks<br />

9:00 a.m. – 10:15 a.m. General Session I: Why Diversity is<br />

Important to the <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

10:15 a.m. – 10:30 a.m. Refreshment Break<br />

10:30 a.m. – 11:45 a.m. General Session II: Impact of Housing Legislation<br />

on Minority Homeownership Opportunities<br />

11:45 a.m. – 1:15 p.m. Diversity Luncheon<br />

1:15 p.m. – 2:30 p.m. Concurrent Sessions:<br />

• Market Psychology around Homeownership:<br />

Perceptions versus Realities<br />

• Trends in Loss Mitigation - Maximizing Home<br />

Retention Strategies<br />

2:30 p.m. – 2:45 p.m. Refreshment Break<br />

2:45 p.m. – 3:45 p.m. Concurrent Sessions:<br />

• Non-Profit’s Role in Early Intervention Foreclosure<br />

Prevention<br />

• Responsible Sustainable <strong>Lending</strong> across the Credit<br />

Spectrum<br />

3:45 p.m. – 4:00 p.m. Refreshment Break

Tuesday, October 7, 2008 cont.<br />

Fourth Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Strategic Markets and Diversity <strong>Conference</strong><br />

AGENDA<br />

4:00 p.m. – 5:00 p.m. General Session III: Tactics and Strategies to<br />

Preserve Minority Homeownership<br />

6:30 p.m. – 7:30 p.m. Strategic Markets & Diversity Reception<br />

7:30 p.m. – 9:30 p.m. Best in <strong>Industry</strong> Dinner<br />

Wednesday, October 8, 2008<br />

8:00 a.m. – 9:00 a.m. Continental Breakfast<br />

8:00 a.m. – 10:00 a.m. Registration<br />

8:00 a.m. – 10:00 a.m. Hospitality Room Open<br />

9:00 a.m. – 10:15 a.m. General Session IV: Affordable Housing,<br />

CRA & Strategic Markets<br />

10:15 a.m. – 10:30 a.m. Refreshment Break<br />

10:30 a.m. – 12:00 p.m. Town Hall Meeting: Consumer Protection



We wish to thank our sponsors for their generous support of the 4th Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong> Strategic Markets &<br />

Diversity <strong>Conference</strong>.. Be sure not to miss the chance to have your company’s name and logo prominently displayed during<br />

next year’s <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong> Diversity <strong>Conference</strong>. For more information on sponsorship opportunities for the next<br />

conference, please call (202) 552-7408.<br />

O F F I C I A L C O N F E R E N C E S P O N S O R S<br />

G O L D S P O N S O R<br />

S I L V E R S P O N S O R S<br />

B R O N Z E S P O N S O R<br />

H O S T S P O N S O R<br />




SHAMUS ®<br />







ComplianceTech<br />

Transforming data into compliance management information<br />

ComplianceTech studies the processes and relationships of people, information technology and<br />

regulatory compliance associated with housing and credit programs. Our strength has been identifying<br />

regulatory compliance issues in lending and devising high-tech and innovative solutions to study<br />

and monitor them. Our research studies, process and data analyses and technological approaches<br />

allow clients to formulate sound program policies and better position themselves<br />

strategically and operationally.<br />










sponsor of the <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />


2120 Washington Blvd. • Arlington, VA 22204 • www.compliancetech.com<br />

1325 G Street, NW, Suite 500 • Washington, DC 20005 • www.compliancetech.com<br />

Contact: jourdainearl@compliancetech.com<br />

Contact: jourdainearl@compliancetech.com

Grow Your Business With A Leader<br />

Outstanding Reputation<br />

BusinessWeek<br />

• Among top 50 Best Places to<br />

Launch a Career*<br />

• Among top 10 Biggest Givers in<br />

Corporate Philanthropy*<br />

Diversity Inc.<br />

• Among top 50 companies in all<br />

industries for diversity<br />

• Among top 10 companies for Latinos<br />

• Among top 10 companies for<br />

Executive Women<br />

• Among top 10 companies for<br />

Recruitment and Retention<br />

LATINA Style<br />

• Among top 50 U.S. companies for<br />

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• Received the Workplace<br />

Excellence Award*<br />

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• Top 25 Great Places to Work for<br />

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* Accolade given in 2007<br />

Our strong commitment to the mortgage market<br />

combined with strength, stability and a recognized<br />

industry reputation makes Wells Fargo the right choice<br />

for moving your business to the next level.<br />

Our attention to diversity is part of that winning<br />

reputation and is at the core of our Vision and Values.<br />

Recognizing and promoting diversity means having an<br />

appreciation for difference and applies not only to<br />

whom we hire and how we do business with the<br />

communities we serve – it applies to everything we do.<br />

Our success is based on meeting your needs. Why not<br />

work with a lender you can consistently count on,<br />

especially in challenging times and markets?<br />

This information is for use by mortgage professionals only and should not be distributed to or used by consumers or other third-parties. Information is<br />

accurate as of date of printing and is subject to change without notice. Wells Fargo Home <strong>Mortgage</strong> is a division of Wells Fargo Bank, N.A. © 2008 Wells<br />

Fargo Bank, N.A. All rights reserved. #61066 9/08-12/08


© 2008, Fannie Mae. All rights reserved.<br />

Diverse communities are feeling the strain of today’s challenging housing market.<br />

To help more borrowers get and stay in a home,Fannie Mae is working with our partners<br />

to respond to today’s tough market conditions. We are committed to providing<br />

mortgage lenders, servicers and counselors with the support they need to help<br />

borrowers in communities across America.We remain steadfast in our commitment to<br />

serve no matter what the market condition. To learn more about how Fannie Mae is<br />

serving today’s challenging housing market through<br />

our Keys to Recovery initiative,visit fanniemae.com.




In today’s market, it is more important than ever for your clients to work<br />

with a lender they trust. Bank of America is the right choice for your client’s<br />

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OTHER THIRD PARTIES. Bank of America, N.A. Member FDIC. Equal Housing Lender.<br />

©2008 Bank of America Corporation AD-TL-T3



HMDA Data Mining for CRA and Minority Origination Opportunities<br />

3:00 p.m. – 5:00 p.m.<br />

Chesapeake 2<br />

Too many financial institutions are sitting on top of a gold mine of underutilized data. Much of<br />

this data comes from compliance reporting and as a byproduct of the originations process. Your<br />

ComplianceTech conference sponsor will walk you through; 1) the process for identifying useful<br />

data; 2) the methods for combining different sources of data directed at CRA and minority<br />

origination opportunities; and 3) insightful report from the latest 2007 HMDA data.<br />

Speaker: Maurice Jourdain-Earl<br />

Managing Director<br />


Maurice Jourdain-Earl<br />

Maurice Jourdain-Earl is founder and Managing Director of CLC Compliance<br />

Technologies, Inc. (ComplianceTech). Formed in 1991, ComplianceTech specializes in<br />

strategic fair lending and emerging markets consulting. ComplianceTech’s emerging<br />

market services help lenders assess opportunities to lend to minority and low-to-moderate<br />

income homebuyers. The company’s fair lending services help lenders use technology to<br />

comprehensively manage fair lending compliance. ComplianceTech is also the organizer<br />

of <strong>Lending</strong> <strong>Industry</strong> Diversity <strong>Conference</strong>, Inc. which sponsors the Annual <strong>Mortgage</strong><br />

<strong>Lending</strong> <strong>Industry</strong> Diversity and Emerging Markets <strong>Conference</strong>.<br />

Mr. Jourdain-Earl has over 33 years of experience in the financial services business,<br />

including prior stints at Citicorp <strong>Mortgage</strong>, Inc., PMI Securities Co., and Continental<br />

Bank. He helps clients navigate the regulatory and operational complexities of emerging<br />

markets, diversity and fair lending issues. For the last 15 years, he has been actively<br />

involved in projects with clients to detect and minimize discrimination in, underwriting,<br />

pricing and marketing mortgage, auto and consumer loans. Throughout his career, he has<br />

evaluated the operational and lending platforms of many lenders including the review of<br />

various types of loans.<br />

Mr. Jourdain-Earl is a noted speaker on lending and banking issues, particularly HMDA<br />

and fair lending practices. He has spoken at events sponsored by the Federal Reserve<br />

Bank, The Federal Home Loan Bank, America’s Community Bankers, Practicing Law<br />

Institute and the <strong>Mortgage</strong> Bankers Association of America. A native of Chicago,<br />

Illinois, he holds a B.A. degree in Social Science from DePaul University.

The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown<br />

By Maurice Jourdain-Earl

Table of Contents<br />

Purpose ....................................................................................................1<br />

About HmdA data ...............................................................................1<br />

Limitations Of HmdA data ..................................................................2<br />

Subprime Rate Loans And The Current <strong>Mortgage</strong><br />

Foreclosure Crisis ...................................................................................3<br />

Methodology ............................................................................................6<br />

Summary Of Findings .............................................................................7<br />

Highlights Of 2004-2006 Subprime Rate <strong>Lending</strong> By Race<br />

And Ethnicity ...........................................................................................8<br />

Distribution Analysis Of 2006 Subprime Rate Loans .........................12<br />

Subprime Rate Loans By Loan Purpose ...........................................14<br />

Subprime Rate Loans By Borrower Income ......................................16<br />

Gender distribution Of Subprime Rate Loans ..................................19<br />

Subprime Rate Loans By Census Tract Income ...............................22<br />

Subprime Rate Loans By Race And Census Tract<br />

Percent minority ................................................................................24<br />

Conclusion .............................................................................................26<br />

About The Author ..............................................................................27<br />

About ComplianceTech .....................................................................27<br />

About <strong>Lending</strong> Patterns ..................................................................27<br />

Page i The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Index of Tables<br />

Table 1: Loan Type and Percent of Foreclosures started ..........................4<br />

Table 2: 2006 “Loans” with a HmdA Spread by Race .............................12<br />

Table 3: Percent of Loans by Race and Percent of Loans with<br />

a Spread by Race ....................................................................................13<br />

Table 4: Loan Purpose by HmdA Spread ................................................14<br />

Table 5: 2006 Loans with a Spread by Borrower Income ........................16<br />

Table 6: Gender and 2006 Loans with a Spread .....................................19<br />

Table 7: 2006 Subprime Rate Loans by CENSUS Tract Income.............22<br />

Table 8: Tract Percent minority and Loans with a Spread .......................24<br />

Page ii The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Index of Figures<br />

Figure 1: 2004-2006 Percent of Subprime Rate Loans by Race ...............8<br />

Figure 2: 2004-2006 Average Spread on Subprime Rate Loans<br />

by Race .....................................................................................................9<br />

Figure 3: 2004-2006 Count of Subprime Rate Loans by Race ...............10<br />

Figure 4: 2004-2006 Percent of Subprime Rate Loans by<br />

Tract Percent minority .............................................................................11<br />

Figure 5: 2006 Frequency and magnitude of Loans with a<br />

HmdA Spread by Race ...........................................................................12<br />

Figure 6: 2006 Subprime Rate loans by Loan Purpose ..........................15<br />

Figure 7: Loans with Spread by Borrower Income ..................................16<br />

Figure 8: 2006 Subprime Rate Loans by Race and Income ...................17<br />

Figure 9: Percent distribution of Subprime Rate Loans by<br />

Race and Income ....................................................................................17<br />

Figure 10: Percent of Subprime Rate Loans by Race and Gender .........20<br />

Figure 11: Subprime Rate Loans by Race and Gender ...........................21<br />

Figure 12: 2006 Subprime Rate Loans by Census Tract Income ............23<br />

Figure 13: 2006 Count of Subprime Rate Loans by Race and<br />

Tract Percent minority .............................................................................25<br />

Figure 14: 2006 Percent of Subprime Rate Loans by Race and<br />

Census Tract Percent minority ................................................................25<br />

Page iii The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Purpose<br />

The purpose of this study is to develop an understanding of the<br />

potential impact of the current mortgage crisis on minorities<br />

and to dispel erroneous assumptions about subprime lending<br />

that could make emerging housing policies less effective.<br />

A common assumption is that subprime rate lending1 is<br />

more prevalent with minorities and low-income borrowers.<br />

The problem with portraying subprime rate lending and<br />

the foreclosure crisis, as a minority and low-income issue<br />

is its effects on how solutions will be approached. If, it is<br />

believed that subprime rate loans were predominately made<br />

to marginal segments of society (Black, Hispanic or lowincome)<br />

housing policymakers may approach solutions with<br />

bias assumptions about minorities and minority qualifications<br />

(low education, bad credit, and low-paying jobs, etc.). Thus,<br />

there may a tendency to write-off the subprime lending<br />

debacle as a type of affirmative action gone bad.<br />

This study will show that subprime rate lending occurred<br />

more with non-Hispanic Whites and upper income borrowers.<br />

Therefore, the current housing crisis is a broader problem<br />

than just with minority and low-income borrowers. This is<br />

accomplished by using 2006 Home mortgage disclosure Act<br />

data (HmdA) 2 to analyze the demographic distribution of<br />

subprime rate loans in order to understand the impact of the<br />

“Subprime mortgage meltdown” on different income, racial<br />

and ethnic groups. It is hoped that this information will be<br />

used strategically by congress, lenders, servicers, federal<br />

and state bank regulators, state attorney generals, state and<br />

local housing organizations, home loan counseling groups,<br />

researchers, community organizations and other interested<br />

parties to improve the formulation of housing policy, fair<br />

lending enforcement, consumer protection initiatives, and<br />

the implementation of loss mitigation activities to help keep<br />

families in their homes.<br />

The premise of this report is that beliefs about the demographic<br />

distribution of subprime rate loans influence ideas about the<br />

housing crisis. Therefore the focus of this study is to analyze<br />

the demographic distribution of subprime rate loans as a<br />

means to influence housing policy. In addition, the study<br />

seeks to use the distribution of subprime rate loans as an<br />

indicator of the expected future pattern of mortgage default<br />

and foreclosure activity. With these goals in mind, this study<br />

is an analysis of the distribution and cost of higher-priced<br />

2006 loans by ethnicity, race, gender and income, as well as<br />

1 In this study subprime rate loans are limited to transactions with a<br />

HmdA reportable spread that are “conventional, 1st lien, 1-4 family unit,<br />

owner occupied, home purchase and refinance loans. Government, home<br />

improvement, and multifamily loans are excluded.<br />

2 http://www.ffiec.gov/HMDA/pdf/regulationc2004.pdf, pg.1<br />

geographically by census tract percent minority.<br />

A lot is at stake. The impact of the subprime market and<br />

subprime foreclosures matter because homeownership is by<br />

far the most important wealth-building tool in this country.<br />

For millions of families, it ultimately makes the difference<br />

between merely surviving between paychecks, or building<br />

savings for a better future. Nearly 60 percent of the total<br />

wealth held by middle-class families resides in their home<br />

equity—the value of their home minus the amount they owe<br />

on it. For African-American and Hispanic families, the share<br />

is much higher, topping 88 percent for both groups. 3<br />

About HmdA data<br />

Congress enacted HmdA in 1975 to: “provide the public<br />

with information to judge whether lenders are serving their<br />

communities; to enhance enforcement of laws prohibiting<br />

discrimination in lending; and to provide private investors<br />

and public agencies with information to guide investments<br />

in housing.” 4 HmdA requires mortgage lenders located<br />

in metropolitan areas to collect data on their mortgage<br />

application transactions, report the data annually to the<br />

government, and make the data publicly available.<br />

HmdA requires reporting of the geographic location of<br />

originated and purchased home loans. HmdA data also<br />

includes information about denied home loan applications<br />

and the race, sex and income of the applicant or borrower.<br />

Subsequent to the 1990 amendment to HmdA that required<br />

race and sex information to be reported, some lenders were<br />

accused and sued for discrimination, alleging that minorities<br />

were disproportionately denied access to home mortgage<br />

credit compared to non-Hispanic Whites.<br />

Since the 2004 reporting year, HmdA requires lenders to<br />

report loan price information in the form of a “rate spread.”<br />

Lenders must report the spread between the annual<br />

percentage rate (APR) 5 on a loan and the rate on a Treasury<br />

security of comparable maturity. Lenders are only required<br />

3 Testimony of Josh Nassar, Center for Responsible <strong>Lending</strong> Before<br />

the U.S. House Committee on Oversight and Government Reform, pg.<br />

2 “Foreclosure, Predatory mortgage and Payday <strong>Lending</strong> in America’s<br />

Cities”, march 21, 2007<br />

4 http://www.ffiec.gov/HMDA/pdf/regulationc2004.pdf, pg.1<br />

5 The APR represents the cost of credit to the consumer. It captures not<br />

just the contract-based interest rate on a loan, but also the points and fees<br />

a consumer pays and other finance charges such as premiums for private<br />

mortgage insurance. Lenders must calculate and disclose the APR to<br />

consumers under a separate law, the Truth in <strong>Lending</strong> Act.<br />

Page 1 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Purpose<br />

to report spreads on loans above designated thresholds.<br />

Therefore, rate spreads are not reported for lower cost<br />

loans.<br />

The threshold set by the Board in Regulation C for first-lien<br />

loans is three percentage points above the Treasury security<br />

of comparable maturity. For second-lien loans, which tend to<br />

have higher prices, the threshold is five percentage points<br />

above the Treasury security of comparable maturity. The<br />

Board chose these thresholds in the belief that they would<br />

exclude the vast majority of prime-rate loans and include<br />

the vast majority of subprime rate loans. From year-to-year,<br />

however, the proportion of subprime-rate loans that have<br />

prices reported might vary because of changes in the interest<br />

rate environment. 6<br />

The growth of the higher-priced mortgage market has raised<br />

concerns that consumers lack the information needed to<br />

negotiate the best terms and therefore might be vulnerable<br />

to unfair or deceptive practices. In addition, the wider range<br />

of prices in this market has raised concerns that price<br />

differences might reflect unlawful discrimination rather than<br />

legitimate risk- and cost-related factors. Lastly, the growth<br />

of the higher-priced mortgage market is believed to be<br />

contributing greatly to an increase in mortgage defaults and<br />

foreclosures.<br />

In short, the requirement to report the HmdA spread is<br />

designed to distinguish subprime rate loans from prime rate<br />

loans. Subprime lenders in contrast to prime lenders, attract<br />

applicants who either have impaired credit or perceive<br />

themselves to have bad credit. Theoretically, subprime<br />

lenders charge higher interest rates to compensate for the<br />

additional credit risk. However, subprime borrowers may<br />

often be exposed to non-risk related discretionary charges.<br />

In recent years, an increased use of risk-based pricing has<br />

blurred the line between prime and subprime lenders. The<br />

HmdA rate spread information was created to illuminate the<br />

distinction and bring more clarity to prime and subprime rate<br />

lending. The HmdA rate spread is focused on higher cost<br />

loans as opposed to lenders who may be classified as highcost<br />

lenders. This enables users of HmdA data to identify<br />

higher cost subprime rate loans, whether prime or subprime<br />

lenders originate them.<br />

6 Frequently Asked Questions About The New HmdA data, Federal<br />

Reserve Board, April 3, 2006<br />

Limitations Of HmdA data<br />

HmdA data are the most complete dataset used to analyze<br />

home mortgage lending in America by race, ethnicity and<br />

gender. The most significant limitation of HMDA data is<br />

borrower credit qualification information is not available.<br />

Credit criteria, such as credit score, loan-to-value, debtto<br />

income ratios, and housing payment ratios used by<br />

lenders to underwrite and price home mortgage loans, is not<br />

available.<br />

HmdA data also do not include information on loan terms<br />

and features needed to ascertain how loans are structured.<br />

For example, HmdA data do not include whether loans<br />

have features such as prepayment penalties, interest-only,<br />

negative amortization, or balloon payments. HmdA data also<br />

do not include whether loans are fixed rate or adjustable rate<br />

mortgages (ARms). It is suspected that many ARm loans<br />

originated in recent years have discounted initial teaser<br />

rates that will reset in two or three years. Finally, HmdA<br />

data do not reveal how loans are sourced by lenders, i.e.<br />

by retail loan officers who work as employees of a lender<br />

or by independent mortgage brokers. Loans with many of<br />

the aforementioned features and attributes are known to<br />

be major contributors to the current increase in mortgage<br />

defaults and foreclosures.<br />

These HmdA data limitations limit the ability to know<br />

important details about loan transactions. For example, how<br />

loans are underwritten and priced, whether Yield Spread<br />

Premiums (YSP) or overages7 contribute to the origination<br />

of higher-priced loans, or whether higher-priced loans are<br />

based on borrowers’ legitimate credit criteria or whether the<br />

overcharges were purely discretionary. Given these HmdA<br />

data limitations, this study has a single focus – to report on<br />

the demographic disparities in the 2006 distribution of higher<br />

priced subprime rate loans.<br />

7 YSP or overages are extra compensation paid by a lender to loan<br />

officers or brokers for delivering an interest rate on a loan higher than the<br />

risk-based price.<br />

Page 2 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Subprime Rate Loans And The Current <strong>Mortgage</strong><br />

Foreclosure Crisis<br />

The subprime market is intended to provide home loans to<br />

people with impaired or limited credit histories. However,<br />

there is evidence that many families who receive subprime<br />

mortgages could qualify for prime loans, but are instead<br />

“steered” into accepting higher-cost subprime loans. The<br />

belief that some subprime loan recipients’ could qualify<br />

for prime rate loans suggests that some borrowers are<br />

overcharged for mortgage credit, above what their riskbased<br />

price may warrant. If this is true, the overcharges<br />

drain money from homeowners and communities.<br />

To what degree prime eligible borrowers misplaced into<br />

subprime has contributed to the foreclosure crisis is unknown.<br />

Also unknown is the extent of illegal steering occurring on a<br />

prohibited basis, i.e. whether borrowers are steered to higher<br />

cost subprime rate loans on a prohibited basis, such as race<br />

or ethnicity. 8 The subprime misplacement question, steering<br />

issues as well as fraud concerns highlights the need for<br />

effective regulatory enforcement by the lending regulatory<br />

community. 9<br />

The Federal Reserve and other federal bank regulators<br />

have been criticized by lawmakers for lax regulation of the<br />

mortgage market. On July 18, 2007 the New York Times<br />

reported that “Representative Barney Frank, chairman of<br />

the House Financial Services Committee, threatened to strip<br />

the Federal Reserve of its authority to write rules against<br />

mortgage abuses if the central bank did not act quickly.” The<br />

article further reported that Christopher dodd, who leads<br />

the Senate Banking Committee, said that “a chronology of<br />

regulatory neglect allowed the problems in the subprime<br />

market to go unchecked.”<br />

many factors contributed to the growth of subprime lending,<br />

such as increases in capital made possible by securitization,<br />

8 mike Hudson and E. Scott Reckard, more Homeowners with Good<br />

Credit Getting Stuck in Higher-Rate Loans, L.A. Times, p. A-1 (October<br />

24, 2005). For most types of subprime loans, African-Americans and<br />

Latino borrowers are more likely to be given a higher-cost loan even after<br />

controlling for legitimate risk factors. debbie Gruenstein Bocian, Keith S.<br />

Ernst and Wei Li, Unfair <strong>Lending</strong>: The Effect of Race and Ethnicity on the<br />

Price of Subprime mortgages, Center for Responsible <strong>Lending</strong>, (may 31,<br />

2006) at http://www.responsiblelending.org/issues/mortgage/reports/page.<br />

jsp?itemId=2937 1010;<br />

9 The terms “bank regulator” or “lending regulator” is used<br />

interchangeably to refer to the enforcement arms of: the Board of<br />

Governors of the Federal Reserve (FRS or Fed) regulating lending affiliate<br />

of bank holding companies and state chartered member banks; the<br />

Federal deposit Insurance Corporation (FdIC) regulating state-chartered<br />

non-member banks; the Office of the Comptroller of the Currency<br />

(OCC) regulating national banks; the Office of Thrift Supervision (OTS)<br />

overseeing federal savings and loans and federal savings banks; the<br />

National Credit Union Administration (NCUA) regulating federally charted<br />

credit unions and department of Housing and Urban development (HUd).<br />

an increase in risk-based pricing facilitated by technological<br />

advances, and the deregulation of the banking industry.” 10<br />

Banking deregulation enabled lenders to offer more<br />

varied loan products, which were attractive to more varied<br />

consumers, and further gave incentives for more lenders to<br />

enter the market. Numerous laws opened the door for the<br />

development of the subprime market. Following is a synopsis<br />

of various laws and party Administrations that contributed to<br />

the growth of the subprime mortgage market:<br />

depository Institutions deregulation and monetary Control<br />

Act (“dIdmCA”). dIdmCA, 1980 (Carter Administration)<br />

• Helped the Savings and Loan (“S&L”) industry stay<br />

competitive with non-federally chartered banks where<br />

consumers received higher rates of return.<br />

• Enabled the S&Ls to recoup the higher interest rates they<br />

were paying by allowing them to preempt state usury laws for<br />

loans to consumers secured by first liens on their homes.<br />

Alternative mortgage Transaction Parity Act, 1982 (Reagan<br />

Administration)<br />

• Extended federal mortgage-lending regulations to most<br />

residential loans, including the permitted use of variable<br />

interest and balloon payments. At the time this law helped<br />

to standardize a wide variety of variable rate mortgages.<br />

Nevertheless, it left room for lenders to create variable rate<br />

loans that would be more risky in a Subprime context.<br />

Tax Reform Act of 1986 (“TRA”) (Reagan Administration)<br />

• Increased the demand for mortgage debt because it<br />

prohibited the deduction of interest on consumer loans,<br />

yet allowed interest deductions on mortgages for a primary<br />

residence as well as one additional home. This fueled the<br />

growth in home equity lending, a major component of the<br />

subprime lending industry.<br />

Financial Institutions Reform Act of 1989 (“FIRREA”) (Bush,<br />

George H.W.)<br />

• Addressed the costly S&L failures of the 1980’s and created<br />

incentives for S&Ls to operate as thinly capitalized mortgage<br />

brokers relying on the secondary market for loans.<br />

Gramm-Leach-Bliley Act, 1999 (Clinton)<br />

• Permitted financial service providers to merge with<br />

insurers.<br />

10 Howell, Benjamin, Exploiting Race and Space: Concentrated Subprime<br />

<strong>Lending</strong> as Housing discrimination, California Law Review, January, 2006.<br />

Page 3 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Subprime Rate Loans And The Current <strong>Mortgage</strong><br />

Foreclosure Crisis<br />

“Some 80 percent of outstanding U.S. mortgages are prime,<br />

while 14 percent are subprime and 6 percent fall into the<br />

near-prime category. These numbers, however, mask the<br />

explosive growth of nonprime/subprime mortgages. The<br />

subprime market sector grew from $150 billion in 2000 to<br />

$650 billion in 2007, or roughly 25 percent of the overall<br />

mortgage market. Subprime and near-prime loans increased<br />

dramatically, from 9 percent of newly originated securitized<br />

mortgages in 2001 to 40 percent in 2006.” 11<br />

The relationship between subprime rate loans and defaults<br />

and foreclosures is undeniable. Numerous surveys and<br />

reports point to a strong relationship between subprime rate<br />

loans and the foreclosure crisis. The delinquency Survey of<br />

the mortgage Bankers Association, and two recent reports,<br />

one entitled “Analysis of Subprime mortgage Servicing<br />

Performance” (data Report 1 and 2) by The State Foreclosure<br />

Prevention Working Group (State Working Group) 12 and<br />

another entitled “OCC mortgage metrics Report – Analysis<br />

and disclosure of National Bank mortgage Loan data” by the<br />

Office of the Comptroller of the Currency all point to subprime<br />

rate loans as a major reason for the foreclosure crisis.<br />

11 The Rise and Fall of Subprime mortgages by danielle dimartino and<br />

John V. duca ,Vol. 2, No. 11, November 2007, Economic Letter—Insights<br />

from the Federal Reserve Bank of dallas<br />

12 The State Foreclosure Prevention Working Group, formed in the<br />

summer of 2007, consists of the Attorneys General of 11 states (Arizona,<br />

California, Colorado, Iowa, Illinois, massachusetts, michigan, New York,<br />

North Carolina, Ohio, and Texas), two state bank regulators (New York<br />

and North Carolina), and the <strong>Conference</strong> of State Bank Supervisors.<br />

On June 5, 2008, the mortgage Bankers Association of<br />

America released its latest delinquency Survey. The survey<br />

reported that “the seasonally adjusted total delinquency<br />

rate is the highest reported in the mBA survey since 1979”<br />

and that “the rate of foreclosure starts and the percent of<br />

loans in the process of foreclosure are at the highest levels<br />

ever.” 13 According to the mBA’s National delinquency<br />

Survey, “the delinquency rate for mortgage loans on oneto-four-unit<br />

residential properties stood at 6.35 percent of all<br />

loans outstanding at the end of the first quarter of 2008 on<br />

a seasonally adjusted (SA) basis, up 53 basis points from<br />

the fourth quarter of 2007 and up 151 basis points from one<br />

year ago. The survey also reported that “the percentage<br />

of loans in the foreclosure process was 2.47 percent of all<br />

loans outstanding at the end of the first quarter, an increase<br />

of 43 basis points from the fourth quarter of 2007 and 119<br />

basis points from one year ago.” 14 Finally, and of most<br />

significance to this study, the survey included a table that<br />

shows prime and subprime rate loans as a percent of loans<br />

outstanding relative to the percent of foreclosures started:<br />


13 delinquencies and Foreclosures Increase in Latest mBA National<br />

delinquency Survey, mortgage Bankers Association of America, pg.<br />

1,June 5, 2008<br />

14 Ibid<br />

Page 4 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Subprime Rate Loans And The Current <strong>Mortgage</strong><br />

Foreclosure Crisis<br />

Table 1 shows that “while subprime ARms represent 6<br />

percent of the loans outstanding, they represent 39 percent<br />

of the foreclosures” started. Subprime fixed rate loans<br />

also represent 6 percent of the loans outstanding and 11<br />

percent of foreclosures started. Together, subprime loans<br />

represent 12 percent of loans outstanding, but 50 percent of<br />

foreclosures started.<br />

Several studies during the years have shown subprime<br />

loans have been disproportionately used by minorities. For<br />

example, a study by the department of Housing and Urban<br />

development (HUd) of the 1998 Home mortgage disclosure<br />

Act (HmdA) data of almost one million mortgages reported<br />

nationwide, concluded that there was a disproportionate<br />

concentration of subprime lending in minority and lowincome<br />

neighborhoods. 15<br />

more recently, an article in the Washington Post on June<br />

30, 2008, entitled “Subprime mortgages and Race: A Bit of<br />

Good News may Be Illusory” by Shankar Vedantam refers<br />

to subprime rate loans “as the original domino that set off<br />

America’s current economic crisis. But the loans – typically<br />

made to people with poor credit – have long been hailed<br />

for one reason: They were thought to be a powerful way to<br />

increase homeownership rates among minorities, and to<br />

provide a mechanism to undo the “redlining” policies of past<br />

decades, in which some banks refused to extend loans in<br />

predominantly minority neighborhoods, even to applicants<br />

with good credit.”<br />

The article also references research conducted by George<br />

Washington University sociologist Gregory d. Squires,<br />

“who, has been looking at rates of subprime loans issued<br />

in about 350 U.S. metropolitan areas”. Squires’ preliminary<br />

findings show that subprime loans were indeed more likely<br />

to be issued to people with poor credit and those with limited<br />

incomes. In the article, Squires’ is credited with saying “we<br />

see these loans heavily concentrated in poor neighborhoods<br />

and targeted to minority neighborhoods,” “There is some<br />

evidence that these neighborhoods were actually targeted<br />

– that lenders have gone after people whom they think are<br />

15 U.S. department of Housing and Urban development, UNEQUAL<br />


AmERICA<br />

less sophisticated borrowers, including single women and<br />

the elderly.”<br />

In addition, the 2007 Annual minority <strong>Lending</strong> Report<br />

by ComplianceTech also reported that loans to Blacks<br />

and Hispanics were disproportionately subprime. This<br />

concentration of subprime activity leaves these homeowners<br />

with significant costs of subprime loans. The Center for<br />

Responsible <strong>Lending</strong> (CRL) recently published numerous<br />

research reports that show African Americans and Latinos<br />

receive a disproportionate share of subprime loans, even<br />

when they have similar credit scores to non-Hispanic White<br />

borrowers. In december 2007, CRL issued a report showing<br />

how subprime home loans are resulting in a devastating<br />

epidemic of foreclosures. 16<br />

despite overwhelming evidence that support the above<br />

findings, this report reveals that the majority of subprime rate<br />

loans originated in 2006 were granted to non-Hispanic Whites<br />

and upper income borrowers. The same pattern occurred in<br />

2005. In 2004, more subprime rate loans were originated<br />

for non-Hispanic Whites, but middle-income borrowers<br />

had the highest share. These findings are contrary to the<br />

way subprime rate lending is commonly portrayed. Popular<br />

media myths and erroneous assumptions about subprime<br />

rate loans are continuously presented as if subprime rate<br />

lending was predominately in the domain of minorities and<br />

low-income borrowers.<br />

16 Testimony of Josh Nassar, Center for Responsible <strong>Lending</strong> Before<br />

the U.S. House Committee on Oversight and Government Reform, pg.<br />

2 “Foreclosure, Predatory mortgage and Payday <strong>Lending</strong> in America’s<br />

Cities”, march 21, 2007<br />

Page 5 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Methodology<br />

<strong>Lending</strong>Patterns , an online HmdA analysis tool developed<br />

by ComplianceTech, was used extensively to mine the HmdA<br />

data to analyze the lending patterns of all HmdA reporting<br />

lenders in the United States by race, income, gender and<br />

geography. The online system produces reports by the<br />

entire United States, metropolitan Statistical Areas (mSA),<br />

states, counties, census tracts and for the 2006 HmdA data,<br />

by Congressional districts of the 110th Congress. Using<br />

<strong>Lending</strong>Patterns conventional, 1st lien, 1 to 4 family, owneroccupied,<br />

home purchase and refinance loans with a HMDA<br />

reported spread were isolated.<br />

The study describes the overall distribution of the frequency<br />

and magnitude of subprime rate loans for the years 2004<br />

to 2006. Looking back at prior years, the study provides a<br />

recent historical perspective on the distribution of subprime<br />

rate loans. The remainder of the study focuses only on loans<br />

originated in 2006. The 2006 loans are analyzed by race and<br />

ethnicity, income of borrowers, gender, census tract income,<br />

and census tract percent minority.<br />

Race and ethnicity is limited to White, Black, Hispanic,<br />

Asian, Native American and Hawaiian. multi-race, unknown<br />

and Not Available (NA) race categories are excluded.<br />

Income of borrowers and census tracts are characterized<br />

by the Community Reinvestment Act (CRA) 17 classifications<br />

of low, moderate, middle and upper income. These income<br />

classifications are calculated using borrower and census<br />

tract income relative to the median income of metropolitan<br />

Statistical Areas (mSA).<br />

Gender distribution is based on whether the primary<br />

applicant’s gender is male or female or, male or female<br />

without a co-applicant. It is not known whether borrowers<br />

without co-applicants are in fact single. HmdA data only<br />

show that no co-applicant was on the loan application.<br />

Same gender, unknown and NA are included in the gender<br />

analysis.<br />

17 The Community Reinvestment Act is intended to encourage depository<br />

institutions to help meet the credit needs of the communities in which they<br />

operate, including low- and moderate-income neighborhoods, consistent<br />

with safe and sound banking operations. It was enacted by the Congress<br />

in 1977 (12 U.S.C. 2901) and is implemented by Regulations 12 CFR<br />

parts 25, 228, 345 and 563e<br />

The loan amount categories are conforming and jumbo.<br />

Conforming loans are those that conform to the loan<br />

purchase limits of Fannie mae and Freddie mac (less than<br />

or equal to $417,000 in 2006). Jumbo loans are those with<br />

a loan amount exceeding $417,000. Although jumbo loans<br />

demand a higher price, they are not analyzed separately<br />

because the focus of this study is on the 1st lien loans that<br />

exceed the three percentage point threshold for HmdA<br />

spread reporting.<br />

Finally, the census tract percent minority analysis uses 2000<br />

Census data to stratify census tracts by their percent of<br />

minority inhabitants. All subprime rate loans are distributed<br />

cross census tracts in 10 percent increments, i.e. a range<br />

from 0% to 100% minority.<br />

Page 6 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Summary Of Findings<br />

• The overall rate of subprime rate lending in 2006 was<br />

27.42% with an average spread of 5.18%.<br />

• During the period of 2004-2006, Whites had more subprime<br />

rate loans than all minorities combined. However, in each<br />

year, the White percent of subprime rate loans was lower<br />

than all minorities, except Asians. Whites and Asians had<br />

average spreads less than the overall average at 5.09%<br />

and 4.95%, respectively.<br />

• Whites had 70.82% of the 2006 loans and 56.23% of<br />

the subprime rate loans with a spread. Asians share of<br />

overall loans at 4.48% was higher than their 2.85% share<br />

of subprime rate loans. By contrast, Blacks and Hispanics,<br />

and Native Americans and Hawaiians, albeit at much<br />

lower volumes, had a higher share of subprime rate loans<br />

than their share of loans overall. For example, Blacks and<br />

Hispanics had 9.97% and 13.92% of the overall pool of<br />

loans, but had 19.18% and 20.76% of the subprime rate<br />

loans, respectively. The Native American share of overall<br />

loans was 0.32% and 0.40% of subprime rate loans.<br />

Finally, the Hawaiian share of overall loans was 0.51%<br />

and 0.58% of the subprime rate loans.<br />

• In 2006, the White and Asian percent of subprime rate<br />

loans was below the national average at 21.78% and<br />

17.43% respectively. Conversely, Blacks, Hispanics,<br />

Native Americans, and Hawaiians all had subprime rate<br />

loans above the national average at 52.76%, 40.91%,<br />

33.98%, and 31.46%, respectively.<br />

• From 2004 to 2006, compared to all other racial groups,<br />

Blacks had the highest jump in subprime rate lending.<br />

during this period the Black incidence of subprime rate<br />

loans increased by 71% from 30.84% in 2004, to 50.96%<br />

in 2005, and to 52.76% in 2006. Similarly, from 2004 to<br />

2006 the average cost of this high cost lending to Blacks<br />

increased by 29%. The Black average spread was 4.28%<br />

in 2004, 4.97% in 2005, and 5.50% in 2006.<br />

• Of the 1,917,809 subprime rate loans in 2006, upperincome<br />

borrowers had the highest share at 39.37%,<br />

followed by 27.55% for middle-income borrowers and<br />

20.99% for moderate-income borrowers. Contrary to<br />

popular belief, low-income borrowers had only 149,173, or<br />

7.57%, of 2006 subprime rate loans.<br />

• Upper-income borrowers from all racial groups had the<br />

largest number of subprime rate loans, followed by middle,<br />

moderate and low-income borrowers.<br />

• Middle-income borrowers from all racial groups had the<br />

second highest use of subprime rate loans, followed by<br />

moderate-income borrowers.<br />

• The 2006 gender distribution shows a pattern where<br />

males and females without co-applicants had the highest<br />

use of subprime rate loans in 2006 at 32.60% and<br />

32.21%, respectively. Combined, these presumably single<br />

borrowers accounted for 64.81% of the 2006 subprime<br />

rate loans.<br />

• Middle-income census tracts had the largest number and<br />

share of subprime rate loans at 1,049,232, or 53.2%.<br />

moderate and upper-income census tracts were almost<br />

even at 21.87% and 21.40%, respectively. Low-income<br />

census tracts had the second highest proportion of<br />

subprime rate loans (47.51%), the highest average spread<br />

(5.43%), but the smallest share of all select 2006 subprime<br />

rate loans at 3.15%.<br />

• Non-Hispanic White subprime rate loans were concentrated<br />

in predominately White areas. Of the 1,108,679 non-<br />

Hispanic White subprime rate loans originated in 2006,<br />

868,806 or 78.36% were located in census tracts less than<br />

30 percent minority. The largest block of non-Hispanic<br />

White subprime rate loans (473,397 or 42.70%) were<br />

located in census tracts less than 10% minority.<br />

• Black subprime borrowers were located both in<br />

predominately White census tracts as well as highly<br />

concentrated in predominately minority census tracts. In<br />

fact, the Black volume of subprime rate loans in census<br />

tracts less than 30% minority totaled 97,693, slightly more<br />

than the 91,906 subprime rate loans in census tracts<br />

90-100% minority. Interestingly, the Black low (20,307)<br />

and high (39,092) was in census tracts

Highlights Of 2004-2006 Subprime Rate <strong>Lending</strong> By<br />

Race And Ethnicity<br />

during the period of 2004-2006, Black Americans, compared<br />

to other racial groups, experienced the largest percentage<br />

build-up of subprime rate loans. (Figure 1)<br />


The vast build-up of higher cost subprime rate loans with<br />

Blacks is likely to translate into a disproportionately larger<br />

percent of loans that will experience mortgage defaults and<br />

foreclosures. In 2004, the first year HMDA pricing information<br />

was reported by lenders, more than 30 percent of the Black<br />

conventional first lien 1 to 4 family home purchase and<br />

refinance loans were comprised of higher-cost subprime rate<br />

loans. This was followed by a frequency greater than 50% in<br />

2005 and 2006. during the same period, Blacks also had the<br />

highest average spread on subprime rate loans. (Figure 2)<br />

Page 8 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Highlights Of 2004-2006 Subprime Rate <strong>Lending</strong> By<br />

Race And Ethnicity<br />


The trend with Hispanics, Native Americans and Hawaiians,<br />

while similar to Blacks, was not as high. Each of the above<br />

groups however, had a higher frequency and higher average<br />

spread on subprime rate loans than Whites or Asians. In<br />

fact, Asians had the lowest frequency and magnitude of<br />

loans with a HmdA reported spread. Thus, percentage-wise,<br />

Hispanics, Native Americans and Hawaiians are also more<br />

likely to experience a higher proportion of mortgage defaults<br />

and foreclosures.<br />

With respect to the number of subprime rate loans during<br />

the three-year period, there is a large difference by race.<br />

In each year, Whites had more subprime rate loans than<br />

all minority groups combined. (Figure 3) Among minorities,<br />

Hispanics had the largest volume of subprime rate loans,<br />

followed by Blacks, with much smaller numbers for Asians,<br />

Native Americans and Hawaiians.<br />

Page 9 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Highlights Of 2004-2006 Subprime Rate <strong>Lending</strong> By<br />

Race And Ethnicity<br />


White homeowners are not going to be insulated from the<br />

subprime mortgage meltdown. The massive numbers of<br />

White subprime rate loans indicate that it is highly probable<br />

that Whites will also experience an increase in mortgage<br />

defaults and foreclosures. Percentage-wise, however,<br />

the incidence of foreclosures in Black and Hispanic<br />

neighborhoods is predicted to be more concentrated than in<br />

White communities. Blacks and Hispanics had a significant<br />

number of higher-cost subprime loans and they had a much<br />

higher proportion of such loans. Thus, the high concentration<br />

of subprime rate loans in Black and Hispanic communities<br />

is likely to translate into a higher number and percent of<br />

mortgage defaults and foreclosures.<br />

Foreclosures in the subprime market have eroded and<br />

are projected to continue to erode some of the gains in<br />

homeownership rates for minority households. For example,<br />

CRL estimates “that the 2005 vintage of subprime loans will<br />

lead to 98,025 foreclosures by Black homeowners relative<br />

to only 50,925 new Black homeowners, or a net reduction<br />

in 47,101 Black homeowners.” 18 Similarly, CRL estimates “a<br />

net decline in homeownership among Hispanic families of<br />

18 Center for Responsible <strong>Lending</strong>, “Subprime <strong>Lending</strong>: A Net drain on<br />

Homeownership,” CRL Issue Paper No. 14, march 27, 2007, available at<br />

http://www.responsiblelending.org/page.jsp?itemId=3203203 1.<br />

37,693.” 19 These findings are evidence that recent gains in<br />

Black and Hispanic homeownership rates are likely to be lost.<br />

CRL studies show that “foreclosures can have a significant<br />

impact in a community where the foreclosed property is<br />

located. This is particularly true when the factors that led to<br />

one foreclosure drive a concentration of foreclosures in the<br />

same neighborhood, for example in a spatial concentration<br />

of subprime lending. A concentration of home foreclosures<br />

in a neighborhood hurts property values in several ways. A<br />

glut of foreclosed homes for sale depresses home market<br />

values for the other owners. Neighboring businesses often<br />

experience a direct monetary loss from reduced sales and<br />

neighborhood landlords experience a loss or reduction in<br />

rental income. moreover, house price declines can also<br />

affect economic activity through their effect on household<br />

wealth. Econometric work has established that household<br />

wealth, along with income, helps to determine the level of<br />

aggregate consumption. Higher levels of wealth lead to<br />

higher consumption, all things being equal. Since declines<br />

in home prices reduce wealth, they reduce consumption and<br />

thus output and employment.” 20<br />

19 Ibid<br />

Page 10 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Highlights Of 2004-2006 Subprime Rate <strong>Lending</strong> By<br />

Race And Ethnicity<br />

In conclusion, the pattern and trend of subprime rate lending<br />

during 2004-2006 indicate that Whites are likely to have<br />

a higher volume of loans that might experience mortgage<br />

defaults and foreclosures, but Blacks and Hispanics are<br />

more likely to be disproportionately impacted, and these<br />

events are more likely to be heavily concentrated in high<br />

minority neighborhoods. (Figure 4) The HmdA data show<br />

a consistent pattern where the percent of subprime rate<br />

loans increase as census tracts become increasingly more<br />

minority.<br />


20 The Subprime <strong>Lending</strong> Crisis, The Economic Impact on Wealth,<br />

Property Values and Tax Revenues, and How We Got Here, Report and<br />

Recommendations by the majority Staff of the Joint Economic Committee,<br />

Senator Charles E. Schumer, Chairman, Rep. Carolyn B. maloney, Vice<br />

Chair, October, 2007, pg. 13-14, http://jec.senate.gov/documents/Reports/<br />

10.25.07OctoberSubprimeReport.pdf<br />

Page 11 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />

In 2006, the HmdA data reported 7,191,015 conventional,<br />

1st lien, 1 to 4 family, owner occupied, home purchase and<br />

refinance loans where the race of the borrower was known.<br />

Of these, a HmdA spread was reported on 1,971,809 or<br />

27.42%. The overall average spread on the loans was 5.18%<br />

or 218 basis points above the 3 percent 1st lien threshold<br />

for reporting. The frequency and magnitude of higher cost<br />

subprime rate loans varied widely by race as shown in Table<br />

2 and graphically in Figure 5 below:<br />



Page 12 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />

The White frequency (percent) of subprime rate loans was<br />

21.78% with a magnitude (average spread) of 5.09%. Using<br />

the White frequency and magnitude of subprime rate loans<br />

as a benchmark, Blacks had the highest difference among all<br />

minorities with a 52.76% frequency and an average spread<br />

of 5.50%. Blacks, therefore, received higher cost subprime<br />

rate loans 2.42 times the frequency in which Whites received<br />

such loans. The difference between the White and Black<br />

average spread was 41 basis points.<br />

Hispanics had the second highest disparity in the frequency<br />

and magnitude of subprime rate loans compared to Whites.<br />

Hispanics had a subprime rate loan frequency of 40.91% or<br />

1.88 times the 21.78% frequency for Whites. The Hispanic<br />

average spread was 5.18% or 9 basis points higher than<br />

Whites.<br />

Asians were the only minority group whose frequency and<br />

magnitude of receiving higher cost subprime rate loans was<br />

less than Whites. Asians received higher cost loans 17.43%<br />

of the time or 20% less often than Whites. Asians had an<br />

average spread of 4.95% or 14 basis points lower than the<br />

White average spread. Native Americans and Hawaiians<br />

received higher cost loans 33.82% and 31.46% of the time,<br />

with an average spread of 5.21% and 5.18%, respectively.<br />

despite the racial disparities in the frequency and magnitude<br />

of 2006 subprime rate loans, Whites had more loans overall<br />

and more subprime rate loans than all minorities combined.<br />

This is expected since Whites comprise a large majority of<br />

the U.S. population. Whites had 70.80% of the loans and<br />

56.23% of the loans with a spread as shown in Table 3<br />

below:<br />


The large number of White subprime rate loans suggests<br />

that the problem with increased defaults and foreclosures is<br />

not likely to be isolated to minority communities. many White<br />

Americans will be adversely affected as well.<br />

Page 13 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />

Subprime Rate Loans By Loan Purpose<br />

In 2006, more subprime rate loans were used to refinance<br />

an existing mortgage than to purchase a new home. Of the<br />

1,971,809 subprime rate loans in 2006, refinance loans<br />

accounted for 55.82% and home purchase loans 44.18%.<br />

Refinance loans had a higher frequency of being higher-cost<br />

subprime rate loans at 29.85%, but a lower average spread<br />

of 5.11%. The subprime rate frequency for home purchase<br />

loans was 24.86% with a higher average spread of 5.27%.<br />

(Table 4)<br />


Page 14 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />

By race and ethnicity, Hispanics and Asians had a higher<br />

percent of subprime rate loans for home purchase at 56.15%<br />

and 55.19%, respectively. Other racial groups had a higher<br />

percent of subprime rate lending for refinance transactions.<br />

The distribution of 2006 subprime rate loans by loan purpose<br />

is shown in Figure 6:<br />


Page 15 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />

Subprime Rate Loans By Borrower Income<br />

Overall, the number of loans and the number of loans with<br />

a HmdA spread, decrease as borrower income decreases.<br />

For example, low-income borrowers had fewer loans than<br />

moderate, middle and upper-income borrowers, but of the<br />

loans obtained by low-income borrowers, a higher percent<br />

were subprime rate loans. Surprisingly, this pattern was not<br />

the same for average spread. moderate and middle-income<br />

borrowers had a higher average spread than low-income<br />

borrowers. Upper-income borrowers had the highest share<br />

(39.37%), but the lowest frequency and lowest average<br />

spread of subprime rate loans by borrower income. Table 5<br />

and Figure 7:<br />



Page 16 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />

The income distribution pattern for each racial group mirrors<br />

the overall pattern; the highest number of subprime rate loans<br />

was with upper-income borrowers. As income decreases,<br />

the number of subprime rate loans decreased. (Figure 8)<br />


Page 17 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />

Percentage-wise, however, the pattern was most pronounced<br />

with Asians and Hawaiians, where 62.21% and 57.81% of<br />

the respective upper-income borrowers from the two racial<br />

groups obtained subprime rate loans. Almost half of upperincome<br />

Hispanics had subprime rate loans (49.59%) with<br />

differences of 10 to 15% between the other income brackets.<br />

Subprime rate loans for upper-income Whites were 37.35%<br />

with differences of 6-to-14 percent between the other income<br />

brackets.<br />

Unlike other racial groups, Blacks received subprime rate<br />

loans fairly evenly across all income brackets. Upperincome<br />

Blacks had 30.29% of subprime rate loans while<br />

the difference between moderate, middle and upper-income<br />

was no more than 2.17%. Low- income Blacks were the only<br />

racial group with a double-digit percent of subprime rate<br />

loans (11.29%). (Figure 9)<br />


Page 18 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />

Gender distribution Of Subprime Rate Loans<br />

All racial groups had a high number and percent of men<br />

and women without co-applicants that made up a significant<br />

portion of the subprime rate loan population in 2006. Rising<br />

real estate costs and home property values apparently<br />

prompted many single persons to enter the real estate<br />

market. Some entered for the sake of homeownership while<br />

others might have made speculative investments, suspecting<br />

that home prices would continue to rise. Either way, with a<br />

single income, many single borrowers might have sought<br />

more creative ways to obtain home loan financing.<br />

The mortgage market accommodated this market segment<br />

with loan features that made it easier to qualify. Loans, such<br />

as 2/28 and 3/27 adjustable rate mortgages (ARms) started<br />

with low teaser rates for the first two or three years of the loan<br />

with a rate reset in later years. In all instances the rate resets<br />

will produce significant mortgage payment increases. Other<br />

non-traditional loan features, such as, pay option ARms,<br />

interest only and underwriting features like “no income” and<br />

“no asset” verification enabled borrowers to “buy now, but<br />

borrow trouble later. “<br />

The gender distribution of subprime rate loans and as a<br />

pattern indicator of mortgage defaults and foreclosures might<br />

have a significant impact on policy discussions at the federal,<br />

state and local level. Single men or women without children<br />

who might have difficulty making mortgage payments is one<br />

thing, but if a large portion of the subprime rate borrowers<br />

are single men or women head of households with children,<br />

the implications of mortgage foreclosures become much<br />

more bleak. Families with children could become homeless.<br />

The 2006 gender distribution of subprime rate loans<br />

show a pattern whereby males without co-applicants and<br />

females without co-applicants (presumably single) had a<br />

higher frequency and higher average spread than males<br />

or females listed as primary borrowers. There is however,<br />

very little disparity between single men and single women<br />

in the percent and average spread on subprime rate loans.<br />

The frequency of subprime rate loans for males without coapplicants<br />

and females without co-applicants was almost<br />

even at 32.60% and 32.21%, respectively. The same is true<br />

for the average spread on loans made to males without coapplicants<br />

and females without co-applicants at 5.23% and<br />

5.24%, respectively.<br />

However, a much wider disparity exists when females were<br />

listed as the primary borrower compared to when men were<br />

listed as primary. The frequency of subprime rate loans with<br />

females as the primary borrower was 29.55% with an average<br />

spread of 5.20%. By contrast, when men were listed as the<br />

primary borrower, the percent of subprime rate loans was<br />

only 18.62% with an average spread of 5.03%. (Table 6)<br />


Page 19 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />

The distribution pattern by race and gender is varied. For all<br />

minority groups, except Blacks, males without co-applicants<br />

followed by females without co-applicants had the highest<br />

percent of subprime rate loans. This is especially true with<br />

Hispanics where 75.86% of 2006 subprime rate borrowers<br />

were either single men without co-applicants (46.69%) or<br />

single females without co-applicants (29.17%). (Figure 10)<br />


Page 20 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />

A male as the primary borrower was ranked third with all<br />

minorities with respect to subprime rate loans by gender.<br />

For blacks however, the highest proportion of subprime<br />

rate loans was with females without co-applicants (42.10%)<br />

followed by males without co-applicants (33.08%) and then<br />

by male as the primary borrower (15.33%).<br />

For Whites, the pattern of subprime rate loans was male<br />

dominated. White males without co-applicants accounted<br />

for 35.67% of the White subprime rate loans followed by<br />

White men as primary borrower at 28.62%. The number of<br />

subprime rate loans to White men (395,441) was more than<br />

half the number of subprime rate loans to all minority males<br />

without co-applicants combined. White females without coapplicants<br />

had 25.32% of the White subprime rate loans, and<br />

that proportion accounts for more than 48% of all subprime<br />

rate loans received by females without co-applicants in 2006.<br />

(Figure 11) Females as the primary borrower had the lowest<br />

percent of subprime rate loans for all racial groups ranging<br />

from a low of 5.48% for Hispanics to a high of 10.56% for<br />

Hawaiians.<br />


Page 21 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />

Subprime Rate Loans By Census Tract Income<br />

In 2006 there was an inverse relationship between census<br />

tract income and the percent of subprime rate loans. As<br />

census tract income increased, the frequency and magnitude<br />

of subprime rate loans by census tract income decreased.<br />

Low-income census tracts had the highest frequency and<br />

highest magnitude of subprime rate loans at 47.51% and<br />

5.43%, respectively. By contrast, upper-income census<br />

tracts had a frequency of 18.25% with an average spread of<br />

5.03%. Table 7 and Figure 12 shows the overall distribution<br />

of the 2006 subprime rate loans by census tract income:<br />


Page 22 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />

despite the inverse relationship of census tract income and<br />

spread frequency and magnitude, the volume of subprime<br />

rate loans is skewed dramatically towards middle-income<br />

census tracts. middle-income census tracts had 53.21% of<br />

the higher cost loans, more than twice the volume of subprime<br />

rate loans in all other census tract income categories<br />

combined. moderate and upper census income tracts had<br />

an almost even percentage of higher priced loans at 21.87%<br />

and 21.40%, respectively. Low-income census tracts had the<br />

smallest number and percent of 2006 subprime rate loans.<br />


Page 23 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />

Subprime Rate Loans By Race And Census Tract<br />

Percent minority<br />

The incidence of higher-cost subprime rate loans is more<br />

prevalent in census tracts with a higher percentage of<br />

minorities. The frequency and magnitude of higher-cost<br />

subprime rate loans increase as the proportion of minorities<br />

in a community increase.<br />

The frequency/average spread range from a low of<br />

22.25%/5.10% in census tracts < 10% minority to a high<br />

of 47.51%/5.36% in census tracts 90 to100% minority.<br />

Throughout the range of census tract strata, the pattern of the<br />

incidence and magnitude of subprime rate loans is linear.<br />

The overall volume of loans and the volume of subprime rate<br />

loans however, are clearly skewed towards largely White<br />

areas. Census tracts that are less than 30% minority account<br />

for 55.61 % of higher price subprime rate loans. Census<br />

tracts < 10% minority had the largest share of subprime<br />

rate loans at 26.47%. By contrast, despite the fact that high<br />

minority census tracts had a higher incidence and higher<br />

average spread, census tracts >70% minority accounted<br />

for only 18.87% of the 2006 subprime rate loans. (Table 8,<br />

Figure 13, and Figure 14).<br />

If the incidence of higher-priced lending is a predictor of<br />

future delinquencies, then the subprime rate loan distribution<br />

by census tract percent minority is an indication that the<br />

mortgage meltdown might be a hurricane in predominately<br />

White census tracts, but it will be a tsunami in predominately<br />

minority census tracts, especially for Blacks and Hispanics.<br />


Page 24 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Distribution Analysis Of 2006 Subprime Rate Loans<br />





Page 25 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

Conclusion<br />

The demographic impact of the Subprime mortgage meltdown<br />

has been under-analyzed. A common theme expressed in<br />

newspaper articles and periodicals on the subject suggest that<br />

the foreclosure crisis is a minority and low-income borrower<br />

problem. For example, an article in the Washington Post on<br />

June 17, 2008 credits former Federal Reserve Chairman<br />

Edward Gramlich with saying “the subprime market, for all<br />

its warts, is a promising development, permitting low-income<br />

and minority borrowers to participant in credit markets” 21<br />

But he added, “a majority of loans are made with very little<br />

supervision.” 22 The same theme is presented in many other<br />

articles, reports and publications.<br />

Although it is true that disproportionate shares of minority<br />

loans are subprime, it is also true that more subprime rate<br />

loans are made to non-Hispanic Whites. To suggest that the<br />

subprime mortgage meltdown and the foreclosure crisis is<br />

a minority and low-income problem is tremendously flawed.<br />

Indeed, in 2006, non-Hispanic Whites and upper income<br />

borrowers had the highest share of (conventional, 1st lien,<br />

1-4 family, owner-occupied, home purchase/refinance)<br />

subprime rate loans. moreover, the majority of subprime<br />

rate loans originated in 2006 were clearly skewed towards<br />

predominately-White areas (census tracts less than 30<br />

percent minority).<br />

The problem with portraying the foreclosure crisis as a<br />

minority and low-income problem is that it affects how<br />

solutions will be approached. If, on one hand, it is believed that<br />

subprime rate loans were predominately made to marginal<br />

segments of society (Black, Hispanic or low-income) housing<br />

policymakers may approach solutions with bias assumptions<br />

about minorities and minority qualifications (low education,<br />

bad credit, and low-paying jobs, etc.). Thus, there may a<br />

tendency to write-off the subprime lending debacle as a type<br />

of affirmative action gone bad. On the other hand, if it is<br />

believed that the foreclosure crisis affects broader and more<br />

demographically diverse segments of society then a more<br />

21 Washington Post, June 17, 2008 “The Bubble –How homeowners<br />

missed mortgage payments set off widespread problems and woke up the<br />

Fed”, pg.A9<br />

22 Ibid.<br />

politically responsible approach is likely, thereby changing<br />

the tone, climate and context of how solutions are crafted.<br />

Besides race and ethnicity, understanding the gender<br />

distribution is also relevant in formulating policy solutions<br />

to the subprime rate lending and foreclosure crisis. The<br />

2006 HmdA data show a pattern where males and females<br />

without co-applicants had the highest use of subprime rate<br />

loans at 32.60% and 32.21%, respectively. Combined,<br />

these presumably single borrowers accounted for 64.81%<br />

of the 2006 subprime rate loans. These presumably single<br />

borrowers do not have two income sources to support the<br />

mortgage. If the single borrowers, in trouble of making their<br />

mortgage payments, are single-head of households, what<br />

about the children?<br />

Not enough research and media attention has been devoted<br />

to other causes of the subprime crisis that may have race<br />

and gender effects. Issues of steering, weak underwriting,<br />

fraud, and discrimination have not been aggressively<br />

investigated. despite the presence of federal regulation<br />

and periodic examinations for safety and soundness,<br />

Community Reinvestment Act compliance and fair lending<br />

compliance, efforts to uncover whether subprime rate loans<br />

can be explained by legitimate business justifications will<br />

be impaired based on erroneous assumptions about the<br />

demographic distribution of subprime rate loans.<br />

Last, if it is believed that subprime rate lending is<br />

predominately an urban minority problem, officials will fail<br />

to see that in 2006 non-Hispanic Whites had 1,108,676<br />

subprime rate loans of which 868,806 or 78.36% were in<br />

census tracts

Conclusion<br />

About The Author<br />

maurice Jourdain-Earl has over 35 years of experience in<br />

the financial services business. He began his career in 1973<br />

as a Registered Representative for IdS Financial Services<br />

and obtained licenses to offer insurance and investment<br />

services to individuals and small businesses. After 3 years<br />

he joined Continental Illinois National Bank as a Bond<br />

Investment Banking Associate where he offered municipal<br />

and Government Bonds to commercial banks and regional<br />

investment banks. In 1979 he joined PmI Securities Co. (a<br />

subsidiary of PmI mortgage Insurance Co.) as a director of<br />

Sales marketing. At PmI, he was responsible for packaging<br />

and selling private placement mortgage-backed securities to<br />

institutional investors.<br />

From 1982 to 1985 he owned and operated a boutique<br />

Investment Brokerage Company facilitating the packaging<br />

and selling of private placement mortgage-backed securities,<br />

direct from Banks and Savings and Loan Associations to<br />

Pension Funds. After doing business with Citicorp, he joined<br />

the company as a Vice-President to help form a newly<br />

developed Treasury marketing Unit responsible for packaging<br />

and selling loans in portfolio as mortgage-backed securities.<br />

The Treasury marketing Unit later became Citimortgage’s<br />

Correspondent business.<br />

In 1991 mr. Jourdain-Earl formed CLC Compliance<br />

Technologies, Inc. (ComplianceTech). ComplianceTech<br />

began as a due diligence portfolio analysis company<br />

analyzing the asset value of loans for secondary market<br />

disposition. After becoming an established contractor for the<br />

RTC, FdIC and private sector companies, ComplianceTech<br />

was asked by a lender to analyze their HmdA data. That<br />

project led to ComplianceTech’s development into a premier<br />

provider of lending intelligence services, specializing in<br />

strategic fair lending and emerging markets consulting.<br />

For the last 17 years mr. Jourdain-Earl has provided thought<br />

leadership in developing consultative and technological<br />

solutions to help clients navigate the regulatory and<br />

operational complexities of strategic markets, diversity and<br />

fair lending issues. He has been actively involved in client<br />

projects to detect and minimize discrimination in underwriting,<br />

pricing and marketing mortgage, auto and consumer loans<br />

and to assess opportunities to lend to minority and low-to-<br />

moderate income homebuyers. ComplianceTech is also<br />

the organizer of <strong>Lending</strong> <strong>Industry</strong> diversity <strong>Conference</strong>,<br />

Inc. which sponsors the Annual mortgage <strong>Lending</strong> <strong>Industry</strong><br />

Strategic markets and diversity <strong>Conference</strong>.<br />

mr. Jourdain-Earl is a noted speaker on lending and banking<br />

issues, particularly on HmdA and fair lending practices. He<br />

has spoken at many events, included some sponsored by<br />

the Federal Reserve Bank, The Federal Home Loan Bank,<br />

America’s Community Bankers, Practicing Law Institute, and<br />

the mortgage Bankers Association of America. A native of<br />

Chicago, Illinois, he holds a B.A. degree in Social Science<br />

from dePaul University.<br />

About ComplianceTech<br />

Since 1991, ComplianceTech has provided specialized lending<br />

intelligence services to financial institutions nationwide. With<br />

its multi-disciplined expertise in lending, research, statistical<br />

analysis, law and economics, ComplianceTech is uniquely<br />

equipped to identify market patterns; unveil opportunities;<br />

formulate lending benchmarks; and implement best practices<br />

for all aspects of consumer lending. The company’s passion<br />

and expertise in data analysis is renowned, and press,<br />

academia, government and private organizations frequently<br />

call on ComplianceTech to share its insights and expertise in<br />

consumer lending intelligence.<br />

About <strong>Lending</strong>Patterns <br />

<strong>Lending</strong>Patterns is a web-based data mining and exploration<br />

tool developed by ComplianceTech that analyzes millions<br />

of records for thousands of lenders to produce executive<br />

level reports on numerous aspects of mortgage lending in<br />

America. It is a powerful analytical tool and is the only fully<br />

accessible national HmdA database on the internet.<br />

To request additional print copies of this report; or for more<br />

information about ComplianceTech or <strong>Lending</strong>Patterns; visit<br />

www.compliancetech.com, www.lendingpatterns.com, or<br />

call 1-800-499- 4632.<br />

Page 27 of 27 The Demographic Impact of the<br />

Subprime <strong>Mortgage</strong> Meltdown

TAB<br />



Successful Sales Tools for Loan Originators in Today’s Market<br />

3:00 p.m. – 5:00 p.m.<br />

Chesapeake 3<br />

This program is the first specialized program in the mortgage industry designed to increase the<br />

sales effectiveness and production of originators who serve affordable, diverse and emerging<br />

markets: This pre-conference workshop sponsored by Genworth <strong>Mortgage</strong> Insurance includes<br />

an overview of a ten-step, high impact sales training and professional development system<br />

designed to help loan originators and production managers increase their day-to-day efficiency,<br />

individual accountability, and closed production. Affordable, diversity, and emerging markets<br />

executives will find this system to be an essential element in supporting corporate production<br />

goals and objectives.<br />

Speaker: Lynn Richardson<br />

President and Chief Executive Officer<br />

Lynn Richardson Enterprises

Lynn Richardson<br />

Wife, mother of 3 beautiful daughters, and fondly known to many happy homeowners as<br />

“The <strong>Mortgage</strong> Guru” – Lynn Richardson has met the expectations of many, yet<br />

surpassed the achievements of most in the mortgage industry, having closed over 100<br />

million her first few years in the business and helped thousands of families achieve the<br />

dream of homeownership in the Chicagoland area.<br />

After completing her education at Northwestern University and Loyola University, Lynn<br />

began to carve her own pathway to success in the mortgage business by mastering<br />

innovative approaches to securing hard to get mortgages for urban first time buyers. One<br />

of her most notable cases is that of a single mother who became a homeowner after 4<br />

previous bankruptcies, 2 foreclosures, and 2 divorces. After completing Lynn's<br />

<strong>Mortgage</strong> Approval Plan (MAP), she received a low interest rate and a low down<br />

payment for her new home purchase! Accordingly, Lynn created a college level<br />

curriculum for knowledge-seeking consumers, The Road to Homeownership and<br />

Creating Family Wealth, which are offered through the City Colleges of Chicago.<br />

As a result of branding her unique approach in the community she serves, Lynn<br />

Richardson became the host of “Wealth ‘n Real Estate” on WVON 1690 am talk radio in<br />

Chicago, where she currently broadcasts Sundays from 9am until 11am. Lynn believes<br />

that the foundation for 21 st Century racism is based on economics, and accordingly,<br />

continues to educate minorities about the benefits of homeownership as the foundation<br />

for building wealth and eluding poverty.<br />

As the Vice President of Emerging Markets National Strategic Partnerships for JP<br />

Morgan Chase, the founder of Emerging Markets Academy for <strong>Mortgage</strong> and Real Estate<br />

Professionals, member of Delta Sigma Theta Sorority, Inc. and National Coordinator for<br />

the DST Homeownership Initiative, Chase relationship manager for the AKA Keys to<br />

Homeownership Initiative, member of Les Brown’s Speaker’s Network, Professor for the<br />

Toyota/Black Star Project Parent University and the author of “Living Check to<br />

Monday: The Real Deal About Money, Credit, and Financial Security,” Lynn's<br />

mission is to increase the homeownership rate in emerging market communities while<br />

promoting financial literacy, economic empowerment, and social and racial equality in<br />

underprivileged communities worldwide.

TAB<br />


Speakers: Maurice Jourdain-Earl<br />

Managing Director<br />

Compliance Tech<br />

Fourth Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Strategic Markets and Diversity <strong>Conference</strong><br />

Mark Goldhaber<br />

Senior Vice President<br />

Government Relations<br />

Genworth <strong>Mortgage</strong> Insurance<br />

John Courson<br />

Chief Operating Officer<br />

<strong>Mortgage</strong> Bankers Association<br />

October 6-8, 2008<br />

Welcome Address<br />

Annapolis Ballroom 1 & 2

John A. Courson<br />

John A. Courson is Chief Operating Officer of the <strong>Mortgage</strong> Bankers Association (MBA)<br />

and will become the Association’s President on January 1, 2009. Courson has been<br />

involved in the mortgage industry for more than 40 years and served as Chairman of<br />

MBA in 2003.<br />

Courson began his lifelong career in mortgage banking working for Kassler & Co., in<br />

Denver, Colorado, during summers in high school and college. Before completing his<br />

degree, he began originating loans as a producing branch manager in a two-person<br />

production office in a Denver suburb. After graduation, Courson worked as a loan officer<br />

on both commercial and residential loans at a Denver, Colorado branch of Fort Wayne<br />

<strong>Mortgage</strong> where he would later take over managing the branch office and eventually he<br />

became the company’s President and Chief Executive Officer in its Detroit, Michigan<br />

headquarters. Courson also served as President and Chief Executive Officer of Central<br />

Pacific <strong>Mortgage</strong> Company, President and Chief Executive Officer of Westwood<br />

<strong>Mortgage</strong> Corporation, and as President and Chief Operating Officer of Fundamental<br />

<strong>Mortgage</strong>.<br />

From 2004 to 2008, Courson served as Chairman of the Board of Directors of the<br />

California Housing Finance Agency, a position for which he was appointed by Governor<br />

Arnold Schwarzenegger.<br />

Prior to serving as MBA’s Chairman in 2003, Courson served as a member of MBA's<br />

Board of Directors, as well as on both the Residential Board of Governors (RESBOG)<br />

and the Commercial Real Estate/Multifamily Finance Board of Governors (COMBOG).<br />

He served as Chairman of RESBOG from 1999 to 2000. Additionally, he served as<br />

Chairman of MBA's Legislative Steering Committee, MORPAC, MBA's State and Local<br />

Liaison Committee and <strong>Mortgage</strong> Reform Task Force. He also served as President of the<br />

California <strong>Mortgage</strong> Bankers Association from 1997 to 1998 and Michigan <strong>Mortgage</strong><br />

Bankers Association from 1978 to 1979, and as a Director of the Texas <strong>Mortgage</strong><br />

Bankers Association from 1986 to 2000.<br />

Courson received his undergraduate degree in business and finance from the University<br />

of Colorado. He is married to Marcia Courson. They have two children and four grand<br />


TAB<br />



Why Diversity is Important to the <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

9:00 a.m. – 10:15 a.m.<br />

Annapolis Ballroom 1 & 2<br />

The mortgage lending industry has made great strides in the past decade in terms of workforce<br />

diversity. Minorities, while still a small percentage of the lending workforce, are no longer<br />

invisible in the industry. The current lending environment is threatening to rollback the recent<br />

gains even though lending to minorities is still likely to outpace loans to non-minorities. Join us<br />

in this session as we hear industry professionals provide their insights on: What senior managers<br />

need to know about diversity & inclusion, diversity and inclusion as a core value, implementing<br />

the “all levels of business activities” mandate in the new housing legislation, managing diversity<br />

in a down market, new opportunities to diversify workforce and re-thinking supplier diversity<br />

strategies.<br />

Opening Remarks: Stacey Stewart<br />

Chief Diversity Officer and Senior Vice President<br />

Office of Community and Charitable Giving<br />

Fannie Mae<br />

Moderator: Jackson Davis<br />

Director<br />

Office of Diversity & Inclusion<br />

Fannie Mae<br />

Speakers: John Browning<br />

Area Manager<br />

Wells Fargo Home <strong>Mortgage</strong><br />

Karen J. Collins<br />

Corporate Vice President, Chief Diversity Officer<br />

The First American Corporation<br />

Chairman/President – The 1st American<br />

Homeownership Foundation

Why Diversity is Important to the <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Speakers continued:<br />

9:00 a.m. – 10:15 a.m.<br />

Annapolis Ballroom 1 & 2<br />

Terri Fowlkes<br />

Director, Consumer Segment Management<br />

REL Strategic Markets<br />

Citi<br />

Jack PenaSoto<br />

Senior Vice-President<br />

Community <strong>Lending</strong> Business Leader<br />

Wachovia <strong>Mortgage</strong>, FSB


Chief Diversity Officer<br />

and<br />

Senior Vice President, Office of Community and Charitable Giving<br />

Stacey D. Stewart is Fannie Mae’s chief diversity officer, Office of Diversity and<br />

Inclusion, and senior vice president, Office of Community and Charitable Giving.<br />

Stewart leads Fannie Mae’s diversity and inclusion strategy and the overall corporate<br />

giving strategy and programs.<br />

As chief diversity officer, Office of Diversity and Inclusion, Stewart is responsible for<br />

development and implementation of strategies that foster a diverse and inclusive<br />

workplace and business environment. She serves as an advisor to the chief executive<br />

officer, Board of Directors, and senior leadership team to leverage diversity as a key<br />

business driver and foster an inclusive work environment. Additionally, she works with<br />

her team and key stakeholders to align and demonstrate Fannie Mae’s diversity and<br />

inclusion commitment externally with customers, partners, and suppliers.<br />

As senior vice president, Office of Community and Charitable Giving, Stewart addresses<br />

housing and homelessness issues in Washington, DC, works to improve education and<br />

schools across the city, addresses housing challenges nationwide through housing and<br />

community development initiatives, and advances efforts to prevent and end<br />

homelessness in America. Stewart designs and implements Fannie Mae’s philanthropic<br />

initiatives to advance the company’s business goals, objectives, and mission.<br />

Prior to joining Fannie Mae in February 2007, Stewart was president and chief executive<br />

officer of the Fannie Mae Foundation. In that role, she directed the largest foundation in<br />

the U.S. dedicated to affordable housing and community development and the largest<br />

foundation in the Washington, DC, metropolitan area with a 2006 budget of $61 million.<br />

From 1995 to 1999, Stewart was vice president, Housing and Community Development,<br />

for Fannie Mae’s Atlanta, GA, office, and public affairs director from 1992 to 1995.<br />

Stewart was a vice president for Pryor, McClendon, Counts & Co., Inc., Atlanta, GA,<br />

from 1990 to 1992. Before that, she was a senior associate with Merrill Lynch.<br />

Stewart has a master of business administration from the University of Michigan and a<br />

bachelor of arts in economics from Georgetown University.<br />

She is currently co-chair of the Board of the DC Education Compact, serves on the<br />

advisory committee of the National Mitigation Counseling Program, is Secretary of the<br />

District of Columbia College Access Program, and is on the Boards of Aidan Montessori,<br />

the Federal City Council, DC Chamber of Commerce, Greater Washington Board of<br />

Trade, Survivors Fund of the Community Foundation for the National Capital Region,<br />

Hands on Network’s Corporate Service Council, National Coalition for Black Civic<br />

Participation, and One Economy.

Karen J. Collins<br />

Chief Diversity Officer<br />

The First American Corporation<br />

Karen J. Collins has been a driving force in the corporate culture and overall success of The First<br />

American Corporation since she joined First American in 1988. Under her leadership and with<br />

the full support of The First American Corporation, First American is actively forging an<br />

enterprise-wide cultural diversity and inclusion strategy.<br />

The cultural diversity strategy is designed specifically to foster an environment where all people<br />

are valued, challenged to think as leaders and are engaged for their diverse viewpoints,<br />

experiences, talents and ideas. This initiative, championed by Collins, will promote First<br />

American’s more than thirty-thousand employee workforce and its suppliers to transform the way<br />

its customers, investors, and communities served view and value First American.<br />

Prior to her current position, Collins managed senior-level strategic sales professionals and served<br />

as a senior strategist leading the direction of First American’s Client Relations division. She<br />

served as senior vice president and director of sales for strategic accounts, providing focus to First<br />

American’s sales organization, which serves mortgage lending and servicing organizations, and<br />

spans many of the company’s key business segments. She holds a bachelor’s degree in Business<br />

Administration from North Carolina A & T State University where she is also a Board of Trustee<br />

member and has completed executive education curriculum at the University of Chicago.<br />

Collins frequently speaks on leadership panels around the country and serves on various advisory<br />

councils. She is also a past recipient of the National Eagle Leadership Institute’s CareerFOCUS<br />

Eagle Award which is presented annually to a select group of African American and Latino<br />

executives who embody excellence in both corporate and community leadership. She and her<br />

family reside in the Chicagoland area.<br />

The First American Corporation, a FORTUNE 500 ® company with revenues of $8.2 billion in<br />

2007, combines advanced analytics with its vast data resources to supply businesses and<br />

consumers with valuable information products to support the major economic events of people’s<br />

lives, such as getting a job, renting an apartment, buying a car or house, securing a mortgage and<br />

opening or buying a business.

Terri J. Fowlkes<br />

Terri J. Fowlkes is a Senior Vice President and Director of Citi<strong>Mortgage</strong>’s Strategic<br />

Markets Group. In this capacity, she is responsible for developing strategies, initiatives<br />

and partnerships to grow mortgage business among minority and low- and moderateborrowers<br />

across Citi’s national footprint. Prior to joining Citi, Ms. Fowlkes has served<br />

as <strong>Mortgage</strong> Director for the National Federation of Community Development Credit<br />

Unions and as Vice President and Residential <strong>Lending</strong> Manager for Carver Federal<br />

Savings Bank. Ms. Fowlkes also serves as an adjunct professor at York College, where<br />

she teaches mortgage banking classes. Ms. Fowlkes has numerous years of experience in<br />

mortgage lending, corporate lending and venture capital. She has a strong commitment to<br />

increasing and sustaining homeownership for homeowners and potential homeowners<br />

across the nation.<br />

Ms. Fowlkes holds a B.S. and an M.B.A. from New York University's Stern School of<br />


Jack PenaSoto<br />

Community <strong>Lending</strong> Business Leader, SVP<br />

Wachovia <strong>Mortgage</strong>, FSB<br />

Charlotte, North Carolina<br />

Jack PenaSoto is currently the Community <strong>Lending</strong> Business Leader for Wachovia<br />

<strong>Mortgage</strong>, FSB. Jack and his team manage the affordable mortgage lending strategy,<br />

emerging market strategy, and regulatory compliance both externally and internally for<br />

Wachovia <strong>Mortgage</strong>.<br />

Jack has a wealth of banking experience and has worked for Bank of America as a<br />

Community Impact Manager, Retail <strong>Mortgage</strong> Account Executive, Premier Banker and<br />

Banking Center Manager. While at Bank of America Jack was active in corporate<br />

diversity initiatives.<br />

Jack PenaSoto is a Kinston, NC native and currently resides in Charlotte, NC. Jack is<br />

active in the community and serves on the boards of The J. Anthony Brown Foundation,<br />

The Charlotte Small Business Enterprise Loan Fund and The NC Initiative Capital.<br />

Jack has a passion for affordable housing and financial literacy issues. He often speaks to<br />

community groups and churches on these issues. Jack has volunteered to facilitate<br />

financial literacy classes in the Charlotte community. He is married and has two children.

The First American<br />

Corporation<br />

Deploying Supplier Diversity<br />

Karen J. Collins<br />

Chief Diversity and Inclusion Officer

2<br />

First American Five-Prong Strategy<br />

for Diversity<br />

Embed Diversity<br />

Into Client<br />

Relations<br />

Embed Diversity<br />

Into Community<br />

Relations<br />

Reflect the<br />

Available<br />

Labor Force<br />

Embed Diversity<br />

Into Human<br />

Resources<br />

Embed Diversity<br />

Into Supplier Relations

What is Supplier Diversity at First<br />

American?<br />

� A strategic focus by corporations to ensure the<br />

inclusion of minority and women owned companies<br />

in the procurement of goods and services.<br />

� The creation of a base of suppliers and business<br />

partners that are highly representative of the<br />

customer.<br />

� Takes root as part of the procurement<br />

infrastructure and seeks to create an inclusive<br />

vendor pool for contracting.

Strategies For First American’s Supplier<br />

Diversity Initiative<br />

� CEO Commitment<br />

� Develop a Compelling Business Case<br />

� Examine the Existing Supplier Base<br />

� Declare Clear Goals<br />

� Provide All Stakeholders with Value<br />

� Internally Market Supplier Diversity


Transformation<br />

Over<br />


Karen J. Collins<br />

Chief Diversity and Inclusion Officer<br />

Thank you

Developing a Winning<br />

Diversity Business Plan<br />

October 7, 2008<br />

Jack Penasoto, SVP<br />

Community <strong>Lending</strong> Business Leader

Ask Yourself…<br />

� What is your business strategy?<br />

� Why is it important to tap into diverse segments to achieve growth<br />

in customer acquisition, retention and loyalty?<br />

� How can your enterprise position itself to capture the enormous<br />

potential revenue growth represented by diverse segments?<br />

� What are your competitors doing to capture diverse customers?<br />

� What metrics and reporting are available to build the case for<br />

diversity business and sustain the business strategy?<br />

� So, what’s next?<br />


Know the Facts<br />

� Minority groups' share of $10 trillion U.S. consumer market is growing<br />

steadily, according to annual buying power study from Terry College's Selig<br />

Center for Economic Growth<br />

Minority Buying Power press release, Selig Center for Economic Growth at the University of Georgia’s Terry<br />

College of Business, 2007<br />

� The buying power of Hispanics -- now the nation's largest minority group -- will<br />

exceed $860 billion in 2007 and is whizzing its way to more than $1.2 trillion five<br />

years from now.<br />

� African American buying power will total $845 billion in 2007 and is projected to<br />

top $1.1 trillion by 2012 -- a 34 percent increase over the five-year period.<br />

� Americans of Asian ancestry, representing the third largest minority group, will<br />

see their purchasing power grow almost as fast as Hispanics over the next five<br />

years. Asian buying power is forecast to grow 45.9 percent, versus 46.3 percent<br />

for Hispanics. In dollars, Asian buying power will total $459 billion in 2007, rising<br />

to $670 billion by 2012.<br />

� Emerging Diverse Markets …...…a multibillion dollar marketplace<br />


Know the Facts – The <strong>Mortgage</strong> Opportunity<br />

2007 <strong>Mortgage</strong> Transactions -- Purchase/Refinance<br />

Applications<br />

� Asian $204,129 Million<br />

� Black $335,148 Million<br />

� Hispanic $478,518 Million<br />

Source September 19, 2008<br />

Inside <strong>Mortgage</strong> Finance<br />

Originations<br />

� Asian $105,618 Million<br />

� Black $123,858 Million<br />

� Hispanic $187,085 Million<br />

Source September 19, 2008<br />

Inside <strong>Mortgage</strong> Finance<br />


Data Sources -- Building The Case<br />

Regulatory Data <strong>Industry</strong> Data<br />

� Census<br />

� CRA Reports<br />

� FFIEC<br />

� HMDA Reports<br />

� <strong>Industry</strong> publications<br />

� <strong>Industry</strong> Research Reports<br />

� Trade Associations<br />


Build Your Strategy<br />

Strategy<br />

Executive Support<br />

Marketing &<br />

Communications<br />

Accountability<br />

Assess your markets<br />

� Strengths, Weaknesses, Opportunities, Threats<br />

(SWOT Analysis)<br />

� Consumer Product Needs<br />

� Business Process Implications<br />

Develop a compelling business case using data/research<br />

� Obtain “Buy in” from Leaders<br />

� Enlist an Executive Sponsor for the strategy<br />

Collaborate with key internal partners to develop<br />

Marketing, Messaging and Brand Strategy<br />

� Brand Relevance, Advertising<br />

� Marketing & Sales Programs and Collateral<br />

� Community Outreach & Advocacy (internal &<br />

external)<br />

� Define Success Measures<br />

� Identify Incentives, Rewards and Responsibilities<br />


Example: Relevant Marketing Collateral<br />


Go Get the Business!<br />

Questions?<br />


Diversity and Inclusion in <strong>Mortgage</strong><br />

<strong>Lending</strong><br />

Draft<br />

John Browning<br />

Area Sales Manager<br />

Wells Fargo Home<br />

<strong>Mortgage</strong><br />

October 7, 2008

Who Is Wells Fargo?<br />

Our Vision<br />

To satisfy all of our customers’ financial needs,<br />

help them succeed financially, be the premier<br />

provider of financial services in every one of<br />

our markets, and be known as one of America’s<br />

great companies.<br />


Our Commitment to Diversity and<br />

Inclusion<br />

Wells Fargo’s commitment to diversity began<br />

with Henry Wells and William Fargo….<br />


Our Commitment to Diversity and<br />

Inclusion…<br />

From Our Beginnings<br />

• Wells Fargo was founded in 1852 and<br />

immediately adopted the ethic of being<br />

"Universal Friend and Agent" to all<br />

• In 1852 we began serving diverse communities<br />

as customers and as skilled employees<br />

• In the 1880s we maintained an "Instruction to<br />

Agents" booklet which insisted upon the fair<br />

treatment of all our customers<br />


Our Commitment to Diversity and Inclusion<br />

Vision & Values…<br />

� “Proper respect must be shown to all. Let them be men, women,<br />

children, rich or poor, black or white.” (Employee Manual, 1888);<br />

� By making diversity a competitive advantage, we can make the<br />

company a better place to work, . . . give customers and communities<br />

outstanding service and deliver more value . . . . We must increase the<br />

number of people of color, women and other diverse groups in senior<br />

management. . . . We’ll continue to provide learning in diversity for all<br />

managers and supervisors. (Richard M. Kovacevich, The Vision and<br />

Values of Wells Fargo.)<br />

� “We don't want our team simply to represent our communities. We<br />

want it to be of our communities.” (John Stumpf, Speech to Senior<br />

Executives, Feb. 2006)<br />


Our Commitment to Diversity and<br />

Inclusion…<br />

Continues Today with<br />

Commitment to Diverse Communities in…<br />

• Home <strong>Mortgage</strong> Seminars<br />

• Commitment to Wealth Building<br />

• Diverse Growth Segments<br />

• Commitment to a Diverse, Inclusive Workplace<br />

• Diversity Councils<br />

• <strong>Lending</strong> to Diversity Home Buyers and Small Businesses<br />

• Financial Education<br />

• CollegeSteps Program<br />

• Philanthropy<br />

• Joint Venture Partnerships<br />


Our Commitment to Diversity and Inclusion<br />

Financial Education<br />

Seminars/Tours<br />

� Realtors, consumers and industry partners<br />

� Wealth Building Strategies<br />

� First Time Homebuyer Seminars<br />

� Down Payment Assistance Programs<br />


Our Commitment to Diversity and Inclusion<br />

Financial Education<br />

Hands On Banking<br />

� Designed to teach the basics of good<br />

money management;<br />

� Developed by Wells Fargo as a free<br />

public service<br />

Specialized Financial Literacy Outreach<br />

� Youth & Young Adults (13-21 yr old): budgeting and smart<br />

shopping, grants & loans appropriate use of credit,<br />

importance of savings)<br />

� Women (single, head-of-household): credit,<br />

homeownership, savings & investments<br />

� Seniors & Retirees (pending): wills, estate planning, reverse<br />

mortgages, trusts<br />


Our Commitment has resulted in this Wells<br />

Fargo <strong>Mortgage</strong> Track Record…<br />

• In the Period 2003 - 2007, Wells Fargo was the 2 nd highest<br />

originator of mortgages to the minority and low and moderate<br />

income segments<br />

• During this period, Wells Fargo originated more than 2.7<br />

million loans to these segments<br />

• In 2007 alone, Wells Fargo originated 391,610 mortgage<br />

loans to the minority and low-to-moderate income segments<br />


Diversity - A Critical Success Factor…<br />

� “ We view diversity and inclusiveness not just as the right<br />

thing to do, but as a market share growth opportunity.<br />

The more diverse we are, the more responsive we can be<br />

to the financial needs of our diverse customers and the<br />

better we’ll be able to help them succeed financially.” (<br />

John Stumpf, Diversity Magazine)<br />

� Workforce diversity is a key component of Wells Fargo’s<br />

success<br />

� Hence…Wells Fargo strives to reflect the communities we<br />

serve.<br />


Recruiting Diverse Talent – a Critical<br />

Success Factor<br />

� <strong>Mortgage</strong> company’s principle goal: Grow<br />

market share<br />

� Real time activity requiring experienced<br />

sales professionals<br />

� Challenge therefore….<br />


Finding Experienced Diverse Sales<br />

Professionals<br />

What we know…<br />

� Minority business opportunity has always<br />

been there<br />

� <strong>Mortgage</strong> brokers have historically<br />

dominated the diverse mortgage segments<br />

� Major lending institutions investment in this<br />

segment has really only increased in the<br />

last 10 years<br />


Finding Experienced Diverse Sales<br />

Professionals<br />

� Recruiting diverse talent is challenged by:<br />

� time in the industry<br />

� dominance of the Broker model in diverse<br />

communities<br />

� lack of presence in major lending institutions<br />

� retail/broker business model differences<br />

� referral source focus<br />

� lack of candidate awareness<br />


Retaining Diverse Sales Professionals<br />

� Retaining Diverse Sales talent is<br />

challenged by market volume shifts:<br />

� Refinance boom experience<br />

� Contracting credit market experience<br />

� Focus on sustaining the commitment to the<br />

business opportunity vs. the regulatory<br />

imperative<br />


Best Practices in Recruiting Diverse<br />

Talent<br />

� When recruiting diverse talent<br />

� Hire diverse Branch managers with existing teams<br />

experienced in mortgage production with major lending<br />

institutions<br />

� Hire diverse talent that possesses an extensive<br />

referral base<br />

� Leverage your currently existing internal network of<br />

successful diverse talent to identify and recruit diverse<br />

candidates<br />

� Establish Realtor outreach initiatives focused on<br />

identifying diverse lending talent<br />


Best Practices in Retaining Diverse<br />

Talent<br />

� Increase retention of diverse talent by ensuring<br />

your diverse talent<br />

� has a balanced book of business<br />

� cultivates productive referral sources<br />

� establishes internal connectivity with top producers<br />

(Mentor) and other successful diverse producers<br />

� is supported by management that is informed and<br />

exposed to the diverse talent and lending opportunity<br />


Thank you<br />

John Browning<br />

Area Sales Manager<br />

Wells Fargo Home <strong>Mortgage</strong><br />

john.browning@wellsfargo.com<br />


Why Diversity & Inclusion are<br />

Important to the <strong>Mortgage</strong><br />

<strong>Lending</strong> <strong>Industry</strong><br />

<strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong> Strategic Markets<br />

and Diversity <strong>Conference</strong><br />

Terri J. Fowlkes<br />

Director, Strategic Markets<br />

Citi<strong>Mortgage</strong><br />

October 7, 2008

Confidential - Copyright © Citi 2008 All Rights Reserved<br />

Overview<br />

• Why is Diversity and Inclusion Important to Citi<strong>Mortgage</strong> and the<br />

<strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong>?<br />

– Diverse Customer Base<br />

• Mix of our workforce to mirror the markets that we serve (better understanding of<br />

the needs of the customers that we serve)<br />

• Customers often feel more comfortable working with people that are of like<br />

backgrounds and speak the same language<br />

– Growing Diverse U.S. Population<br />

– Increased Income and Buying Power of Ethnic Minorities and Women<br />

– Regulatory / Fair <strong>Lending</strong> Obligations<br />

• Equal Credit Opportunity Act<br />

• Fair Housing Act<br />

– It is the Right Thing to Do!<br />


Confidential - Copyright © Citi 2008 All Rights Reserved<br />

DiversityInc<br />

Citi is ranked 45th on DiversityInc’s 2008 Top 50<br />

Companies for Diversity!<br />

The 50 Companies were chosen based on remarkable and consistent<br />

strength in 4 critical areas of diversity management:<br />

• CEO Commitment<br />

• Human Capital<br />

• Corporate and Organizational Communications<br />

• Supplier Diversity<br />


• <strong>Mortgage</strong> Market Dislocation<br />

• Regulatory Intervention<br />

• Many Lenders Exiting the Business<br />

• Tightened Credit Standards<br />

– Higher FICO scores required<br />

– Lower debt-to-income ratios allowed<br />

– Higher down payments required<br />

– Less uses of non-traditional / alternative credit<br />

• Declining Markets<br />

Confidential - Copyright © Citi 2008 All Rights Reserved<br />

Current <strong>Mortgage</strong> Environment<br />

• Increased Housing Inventory due to Foreclosure /<br />

Downward Pressure on Home Prices<br />

• Depleted Home Equity<br />


Confidential - Copyright © Citi 2008 All Rights Reserved<br />

Impact<br />

• Release of 2007 HMDA Data Reflects:<br />

• Decline in loan originations to Hispanics and African Americans<br />

• Home <strong>Lending</strong> activity fell more than 20% in 2007 compared with the prior year<br />

• Differences in the incidence of higher-priced lending between racial and ethnic<br />

groups continued as did the differences in denial rates on loan applications<br />

• Home purchase loans to Hispanic and Black borrowers fell 49% and 35%, respectively<br />

• Loans to non-Hispanic white borrowers fell 22% over the same period<br />

• FEAR!<br />

• Many potential and existing homeowners are fearful of homeownership and new<br />

home purchases<br />


1. Dedicated / Focused / Diverse Strategic Markets Team<br />

2. Strategic Partnerships / Alliances<br />

3. Focused Initiatives<br />

4. Competitive Products<br />

5. High Level of Integrity and Fair Practices<br />

Confidential - Copyright © Citi 2008 All Rights Reserved<br />

Citi’s Citi s Strategic Focus<br />


• Dedicated / Focused / Committed / Diverse<br />

Strategic Markets Team within Citi<strong>Mortgage</strong><br />

• Mission:<br />

- To meet the mortgage needs of ethnic minority (African-<br />

Americans, Asians and Hispanics)<br />

and low- and moderate-income (LMI) consumers<br />

• Leverage Citi’s wealth of resources for the<br />

benefit of the consumer<br />

Confidential - Copyright © Citi 2008 All Rights Reserved<br />

Strategic Markets Team<br />


• GSEs<br />

• MI Companies<br />

• Non-Profit Organizations<br />

• Community Development Organizations<br />

• Real Estate Professionals<br />

– Title Companies<br />

– Realtors<br />

– Builders<br />

– Insurance Brokers<br />

• Trade Organizations<br />

• Technology / Data Companies<br />

• Community Leaders<br />

• Other Lenders<br />

– <strong>Mortgage</strong> Brokers<br />

– Correspondent Lenders<br />

• Internal Citi Team Members<br />

• And More…<br />

Confidential - Copyright © Citi 2008 All Rights Reserved<br />

Strategic Partnerships/ Alliances<br />


• Home Buyer / Home Owner<br />

• Faith Based Focus<br />

Confidential - Copyright © Citi 2008 All Rights Reserved<br />

Education Focus<br />

• Employer Based Focus<br />

• Community Based Outreach Focus<br />

• Trusted Adviser Focus<br />

Focused Initiatives<br />


• Access<br />

• R-HOME<br />

• Home Run<br />

Confidential - Copyright © Citi 2008 All Rights Reserved<br />

Unique and Competitive Products<br />

Aim to serve the unique needs<br />

of the diverse consumer<br />

segment better than anyone<br />

else via the right mix of<br />

products, processes and<br />

customer service.<br />


Confidential - Copyright © Citi 2008 All Rights Reserved<br />

High Level of Integrity and Fair Practices<br />

We aim to:<br />

• Provide stability in the midst of chaos and<br />

uncertainty about whom you can trust and<br />

what businesses will be around for the longterm.<br />

• Provide high-standards of excellence both in<br />

terms of our product offerings and our<br />

customer service.<br />

• Be the best in Diverse <strong>Lending</strong>!<br />


TAB<br />



Impact of Housing Legislation on Minority Homeownership<br />

Opportunities<br />

10:30 a.m. – 11:45 a.m.<br />

Annapolis Ballroom 1 & 2<br />

The new paradigm brought on by the groundbreaking Housing and Economic Recovery Act of<br />

2008 (HERA) is likely to radically transform the minority and affordable lending landscape.<br />

New resources will be made available for troubled borrowers through the Hope for Homeowners<br />

provisions. The stock of affordable housing will be stimulated by emergency assistance<br />

provisions that will provide billions of dollars to states for acquiring foreclosed properties to<br />

rehabilitate and resale. <strong>Lending</strong> operations are expected to be dramatically altered by new<br />

originator licensing standards; FHA modernization, risk based pricing, and enhanced mortgage<br />

disclosures to consumers. Affordable housing and minority lending are also likely to be impacted<br />

by the following: The expected transformation of the GSE’s, CRA-like GSE affordable housing<br />

goals, the use of new tax credits, and affordable housing trust funds.<br />

Moderator: Michael Taliefero<br />

Managing Director<br />

Compliance Tech<br />

Speakers: Tim Doyle<br />

Vice President<br />

<strong>Conference</strong> of State Bank Supervisors, Inc<br />

Tom Goyda<br />

Vice President<br />

Research and Analysis<br />

Wells Fargo<br />

Joseph Pigg<br />

Vice President and Senior Counsel<br />

<strong>Mortgage</strong> Finance<br />

American Bankers Association

Michael Taliefero<br />

Michael Taliefero is Managing Director and co-founder of the Washington D.C.based<br />

Compliance Technologies, Inc. (ComplianceTech). ComplianceTech is an<br />

innovative consulting firm specializing in fair lending and risk analysis services to banks,<br />

thrifts, mortgage companies and government agencies. Mr. Taliefero has spent his entire<br />

professional career studying the housing industry activities in a regulatory context. In<br />

recent years he has been involved in integrating social science research methods with<br />

legal analysis to improve executive decision-making. Mr. Taliefero supervises lender<br />

self-evaluations, compliance audits, compliance technology development, and<br />

compliance-related statistical analyses and research for clients nationwide.<br />

Mr. Taliefero formerly held the position of Staff Vice President, Government Agency<br />

Relations for the <strong>Mortgage</strong> Bankers Association of America (MBAA). In the various<br />

MBAA positions he led lobbying efforts on a wide range of bank/thrift regulatory and<br />

secondary market issues.<br />

Prior to his tenure at the MBAA, Mr. Taliefero served as Ginnie Mae's Section Chief<br />

Attorney, a supervisory position in the Office of the General Counsel at HUD. Previous<br />

attorney positions at HUD include tax-exempt bond financing attorney and Fannie Mae<br />

regulatory oversight attorney. Mr. Taliefero holds a J.D. degree from Northwestern<br />

University School of Law and a B.S. degree in Business Management (Finance) from<br />

Indiana University. He also has also completed two years of graduate study in public<br />

finance at The American University. Mr. Taliefero has over 26 years experience in the<br />

housing and mortgage finance industry.

Tom Goyda<br />

Vice President<br />

Wells Fargo<br />

Tom Goyda currently manages research and analysis for the Government and <strong>Industry</strong><br />

Relations team at Wells Fargo’s Home and Consumer Finance Group, and has 20 years<br />

of experience in the financial services industry through positions with companies<br />

including Citigroup and Mercantile Bancorporation,. Prior to joining Wells Fargo, Tom<br />

spent six years with Weber Shandwick, a major global public relations agency, were he<br />

managed accounts for clients including the Federal Reserve Banks Retail Payments<br />

Office, MasterCard International, CIGNA, Deutsche Bank and Citi<strong>Mortgage</strong>. A graduate<br />

of Northwestern University with a degree in Radio-TV-Film, Tom began his professional<br />

career in 1984 on the Washington, D.C. staff of U.S. Senator John C. Danforth.

Tim Doyle is a Vice President of <strong>Industry</strong> and Agency Relations with the<br />

<strong>Conference</strong> of State Bank Supervisors (CSBS). At CSBS, Mr. Doyle is<br />

responsible for coordinating state mortgage regulators in developing<br />

Nationwide <strong>Mortgage</strong> Licensing System (NMLS). In this capacity, Mr. Doyle<br />

is responsible for the legislative and regulatory policies that seek to create a<br />

system of strong and efficient regulation.<br />

Prior to joining CSBS, Mr. Doyle was a Senior Director in the Government<br />

Affairs department of the <strong>Mortgage</strong> Bankers Association (MBA). At MBA, Mr.<br />

Doyle managed policy issues concerning residential loan production,<br />

including government lending, affordable housing, licensing, and mortgage<br />

fraud issues.<br />

Previous to working at MBA, Mr. Doyle worked for the U.S. Department of<br />

Agriculture (USDA) Rural Development, where he worked on community<br />

development issues, with responsibilities throughout New York State. Mr.<br />

Doyle has also worked at the Community Preservation Corporation, a notfor-profit,<br />

multi-family affordable housing lender, where he originated loans<br />

and consulted on HUD’s Mark-to-Market program, evaluating Section 8<br />

subsidized properties for debt restructuring. He began his housing career<br />

working with the Federal Housing Administration (FHA) in the Single Family<br />

Housing Programs and Policies Division.<br />

Mr. Doyle, a native of Virginia, is a graduate of the College of William & Mary<br />

and holds a master’s degree in public administration from the Maxwell<br />

School of Citizenship and Public Administration at Syracuse University.


Joseph Pigg is Vice President and Senior Counsel for the American Bankers Association. In this capacity<br />

Joe serves as legislative counsel on housing, real estate finance, Federal Home Loan Bank and other<br />

government sponsored enterprise related issues as well as on general financial industry issues.<br />

Prior to joining the ABA, Joe was a legislative representative for Mayor Rudolph Giuliani of New York<br />

City and a banking aide to U.S. Representative Doug Bereuter of Nebraska. Joe worked closely on the<br />

development of the HUD Section 184 Indian Housing Loan Guarantee program as well as the development<br />

and implementation of a variety of rural housing programs.<br />

A native of Homer, Nebraska, Joe graduated with honors from the University of Nebraska where he<br />

received a B.A. in English Literature, and Georgetown University Law Center where he earned his J.D.<br />

He lives in Washington, DC.

Housing and Economic Recovery Act of 2008,<br />

H.R. 3221<br />

NCSHA Summary<br />

Housing Assistance Tax Act of 2008<br />

(Housing Bond and Credit Cap Increase and<br />

Modernization Provisions)

Housing and Economic Recovery Act of 2008, H.R. 3221<br />

NCSHA Summary<br />

Housing Assistance Tax Act of 2008<br />

(Housing Bond and Credit Cap Increase and Modernization Provisions)<br />

Housing Credit Modifications<br />

• Provides a 20-cent per capita Housing Credit cap increase for 2008-2009 and increases<br />

the small state minimum by 10 percent for those same years.<br />

• Repeals permanently the Alternative Minimum Tax on Housing Credits for buildings<br />

placed in service after December 31, 2007.<br />

• Sets the 70 percent present value (“9 percent”) Credit applicable percentage at the<br />

greater of current law and 9 percent, with a sunset date of December 31, 2013, effective<br />

for buildings placed in service after date of enactment.<br />

• Eliminates below-market federal loans from the definition of federally subsidized<br />

properties, allowing the 9 percent Credit on all federally subsidized properties, except<br />

for tax-exempt bond financed properties, effective for buildings placed in service after<br />

date of enactment.<br />

• Clarifies that the eligible basis of a building shall not include any costs financed with the<br />

proceeds of a federally funded grant, effective for buildings placed in service after date<br />

of enactment.<br />

• Eliminates the prohibition on the 30 percent basis boost for HOME-assisted properties in<br />

qualified census tracts (QCT) or difficult development areas (DDA), effective for<br />

buildings placed in service after date of enactment.<br />

• Authorizes allocating agencies to award a 30 percent “basis boost” to buildings that<br />

states determine need the boost to be economically feasible, effective for buildings<br />

placed in service after date of enactment.<br />

• Clarifies the general public use test to explicitly allow Credit developments that<br />

establish tenancy restrictions for persons with special needs, tenants who are involved<br />

in artistic or literary activities, and persons who are members of a specified group under<br />

a Federal or state program or policy that supports housing for such a specified group,<br />

effective for buildings placed in service before, during, and after date of enactment.<br />

• Repeals the Housing Credit ten-year (anti-churning) rule for acquisition of Housing<br />

Credits for projects currently subsidized pursuant to certain specified HUD and USDA<br />

housing programs and similar state assisted programs, effective for buildings placed in<br />

service after date of enactment.<br />

o Programs included are HUD Section 8, Section 221(d)(3), Section 221(d)(4),<br />

Section 236, and USDA Section 515 and any other housing program<br />

administered by HUD or the Rural Housing Service of the Department of<br />

Agriculture.<br />

• Modifies HUD’s income limit methodology for calendar years after 2008 to require HUD<br />

to increase applicable area median incomes by the amount area median incomes rise,<br />

even if the HUD-determined area median incomes would be frozen under HUD’s 2007<br />

and 2008 income limit methodology.<br />

Revised, 8/6/08

• Adds energy efficiency and historic character to items that must be factored into state<br />

QAPs, effective for allocations made after December 31, 2008.<br />

• Modifies the Housing Credit student rule to make children who received foster care<br />

assistance eligible for Housing Credit apartments, effective for determinations after date<br />

of enactment.<br />

• Defines area median income in rural areas as the greater of the area median income and<br />

the national non-metropolitan median income, effective for income determinations<br />

made after date of enactment, applicable only to 9 percent Credit developments.<br />

• Increases the minimum rehabilitation threshold for acquisition and rehabilitation<br />

Credits to the greater of 20 percent of eligible basis and $6,000 per unit, effective for<br />

Housing Credit allocations made after date of enactment for non-bond-financed<br />

developments and effective for bonds allocated after date of enactment for bondfinanced<br />

developments. Adjusts per unit limit for inflation in future years.<br />

• Expands the allowable basis for community service facilities, effective for buildings<br />

placed in service after date of enactment.<br />

• Relaxes the Housing Credit related party rule restricting investment in properties<br />

owned by related parties, effective for buildings placed in service after date of<br />

enactment. Expands allowable related party interest to 50 percent from 10 percent.<br />

• Allows Housing Credits on properties financed with HUD’s Section 8 Moderate<br />

Rehabilitation program, effective for buildings placed in service after date of enactment.<br />

• Extends the time developers have to meet the 10 percent carryover allocation test to one<br />

year from allocation, effective for buildings placed in service after date of enactment.<br />

• Eliminates the annual income recertification requirement for 100 percent qualified unit<br />

developments, applicable for years ending after the date of enactment.<br />

• Repeals the Housing Credit recapture bond rule, effective for future dispositions and<br />

past dispositions if: a) it is reasonably expected the building will continue to be<br />

operated as a qualified low-income building; and b) the taxpayer elects to be subject to<br />

the new longer statute of limitations.<br />

• Excludes military employees’ basic allowance for housing from the definition of income<br />

if they are housed in a building located in a county with a military base that had its<br />

population grow by 20 percent or more between December 31, 2005 and June 1, 2008, or<br />

any county adjacent to such a county. Applies to new and existing 9 percent Credit<br />

buildings for determinations made after date of enactment and before January 1, 2012.<br />

GAO Study<br />

• Directs the GAO to complete a report analyzing the implementation of the bill’s<br />

Housing Credit changes and the distribution of Housing Credit allocations before and<br />

after the effective date of such modifications by December 31, 2012.<br />

Housing Bond Provisions<br />

• Provides $11 billion in new tax-exempt Housing Bond authority in 2008 for single-family<br />

and multifamily housing activities. Authority is available through 2010.<br />

• Clarifies that unused authority in 2008 and 2009 can be carried forward, but amounts<br />

carried forward must be used for housing issues.<br />

Revised, 8/6/08

• Makes refinancing an eligible MRB activity for 2008-2010 for adjustable rate singlefamily<br />

mortgages made after December 31, 2001, and before January 1, 2008, that the<br />

bond issuer determines would be reasonably likely to cause financial hardship to the<br />

borrower if not refinanced.<br />

• Exempts permanently Housing Bonds from the Alternative Minimum Tax, effective for<br />

bonds issued after date of enactment.<br />

• Allows HFAs to use Housing Bonds for single-room occupancy units, effective for bonds<br />

issued after date of enactment.<br />

• Modifies the tax-exempt bond next available unit and student rules to make them<br />

consistent with the Credit rules, effective for bonds issued after date of enactment.<br />

• Extends MRB disaster relief by waiving the first-time homebuyer rule and increasing<br />

purchase price and income limits to targeted area requirements in presidentially<br />

declared disaster areas established on or after May 1, 2008 and on or before January 1,<br />

2010, effective for bonds issued after May 1, 2008.<br />

• Permits recycling of tax-exempt multifamily bonds—<br />

o If the second (refunding) bond is issued within six months of loan repayment and<br />

not later than four years of original issuance.<br />

o Second bond (refunding bond) does not generate new Housing Credits.<br />

o Effective for loan repayments made after date of enactment.<br />

First-Time Homebuyer Credit<br />

• Establishes a first-time homebuyer refundable tax credit equal to 10 percent of the<br />

purchase price of a principal residence, not to exceed $7,500.<br />

• Phases out the credit for taxpayers with incomes over $75,000 ($150,000 for joint<br />

returns).<br />

• Prevents credit from being allowed to any taxpayer for any taxable year if:<br />

o The taxpayer receives the District of Columbia first-time homebuyer credit.<br />

o The residence is financed by the proceeds of a tax-exempt MRB.<br />

o The taxpayer is a nonresident alien.<br />

o The taxpayer disposes of such residence before the close of the taxable year.<br />

• Allows the credit for purchases on or after April 9, 2008 and before July 1, 2009.<br />

• Requires taxpayers receiving the credit to repay it over 15 years in equal installments by<br />

imposing a surcharge on the taxpayers’ annual income tax.<br />

Revised, 8/6/08

Emergency Assistance for the Redevelopment of Abandoned and Foreclosed Homes<br />

(Neighborhood Stabilization Funding)<br />

Key Provisions for HFAs<br />

• Appropriates $3.92 billion for grants to states and localities for the redevelopment of<br />

abandoned and foreclosed homes and $180 million for housing counseling.<br />

• Requires HUD to establish a funding allocation formula based on the number and<br />

percentage of home foreclosures, subprime mortgages, and homes in default or<br />

delinquency in each state or locality.<br />

• Amounts appropriated will be treated as though such funds were community<br />

development block grant (CDBG) funds. This implies 70 percent of the funds will be<br />

distributed to localities and 30 percent to states, as under the CDBG program.<br />

• Establishes a minimum state allocation of 0.5 percent of the funds ($19.6 million based<br />

on $3.92 billion amount).<br />

• Requires all funds be used with respect to individuals and families whose income does<br />

not exceed 120 percent of area median income (AMI).<br />

• Requires that at least 25 percent of the funds be used for the purchase and<br />

redevelopment of homes and properties that will be used to house individuals and<br />

families with incomes not greater than 50 percent of AMI.<br />

• Requires states and local governments to give priority emphasis and consideration to<br />

areas with the greatest need, including those: with the greatest percentage of home<br />

foreclosures, the highest percentage of subprime mortgages, and those at risk of<br />

increased foreclosures.<br />

• Directs states and local governments to use their allocation within 18 months of receipt.<br />

• Directs entities approved by HUD or the Neighborhood Reinvestment Corporation<br />

(NRC) and state housing finance entities receiving foreclosure mitigation counseling<br />

funds to identify and coordinate with nonprofit organizations operating national or<br />

statewide toll-free foreclosure prevention hotlines.<br />

Other Significant Provisions<br />

Eligible Uses<br />

• Allows funds to be used for establishing financing mechanisms for purchase and<br />

redevelopment of foreclosed homes, purchasing and rehabilitating properties that have<br />

been abandoned or foreclosed, establishing land banks for foreclosed homes,<br />

demolishing blighted structures, and redeveloping demolished or vacant properties.<br />

• Purchases of foreclosed homes must be at a discount from the current market appraised<br />

value of the home or property.<br />

• Sales of these homes and properties to an individual as a primary residence must be in<br />

an amount equal or less than the cost to acquire and rehabilitate such home or property.<br />

• Creates a five-year reinvestment period in which revenue from the sale, rental,<br />

redevelopment, rehabilitation, or other eligible use in excess of the cost to acquire and<br />

rehabilitate the home or property must be used by the state or locality in accordance<br />

with the provisions of this Act.<br />

• No matching funds are required.<br />

Revised, 8/6/08

• Requires the Secretary ensure, to the maximum extent practicable and for the longest<br />

feasible term, that the homes and properties remain affordable.<br />

Housing Counseling<br />

• Appropriates $180 million to the NRC to remain available until September 30, 2008 for<br />

foreclosure mitigation activities.<br />

• Requires the NRC to use $30 million of the $180 million in counseling funds to make<br />

grants to counseling intermediaries or to hire attorneys and assist homeowners with<br />

legal issues directly related to the homeowner’s foreclosure, delinquency, or short sale.<br />

• Requires that at least 15 percent of counseling funds be provided to counseling<br />

organizations that target loss mitigation counseling services to minority and low-income<br />

homeowners or provide such services in neighborhoods with high concentrations of<br />

minority and low-income homeowners.<br />

Revised, 8/6/08

Key Provisions for HFAs<br />

FHA Modernization Act of 2008<br />

• Increases the FHA loan limit from 95 percent to 115 percent of area median home price,<br />

up to 150 percent of the GSE conforming loan limit, or $625,000, effective January 1,<br />

2009.<br />

• Requires a down payment of at least 3.5 percent for any FHA loan.<br />

• Places a 12-month moratorium on HUD implementation of risk-based premiums.<br />

Other Significant Provisions<br />

• Prohibits seller-financed down payments.<br />

• Allows down payment assistance from family members.<br />

• Imposes a 100 percent loan-to-value (LTV) ratio cap on FHA-insured mortgages. Adds<br />

the FHA upfront mortgage insurance premium to the insured mortgage, including it in<br />

the calculation of the LTV ratio.<br />

• Expands HUD’s Home Equity Conversion <strong>Mortgage</strong> (HECM) program.<br />

• Establishes a pilot program to test alternative automated underwriting systems for<br />

borrowers without sufficient credit history.<br />

• Directs HUD to consult with industry, the Neighborhood Reinvestment Corporation<br />

(NRC), and other entities involved in foreclosure prevention activities to develop and<br />

implement a plan to improve FHA’s loss mitigation process.<br />

• Establishes a three-year pre-purchase homeownership counseling demonstration.<br />

Multifamily Insurance Premiums<br />

• Prevents HUD from increasing FHA multifamily premiums until October 1, 2009.<br />

Manufactured Housing<br />

• Restructures FHA’s manufactured housing insurance program and increases consumer<br />

protections for manufactured home residents.<br />

Revised, 8/6/08

Key Provisions for HFAs<br />

Federal Housing Finance Regulatory Reform Act of 2008<br />

(Government-Sponsored Enterprises (GSE) Reform)<br />

• Establishes a GSE-financed housing trust fund to provide grants to states for rental and<br />

homeownership activities targeted to extremely low-income families.<br />

• Requires Fannie Mae and Freddie Mac to set aside an amount equal to 4.2 basis points<br />

for each dollar of the unpaid principal balance of its total new business purchases and to<br />

transfer 65 percent of that amount to HUD to fund the new Housing Trust Fund and 35<br />

percent to Treasury to fund the new Capital Magnet Fund.<br />

• Directs all the GSE set-aside funds the first year, half of the funds the second year, and<br />

25 percent of the funds the third year to a special fund to offset the costs of the new FHA<br />

refinancing program.<br />

• Increases Fannie Mae and Freddie Mac’s high-cost area loan limits to the lesser of 115<br />

percent of the median house price and 150 percent of the conforming loan limit, or<br />

$625,000, effective January 1, 2009.<br />

• Strengthens Fannie Mae and Freddie Mac’s affordable housing goals by lowering the<br />

income limit on qualifying mortgages from 100 percent of area median income (AMI) to<br />

80 percent of AMI; requiring Fannie Mae and Freddie Mac to serve a variety of<br />

underserved markets, such as rural areas, manufactured housing, and preservation; and<br />

expanding the regulator’s enforcement powers.<br />

Other Significant Provisions<br />

New Regulator with Expanded Powers<br />

• Creates a new, independent GSE regulator named the Federal Housing Finance Agency<br />

(FHFA).<br />

• Gives the FHFA director banking regulator-type powers over Fannie Mae, Freddie Mac,<br />

and the Federal Home Loan Banks (FHLBs).<br />

• Requires the director to establish criteria for the portfolio holdings of the GSEs and to<br />

establish risk-based capital requirements for the GSEs and FHLBs.<br />

• Gives the Federal Reserve Board a consultative role in advising the new GSE regulator<br />

on capital standards and other regulations.<br />

• Requires each GSE to obtain initial approval from the director before offering any new<br />

product.<br />

• Sets the conforming loan limits for Fannie Mae and Freddie Mac at $417,000 for a<br />

mortgage on a single-family home. Allows the FHFA to adjust the limit on January 1 of<br />

each year to recognize price changes.<br />

• Gives Treasury temporary authority to purchase obligations and securities issued by the<br />

GSEs, if the Treasury Secretary determines the action is necessary to provide stability to<br />

the financial markets, prevent disruptions in the availability of mortgage finance, and<br />

protect the taxpayer.<br />

Revised, 8/6/08

Mission Improvement<br />

• Requires the director to give full credit toward the achievement of the multifamily<br />

special affordable housing goal to units in multifamily housing that otherwise qualify<br />

under the goal and that are financed by tax-exempt or taxable bonds issued by a state or<br />

local housing finance agency, if the bonds, in whole or in part, are secured by a<br />

guarantee of the enterprise or are purchased by the enterprise (with the exception that<br />

less than full credit may be given for purchases of investment grade bonds, to the extent<br />

that such purchases do not provide a new market or add liquidity to the existing<br />

market).<br />

• Requires new affordable housing goals similar to those that apply to Fannie Mae and<br />

Freddie Mac for FHLB mortgage purchase programs and requires the FHLBs to create a<br />

public-use database for the programs.<br />

• Allows Treasury-certified Community Development Financial Institutions (CDFIs) to<br />

join FHLBs. Allows CDFI FHLB members to use FHLB advances for community<br />

development purposes.<br />

Affordable Housing Trust Fund<br />

• Establishes a Housing Trust Fund to provide grants to states for use:<br />

o To increase and preserve the supply of rental housing for extremely low and very<br />

low-income families, including homeless families; and<br />

o To increase homeownership for extremely low and very low-income families.<br />

• Allows states receiving grants to designate a state housing finance agency, housing and<br />

community development entity, tribally designated housing entity, or any other<br />

qualified instrumentality of the state to receive the grant funds.<br />

• Requires the HUD Secretary to establish a needs-based formula for distributing funds to<br />

the states within 12 months of enactment of the bill.<br />

• Establishes a minimum state allocation of $3 million.<br />

• Requires the state or state-designated entity receiving grant funds to establish an<br />

allocation plan.<br />

• Defines eligible activities as production, preservation, and rehabilitation of rental<br />

housing and production, preservation, and rehabilitation of housing for<br />

homeownership, including down payment assistance, closing cost assistance, and<br />

assistance for interest rate buy-downs.<br />

• All assistance must be used to benefit very low- income families (with incomes not<br />

greater than 50 percent of area median income (AMI)) and at least 75 percent of<br />

assistance received must be used to benefit extremely low-income families (with<br />

incomes not greater than 30 percent of AMI).<br />

• Limits state spending on homeownership activities to not more than 10 percent of total<br />

assistance provided.<br />

• Requires state grantees to use or commit all funds within two years of when they<br />

become available.<br />

• Requires state grantees to submit an annual report to the Secretary describing the<br />

activities funded by the grants and compliance with established allocation plans.<br />

Capital Magnet Fund<br />

Revised, 8/6/08

• Establishes the Capital Magnet Fund within the Treasury’s Community Development<br />

Financial Institutions Fund.<br />

• Directs Treasury to carry out a competitive grant program to attract private capital and<br />

increase investment for:<br />

o The development, preservation, rehabilitation, or purchase of affordable housing for<br />

primarily extremely low, very low, and low-income families; and<br />

o Economic development activities or community service facilities which, in<br />

conjunction with affordable housing activities, stabilize or revitalize a low-income<br />

area or underserved rural area.<br />

• Defines eligible grantees as Treasury-certified community development institutions and<br />

nonprofit organizations having as one of their principal purposes the development or<br />

management of affordable housing.<br />

Set-Aside Provisions<br />

• Allows the Director to suspend the set-aside requirement if it would contribute to the<br />

financial instability of the enterprise, would cause the enterprise to be undercapitalized,<br />

or would prevent the enterprise from successfully completing a capital restoration plan.<br />

• Prohibits Fannie Mae and Freddie Mac from passing the cost of the set-asides to lenders.<br />

Revised, 8/6/08

Key Provisions for HFAs<br />

HOPE for Homeowners Act of 2008<br />

(FHA Foreclosure Prevention Refinancing Program)<br />

• Authorizes the FHA to insure refinance loans for distressed borrowers to prevent<br />

foreclosures.<br />

• Authority goes into effect for mortgage commitments on or after October 1, 2008 and<br />

expires September 30, 2011.<br />

• Limits the aggregate original principal obligation of all mortgages insured to $300<br />

billion.<br />

• Limits mortgage amounts to not more than 90 percent of the appraised value of the<br />

property.<br />

• Requires existing mortgage holders to accept the proceeds of the insured loan as<br />

payment in full for all indebtedness.<br />

• <strong>Mortgage</strong>s must bear interest at a single rate that is fixed for the entire term of the<br />

mortgage and have a maturity of not less than 30 years.<br />

• The principal obligation amount of each mortgage shall not exceed 132 percent of the<br />

2007 FHA mortgage insurance program limit for the area in which the property is<br />

located.<br />

Other Significant Provisions<br />

• Restricts eligibility to mortgages on principal residences.<br />

• Creates a Board, composed of the HUD Secretary, the Secretary of the Treasury, the<br />

Chair of the Board of Governors of the Federal Reserve System, and the Chair of the<br />

Board of Directors of the Federal Deposit Insurance Corporation, to establish program<br />

requirements and standards and to provide necessary guidance.<br />

Requirements for Insured <strong>Mortgage</strong>s<br />

• The mortgagor must lack the capacity to pay the existing mortgage.<br />

• The mortgagor must certify that there was not intentional default on the mortgage or<br />

other debt and that no false information was used to obtain any eligible mortgage.<br />

• The mortgagor must have had a mortgage debt-to-income ratio, including all existing<br />

mortgages, greater than 31 percent as of March 1, 2008.<br />

• Requires lenders to waive or forgive all penalties for prepayment or refinancing and all<br />

fees and penalties related to default or delinquency on the eligible mortgage.<br />

• A mortgagor may not grant a new second lien on the mortgaged property during the<br />

first five years of term of the newly insured mortgage, with exceptions for second liens<br />

necessary to ensure the maintenance of property standards. Second liens cannot reduce<br />

the value of the Government’s equity in the borrower’s home and, when combined with<br />

the mortgagor’s existing mortgage indebtedness, cause total indebtedness to exceed 95<br />

percent of the home’s appraised value at time of the second lien.<br />

• Establishes a 3 percent upfront mortgage insurance premium and a 1.5 percent annual<br />

premium for all mortgages insured under this program.<br />

Revised, 8/6/08

• Directs the Board to establish reasonable limits on origination fees and procedures to<br />

ensure that interest rates are commensurate with market interest rates.<br />

• Establishes an equity-sharing system applicable if a HOPE mortgage property is sold or<br />

refinanced within five years, as follows:<br />

o Within one year, the Secretary is entitled to 100 percent of the equity.<br />

o After one year but within two, the Secretary is entitled to 90 percent of the equity<br />

and the mortgagor is entitled to 10 percent.<br />

o After two years but within three, the Secretary is entitled to 80 percent of the equity<br />

and the mortgagor is entitled to 20 percent.<br />

o After three years but within four, the Secretary is entitled to 70 percent of the equity<br />

and the mortgagor is entitled to 30 percent.<br />

o After four years but within five, the Secretary is entitled to 60 percent of the equity<br />

and the mortgagor is entitled to 40 percent.<br />

o After five years, the Secretary is entitled to 50 percent of the equity and the<br />

mortgagor is entitled to 50 percent.<br />

HOPE Fund<br />

• Establishes within FHA a revolving fund called the Home Ownership Preservation<br />

Entity (HOPE) Fund to be used for mortgage insurance obligations.<br />

• Requires the Board to submit monthly reports to Congress identifying progress of the<br />

HOPE for Homeowners Program.<br />

• Authorizes Ginnie Mae to guarantee securities based on and backed by a trust or pool<br />

composed of HOPE mortgages.<br />

• Authorizes HUD to insure mortgages under this program effective for commitments<br />

made on or after October 1, 2008 and on or before September 30, 2011.<br />

Study of Auction or Bulk Refinance Program<br />

• Directs the Board to study the need for an auction or bulk refinancing mechanism to<br />

refinance existing mortgages that are at risk of foreclosure.<br />

Revised, 8/6/08

<strong>Mortgage</strong> Foreclosure Protections for Servicemembers<br />

• Temporarily increases the maximum loan guarantee for Veterans Affairs-guaranteed<br />

loans to 25 percent of the higher of the applicable GSE loan limit and 125 percent of the<br />

area median price for a single-family residence (provided the amount does not exceed<br />

175 percent of the conforming loan limit), whichever is higher.<br />

• Directs the Secretary of Defense to develop and implement a program to advise<br />

members of the Armed Forces who are returning from service on active duty abroad on<br />

actions to take to prevent or forestall foreclosure.<br />

• Extends, effective from date of enactment until December 31, 2010, the period a lender<br />

must wait before starting foreclosure proceedings from three months to nine months<br />

after a serviceperson returns from service.<br />

• Suspends increases in mortgage interest rates in excess of 6 percent during the service<br />

period and for one year after a serviceperson ends his/her service.<br />

o Interest includes service charges, renewal charges, fees, or any other charges<br />

(excepting bona fide insurance) with respect to an obligation or liability.<br />

o This provision sunsets on January 1, 2011.<br />

Secure and Fair Enforcement for <strong>Mortgage</strong> Licensing Act of 2008<br />

• Encourages the <strong>Conference</strong> of State Bank Supervisors and the American Association of<br />

Residential <strong>Mortgage</strong> Regulators to create a Nationwide <strong>Mortgage</strong> Licensing System<br />

and Registry that would establish minimum national standards for all residential<br />

mortgage brokers and lenders.<br />

• Requires that the federal banking agencies create a system for registering employees of<br />

depository institutions or subsidiaries as registered loan originators with the<br />

nationwide system and registry.<br />

• Requires states to establish state licensing and registration systems.<br />

• Prohibits lenders from issuing loans if they have not registered with the national and<br />

state systems.<br />

• Grants HUD the authority and enforcement power to back up the national system and<br />

registry or create its own nationwide system and registry if the above nationwide<br />

system fails or is not established.<br />

• Requires the Secretary to submit, within 12 months of enactment, a report to Congress<br />

on the root causes of default and foreclosure of home loans.<br />

Conversion of Project-Based Rental Assistance Contracts<br />

• Allows the Secretary to convert, at the request of an owner of a multifamily housing<br />

project that exceeds 5,000 units to which a contract for Section 8 project-based rental<br />

assistance and a Rental Assistance Payment contract is subject, such contracts to a<br />

Section 8 project-based rental assistance contract.<br />

Revised, 8/6/08

<strong>Mortgage</strong> Disclosure Improvement Act<br />

• Amends the Truth-in-<strong>Lending</strong> Act (TILA) to expand the types of home loans subject to<br />

early disclosures and improve loan disclosures given to individuals and families on<br />

original and refinancing home loans.<br />

• Requires that mortgage loan terms be disclosed no later than seven days before closing,<br />

and if terms change, not later than three, including the maximum loan payment for<br />

adjustable rate mortgages.<br />

Reforms Related to Real Estate Investment Trusts (REITs)<br />

• Modernizes REIT rules to liberalize the regulation of real estate investment trusts.<br />

General Provisions<br />

Revenue Provisions<br />

• Extends and expands certain Gulf Opportunity (GO) Zone incentives to provide<br />

assistance to taxpayers located within the GO Zone.<br />

• Expands the use of the bonus depreciation provision enacted as a part of the Economic<br />

Stimulus Act of 2008.<br />

• Allows taxpayers to elect to accelerate the recognition of a portion of their historic AMT<br />

or research and development (R&D) credits in lieu of the bonus depreciation tax benefit<br />

that was included in the Economic Stimulus Act of 2008.<br />

Revenue Offsets<br />

• Contains the following revenue-raising provisions:<br />

o Establishes information-reporting requirement on payment card and third-party<br />

network transactions;<br />

o Excludes gain on sales of a principal residences not to apply to nonqualified use;<br />

o Delays implementation of the worldwide interest allocation rules for two years; and<br />

o Modifies corporate estimated tax payment rules.<br />

Revised, 8/6/08

Key Provisions for HFAs<br />

Housing Tax Credit Coordination Act of 2008<br />

• Requires state Housing Credit allocating agencies to report Housing Credit tenant data<br />

to HUD annually, including tenant race, ethnicity, family composition, age, income, use<br />

of rental assistance or other similar assistance, disability status, and monthly rental<br />

payments.<br />

• Streamlines FHA multifamily insurance processing for Housing Credit transactions.<br />

• Allows qualified and willing HFAs to underwrite Section 202 program transactions.<br />

Other Significant Provisions<br />

Section 8 Assistance<br />

• Increases project-based voucher program flexibility<br />

o Increases the maximum Section 8 voucher contract period to 15 years from 10 year.<br />

o Allows project-based voucher rents in Housing Credit developments to reach<br />

normally allowed voucher maximum rent, even if greater than Housing Credit rent.<br />

o Eliminates HUD’s subsidy layering review for project-based vouchers if a state or<br />

locality has completed such review for Housing Credit purposes.<br />

o Repeals the requirement that PHAs undertake environmental review for housing<br />

assistance payments contracts unless otherwise required.<br />

o Clarifies standards for voucher rent reasonableness for Housing Credit<br />

developments.<br />

McKinney-Vento Homeless Assistance<br />

• Extends the time period for completion of Shelter Plus Care projects utilizing Housing<br />

Credits.<br />

• Authorizes 15 year terms for renewal of Shelter Plus Care permanent housing assistance<br />

contracts.<br />

Section 202<br />

• Requires delegated processing of all new Section 202 elderly housing grants that also use<br />

funding sources not associated with HUD.<br />

Revised, 8/6/08

Summary<br />

of<br />

H.R. 3221


2008<br />

The House and Senate have both passed omnibus legislation relating to the mortgage markets,<br />

Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The President is expected to sign<br />

the bill into law later this week.<br />

The legislation will consolidate the governance of Fannie Mae, Freddie Mac and the Federal<br />

Home Loan Banks under a single regulator, with powers similar to those of the banking<br />

regulators. It will provide the Treasury Department with the authority to make direct<br />

investments in Fannie Mae, Freddie Mac and the Federal Home Loan Banks, if necessary; it will<br />

reform the Federal Housing Administration and create a new, voluntary FHA backed refinance<br />

plan for troubled borrowers; and it will provide for licensing of mortgage brokers and the<br />

registration (through their primary regulator) of mortgage lenders working for a bank. Due to the<br />

size of the bill, we have provided separate summaries of the key sections of the bill. The links<br />

below will take you to each of these individual summaries. Should you need further information<br />

about the legislation, please contact ABA Vice President and Sr. Counsel Joseph Pigg at<br />

JPigg@aba.com or (202) 663-5480 or Executive Vice President Bob Davis at BDavis@aba.com<br />

or (202) 663-5588.<br />



Title I of the Housing and Economic Recovery Act of 2008, HR 3221, creates a new and more<br />

powerful regulator for Fannie Mae and Freddie Mac, the ―GSEs.‖ The title also grants the<br />

Treasury Department broad temporary authority to purchase obligations of these GSEs. The new<br />

regulator will have all of the powers of the current GSE regulator, OFHEO, plus additional<br />

powers over capital, product approval, prudential management and operation standards,<br />

executive compensation, prompt corrective actions and enforcement actions. The title also<br />

revises the mission and housing goals of the GSEs, creates a national Housing Trust Fund and<br />

Capital Magnet Fund and includes a higher conforming loan limit for mortgages in high cost<br />

areas.<br />

NEW REGULATOR - The new regulator will be known as the Federal Housing Finance<br />

Agency( the ―Agency‖). This agency will assume the duties of the Office of Federal Housing<br />

Enterprise Oversight of the Department of Housing and Urban Development and the Federal<br />

Housing Finance Board. The authorizing statutes for the Agency will be the Federal National<br />

<strong>Mortgage</strong> Association Charter Act, the Federal Home Loan <strong>Mortgage</strong> Corporation Act and the<br />

Federal Home Loan Bank Act.<br />

The Agency will be an independent agency of the federal government, meaning that the Agency<br />

will be funded by assessments from the entities it supervises and will not be funded by annual<br />

appropriations from Congress as is currently the case for OFHEO. The Director of the Agency<br />

will be appointed by the President and confirmed by the Senate for a term of five years. The<br />

Title establishes separate deputy directors for the GSEs, the Home Loan Banks and the Housing<br />


Mission and Goals of the GSEs. The Director‘s principal duties are to oversee the prudential<br />

operations of each regulated entity, and to ensure that each entity operates in a safe and sound<br />

manner, including maintenance of adequate capital and internal controls, the operations and<br />

activities of each entity foster liquid, efficient, competitive, and resilient national housing finance<br />

markets and the entities comply with this Act, their mission and in a manner consistent with the<br />

public interest.<br />

The Director will be advised by a Federal Housing Finance Oversight Board composed of the<br />

Secretary of the Treasury, the Secretary of Housing and Urban Development, the Chairman of<br />

the Securities and Exchange Commission and the Director, who shall serve as the Chairperson of<br />

the Board. The Director has the ability to require regular and special reports from the GSEs and<br />

to impose penalties for any failure to file reports. The Agency will have an examination staff<br />

and the ability to make assessments to cover the cost of running the Agency and supervising the<br />

GSEs. The Director also has general rule making and regulatory authority.<br />

The Director is required to establish prudential management and operations standards governing<br />

the following topics: internal controls and information systems, internal audit systems,<br />

management of interest rate risk exposure, management of market risk, adequacy and<br />

maintenance of liquidity and reserves, management of asset and investment portfolios growth,<br />

investments and acquisitions of assets, overall risk management processes, including oversight<br />

by senior management and the boards of the GSEs, reputational risk, business resumption plans,<br />

management of credit and counterparty risk, maintenance of adequate records and such other<br />

operational and management standards as the Director determines to be appropriate. The<br />

Director is required to consult with and consider the views of the Chairman of the Federal<br />

Reserve Board when establishing these standards, the capital requirements of the GSEs and any<br />

decision to place a GSE in conservatorship or receivership.<br />

PORTFOLIO MANAGEMENT - The Director shall regulate the portfolio holding of the GSEs<br />

to ensure that the holdings are backed by sufficient capital, and consistent with the mission and<br />

the safe and sound operations of the GSEs. In establishing such criteria, the Director shall<br />

consider the ability of the GSEs to provide a liquid secondary market through securitization and<br />

the portfolio holdings in relation to the overall mortgage market. The Director has authority to<br />

make temporary adjustments to the portfolio holdings of a GSE by order.<br />

RISK BASED CAPITAL LEVELS - The Director also has authority to set risk-based capital<br />

levels for the GSEs. The Director may establish risk-based capital requirements for any product<br />

or activity of a GSE to ensure that the GSE operates in a safe and sound manner, with sufficient<br />

capital and reserves to support the risks that arise in its operation. The Title also requires the<br />

GSEs to register their securities with the SEC under the securities laws. The Director also has<br />

the authority to limit golden parachutes to executives of the GSEs, and to review and limit the<br />

compensation of the senior executives of the GSEs.<br />


grants the Secretary of the Treasury temporary authority to purchase obligations and securities of<br />

the GSEs and Home Loan Banks. This authority authorizes the Secretary of the Treasury to<br />

purchase any obligations and other securities issued by the GSEs and Home Loan Banks on such<br />


terms, conditions as the Secretary may determine ,in such amounts as the Secretary may<br />

determine, although nothing permits the Secretary to engage in open market purchase of the<br />

common securities of the GSEs. This authority may only be used if the Secretary determines<br />

that such actions are necessary to provide stability to the financial markets, prevent disruptions in<br />

the availability of mortgage finance and to protect taxpayers. This authority also allows the<br />

Secretary to require restrictions on the use of GSE resources, including the payment of dividends<br />

and executive compensation. This authority expires on December 31, 2009.<br />

PRODUCT APPROVAL - The Director is given the authority to review products offered by the<br />

GSEs, including the authority to require prior approval for any product before initially offering<br />

the product. This section includes a process for public comment on product approvals and<br />

conditional approvals prior to final approval. Nothing in this section limits the ability of the<br />

Director to review new and existing products or activities for compliance with the safe and sound<br />

operation of the GSEs and for consistency with the mission of the GSEs.<br />

CONFORMING LOAN LIMITS - This title establishes new conforming loan limits for the<br />

GSEs and authorizes higher limits in ―high-cost areas.‖ These limits are adjusted each year<br />

based on the housing price index maintained by the Director of the Federal Housing Finance<br />

Agency. The new conforming loan limit is $417,000 and up to $625,500 in ―high-cost areas.‖<br />

The GSEs and the Agency are also required to prepare a number of annual reports on the housing<br />

markets.<br />

HOUSING GOALS - The title makes numerous revisions to the housing goals of the GSEs.<br />

The GSEs will have separate goals for single family housing and multifamily special affordable<br />

housing, The single family housing goal will include goals for purchasing money mortgages,<br />

the inclusion of low-income families, low income areas, very low income families, refinancings<br />

and single-family owner occupied rental housing. The Director will have the authority to<br />

provide adjustments to the goals based on market and economic conditions. The GSEs will also<br />

have a duty to serve underserved markets.<br />

HOUSING TRUST FUND - Section 1131 of the bill imposes a new requirement on the GSEs<br />

to support affordable housing and creates a permanent Housing Trust Fund and Capital Magnet<br />

Fund. Under this section, each year the GSEs must set aside an amount equal to 4.2 basis points<br />

of each dollar of the unpaid principal balance of their total new business purchases and allocate,<br />

or otherwise transfer, 65% of such amounts to the Housing Trust fund to be run by the<br />

Department of Housing and Urban Development, and 35% into the Capital Magnet Fund to be<br />

run by the Secretary of the Treasury.<br />

During calendar year 2009, 100% of these funds will be used to cover losses under the Hope For<br />

Homeowners Title of the bill(the title establishing the FHA guarantee program for the<br />

refinancing of mortgages on certain owner occupied homes). In calendar year 2010, 50% of<br />

these funds will be used to cover such losses; and in Calendar year 2011, 25% of these funds will<br />

be used to cover such losses. Any funds not needed for such purposes will be used for their<br />

original purpose – the Housing Trust Fund and the Capital Magnet Fund.<br />


The Housing Trust Fund will provide grants to the states to increase and preserve the supply of<br />

rental housing for extremely low- and very low-income families, (including homeless families),<br />

and to increase homeownership for extremely low- and very low-income families. The Capital<br />

Magnet Fund is a special account within the Community Development Financial Institutions<br />

Fund. The Capital Magnet Fund will be available to the Secretary of the Treasury to carry out a<br />

competitive grant program to attract private capital for and increase investment in the<br />

development, preservation, rehabilitation or purchase of affordable housing, primarily for<br />

extremely low- , very low-, and low-income families; economic development activities or<br />

community service facilities, such as day care centers, workforce development centers and health<br />

care clinics, which, in conjunction with affordable housing activities, implement a concerted<br />

strategy to stabilize or revitalize a low-income or underserved rural areas.<br />

The director may temporarily suspend allocations from the GSEs to these funds if such<br />

contributions would contribute to the financial instability of the GSEs, cause the GSEs to<br />

become classified as undercapitalized or prevent the GSEs from successfully completing a<br />

capital restoration plan. The section also prohibits the GSEs from redirecting the costs of the<br />

allocations through increased charges or fees, decreased premiums or any other manner to<br />

mortgage originators, mortgages purchased or securitized by the GSEs.<br />

The Housing Trust Fund and Capital Magnet Fund sections contain detailed descriptions of how<br />

they should operate and how funds should be allocated, used andunused. The section also limits<br />

the ability of the GSEs to be involved in the allocation and use of the funds, and prohibits their<br />

use for any type of political activity.<br />

PROMPT CORRECTIVE ACTION - The Title grants the regulator broad, bank-like prompt,<br />

corrective action powers, including the ability to require the GSEs to conserve capital and create<br />

capital plans when they become undercapitalized. These sections also give the Director the<br />

authority to place the GSEs into conservatorship and receivership in certain circumstances.<br />

These powers are patterned after the powers the FDIC has to resolve failed and failing banks.<br />

ENFORCMENT AUTHORITIES - Finally, the title gives the Director broad enforcement<br />

powers similar to those enjoyed by the banking agencies. These powers include cease and desist<br />

authority; the ability to remove officers, directors or other employees from office and to prohibit<br />

them from participating in the affairs of the GSEs;and the ability to impose civil money<br />

penalties, limited criminal penalties and subpoena authority. The Director will also be free to<br />

testify before Congress as an independent federal agency.<br />



NEW REGULATOR - This title changes the regulation of the Federal Home Loan Banks by<br />

placing the Banks under the same regulator as Fannie Mae and Freddie Mac. The new regulator,<br />

the Federal Housing Finance Agency (FHFB), replaces the Federal Housing Finance Board as<br />

the regulator of the Federal Home Loan Banks.<br />


is required to take into consideration the FHLBanks‘ cooperative structure; mission to provide<br />

liquidity, affordable housing and community development; capital structure, and joint and<br />

several liability before issuing any regulation, examination or advisory document.<br />

FHLB BOARDS OF DIRECTORS - Sets the Board of Directors of each FHLBank at 13<br />

members or any other number determined by the Director of the FHFA. Each board must be<br />

made up of at least a majority of members of the FHLBank, with independent directors<br />

(including public interest directors) comprising not fewer than 2/5 of each board.<br />

At least two of the independent directors must be public interest directors with more than four<br />

years experience in banking, credit, housing or consumer financial protection. Independent<br />

directors cannot serve as an officer of any FHLBank or as an officer, director or employee of a<br />

member bank or entity that receives advances from a FHLBank.<br />

Board members are to be elected by a plurality vote and must be U.S. citizens.<br />

Independent directors shall be elected from eligible persons nominated by the Board of Directors<br />

of each FHLBank. Election shall be by a plurality vote of the membership.<br />

Director terms set at 4 years (current term is 3 years).<br />

The Director of the FHFA is required to submit an annual report to Congress on the<br />

compensation and expenses paid by each FHLBank to board members.<br />

Current directors shall serve until the end of their existing term.<br />

ISSUANCE OF CONSOLIDATED OBLIGATIONS– Replaces the Federal Housing Finance<br />

Board with the Office of Finance as the issuer of consolidated obligations of the Federal Home<br />

Loan Banks.<br />

HOUSING GOALS – Subjects the Federal Home Loan Banks to housing goals consistent with<br />

those required for Fannie Mae and Freddie Mac for any mortgages purchased by any Federal<br />

Home Loan Bank. In establishing goals for the FHLBanks, the Director of the FHFA must<br />

consider the unique mission and ownership structure of the Federal Home Loan Banks.<br />


FHLBank System.<br />


SHARING OF INFORMATION AMONG FHLBS – Mandates that the Director of the FHFA<br />

establish regulations to allow the FHLBanks to share information among themselves in order for<br />

each Bank to be able to evaluate the financial condition of any one or more of the FHLBs.<br />


FHLBanks and members with exemptions from certain reporting requirements under the<br />

Securities Exchange Act of 1934.<br />

VOLUNTARY MERGERS – Allows voluntary mergers of Federal Home Loan Banks and<br />

requires the Director of the FHFA to promulgate regulations establishing conditions and<br />

procedures for such mergers.<br />

REDUCTION OF FHLB DISTRICTS – Allows for a reduction of FHLBank districts to fewer<br />

than 8 through either voluntary mergers, or a liquidation mandated by the Director of the FHFA.<br />

COMMUNITY FINANCIAL INSTITUTIONS – The asset size limitation of Community<br />

Financial Institutions is increased to $1 billion.<br />

COLLATERAL REPORT – Requires an annual report from the Director of the FHFA to<br />

Congress on the collateral pledged to each Federal Home Loan Bank.<br />

PUBLIC DATABASE – Requires each FHLBank to provide the Director of the FHFA with<br />

census tract level data regarding Home <strong>Mortgage</strong> Data Act information on any mortgage loans<br />

purchased by the FHLBanks.<br />

REFCORP REPORT – Requires the Director of the FHFA to report to Congress semi-annually<br />

on the projected fulfillment date of the RefCorp obligation.<br />

NOTICE PRIOR TO LIQUIDATION – Requires the Director of the FHFA to provide at least<br />

30 days notice to a FHLB if the Director intends to liquidate that Bank. The Bank may contest<br />

such liquidation and be entitled to a hearing before the Director.<br />

SECURITIZATION OF ACQUIRED MEMBER ASSETS – Requires a study by the Director<br />

of the FHFA, due 1 year after enactment, on the securitization of Acquired Member Assets.<br />


Requires a study by the Director of the FHFA, due one year after enactment, on the degree to<br />

which FHLBank advances are consistent with interagency guidelines on non-traditional<br />

mortgage products.<br />


FHFA authority to set a percentage of Affordable Housing Program funds which the Banks may<br />

use to refinance the first mortgage loans on primary residences for families at or below 80<br />

percent of median income.<br />



GENERAL - The legislation creates a voluntary program that would permit FHA to refinance<br />

up to $300 billion in loans, providing guarantees on refinanced loans to assist at-risk borrowers<br />

into viable mortgages.<br />

PARTICIPATION - In order to participate, a borrower or existing loan servicer of an eligible<br />

loan would contact an FHA-approved lender, who would determine the size of a loan that would<br />

be consistent with the requirements of the program and that the borrower could reasonably<br />

repay. If the current lender or mortgage holder agrees to a write-down to 87 percent of the<br />

current appraised value of the property (90 percent minus a 3 percent origination fee), the FHAlender<br />

will pay off the discounted existing mortgage from the proceeds of the new, FHA<br />

guaranteed loan.<br />


<strong>Mortgage</strong> must be for owner-occupied principal residences (no investors, speculators or<br />

second homes), and borrowers must certify that they do not own any other homes.<br />

<strong>Mortgage</strong> must have been originated on or before January 1, 2008. Borrower must<br />

have a mortgage debt to income (DTI) ratio of not less than 31 percent as of March 1,<br />

2008, but this DTI can be set higher by the Oversight Board. Borrowers must certify that<br />

they have not intentionally defaulted on existing mortgage(s). Borrowers must<br />

acknowledge that any willful false statement relating to this provision is punishable by<br />

fine or imprisonment of not more than five years, or both.<br />



Participating mortgage holders/investors must waive any penalties or fees on the existing<br />

mortgage and must accept proceeds of the new loan as payment in full; and<br />

Agree to fund a single premium payment in an amount equal to 3 percent of the amount<br />

of the principal obligation of the new loan, funded by reducing the indebtedness on the<br />

original loan. This calculation brings the payout to the existing loan holder to 87 percent<br />

of the property‘s current appraised value.<br />


New FHA loans must be properly underwritten and must be based on current appraised<br />

value of the house and borrower‘s documented income. The new loan cannot exceed 90<br />

percent of the appraised value of the property. Oversight Board can set DTI higher than<br />

the 31 percent in the legislation.<br />

Borrowers must agree to pay an ongoing annual premium in an amount equal to 1.5<br />

percent of the amount of the remaining principal balance of the mortgage.<br />

New loans must be at a fixed rate and for a term of not less than 30 years.<br />


New FHA loans under this program may not exceed 132 percent of the 2007 Freddie Mac<br />

limit (for a maximum program limit of $550,000).<br />

The FHA will retain a share of the borrower‘s future profits. When the borrower sells the<br />

home or refinances the loan, the borrower will pay from any profits the higher of a<br />

declining percentage of any net proceeds attributable to home appreciation (i.e., from 100<br />

percent in year one to 50 percent in year five and thereafter minus the fees the borrower<br />

has paid into FHA).<br />

Borrowers will be prohibited from taking out a second mortgage on the property for five<br />

years, except as determined necessary by the Board for maintenance of the property. Any<br />

such second liens cannot reduce the value of the Government‘s equity in the property.<br />

Total loan to value on the property (combining existing mortgage indebtedness and the<br />

second lien) cannot exceed 95 percent.<br />


Oversight Board. The program will be overseen by a ―Refinance Program Oversight Board‖<br />

consisting of the Secretary of Treasury, the Secretary of HUD, and Chairman of the FDIC.<br />

Existing Lien-Holders and Shared Appreciation for Second Lien Holders. The Oversight<br />

Board will be authorized to allow existing second lien-holders to share in future appreciation in<br />

value and shall be empowered to establish a formula for compensating second lien holders. The<br />

Board is also given authority to take actions to facilitate and coordinate agreements among<br />

existing lien holders.<br />

Separate FHA Fund. To protect the FHA Mutual <strong>Mortgage</strong> Insurance Fund, these new loans<br />

will exist in a separate fund in FHA – and will be permitted to be resold through GNMA, with a<br />

maximum of $300,000,000,000 to be insured.<br />

Improving FHA Capacity. The Oversight Board will take actions as necessary to increase<br />

FHA‘s capacity including contracting for the establishment of underwriting criteria, pricing<br />

standards, and other factors relating to eligibility; and increasing HUD personnel.<br />

Auction or Bulk Refinance. The Oversight Board is required to conduct a study regarding the<br />

creation of an auction or bulk refinancing mechanism for mortgages on a bulk basis. The Board<br />

must issue a report within 60 days of enactment of this section.<br />

Appraisals. The bill requires enhanced appraisal standards and appraiser independence for<br />

loans originated under the program.<br />

Sunset. The program sunsets after September 30, 2011.<br />

Fiduciary Duty of Servicers of Pooled <strong>Mortgage</strong>s. The bill contains a provision intended to<br />

provide servicers with a safe harbor from investor lawsuits if a servicer engages in loan<br />

modifications or refinancings pursuant to the HOPE for Homeowners Program.<br />




Title V of the Bill, entitled ―The Secure and Fair Enforcement <strong>Mortgage</strong> Licensing Act of 2008,‖<br />

establishes uniform professional standards for all mortgage originators, whether mortgage<br />

brokers or lenders, and whether they operate through federal or state licensing arrangements.<br />

The legislation creates a national registry, requiring licensing and/or registration for all mortgage<br />

originators, including loan officers of national banks and their subsidiaries. Under the Bill,<br />

licensing requirements apply at the ―individual,‖ not company level, ensuring that all mortgage<br />

professionals are trained in federal lending laws, ethics, consumer protection, and subprime<br />

market lending. The legislation would also create a national database that consumers can use to<br />

verify the credentials of their brokers and lenders. Importantly, the legislation makes a<br />

distinction between mortgage brokers, who will be licensed under state law, and mortgage<br />

lenders who are employees of banks and their subsidiaries, who will only register with their<br />

primary regulator.<br />


Title V begins with an official Congressional recognition of the national mortgage licensing and<br />

registration system currently being developed and administered by the <strong>Conference</strong> of State Bank<br />

Supervisors (CSBS) and the American Association of Residential <strong>Mortgage</strong> Regulators<br />

(AARMR). This new system is recognized under as the ―Nationwide <strong>Mortgage</strong> Licensing<br />

System and Registry‖ (NMLSR).<br />

Section 1504 of the Bill then sets forth the basic, and very broad, requirement that individuals<br />

may not engage in originations of residential mortgage loans unless they obtain, and maintain, a<br />

license or registration, and obtain a unique identifier. States are then encouraged to establish<br />

licensing or registration systems that meet the standards set forth by the Bill.<br />

o In terms of coverage, a ―loan originator‖ is defined under the Bill as an individual who—<br />

� Takes loan applications and offers or negotiates terms of loans for<br />

compensation or gain. (Advising on loan terms, preparing loan packages, or<br />

collecting information on behalf of the consumer would qualify as<br />

―origination.‖)<br />

� Supervised loan processors and underwriters are specifically exempted from<br />

any requirement to register. ―Independent contractors‖ performing processors<br />

and underwriter tasks must, however, follow the registration requirements<br />

under the NMLSR (below).<br />

� Also excluded are properly licensed real estate brokers that perform such<br />

brokerage activities.<br />

Under the broad system established by this legislation, a mortgage originator must do two things<br />

to be compliant with the law‘s registration requirements —<br />

o Obtain a ―unique identifier‖ through the NMLSR. ―Unique identifier‖ is defined as a<br />

―number or other identifier‖ that identifies the specific originating individual, and is<br />

assigned to facilitate accurate tracking of individual originators; AND<br />


o Register and maintain such registration, as either—<br />

� A ―Registered loan originator‖ (defined as an individual who (1) is an<br />

employee of a depository institution (or wholly owned subsidiary), and (2) is<br />

registered and uniquely identified through the NMLSR), OR<br />

� A ―State-licensed loan originator‖ (defined as an individual who (1) is a loan<br />

originator not employed by a depository institution (or wholly owned<br />

subsidiary), (2) is licensed by a State or the HUD Secretary, and (3) is<br />

uniquely identified through the NMLSR).<br />


State Licensing:<br />

In order to be recognized as adequately meeting the requisites of this Bill, State licensing and<br />

registration systems must participate with, and furnish information to, the NMLSR system. The<br />

Bill sets forth the following minimum items of information that applicants must furnish,<br />

including: applicant‘s identity, fingerprints for submission to FBI, and personal history<br />

(including experience, credit report, and past criminal history).<br />

Section 1505 of the Bill then defines the minimum standards allowable for licensing and<br />

registration as a ―State-licensed loan originator.‖ Under such minimum standards, an applicant<br />

must:<br />

o Have no felony convictions in domestic, foreign, or military courts;<br />

o Have no license revocation in any governmental jurisdiction;<br />

o Demonstrate a record of financial responsibility and general fitness;<br />

o Fulfill education requirements (20 hours of approved courses, to include at least 3<br />

hours related to federal laws, 4 hours on ethics and consumer protection in mortgage<br />

lending, and 2 hours on the sub-prime mortgage marketplace);<br />

o Pass a written exam (the Bill sets forth detailed standards for the composition of such<br />

exam, including minimum score of 75% required to pass, and retest criteria); and<br />

o Meet net worth or surety bond requirements.<br />

The Bill also sets forth the following minimum educational standards for State licensure<br />

renewal—<br />

o Satisfaction of annual continuing education requirements, including 8 hours of<br />

approved education, and other items specified under the Bill;<br />

o Continuous satisfaction of the minimum standards set forth above.<br />


Section 1507 of the Bill requires that the Federal Banking Agencies, jointly through the FFIEC<br />

(and the Farm Credit Administration), develop and maintain a system for registering employees<br />

of depository institutions, subsidiaries, or institutions regulated by the Farm Credit<br />

Administration. This system is required to be fully implemented within one year of the Bill‘s<br />

enactment. In that time frame, federal banking agencies would be ordered to register all<br />


esidential mortgage loan originators employed by federally regulated banks. Such registration<br />

must, at minimum, include a submission of the following information to the NMLSR—<br />

o Fingerprints, for submission to FBI and other appropriate agencies;<br />

o Personal history and experience information, including authorization to NMLSR<br />

to obtain additional administrative, civil, or criminal information relating to<br />

applicant.<br />

The Federal Banking agencies are required to coordinate with NMLSR to establish protocols for<br />

assigning unique identifiers to each registered loan originator.<br />


Section 1508 of the Bill authorizes the Secretary of HUD to determine, within one year of<br />

enactment, whether States have developed satisfactory licensing and registration systems<br />

pursuant to this bill. If the Secretary determines that such systems are not in place, the Secretary<br />

shall provide for the establishment and maintenance of a system for registry and license of loan<br />

originators operating in those states.<br />

Section 1508 of the Bill sets forth standards that HUD shall consider in determining whether the<br />

State systems satisfy minimum requirements. Such requirements should involve, among others,<br />

effective supervision and enforcement systems, including terminations and non-renewals for<br />

violators, and effective reporting of relevant information to NMLSR. The Bill commands that<br />

any system established by the Secretary shall meet the standards set forth to cover State-licensed<br />

loan originators, and HUD shall coordinate with NMLSR to establish protocols for assigning<br />

unique identifiers to such originators.<br />

The legislation creates extensive enforcement authority for HUD, pursuant to this backup<br />

licensing system Under the Bill, HUD may examine books and records of loan originators,<br />

assess fees to cover costs of examinations, issue cease and desist orders, including prohibitions,<br />

conditionally or unconditionally, against persons that violate this part, or demonstrate ―unfitness‖<br />

to serve as loan originators.<br />


The Bill calls for the crafting of numerous reports and recommendations to Congress—<br />

o HUD must submit annual reports on the effectiveness of the provisions of this Act.<br />

Such reports shall include legislative recommendations to enhance the consumer<br />

protections and examination standards of the Act.<br />

o HUD is also ordered to submit, within 6 months of enactment, recommendations for<br />

legislative reforms to RESPA to promote more transparent disclosures, and to allow<br />

consumers to better compare prices and shop for mortgage loan terms;<br />

o HUD shall conduct ―extensive‖ study on the root causes of default and foreclosure of<br />

home loans, and issue preliminary and final reports. Congress also requests<br />

recommendations for ―Best Practices‖ and for processes to provide targeted<br />

assistance to populations with the highest default or foreclosure risks.<br />



GENERAL - The legislation reforms the Federal Housing Administration programs to help<br />

them keep pace with innovations in the mortgage markets and to increase loan levels in higher<br />

cost areas.<br />

LOAN LIMITS - Increases FHA mortgage limits to a maximum of $625,500, however the<br />

added provisions do not impact the temporary limits set by the Economic Stimulus Act of 2008<br />

(setting a temporary limit of $729,750 through Dec. 31, 2008).<br />

FHA DOWNPAYMENT: Permits FHA to finance up to 100 percent of the appraised value of<br />

the property. Requires a borrower to make a cash investment of not less than 3.5 percent of the<br />

appraised value of the property, or such larger amount as the Secretary may determine.<br />

Continues current statutory language allowing family members to contribute funds to the<br />

mortgagor‘s cash investment, if repayment is secured by lien, lien is subordinate to mortgage and<br />

total of principal and loan may not exceed 100 percent of appraised value of property.<br />

DOWNPAYMENT ASSISTANCE RESTRICTION - Explicitly prohibits the following<br />

sources from contributing funds to the mortgagor‘s cash investment: the seller or any other<br />

person/entity that financially benefits from the transaction; and any third party/entity that is<br />

reimbursed by the seller or anyone who benefits financially from the sale. The provision will<br />

take effect on October 1, 2008.<br />

FHA PREMIUM PRICING POLICIES - Allowable upfront premium ceiling would be<br />

increased from 2.25 percent to 3 percent of the mortgage amount. Premium could not exceed<br />

2.75 for first time homebuyers who complete counseling program. Allowable annual premium<br />

ceiling remains the same at .50 percent. The bill includes a 12-month moratorium on<br />

implementing FHA risk based premiums as published in the Federal Register on May 13, 2008<br />

(73FH 27703). Implementation of the 12-month moratorium will be delayed until October 1,<br />

2008.<br />

HOME EQUITY CONVERSION MORTGAGE (HECMS) - Removes the limit on the<br />

aggregate number of HECMs that may be originated and establishes a national HECM loan limit<br />

equal to Freddie Mac conforming loan limit. Requires borrowers to receive counseling through<br />

and independent third party that is not associated with or compensated by the party that is<br />

involved in funding, originating or servicing the mortgage; or the sale of annuities, investments<br />

or other financial or insurance products. Permits HECMs to be used for home purchase and<br />

limits the mortgage to the Freddie Mac conforming limit. Permits HECMs on cooperatives.<br />

Limits the origination fees to 1.5 percent of the maximum claim; Requires HUD to conduct two<br />

studies: the first on mortgage insurance premiums on HECMs to determine the effect of limiting<br />

costs and fees under the program; the second to determine the consumer protection and<br />

underwriting standards to ensure that the purchaser of such products would be appropriate for the<br />

borrowers. Finally, the bill prohibits lenders from requiring borrowers to purchase an insurance<br />

annuity, or other product as a condition of eligibility for HECM.<br />




MAXIMUM GUARANTEE – The legislation would increase the maximum loan guaranty<br />

amount for certain housing loans that are guaranteed by the Department of Veterans Affairs, and<br />

which are originated beginning on October 1, 2008 until December 31, 2008. The maximum<br />

guaranty amount on these loans means an amount equal to 25 percent of the higher of: (1) the<br />

limitation determined under section 305(a)(2) of the Federal Home Loan <strong>Mortgage</strong> Corporation<br />

Act (12 USC 1454(a)(2)) for the calendar year in which the loan is originated for a singlefamily<br />

residence; or (2) 125 percent of the area median price for a single-family residence,<br />

subject to a cap of 175 percent of the limitation determined under section 305(a)(2) for the<br />

calendar year in which the loan is originated for a single-family residence. This loan amount<br />

would equal a maximum of $729,750.<br />

PREVENTING FORECLOSURES FOR SERVICMEMBERS – The legislation requires the<br />

Secretary of Defense to develop and implement a program to advise members of the Armed<br />

Forces (including the National Guard and Reserves) who return from active duty service abroad,<br />

on actions the servicemembers should take to prevent or forestall mortgage foreclosures. The<br />

program must include: (1) credit counseling, (2) home mortgage counseling, and (3) such other<br />

counseling and information as the Secretary of Defense considers appropriate. This counseling<br />

and information shall be provided to the servicemembers as soon as practicable after their return<br />

from active duty service abroad.<br />


from 90 days to 9 months following a servicemember‘s military service the protection against a<br />

sale, foreclosure, or seizure of property secured by a mortgage, trust deed, or other security in the<br />

nature of a mortgage, when there is a breach of the obligation. This does not change the<br />

requirement that the obligation on the property must have been originated before the period of<br />

the servicemember‘s military service. Similarly, the period of time relating to filing an action for<br />

a stay of proceedings and adjustment of a servicemember‘s mortgage obligation would be<br />

extended from 90 days to 9 months following military service. These provisions would become<br />

effective upon enactment and sunset on December 31, 2010.<br />

EXTENSION OF INTEREST RATE LOCK – The legislation also extends the period of time<br />

a servicemember can have the interest rate on a mortgage obligation or liability reduced to no<br />

more than 6 percent per year, to the period of military service, and one year thereafter. This does<br />

not change the requirement that the mortgage obligation or liability must have been incurred<br />

before the servicemember enters military service. The reduced interest rate for all other<br />

obligations would continue to be only during the period of military service.<br />

Interest, obligation and liability are defined.<br />




Refundable first-time home buyer credit. The bill would provide a refundable tax credit that is<br />

equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500)<br />

by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008<br />

and before July 1, 2009. Taxpayers receiving this tax credit would be required to repay any<br />

amount received under this provision back to the government over 15 years in equal installments.<br />

The credit begins to phase out for taxpayers with adjusted gross income in excess of $75,000<br />

($150,000 in the case of a joint return).<br />

Additional standard deduction for real property taxes. The bill would provide home owners<br />

who claim the standard deduction with an additional standard deduction for State and local real<br />

property taxes. The maximum amount that may be claimed under this provision is $500 ($1,000<br />

for joint filers). This proposal applies only for 2008. The bill would eliminate language included<br />

in the Senate version of the bill that would have prevented taxpayers from claiming this<br />

additional standard deduction if they reside in a locality that increased property tax rates in 2008.<br />


Temporary increase in low-income housing tax credit. Under current law, there is a state-bystate<br />

limit on the annual amount of Federal low-income housing tax credits that may be allocated<br />

by each state. This limitation is currently set at $2.00 for each person residing in the state. States<br />

with small populations are provided with a special set aside. The bill would increase this<br />

limitation in 2008 and 2009 by an additional 20 cents for each person residing in the state and<br />

increase the small state set-aside by 10 percent.<br />

Low-income housing tax credit simplification. The bill contains numerous proposals to<br />

simplify the technical rules relating to the LIHTC. In particular, the bill would: temporarily<br />

establish a minimum credit rate for non-Federally subsidized buildings placed in service after<br />

date of enactment and before December 31, 2013; clarify the circumstances under which a<br />

building is considered to be federally subsidized and the circumstances in which Federal<br />

assistance will be taken into account in calculating the LIHTC; provide State housing agencies<br />

with greater flexibility to select sites for low-income housing projects and allocate adequate<br />

amounts of credit for projects; clarify the rules relating to determinations of current income;<br />

provide developers with more time to begin construction of low-income housing projects after<br />

the credits have been awarded (one year instead of current law 6 months); reform rules<br />

pertaining to sales of low-income housing buildings; allow projects to establish housing units for<br />

individuals who share common characteristics; relax income rules for rural areas; and eliminate<br />

technical barriers to rehabilitating low-income housing projects.<br />

Tax Exempt Housing Bond Simplification- The bill contains two proposals to simplify the<br />

technical rules relating to tax-exempt housing bonds. In the construction and development of<br />

low-income housing projects, states may find that it is most efficient to finance projects using a<br />

series of short-term bonds. Under current law, there is a limitation on the annual amount of tax<br />


exempt housing bonds that each state may issue. In the construction and development of low<br />

income housing projects, states may find that it is most efficient to finance projects using a series<br />

of short-term bonds. The bill would clarify that where a state issues a series of short-term bonds<br />

for low-income housing projects that these bonds will only be counted once against this<br />

limitation; as well as update the tax-exempt housing bond rules to conform certain aspects of<br />

these rules to the low-income housing tax credit rules.<br />


Temporary increase in mortgage revenue bonds. Under current law, there is a national limit<br />

on the annual amount of tax-exempt housing bonds that each state may issue. Many states have<br />

reached their limit. The bill would increase this national limit in 2008 to allow for the issuance of<br />

an additional $11 billion of tax-exempt bonds to provide loans to first-time home buyers and to<br />

finance the construction of low-income rental housing. The bill would also temporarily allow<br />

qualified mortgage revenue bonds (a form of tax-exempt bond issued by states to help provide<br />

financing to first-time home buyers) to be used to refinance certain subprime loans.<br />

Eliminate costs imposed on housing programs by the alternative minimum tax. The<br />

alternative minimum tax (AMT) can increase the cost of implementing housing programs. Under<br />

current law, interest on tax-exempt housing bonds is subject to the AMT. This limits the<br />

marketability of these bonds and limits the incentive effect of these bonds. Additionally, under<br />

current law both low-income housing tax credits and rehabilitation tax credits cannot be taken<br />

against the AMT. This limits the incentive effect of these credits. The bill would allow the low<br />

income housing tax credit and the rehabilitation tax credit to be used to offset the AMT and<br />

would ensure that interest on tax-exempt housing bonds is not subject to the AMT.<br />

Municipal bonds guaranteed by Federal home loan banks eligible for treatment as tax<br />

exempt bonds. Under current law, municipal bonds that are guaranteed by Federal home loan<br />

banks cannot qualify as tax-exempt bonds unless the bonds are used to finance housing<br />

programs. State and local governments currently face significant costs when issuing tax-exempt<br />

municipal bonds to finance state and local projects. The bill would help these municipalities by<br />

temporarily allowing bonds that are guaranteed by Federal home loan banks to be eligible for<br />

treatment as tax-exempt bonds regardless of whether the bonds are used to finance housing<br />

programs. Allowing these bonds to be guaranteed by Federal home loan banks will help State<br />

and local governments obtain financing for necessary projects (e.g., constructing roads, repairing<br />

bridges, building and renovating schools and hospitals, funding college loans, etc) at a lower<br />

cost.<br />

Protection of taxpayer Social Security numbers in real estate transactions. Under current<br />

law, an individual selling a home is required to provide the purchaser of the home with an<br />

affidavit stating, under penalties of perjury that the seller is not a nonresident alien individual or<br />

a foreign corporation (special tax rules apply to sales of real estate by nonresident alien<br />

individuals and foreign corporations). This affidavit must contain the seller‘s Social Security<br />

number. In order to protect individuals from identity theft that could occur in connection with the<br />

sale of real estate, the bill will allow the seller to provide this affidavit to the business<br />

professional responsible for closing the real estate transaction (e.g., an attorney or title company)<br />

instead of sending this affidavit to the purchaser.<br />


Encouraging the rehabilitation of government-leased buildings. Under current law, taxpayers<br />

are not eligible for the full amount of the rehabilitation credit if more than 35% of a rehabilitated<br />

building is leased to a State or local government. In such a situation, expenditures that are<br />

allocable to the portion of the building that is leased by the government will not be counted in<br />

calculating the rehabilitation credit. In general, the bill would allow taxpayers to qualify for the<br />

full amount of the rehabilitation credit so long as less than 50% of the rehabilitated building is<br />

leased to State and local governments or other tax-exempt entities.<br />

Disaster mortgage revenue bonds. The bill would also temporarily allow qualified mortgage<br />

revenue bonds (a form of tax-exempt bond issued by states to help provide financing to first-time<br />

home buyers) to be used to help individuals purchase new homes in Presidentially-declared<br />

disaster areas. This provision would apply to bonds issued after May 1, 2008 and prior to January<br />

1, 2010.<br />


Real estate investment trust reforms. The bill would include most of the provisions of H.R.<br />

1147, the REIT Investment Diversification and Empowerment Act of 2007 (RIDEA). Real estate<br />

investment trusts (REITs) are subject to complex rules that can limit the ability of these<br />

businesses to adjust to changing market conditions and to manage risk. The bill would liberalize<br />

these rules by clarifying that REITs can earn foreign currency income associated with real estate<br />

activities, increasing the permissible size of REIT investments in taxable REIT subsidiaries,<br />

modifying the REIT safe harbor for dealer sales, and extending the special rules for lodging<br />

facilities to health care facilities.<br />



Extension and expansion of certain Gulf Opportunity (GO) Zone incentives. The bill would<br />

allow taxpayers in affected GO Zone areas to amend prior returns to take into account receipt of<br />

hurricane-related recovery grants, waive the start-construction deadline for certain property<br />

eligible for bonus deprecation in the GO Zone, and allow projects in two additional counties in<br />

Alabama to qualify for tax-exempt bond financing.<br />


ACT OF 2008<br />

Election to accelerate recognition of historic AMT/R&D credits. The bill would allow<br />

taxpayers to elect to accelerate the recognition of a portion of their historic AMT or research and<br />

development (R&D) credits in lieu of the bonus depreciation tax benefit that was included in the<br />

Economic Stimulus Act of 2008. The amount that taxpayers receive is calculated based on the<br />

amount that each taxpayer invests in property that would otherwise qualify for bonus<br />

depreciation under the Economic Stimulus Act of 2008. This amount is capped at the lesser of 6<br />

percent of historic AMT and R&D credits or $30 million.<br />


Transfer of funds appropriated to carry out 2008 recovery rebates for individuals. The<br />

Economic Stimulus Act of 2008 appropriated money into several Department of the Treasury<br />

accounts in order to carry out the recovery rebate program. The bill would provide the Secretary<br />

of the Treasury with flexibility to transfer funds among these accounts to carry out the purposes<br />

of the Economic Stimulus Act of 2008.<br />


Information returns for merchant payment card reimbursements.<br />

The bill would enact a proposal contained in the President‘s FY 2009 Budget to require<br />

institutions that make payments to merchants in settlement of payment card transactions to file<br />

an information return with the Internal Revenue Service. The bill would also require information<br />

returns for payments in settlement of certain third party network transactions that operate in a<br />

manner similar to payment card transactions. Additionally, the proposal will require payment<br />

system providers to request and match Taxpayer Identification Numbers (TINs) from their<br />

merchant customers. If the institution is unable to properly match a TIN to a merchant, backup<br />

withholding will result. The proposal applies to returns for calendar years beginning after<br />

December 31, 2010. Backup withholding applies for amounts after December 31, 2011.<br />

Delay implementation of worldwide allocation of interest. In 2004, Congress provided<br />

taxpayers with an election to take advantage of a liberalized rule for allocating interest expense<br />

between United States sources and foreign sources for purposes of determining a taxpayer‘s<br />

foreign tax credit limitation. Although enacted in 2004, this election is not available to taxpayers<br />

until taxable years beginning after 2008. The bill would delay the phase-in of this new liberalized<br />

rule for two years (for taxable years beginning after 2010). Special transition rules<br />

would apply in the first year that the liberalized rule phases in. A portion of the revenue raised<br />

from this provision will also cover some of the cost of supplemental funding for the Community<br />

Development Block Grant program.<br />

Modification of exclusion of gain on sale of a principal residence. The bill amends the current<br />

law exclusion of up to $250,000 ($500,000 if married filing a joint return) of gain realized on the<br />

sale or exchange of a principal residence. Under current law, the sale of a home will qualify for<br />

this exclusion if the home is a taxpayer‘s principal residence for at least two of the five years<br />

ending on the sale or exchange. This exclusion applies even if the home was initially purchased<br />

as a second home. Under the bill, if a taxpayer moves their principal residence to a second home,<br />

the taxpayer will only be able to utilize this exclusion to the extent that it relates to the period of<br />

time when the home was first used as a principal residence and to the extent that it relates to the<br />

period of time that the home was owned prior to January 1, 2009.<br />



ACT<br />

GENERAL – This Title amends the Truth in <strong>Lending</strong> Act (TILA) to expand mortgage loans<br />

subject to early disclosures, requires other TILA disclosures be made not later than seven days<br />

before closing, requires receipt of early disclosures before fees are collected, requires disclosure<br />

of certain additional information, and doubles potential civil monetary penalties. Several of<br />

these provisions codify portions of the TILA/HOEPA rulemaking finalized by the Federal<br />

Reserve on July 14, 2009.<br />

TIMING – TILA is amended to expand the mortgage loans subject to early disclosures within<br />

three days of application. Other TILA disclosures are required seven days before closing and any<br />

correction of an APR must be made three days before closing.<br />


The following disclosure must be made, that ―You are not required to complete this<br />

agreement merely because you have received these disclosures or signed a loan<br />

application.‖<br />

For variable rate mortgages, disclosures must indicate that that payments will vary based<br />

on rate changes, provide examples of payment changes that may occur based on changes<br />

in the rates specified in the contract, and indicate the maximum interest rate and payment<br />

allowed under the contract.<br />

FEE COLLETION – No fee may be collected, with the exception of a reasonable fee for a<br />

credit report, prior to receipt by the consumer of required early TILA disclosures.<br />

DISCLOSURE TIMING WAIVERS – The consumer may waive or modify the timing<br />

requirements for disclosures provided there is a ‗bona fide personal emergency‘ as defined by the<br />

Federal Reserve and the consumer attests to the emergency in a written statement.<br />

CIVIL MONETARY PENALITIES – Civil monetary penalties under TILA are doubled to not<br />

less than $400 or greater than $4,000.<br />

EFFECTIVE DATES – The effective date for provisions in Title V is 12 months after<br />

enactment, except that the effective date for new disclosures concerning variable rates mortgages<br />

is the earlier of the compliance date established by regulation or 30 months after enactment.<br />


The<br />

Emergency<br />

Economic<br />

Stabilization Act<br />

of 2008

October 2008<br />

[The Emergency Economic Stabilization Act of 20008]<br />

The following is a summary of the portions of the “_________” that are of most interest to bankers.<br />

Division A of the Act deals with “Emergency Economic Stabilization” of the financial markets and is<br />

summarized in detail below. Division B is dedicated to energy provisions and is not summarized here.<br />

Division C includes provisions dealing with the Alternative Minimum Tax and a variety of other tax<br />

provisions which are listed below.<br />

Emergency Economic Stabilization<br />

Section 1 – Title<br />

The title of Division A is the “Emergency Economic Stabilization Act of 2008” (hereafter “EESA”).<br />

Section 2 – Purposes<br />

The purpose of EESA is to restore liquidity and stability to the financial system of the United States and<br />

to protect home values, college funds, retirement accounts, and life savings and to preserve<br />

homeownership, promote jobs and economic growth.<br />

Section 3 – Definitions<br />

Defines several terms used in the legislation, including the type of financial institutions which will be able<br />

to participate in the program and the types of troubled assets that will be purchased under the program.<br />

The definition of “financial institutions” includes, but is not limited to, banks, savings associations, credit<br />

unions, securities brokers and dealers, insurance companies organized by the United States or one of its<br />

states or territories and having significant operation in the United States, excluding central banks, or<br />

institutions owned by a foreign government.<br />

The definition of “troubled assets” includes residential or commercial mortgages and any securities,<br />

obligations, or other instruments that are based on or related to such mortgages, that in each case was<br />

originated or issued on or before March 14, 2008, the purchase of which the Secretary determines<br />

promotes financial market stability; and any other financial instrument that the Secretary of the Treasury<br />

(the “Treasury”), after consultation with the Chairman of the Federal Reserve Board, determines the<br />

purchase of which is necessary to promote financial market stability.<br />

Section 101 – Purchases of Troubled Assets<br />

Authorizes Treasury to establish the troubled asset relief program (“TARP”) to purchase troubled assets<br />

from any financial institution. The program will be operated through an Office of Financial Stability<br />

within Treasury and will be run by an Assistant Secretary appointed by the President and confirmed by<br />

the Senate. In exercising this authority Treasury must consult with the Board of Governors of the Federal<br />

Reserve System, the Federal Reserve Bank of New York, the FDIC, the OCC, the OTS, and the Secretary<br />

of Housing and Urban Development.<br />


October 2008<br />

Treasury must issue program guidelines describing the mechanism for the purchase of troubled assets,<br />

pricing and valuing troubled assets, the procedures for the selection of asset managers and the criteria for<br />

deciding which troubled assets to purchase. Treasury must take steps to prevent unjust enrichment of<br />

financial institutions, including preventing resale of troubled assets to Treasury at a higher price than what<br />

the seller paid to purchase the assets.<br />

Section 102 – Insurance of Troubled Assets<br />

Requires Treasury to establish a program to guarantee troubled assets of financial institutions, and it is<br />

required to establish risk-based premiums for such guarantees sufficient to cover anticipated claims.<br />

Premiums collected will be deposited into a Troubled Asset Insurance Fund.<br />

Section 103 – Considerations for Use of the Program<br />

Requires Treasury to consider the following in exercising the authorities granted by the EESA: (1)<br />

protecting the interests of taxpayers, (2) providing stability and preventing disruption to financial markets,<br />

(3) the need to help families keep their homes and to stabilize communities, (4) in determining whether to<br />

purchase assets, the long-term viability of the financial institution, (5) ensuring that all financial<br />

institutions are eligible to participate without discrimination based on size, geography, form of<br />

organization or the size, type and number of assets eligible for purchase, (6) providing financial assistance<br />

to financial institutions that have assets less than $1 billion that were well capitalized before the<br />

conservatorship of the GSEs, (7) the need to ensure stability for public instrumentalities, such as counties<br />

and cities, (8) protecting the retirement security of Americans by purchasing troubled assets held by or on<br />

behalf of certain retirement plans, and (9) the utility of purchasing other real estate owned and instruments<br />

backed by mortgages on multifamily properties.<br />

Section 104 – Oversight Board<br />

Creates a Financial Stability Oversight Board (the “Board”) consisting of the Federal Reserve Chair,<br />

Secretary of Treasury, SEC Chair, HUD Secretary, and Director of the Federal Housing Finance Agency.<br />

The Board’s purpose is to review Treasury’s exercise of authority, including appointing financial agents,<br />

designating asset classes to be purchased, and plans for the structure of vehicles that will be used to<br />

purchase troubled assets. The Board is also to review EESA’s effect on preserving homeownership,<br />

protecting taxpayers, and the stability of financial markets. The Board is also responsible for reporting<br />

fraud, and malfeasance to the Special Inspector General under the Act. The Board may also appoint a<br />

Credit Review Committee to evaluate the exercise of purchase authority. Finally, the Board is required to<br />

report to the appropriate Committees of Congress and the Congressional Oversight Panel at least<br />

quarterly.<br />

Section 105 – Reports<br />

Within 60 days of exercising its authority under the EESA, Treasury is required to report to the<br />

appropriate committees of Congress on actions taken, funds expended, detailed financial statement of<br />

exercise of authority (all agreements, insurance contracts, transaction and parties, assets purchased,<br />

operating expenses, valuation and pricing methods, projected costs and liabilities, and vehicles used in<br />

exercise of authority).<br />


October 2008<br />

Within 7 days after there is an aggregate commitment to purchase the first $50 billion of troubled assets,<br />

and within 7 days of each subsequent commitment to purchase $50 billion in troubled assets, Treasury is<br />

required to submit to the appropriate Congressional committees a written “Tranche” report that includes a<br />

description of-- all transactions during the period, pricing mechanisms, impact on the financial system,<br />

challenges remaining in the financial system, benchmarks to be achieved, estimate of additional actions<br />

necessary, and a justification of the price paid for transactions.<br />

By April 30, 2009, Treasury is required to provide the appropriate Congressional committees a<br />

“Regulatory Modernization Report” analyzing the current state of the regulatory system and its<br />

effectiveness in overseeing participants in the financial markets, including the over the counter swaps<br />

markets and GSEs, and making recommendations for improving the system including whether there are<br />

participants in the market that are currently outside the regulatory system that should be subject to<br />

regulation.<br />

Section 106 – Management, Sale and Revenues<br />

Authorizes Treasury to manage and sell assets under the program, enter into transactions and to transfer<br />

revenues to the general fund of the Treasury to reduce the public debt.<br />

Section 107 – Contracting<br />

Authorizes Treasury to waive the provision of the Federal Acquisition Regulation (FAR), which governs<br />

Federal agency responsibilities in acquisition of supplies and services with government appropriated<br />

funds. If FAR is waived, Treasury is required to submit a justification, within 7 days, to the Committees<br />

on Oversight and Government reform, House Financial Services and Senate Banking, and the Committees<br />

on Homeland Security and Governmental Affairs. If Treasury has waived any provisions of FAR relating<br />

to minority and women contracting, it must develop standards and procedures to ensure that minorities<br />

and women are used and included to the maximum extent practicable.<br />

The FDIC is eligible for consideration as asset managers for residential mortgage loans and asset backed<br />

securities, with reimbursement for services by Treasury.<br />

Section 108 – Conflicts of Interest<br />

Requires Treasury to establish guidelines and regulation governing conflicts of interest that may arise in<br />

execution of authority under the Act, including conflicts in hiring, purchase of troubled assets,<br />

management of troubled assets, post employment restrictions and other potential conflicts.<br />

Section 109 – Foreclosure Mitigation Efforts<br />

Requires Treasury to provide foreclosure avoidance assistance to borrowers living in properties securing<br />

assets which are acquired under the TARP program. Treasury is also required to assist renters in staying<br />

in rental properties acquired under the program.<br />

Specifically, Treasury must implement a plan to minimize foreclosures on properties (including<br />

multifamily properties) securing the mortgages, mortgage backed securities and other assets it acquires.<br />

Treasury must encourage servicers of underlying mortgages to use the HOPE for Homeowners Program<br />


October 2008<br />

and other available programs to assist borrowers in avoiding foreclosure, and it is authorized to use loan<br />

guarantees and credit enhancements to facilitate loan modifications. Treasury is required to coordinate<br />

with other Federal Government entities holding troubled assets to identify opportunities for acquisition of<br />

classes of trouble assets for the purpose of facilitating loan modifications and restructurings. In addition,<br />

Treasury must protect Federal, State and Local rental subsidies on residential rental properties it acquires,<br />

and must consent to reasonable requests for loss mitigation.<br />

Section 110 – Assistance to Homeowners and Localities<br />

Requires other Federal entities owning or controlling assets secured by residential real estate (including<br />

both single and multifamily and rental properties) to implement a plan to provide assistance to avoid<br />

foreclosure and to assist renters in staying in their homes.<br />

Specifically, the Federal Housing Finance Agency (in its capacity as conservator for Fannie Mae and<br />

Freddie Mac), the FDIC (in its capacity as a bridge bank for any failed institution) or the Board of<br />

Governors of the Federal Reserve (in its capacity on behalf of any Federal reserve bank), must provide<br />

foreclosure avoidance assistance to homeowners living in properties securing assets held, owned or<br />

controlled by those entities. They are also required to encourage servicers of such mortgages to use the<br />

Hope for Homeowners program or other programs to minimize foreclosures. They must continue existing<br />

Federal, State and local rental subsidies and ensure that modifications provide funds for safe conditions in<br />

rental properties. They must implement these actions within 60 days of enactment and report to Congress<br />

every 30 days thereafter on the number and type of loan modifications made, and the actual foreclosures<br />

occurring during each reporting period. The agencies are also required to consult with one another in<br />

developing their assistance plans to utilize consistent approaches, and to encourage similar assistance<br />

efforts by loan servicers on loans which the entities do not control but do have an interest.<br />

Section 111 – Executive Compensation and Corporate Governance<br />

Requires any financial institution that sells troubled assets to Treasury to put in place certain limits on<br />

executive compensation and restricts certain tax benefits. Where Treasury buys assets directly from an<br />

individual financial institution, and it receives a meaningful equity or debt position, it must require the<br />

institution to: limit incentives for taking unnecessary and excessive risks that threaten the value of the<br />

institution; provide for the recovery of any bonus or incentive paid to a senior executive officer based on<br />

materially inaccurate statements of earnings; and, prohibit golden parachute payments to senior<br />

executives. A “senior executive” is defined as one of the top five executives in a public company subject<br />

to SEC compensation disclosure. These provisions are effective for the period that Treasury holds the<br />

equity or debt position in the financial institution.<br />

When Treasury buys assets at auction, and where the purchase exceeds $300 million in the aggregate from<br />

a financial institution, it must prohibit any new employment contract for that institution that provides a<br />

golden parachute in the event of an involuntary termination, bankruptcy filing, insolvency or<br />

receivership. These provisions apply only to the period during which Treasury’s authority to purchase<br />

troubled loans is in effect (December 31, 2009 unless extended per Section 120). There are special tax<br />

rules that also apply (see Section 302 below).<br />


Section 112 – Coordination with Foreign Authorities and Central Banks<br />

October 2008<br />

Requires Treasury to coordinate with foreign financial authorities and central banks to work toward the<br />

establishment of similar programs. To the extent such foreign financial authorities or banks hold troubled<br />

assets as a result of extending financing to financial institutions that have failed or defaulted on such<br />

financing, those troubled assets qualify for purchase under the TARP.<br />

Section 113 – Minimization of Long-Term costs and Maximization of Benefits for Taxpayers<br />

Requires Treasury to minimize any potential long-term negative impact on the taxpayer by holding the<br />

assets to maturity or for resale for and until such time as Treasury determines that the market is optimal<br />

and selling such assets at a price that Treasury determines will maximize the return on the investment for<br />

the federal government. Treasury must encourage the private sector to purchase troubled assets and to<br />

invest in financial institutions. Treasury is charged with purchasing troubled assets at the lowest price and<br />

with the maximum amount of efficiency. Treasury is also authorized to purchase troubled assets through<br />

market mechanisms, such as auctions, and direct purchases.<br />

To protect the government against loss in the sale of assets and to allow it to participate in any equity<br />

appreciation of the financial institutions selling troubled assets to the TARP, Treasury must take warrants<br />

from any financial institution selling $100 million or more of troubled assets into the TARP. The<br />

warrants may be for voting or nonvoting stock, or preferred stock for listed companies or in the case of<br />

non-listed companies, or senior debt instruments with a reasonable interest rate premium. Treasury must<br />

agree not to exercise voting power, although such voting power could be exercised by someone who<br />

purchases the warrant from the Treasury. The warrant must contain anti-dilution provisions, and Treasury<br />

may set the exercise price of the warrant in the interest of the taxpayers.<br />

Section 114 – Market Transparency<br />

Treasury is required, within 2 days of the purchase, trade or other disposition of troubled assets, to make<br />

information regarding the transaction available to the public in electronic form, including the amounts,<br />

and pricing of assets. For each financial institution that sells assets, Treasury is to determine whether the<br />

public disclosure required by the financial institution is sufficient to disclose the institution’s true financial<br />

position to the public. If not, Treasury must make recommendations to the appropriate regulators for<br />

additional disclosure.<br />

Section 115 – Graduated Authorization to Purchase<br />

Treasury is to receive authority to purchase troubled assets in tranches. Upon enactment, the authority is<br />

limited to $250 billion outstanding at any time, which can be raised to $350 billion outstanding if the<br />

President certifies to Congress that Treasury needs to exercise purchase authority. The outstanding<br />

amount can be raised to a maximum of $700 billion upon the request of the President, but Congress has 15<br />

days to disapprove the request by passing a Joint Resolution. The President has the authority to veto the<br />

Congressional Joint Resolution.<br />

Section 116 – Oversight and Audits<br />

Authorizes the Comptroller General (GAO) to commence ongoing oversight of the activities and<br />

performance of the TARP as soon as the program is established. This includes TARP performance in<br />


October 2008<br />

foreclosure mitigation, financial market stability, and tax payer protection. GAO also has oversight<br />

authority for the internal workings of the TARP, including transactions, prices paid, terms and conditions,<br />

and future commitments. Additionally, GAO is to evaluate contracting procedures, including inclusion of<br />

minorities and women, and it is authorized to audit audited TARP financial statements, program activities,<br />

receipts, expenditures, and financial transactions. GAO is required to submit reports on its findings under<br />

this section to the appropriate Congressional committees and the TARP Special Inspector General at least<br />

every 60 days.<br />

The TARP is required to establish and maintain internal controls that ensure effective and efficient<br />

operation, and reliable financial reporting.<br />

Section 117 – Study and Report on Margin Authority<br />

GAO is required to determine to what extent leverage and deleveraging of financial institutions caused the<br />

present crisis, and to submit a report with recommendations to the House Financial Services and Senate<br />

Banking Committees by June 1, 2009. The analysis is to include a review of the SEC, Federal Reserve,<br />

and other Federal banking agencies and their role in monitoring leveraging activity, including any use of<br />

margin authority by the Federal Reserve.<br />

Section 118 – Funding<br />

The costs of the EESA are to be funded through the U.S. Government’s borrowing authority.<br />

Section 119 – Judicial Review and Related Matters<br />

Any action by Treasury authorized by the EESA is subject to judicial review under the Administrative<br />

Procedures Act (APA) and can be set aside if it is found to be arbitrary, capricious or an abuse of<br />

discretion. However, injunctions or other forms of equitable relief are not allowed with respect to<br />

Treasury’s purchase or insurance of troubled assets, actions to manage or sell troubled assets or to<br />

mitigate foreclosures (Sections 101, 102, 106 and 109) except to remedy a violation of the Constitution.<br />

Any injunction is to be considered on an expedited basis. Actions by persons that sell assets to Treasury<br />

are limited to judicial review under the APA except where expressly provided for in a written contract<br />

with Treasury. Homeowners’ rights are preserved for residential mortgages sold to Treasury. Servicers<br />

that make a determination whether modification of loans would provide a greater net recovery than<br />

foreclosure are deemed to be acting in the best interests of all investors if they agree to a modification or<br />

work out plan except as established otherwise by contract.<br />

Section 120 – Termination of Authority<br />

Treasury’s authority to purchase and provide insurance for troubled assets terminates on December 31,<br />

2009. Treasury may extend this authority for a period not later than two years from the date of enactment<br />

(on or about October 2010).<br />

Section 121 – Special Inspector General for the Troubled Asset Relief Program<br />

Requires the President to appoint a Special Inspector General (SIG) as soon as practicable after enactment<br />

with the advice and consent of the Senate. The SIG will be responsible for conducting and supervising<br />

audits and investigations regarding the purchase and sale of assets and authority used under the TARP.<br />


October 2008<br />

The TARP SIG is required to report to the appropriate Congressional committees, 60 days after<br />

appointment, and every calendar quarter thereafter, the SIG’s activities that took place 120 days before<br />

reporting. The report will disclose a detailed statement of all purchases, obligations, expenditures and<br />

revenues associated with the programs established under the Secretary’s authority.<br />

Section 122 – Increase in Statutory Debt Limit<br />

Increases the Statutory debt limit to $11.315 trillion.<br />

Section 123 – Credit Reform<br />

Provides that the treatment of costs, cash flows associated with the purchase or insurance of troubled<br />

assets or other activities authorized by the EESA are to be determined as provided by the Federal Credit<br />

Reform Act.<br />

Section 124 – HOPE for Homeowners Amendments<br />

Amends the recently enacted HOPE for Homeowners program to allow for broader eligibility by troubled<br />

borrowers, including a substantial amendment allowing for the use of funds generated through the<br />

financing of HOPE Bonds already authorized to be used to pay second lien holders.<br />

Specifically, this section extends the March 1, 2008 date on which an eligible borrower’s mortgage debt to<br />

income ratio must have been at least 31 percent. The amendment allows borrowers to qualify if their<br />

mortgage debt to income goes to 31 percent or higher after March 1, 2008 due to a reset in the terms of<br />

their mortgage loan. This section also allows the Board overseeing the Hope for Homeowners program to<br />

allow for the outstanding principal obligation on a loan refinanced under the program to exceed 90<br />

percent. This section also allows for payments to be made to subordinate lien holders in lieu of any future<br />

appreciation payments already authorized under Hope for Homeowners. Significantly, this section allows<br />

funds raised through the issuance of HOPE Bonds (already authorized as part of the Hope for<br />

Homeowners program) to be used to pay second lien holders.<br />

Section 125 – Congressional Oversight Panel<br />

Establishes a 5-Member “Congressional Oversight Panel” appointed by the Majority and Minority<br />

Leadership of the House and Senate. The panel is to review the current state of the financial markets and<br />

report regularly to Congress beginning 30 days after Treasury first uses its loan purchasing authority. The<br />

reports are to include an assessment of the impact of Treasury’s loan purchases and effectiveness of the<br />

foreclosure mitigation efforts, among other things. A special report is required not later than January 20,<br />

2009 analyzing the current regulatory system that is to include recommendations on whether there are any<br />

gaps in existing consumer protections and whether participants outside of the current regulatory system<br />

should be covered. The Panel can hold hearings and has the right to obtain data from other agencies. The<br />

panel terminates on or about June 30, 2010.<br />

Section 126 – FDIC Authority<br />

Prohibits misuse of the FDIC’s name and logo to falsely represent that deposits are insured. This can be<br />

enforced by the appropriate Federal banking agency or by the FDIC if that agency fails to act. For sales<br />

of bank assets in either an assisted transaction or a failed bank situation, a financial institution can submit<br />


October 2008<br />

a bid regardless of any previously signed confidentiality agreement with the bank whose assets are being<br />

sold.<br />

Section 127 – Cooperation with the FBI<br />

Provides that any Federal financial regulatory agency shall cooperate with the FBI and other law<br />

enforcement agencies investigating fraud and misrepresentation with respect to the development,<br />

advertising and sale of financial products.<br />

Section 128 – Acceleration of Effective Date<br />

Moves the effective date of the authority included in regulatory reform legislation enacted in 2006<br />

allowing the Fed to pay interest on sterile reserves from October 1, 2011 to October 1, 2008.<br />

Section 129 – Disclosures on Exercise of Loan Authority<br />

Requires the Fed to provide a detailed report to Congress, in an expedited manner, when it uses its<br />

emergency lending authority under Section 13(3) of the Federal Reserve Act.<br />

Section 130 –Technical Corrections<br />

Makes technical corrections to the Truth in <strong>Lending</strong> Act.<br />

Section 131 – Exchange Stabilization Fund Reimbursement<br />

Treasury must reimburse the Fund for any losses caused by the temporary money market mutual fund<br />

guarantee. Treasury cannot use the Fund for any future guarantee program for the money market mutual<br />

fund industry.<br />

Section 132 – Authority to Suspend Mark-to-Market Accounting<br />

Authorizes the SEC to suspend by rule, regulation or order, the application of FAS 157 with respect to any<br />

issuer or with respect to any class or category of transaction if the Commission determines it is in the<br />

public’s interest and consistent with the protection of investors.<br />

Section 133 – Study on Mark-to-Market Accounting<br />

Requires the SEC, in consultation with Treasury and the Fed, to conduct a study of mark-to-market<br />

accounting as provided in FAS 157 as such standards are applicable to financial institutions. The study is<br />

to consider the effect on a financial institution’s balance sheet, impact on bank failures, the quality of<br />

financial information available to investors, the advisability of modifications to the standard and any<br />

alternatives. The SEC is to report to Congress within 90 days of enactment.<br />

Section 134 –Recoupment<br />

Five years after the date of enactment, OMB, in consultation with CBO, must submit a report to Congress<br />

on TARP’s net gain or loss. If there is a loss, the President must propose legislation that recoups “from<br />


October 2008<br />

the financial industry” an amount equal to the shortfall to ensure the TARP does not add to the budget<br />

deficit or the national debt.<br />

Section 135 – Preservation of Authority<br />

Nothing in the Act limits the authority of Treasury or the Fed, except Section 131 (Exchange Stabilization<br />

Fund Reimbursement).<br />

Section 136 - Temporary Increase in Deposit and Share Insurance Coverage<br />

Temporarily raises the coverage limit on non-retirement accounts for banks and credit unions from<br />

$100,000 to $250,000 per account holder per institution. Coverage for retirement accounts, currently<br />

covered up to $250,000, is not changed. The increase is effective from the date of enactment until<br />

December 31, 2009.<br />

The FDIC and NCUA are not to consider the temporary increase when setting premiums. The FDIC’s<br />

ability to borrow from the Treasury (currently limited to $30 billion at any one time) is temporarily lifted<br />

from the date of enactment until December 31, 2009. The inflation adjustment to the current coverage<br />

limits (scheduled to begin in 2010) remains in effect and applies to the current $100,000 level and not the<br />

temporary $250,000 level.<br />

Section 201 – Information for Congressional Support Agencies<br />

Requires that information used by Treasury in connection with activities authorized by the EESA must be<br />

made available to certain agencies and congressional committees.<br />

Section 202 – Reports by the Office of Management and Budget and the Congressional Budget<br />

Office<br />

Requires OMB and CBO to report cost estimates and related information to Congress and the President<br />

regarding the authorities that the Secretary has exercised under the legislation.<br />

Section 203 – Analysis in President’s Budget<br />

Requires the President to include in his annual budget certain analyses and estimates relating to costs<br />

incurred as result of this legislation.<br />

Section 204 – Emergency Treatment<br />

Provides that the EESA is “emergency” legislation for budget purposes.<br />

Section 301 – Gain or Loss from Sale or Exchange of Certain Preferred Stock<br />

Allows financial institutions that held preferred stock in Fannie Mae and Freddie Mac to treat losses<br />

arising from these securities as ordinary losses for tax purposes. This treatment shall apply to any<br />


preferred stock held by the financial institution on September 6, 2008 or sold or exchanged by that<br />

institution on or after January 1, 2008 and before September 7, 2008.<br />

October 2008<br />

Section 302 - Special Rules for Tax Treatment of Executive Compensation of Employers<br />

Participating in the Troubled Assets Relief Program.<br />

Applies limits on deductions and other tax treatment of executive compensation and golden parachutes for<br />

certain executives of employers who participate in the auction program.<br />

Section 303 - Extension of Exclusion of Income from Discharge of Qualified Principal Residence<br />

Indebtedness.<br />

Extends current law tax forgiveness on the cancellation of mortgage debt.<br />

Alternative Minimum Tax (AMT) Relief and Tax Extenders<br />


Sec. 101. Extension of alternative minimum tax relief for nonrefundable personal credits.<br />

Sec. 102. Extension of increased alternative minimum tax exemption amount.<br />

Sec. 103. Increase of AMT refundable credit amount for individuals with long-term unused credits<br />

for prior year minimum tax liability, etc.<br />


Sec. 201. Deduction for State and local sales taxes.<br />

Sec. 202. Deduction of qualified tuition and related expenses.<br />

Sec. 203. Deduction for certain expenses of elementary and secondary school teachers.<br />

Sec. 204. Additional standard deduction for real property taxes for nonitemizers.<br />

Sec. 205. Tax-free distributions from individual retirement plans for charitable purposes.<br />

Sec. 206. Treatment of certain dividends of regulated investment companies.<br />

Sec. 207. Stock in RIC for purposes of determining estates of nonresidents not citizens.<br />

Sec. 208. Qualified investment entities.<br />


Sec. 301. Extension and modification of research credit.<br />

Sec. 302. New markets tax credit.<br />

Sec. 303. Subpart F exception for active financing income.<br />

Sec. 304. Extension of look-thru rule for related controlled foreign corporations.<br />


October 2008<br />

Sec. 305. Extension of 15-year straight-line cost recovery for qualified leasehold improvements<br />

and qualified restaurant improvements; 15-year straight-line cost recovery for certain<br />

improvements to retail space.<br />

Sec. 306. Modification of tax treatment of certain payments to controlling exempt organizations.<br />

Sec. 307. Basis adjustment to stock of S corporations making charitable contributions of property.<br />

Sec. 308. Increase in limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands.<br />

Sec. 309. Extension of economic development credit for American Samoa.<br />

Sec. 310. Extension of mine rescue team training credit.<br />

Sec. 311. Extension of election to expense advanced mine safety equipment.<br />

Sec. 312. Deduction allowable with respect to income attributable to domestic production<br />

activities in Puerto Rico.<br />

Sec. 313. Qualified zone academy bonds.<br />

Sec. 314. Indian employment credit.<br />

Sec. 315. Accelerated depreciation for business property on Indian reservations.<br />

Sec. 316. Railroad track maintenance.<br />

Sec. 317. Seven-year cost recovery period for motorsports racing track facility.<br />

Sec. 318. Expensing of environmental remediation costs.<br />

Sec. 319. Extension of work opportunity tax credit for Hurricane Katrina employees.<br />

Sec. 320. Extension of increased rehabilitation credit for structures in the Gulf Opportunity Zone.<br />

Sec. 321. Enhanced deduction for qualified computer contributions.<br />

Sec. 322. Tax incentives for investment in the District of Columbia.<br />

Sec. 323. Enhanced charitable deductions for contributions of food inventory.<br />

Sec. 324. Extension of enhanced charitable deduction for contributions of book inventory.<br />

Sec. 325. Extension and modification of duty suspension on wool products; wool research fund;<br />

wool duty refunds.<br />


Sec. 401. Permanent authority for undercover operations.<br />

Sec. 402. Permanent authority for disclosure of information relating to terrorist activities.<br />


Subtitle A--General Provisions<br />

Sec. 501. $8,500 income threshold used to calculate refundable portion of child tax credit.<br />

Sec. 502. Provisions related to film and television productions.<br />

Sec. 503. Exemption from excise tax for certain wooden arrows designed for use by children.<br />


October 2008<br />

Sec. 504. Income averaging for amounts received in connection with the Exxon Valdez litigation.<br />

Sec. 505. Certain farming business machinery and equipment treated as 5-year property.<br />

Sec. 506. Modification of penalty on understatement of taxpayer's liability by tax return preparer.<br />

Subtitle B--Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of<br />

2008<br />

Sec. 511. Short title.<br />

Sec. 512. Mental health parity.<br />


Sec. 601. Secure rural schools and community self-determination program.<br />

Sec. 602. Transfer to abandoned mine reclamation fund.<br />


Subtitle A--Heartland and Hurricane Ike Disaster Relief<br />

Sec. 701. Short title.<br />

Sec. 702. Temporary tax relief for areas damaged by 2008 Midwestern severe storms, tornados,<br />

and flooding.<br />

Sec. 703. Reporting requirements relating to disaster relief contributions.<br />

Sec. 704. Temporary tax-exempt bond financing and low-income housing tax relief for areas<br />

damaged by Hurricane Ike.<br />

Subtitle B--National Disaster Relief<br />

Sec. 706. Losses attributable to federally declared disasters.<br />

Sec. 707. Expensing of Qualified Disaster Expenses.<br />

Sec. 708. Net operating losses attributable to federally declared disasters.<br />

Sec. 709. Waiver of certain mortgage revenue bond requirements following federally declared<br />

disasters.<br />

Sec. 710. Special depreciation allowance for qualified disaster property.<br />

Sec. 711. Increased expensing for qualified disaster assistance property.<br />

Sec. 712. Coordination with Heartland disaster relief.<br />



Sec. 801. Nonqualified deferred compensation from certain tax indifferent parties.<br />


State Licensed <strong>Mortgage</strong> Loan Originator<br />

Requirements and Standards under the S.A.F.E. Act<br />

Starting July 31, 2009, any individual who, for compensation or gain, takes a residential<br />

mortgage loan application or offers or negotiates terms of a residential mortgage loan application<br />

must be licensed or registered as a <strong>Mortgage</strong> Loan Originator.<br />

The S.A.F.E. <strong>Mortgage</strong> Licensing Act of 2008 does not provide any exceptions to licensing for<br />

individuals conducting above activities. Real estate brokerage, loan processing and loan<br />

underwriting activities are not covered.<br />

Note: the S.A.F.E. Act requires a system of licensure to be in place by July 31, 2009 in all states.<br />

Transitioning existing loan originators onto this system will be implemented on a different<br />

timeframe sometime after July 31, 2009.<br />

Licensing Requirements:<br />

<strong>Mortgage</strong> Loan Originators must:<br />

� Provide fingerprints for an FBI criminal history background check<br />

� Provide authorization for NMLS&R to obtain a credit report<br />

� Input and maintain their personal <strong>Mortgage</strong> Loan Originator record in NMLS&R as their<br />

license in each state in which they wish to conduct loan origination activity<br />

� Pass a national mortgage test<br />

� Take 20 hours of pre-licensure education courses approved by NMLS&R. The education<br />

must include:<br />

o 3 hours of federal law and regulations<br />

o 3 hours of ethics, which must include fraud, consumer protection, and fair lending<br />

o 2 hours of standards on non-traditional mortgage lending

Licensing Standards:<br />

All state-licensed <strong>Mortgage</strong> Loan Originators must meet the following standards:<br />

� Never had a loan originator license revoked; and<br />

� Has had no felonies in the past seven years; and<br />

� Never had a felony involving fraud, dishonesty, breach or trust or money laundering; and<br />

� Demonstrates financial responsibility and general fitness; and<br />

� Scores 75% or better on a national test created by NMLS&R. The test will include:<br />

o Ethics<br />

o Federal law and regulation<br />

o State law and regulation<br />

o Federal and state law and regulation pertaining to fraud, consumer protection,<br />

nontraditional mortgages, and fair lending; and<br />

� Takes eight hours of continuing education annually. The education must include:<br />

o 3 hours of federal law and regulations<br />

o 3 hours of ethics, which must include fraud, consumer protection, and fair lending<br />

o 2 hours of standards on non-traditional mortgage lending; and<br />

� Maintain licensure through NMLS&R.<br />

State Regulatory Registry LLC - September 2009 2

<strong>Industry</strong><br />

Public Law 110-289<br />


‘‘Secure and Fair Enforcement for <strong>Mortgage</strong> Licensing Act of 2008’’<br />

Mandates of P.L. 110-289<br />

o All residential mortgage loan originators must be either state-licensed or federally registered.<br />

� A mortgage loan originator employed by a federally insured depository institution or any<br />

credit union or an owned and controlled subsidiary that is federally supervised must be<br />

registered.<br />

� All other mortgage loan originators, without exception, must be state licensed.<br />

o All state licensed and federally registered mortgage loan originators must be registered with<br />

the Nationwide <strong>Mortgage</strong> Licensing System & Registry maintained by the <strong>Conference</strong> of<br />

State Bank Supervisors and the American Association of Residential <strong>Mortgage</strong> Regulators.<br />

States<br />

o All states must have a system of licensing in place for residential mortgage loan originators<br />

by July 31, 2009 that meets national definitions and minimum standards, that include, among<br />

other things:<br />

� criminal history and credit background checks<br />

� pre-licensure education<br />

� pre-licensure testing<br />

� continuing education<br />

� net worth, surety bond or recovery fund<br />

o All states must license mortgage loan originators through NMLS&R.<br />

U.S. Department of Housing and Urban Development (HUD)<br />

o HUD must determine:<br />

� That the state’s mortgage loan originator licensing standards meet the federally mandated<br />

minimums, and<br />

� That the state is participating in NMLS&R.<br />

o If HUD determines that a state not in compliance with both items above, HUD must<br />

implement a system for all state licensed mortgage loan originators in that state.

Federal Banking Agencies/Federal Financial Institutions Examination Council/Farm<br />

Credit Administration<br />

o Must develop and maintain a system for registering employees of federally insured<br />

depositories and subsidiaries they own and control, and employees of Farm Credit<br />

Administration regulated entities, with NMLS&R. Registering with NMLS&R requires<br />

registered loan officers to submit fingerprints for a state and federal background check and<br />

personal history and experience.<br />

o Shall coordinate with NMLS&R in assigning unique identifier.<br />

<strong>Conference</strong> of State Bank Supervisors/American Association of Residential <strong>Mortgage</strong><br />

Regulators<br />

o CSBS and AARMR must develop and maintain the Nationwide <strong>Mortgage</strong> Licensing System<br />

and Registry for the purposes identified in the Section 1502 of P.L. 110-289.<br />

Nationwide <strong>Mortgage</strong> Licensing System and Registry<br />

o NMLS&R must establish protocols for the issuance of unique identifiers.<br />

o NMLS&R must receive and process fingerprints for national and state criminal history<br />

background checks for all loan originators.<br />

o NMLS&R must review and approve, using reasonable standards, pre-licensure and<br />

continuing education courses.<br />

o NMLS&R must develop a qualified written test and approve test providers.<br />

o NMLS&R must develop a mortgage call report.<br />

o NMLS&R must provide public access to licensing information.<br />

State Regulatory Registry LLC - September 2009 2


Nationwide <strong>Mortgage</strong> Licensing System<br />

Improving Supervision of the <strong>Mortgage</strong> <strong>Industry</strong> through Collaboration and Technology<br />

In order to protect their citizens and bring greater accountability and transparency to the mortgage industry, state<br />

mortgage regulators developed the Nationwide <strong>Mortgage</strong> Licensing System (“NMLS”). NMLS increases and<br />

centralizes information available to state regulators and the mortgage industry about the professionals and<br />

companies that originate home mortgages.<br />

State regulators recognized that the rapid expansion and evolution of the mortgage industry demanded a regulatory<br />

framework that was efficient and effective. In 2004, a nationwide taskforce of regulators began developing a<br />

uniform licensing registry, which was launched on January 2, 2008 as the Nationwide <strong>Mortgage</strong> Licensing System.<br />

NMLS<br />

Fourteen states currently use the system to manage their mortgage licenses. In fall 2008, another six agencies will<br />

begin participating in NMLS and in January 2009, four more states will join. Thus, in the first year of operations,<br />

nearly half of the states will be part of a system that:<br />

� Improves the efficiency and effectiveness of supervision of the mortgage industry;<br />

� Enhances consumer protection;<br />

� Fights mortgage fraud and predatory lending that costs consumers and the industry hundreds of millions of<br />

dollars each year;<br />

� Increases accountability among mortgage industry professionals; and<br />

� Unifies and streamlines state license processes for mortgage lenders and brokers.<br />

In the first 8 months of operations, NMLS is already managing:<br />

� Over 7,500 mortgage companies<br />

� Over 6,800 mortgage company branch locations<br />

� Over 33,000 loan officers<br />

Through NMLS, licensed mortgage lenders, bankers, broker companies and loan officers in participating states are<br />

able to complete a single uniform form electronically (regardless of the number of states they are licensed in). This<br />

information is housed in a secure centralized repository available to mortgage regulators. Licensees are able to<br />

access their own record 7 days a week through the NMLS website to update, amend and renew their licenses, or<br />

apply for new licenses.

Increasing Transparency and Accountability in the <strong>Mortgage</strong> <strong>Industry</strong><br />

As mortgage companies and/or individuals create a record for themselves and submit to their regulators, NMLS<br />

will permanently assign a unique identifying number to each record. The unique identifying number allows<br />

regulators to definitively track companies and professionals across states and over time.<br />

Additionally, consumers and the industry will eventually be able to check on the license status and history of the<br />

companies and professionals with which they wish to do business in order to make a more informed decision.<br />

Raising Standards through the S.A.F.E. Act<br />

On July 30, 2008, the President signed into law the Housing and Economic Recovery Act of 2008. Title V of this<br />

Act, entitled the Safe and Fair Enforcement <strong>Mortgage</strong> Licensing Act 0f 2008 (“The S.A.F.E. Act) recognizes and<br />

builds on states efforts by requiring all mortgage loan originators, regardless of the type of entity they are employed<br />

by, to be either state-licensed or federally-registered. All mortgage loan originators must be licensed or registered<br />

through the expanded Nationwide <strong>Mortgage</strong> Licensing System and Registry.<br />

Under the S.A.F.E. Act, all states must implement a mortgage loan originator licensing system that meets certain<br />

minimum standards and license through the NMLS&R.<br />

More information about NMLS is available at http://www.stateregulatoryregistry.org/NMLS.<br />

_____________________<br />

# # #<br />

<strong>Conference</strong> of State Bank Supervisors is the national organization for state banking, representing the bank<br />

regulators of the 50 states, the District of Columbia, Guam, Puerto Rico and the Virgin Islands, and<br />

approximately 6,200 state-chartered financial institutions. The <strong>Conference</strong> is responsible for defending state<br />

authority to determine banking structure and the products and services state-chartered institutions can offer<br />

and for improving the quality of state bank supervision by providing the departments with performance<br />

evaluation and accreditation programs and supervisory education/training programs for state banking<br />

department personnel.<br />

American Association of Residential <strong>Mortgage</strong> Regulators is the national organization representing state<br />

residential mortgage regulators. AARMR's mission is to promote the exchange of information between and<br />

among the executives and employees of the various states who are charged with the responsibility for the<br />

administration and regulation of residential mortgage lending, servicing and brokering.<br />


The Impact of Housing Legislation on<br />

Minority Homeownership Opportunities<br />

<strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong> Strategic<br />

Markets and Diversity <strong>Conference</strong><br />

October 7, 2008<br />

Tom Goyda

Housing Legislation in a Broader<br />

Context<br />

Nontraditional<br />

<strong>Mortgage</strong> Guidance<br />

2006<br />

State Implementation<br />

2007<br />

<strong>Mortgage</strong> and Housing Market Challenges<br />

Subprime Statement<br />

HOEPA (Reg. Z)<br />

Updates<br />

2008<br />

State Implementation

Impact of Regulatory Changes<br />

• Repayment ability calculated at fully-indexed<br />

rate assuming a fully-amortizing schedule<br />

(new and existing homeowners)<br />

• “Risk layering” reduced<br />

• Documentation of income expanded<br />

• Disclosure requirements increased<br />

• Protections/limitations imposed on “higherpriced”<br />


Impact of Market Challenges<br />

• Liquidity evaporated<br />

• Products disappeared<br />

• Underwriting tightened<br />

• Rates and costs increased<br />

• Problems will lead to additional legislation<br />

and regulation

Developments Since HERA<br />

• $1 trillion in government funds committed<br />

– Fannie Mae and Freddie Mac conservatorship<br />

– AIG bailout<br />

– TARP<br />

• Investment banks transformed<br />

– Morgan Stanley and Goldman Sachs converted to bank<br />

holding companies<br />

– Merrill-Lynch purchased by Bank of America<br />

– Lehman Brothers bankrupt<br />

• Washington Mutual seized

Components of HERA<br />

• FHA Modernization<br />

• Hope for Homeowners<br />

• Tax Incentives<br />

• Redevelopment of Abandoned and Foreclosed<br />

Homes<br />

• GSE Regulatory Reform<br />

• <strong>Mortgage</strong> Originator Licensing and Registration<br />

• Counseling<br />

• TILA Disclosures

14.0%<br />

12.0%<br />

10.0%<br />

8.0%<br />

6.0%<br />

4.0%<br />

2.0%<br />

0.0%<br />

Resurgent FHA Vital for Minority and<br />

LMI Homebuyers<br />

1990<br />

1991<br />

1992<br />

1993<br />

Source: Inside <strong>Mortgage</strong> Finance<br />

1994<br />

1995<br />

FHA Endorsements as % of Total Originations<br />

1996<br />

1997<br />

1998<br />

1999<br />

One in three FHA purchase loans go to minority homebuyers and<br />

nearly half of all FHA borrowers earn less than $50,000 per year.<br />

Source: 2007 HMDA data<br />

2000<br />

2001<br />

2002<br />

2003<br />

2004<br />

2005<br />

2006<br />

2007<br />


Wells Fargo’s Long-term Commitment<br />

to Government <strong>Lending</strong><br />

$60,000<br />

$50,000<br />

$40,000<br />

$30,000<br />

$20,000<br />

$10,000<br />

$0<br />

2001 2002 2003 2004 2005 2006 2007 6MO08<br />

Wells Fargo FHA/VA Originations Wells Fargo FHA/VA Market Share<br />

Since 2001, FHA/VA lending has made up more than 9 percent of<br />

Wells Fargo’s total loan volume; nearly twice the FHA/VA share of<br />

the total market.<br />

35.0%<br />

30.0%<br />

25.0%<br />

20.0%<br />

15.0%<br />

10.0%<br />

5.0%<br />


FHA Modernization and Minority<br />

Homeownership<br />

Condominium<br />

processes<br />

Loan limit<br />

Risk-based pricing<br />

Seller-funded downpayment<br />

assistance<br />

Cash requirement<br />

Simplified and streamlined<br />

Floor raised to $271K plus highcost<br />

area limits<br />

No RBP implementation for 12<br />

months<br />

Prohibited<br />

Requires 3.5% cash down and<br />

LTV = 100%

Other HERA Provisions<br />

Hope for<br />

Homeowners<br />

First-time homebuyer<br />

tax credit<br />

Abandoned and<br />

foreclosed<br />

properties<br />

Fannie Mae and<br />

Freddie Mac<br />

FHA refinance program for<br />

distressed borrowers<br />

$7,500 credit repayable over five<br />

years<br />

$4 billion in CDBG grants to fund<br />

state redevelopment efforts<br />

Stronger regulation—Made<br />

obsolete by conservatorship

What Does the Future Hold?<br />

• <strong>Mortgage</strong> lender origination and servicing<br />

practices further regulated<br />

• <strong>Mortgage</strong> broker activities more tightly<br />

controlled<br />

• Fannie and Freddie exit strategy/future state<br />

determined<br />

• Wall Street role reevaluated<br />

• Rating agency operations scrutinized<br />


Questions?<br />

Tom Goyda<br />

Wells Fargo<br />

Home and Consumer Finance Group<br />

636-594-2259<br />




Sponsored by:<br />

Diversity Luncheon<br />

11:45 a.m. – 1:15 p.m.<br />

Annapolis Ballroom 3 & 4<br />

Afternoon: Market Psychology and Preserving Minority Homeownership




Market Psychology around Homeownership: Perceptions versus<br />

Realities<br />

1:15 p.m. – 2:30 p.m.<br />

Azalea 2<br />

Many argue that the market psychology around housing is worst than the fundamentals. It is true<br />

that bad news has put a damper on many segments of housing demand. It is also likely that<br />

market perceptions, rather than reality, will drive suppliers of credit to overreact and tighten<br />

more than reality warrants. Some questions to answer are: Where are we now in the housing<br />

economic cycle and what will be the earliest signs of recovery? What are the signs of a fear<br />

driven market? How much of the current crisis is explained by fear versus market fundamentals?<br />

Are declining markets policies appropriate risk management measures or do they contribute to<br />

the psychology of fear? Are media portrayals accurate enough to truly explain what’s going on?<br />

This session will describe the economic realities of the current crisis and contrast them with<br />

common public misperceptions with a view toward identifying the correct signposts for market<br />

assessment. The session will provide those involved in the credit granting process with a<br />

framework for making rational credit policy.<br />

Moderator: Ken Temkin<br />

President<br />

Temkin & Associates<br />

Speakers: Jay Brinkmann<br />

Chief Economist<br />

<strong>Mortgage</strong> Bankers Association<br />

Guy Cecala<br />

President and Publisher<br />

Inside <strong>Mortgage</strong> Finance<br />

Maurice Jourdain-Earl<br />

Managing Director<br />


Guy D. Cecala<br />

Guy D. Cecala is the CEO and publisher of Inside <strong>Mortgage</strong> Finance Publications, Inc., a<br />

Bethesda, MD-based company that he founded in 1984. The company produces 9<br />

newsletters, numerous special reports and a large amount of original research and<br />

statistics related to mortgage finance in the United States.<br />

Mr. Cecala is frequently quoted in the Wall Street Journal, the New York Times, the<br />

Washington Post, the Los Angeles Times, USA Today and other major newspapers as well<br />

as Bloomberg and Reuters. He also has appeared on the NBC Today Show, NBC Nightly<br />

News, CNBC, ABC News, CBS News, Fox Business News, PBS Nightly Business<br />

News, CNN, the BBC, CBS Radio and NPR as an expert on the U.S. mortgage market.<br />

Mr. Cecala earned a B.A. degree in English and political science from Boston College,<br />

where he graduated magna cum laude. He also holds a M.A. degree in journalism from<br />

the University of Maryland.<br />

Mr. Cecala also serves on the Specialized Information Publishers Assocation’s board of<br />

directors as an executive officer and as a US representative to SIPA-UK.

<strong>Mortgage</strong> Strategic Markets & Diversity <strong>Conference</strong><br />

October 7, 2008<br />

Jay Brinkmann<br />

<strong>Mortgage</strong> Bankers Association

Foreclosures Started by Quarter<br />


Share Foreclosures by Loan Type<br />

Product Percent of US Percent of US<br />

Loans Outstanding Foreclosures Started<br />

Prime Fixed 65% 21%<br />

Prime ARM 14% 23%<br />

Subprime Fixed 6% 13%<br />

Subprime ARM 6% 36%<br />

FHA 8% 7%<br />

Total 100% 100%<br />

Source: <strong>Mortgage</strong> Bankers Association<br />


Q2-2008 All Loans Foreclosure Start Rate<br />

US Average = 1.08% (NSA)<br />

Legend<br />

Less than 0.69%<br />

0.69% to 1.08%<br />

1.09% to 2.20%<br />

Greater than 2.20%<br />


Q2-2008 Prime ARM Foreclosure Start Rate<br />

US Average = 1.82% (NSA)<br />

Legend<br />

Less than 1.26%<br />

1.26% to 1.82%<br />

1.83% to 2.46%<br />

Greater than 2.46%<br />


Q2-2008 Subprime ARM Foreclosure Start Rate<br />

US Average = 6.63% (NSA)<br />

Legend<br />

Less than 5.38%<br />

5.38% to 6.63%<br />

6.64% to 8.14%<br />

Greater than 8.14%<br />


Foreclosures in “Sand” States<br />

All Loans<br />

State Percent of US Percent of US<br />

Loans Outstanding Foreclosure Starts<br />

California 13% 22%<br />

Florida 8% 16%<br />

Nevada 1% 3%<br />

Arizona 3% 4%<br />

Total 25% 46%<br />

CA, FL, AZ & NV share of increase: 87%<br />

Source: <strong>Mortgage</strong> Bankers Association<br />


Foreclosures in “Sand” States<br />

Prime Fixed<br />

State Percent of US Percent of US<br />

Loans Outstanding Foreclosure Starts<br />

California 11% 10%<br />

Florida 18% 18%<br />

Nevada 2% 2%<br />

Arizona 3% 3%<br />

Total 34% 33%<br />

Prime ARM<br />

State Percent of US Percent of US<br />

Loans Outstanding Foreclosure Starts<br />

California 28% 38%<br />

Florida 11% 20%<br />

Nevada 2% 4%<br />

Arizona 4% 5%<br />

Total 45% 66%<br />

CA, FL, AZ & NV Share of Prime ARM increase: 93%<br />

Source: <strong>Mortgage</strong> Bankers Association<br />


Foreclosures in “Sand” States<br />

Subprime Fixed<br />

State Percent of US Percent of US<br />

Loans Outstanding Foreclosure Starts<br />

California 11% 12%<br />

Florida 9% 14%<br />

Nevada 1% 1%<br />

Arizona 2% 3%<br />

Total 23% 30%<br />

Subprime ARM<br />

State Percent of US Percent of US<br />

Loans Outstanding Foreclosure Starts<br />

California 18% 26%<br />

Florida 12% 17%<br />

Nevada 3% 3%<br />

Arizona 5% 5%<br />

Total 38% 52%<br />

CA, FL, AZ & NV Share of Subprime ARM increase: 83%<br />

Source: <strong>Mortgage</strong> Bankers Association<br />


Homeowner Vacancy Rate, by Year Structure Built<br />

Percent vacant<br />

12<br />

10<br />

8<br />

6<br />

4<br />

2<br />

0<br />

2002-Q1<br />

Source: Census<br />

2002-Q3<br />

Built 2000 or later<br />

Built before 2000<br />

2003-Q1<br />

2003-Q3<br />

2004-Q1<br />

2004-Q3<br />

Vacancy rate for “Built before 2000” is the simple average of the vacancy<br />

rates of properties built during each decade prior to the 2000s.<br />

2005-Q1<br />

2005-Q3<br />

2006-Q1<br />

2006-Q3<br />

2007-Q1<br />

2007-Q3<br />

2008-Q1<br />


Change in Number of Owner- and Renteroccupied<br />

Households, Year-over-year (additive)<br />

Thousands of households<br />

2500<br />

2000<br />

1500<br />

1000<br />

500<br />

0<br />

-500<br />

-1000<br />

-1500<br />

1990 - Q1<br />

Change in owner-occupied households<br />

Change in renter-occupied households<br />

1991 - Q1<br />

1992 - Q1<br />

1993 - Q1<br />

Source: Census Bureau and MBA<br />

1994 - Q1<br />

1995 - Q1<br />

1996 - Q1<br />

1997 - Q1<br />

1998 - Q1<br />

1999 - Q1<br />

2000 - Q1<br />

2001 - Q1<br />

2002 - Q1<br />

2003 - Q1<br />

2004 - Q1<br />

2005 - Q1<br />

2006 - Q1<br />

2007 - Q1<br />

2008 - Q1<br />


52<br />

50<br />

48<br />

46<br />

44<br />

42<br />

98<br />

99<br />

Homeownership Rate: Black Total<br />

NSA, %<br />

Homeownership Rate: Hispanic Total<br />

NSA, %<br />

00<br />

Source: Census Bureau<br />

01<br />

02<br />

03<br />

04<br />

05<br />

06<br />

07<br />

52<br />

50<br />

48<br />

46<br />

44<br />

42<br />

08<br />


77<br />

76<br />

75<br />

74<br />

73<br />

72<br />

71<br />

98<br />

Homeownership Rate: White Non-Hispanic Total<br />

99<br />

00<br />

Source: Census Bureau<br />

01<br />

NSA, %<br />

02<br />

03<br />

04<br />

05<br />

06<br />

07<br />

77<br />

76<br />

75<br />

74<br />

73<br />

72<br />

71<br />

08<br />


Issues Going Forward<br />

• What to do with the excess housing inventory, now about<br />

2.2 million more units than in a normal market, new and<br />

used?<br />

• Have we lowered our expectations on homeownership<br />

rates?<br />

• Given the already high percentage of 30-day delinquencies<br />

going to foreclosure, what happens when job losses<br />

increase with the recession?<br />


Changing the Market Psychology<br />

around Homeownership<br />

<strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Strategic Markets and Diversity <strong>Conference</strong><br />

October 6-8, 2008 – Washington, DC<br />

Guy Cecala<br />

CEO & Publisher

Credit Crisis or Credit Panic?<br />

� Numbers and available data generally<br />

don’t support perception that the U.S.<br />

mortgage market has collapsed.<br />

� Crisis in investor confidence is what is<br />

driving down stock markets around the<br />

world – not actual mortgage losses.<br />

� Perception has become more important<br />

than reality when it comes to investors.<br />


The Truth about Foreclosures<br />

• Perception: record high foreclosures are<br />

overwhelming and threatening any<br />

company exposed to mortgages.<br />

• Reality: More than 90% of outstanding<br />

mortgages in the U.S. as of June 30 were<br />

current – no late payments or<br />

foreclosures. Few companies are in<br />

immediate danger of failing because of<br />

mortgage losses.<br />


The Truth about Subprime Exposure<br />

• Perception: Most subprime mortgages<br />

are now defaulting – threatening investors<br />

with trillion dollar plus losses.<br />

• Reality: About 18% of subprime<br />

mortgages were seriously delinquent or in<br />

foreclosure as of June 30. If 30% of all<br />

subprime loans ultimately default,<br />

expected losses could reach $100 billion.<br />


The Truth about <strong>Mortgage</strong><br />

Securitization<br />

• Perception: Anybody holding mortgage<br />

securities, particularly those backed by<br />

subprime loans, is likely to face huge<br />

losses due to rising defaults.<br />

• Reality: The vast majority of MBS<br />

investments, even those backed by<br />

subprime loans, are still investment-grade<br />

and are providing their promised cash<br />

flows and yields.<br />


The Truth about Fannie<br />

and Freddie<br />

• Perception: Fannie Mae and Freddie Mac had<br />

to be taken over by the government because of<br />

their exposure to bad mortgages and huge<br />

losses.<br />

• Reality: Less than 2% of the mortgages held or<br />

guaranteed by Fannie and Freddie are seriously<br />

delinquent. While credit losses and expenses<br />

have jumped dramatically at the GSEs, they<br />

have set aside more than $12 billion to cover<br />

future losses and are not in imminent danger.<br />


What has the Credit Panic Done to<br />

the <strong>Mortgage</strong> Mix in the US?<br />

Alt A<br />

11%<br />

Subprime<br />

8%<br />

HEL<br />

14%<br />

Jumbo<br />

14%<br />

FHA/VA<br />

5%<br />

In 2007<br />

Conv/Conf<br />

48%<br />


It’s Left Only Government Related<br />

<strong>Mortgage</strong>s Standing<br />

Subprime<br />

1%<br />

Jumbo<br />

6%<br />

Alt A<br />

2%<br />

HEL<br />

8%<br />

FHA/VA<br />

16%<br />

Conv/Conf<br />

67%<br />

In 2Q08<br />


80%<br />

75%<br />

70%<br />

65%<br />

60%<br />

55%<br />

50%<br />

45%<br />

40%<br />

35%<br />

30%<br />

It Started with a Market Shift<br />

to the GSEs<br />

Fannie/Freddie Share of Originations<br />

1990<br />

1991<br />

1992<br />

1993<br />

1994<br />

1995<br />

1996<br />

1997<br />

1998<br />

1999<br />

2000<br />

2001<br />

2002<br />

2003<br />

2004<br />

2005<br />

2006<br />

2007<br />

1Q08<br />

2Q08<br />


And Then a Shift to FHA as Panic<br />

% of Originations<br />

20%<br />

18%<br />

16%<br />

14%<br />

12%<br />

10%<br />

8%<br />

6%<br />

4%<br />

2%<br />

0%<br />

Threatened GSEs<br />

FHA Market Share<br />

1990<br />

1991<br />

1992<br />

1993<br />

1994<br />

1995<br />

1996<br />

1997<br />

1998<br />

1999<br />

2000<br />

2001<br />

2002<br />

2003<br />

2004<br />

2005<br />

2006<br />

2007<br />

2008E<br />


Rank<br />

1<br />

2<br />

3<br />

4<br />

5<br />

6<br />

7<br />

8<br />

9<br />

10<br />

11<br />

12<br />

13<br />

14<br />

15<br />

It’s Decimated the Ranks of Top <strong>Mortgage</strong><br />

Lenders Since Beginning of 2007<br />

Lender<br />

Countrywide Financial, CA<br />

Wells Fargo Home <strong>Mortgage</strong>, IA<br />

Washington Mutual, WA<br />

Citi<strong>Mortgage</strong> Inc., MO<br />

Chase Home Finance, NJ<br />

Bank of America Mtg., NC<br />

Wachovia Corporation, NC<br />

Residential Capital Group, MN<br />

IndyMac, CA<br />

GMAC Residential. PA<br />

EMC <strong>Mortgage</strong>, TX<br />

New Century Financial Corp., CA<br />

American Home <strong>Mortgage</strong> Corp., NY<br />

SunTrust <strong>Mortgage</strong> Inc., VA<br />

HSBC Finance, IL<br />

Volume<br />

$462.50<br />

$397.64<br />

$195.70<br />

$183.48<br />

$172.90<br />

$167.90<br />

$104.74<br />

$102.50<br />

$89.95<br />

$74.60<br />

$72.43<br />

$59.80<br />

$58.90<br />

$56.45<br />

$52.77<br />

Share<br />

15.5%<br />

13.3%<br />

6.6%<br />

6.2%<br />

5.8%<br />

5.6%<br />

3.5%<br />

3.4%<br />

3.0%<br />

2.5%<br />

2.4%<br />

2.0%<br />

2.0%<br />

1.9%<br />

1.8%<br />

Rank<br />

16<br />

17<br />

18<br />

19<br />

20<br />

21<br />

22<br />

23<br />

24<br />

25<br />

26<br />

27<br />

28<br />

29<br />

30<br />

Lender<br />

National City <strong>Mortgage</strong> Co., OH<br />

PHH <strong>Mortgage</strong>, NJ<br />

ABN AMRO <strong>Mortgage</strong> Group, MI<br />

Aurora Loan Services, CO<br />

GreenPoint <strong>Mortgage</strong>, CA<br />

WMC <strong>Mortgage</strong> Corp., CA<br />

Fremont General Corp., CA<br />

First Horizon Home Loans, TX<br />

First Magnus Financial, AZ<br />

Option One <strong>Mortgage</strong>, CA<br />

<strong>Mortgage</strong>IT, Inc., NY<br />

Ameriquest <strong>Mortgage</strong> Co., CA<br />

First Franklin Financial, CA<br />

Taylor, Bean, & Whitaker, FL<br />

US Bank Home <strong>Mortgage</strong>, MN<br />

Volume<br />

$43.12<br />

$41.26<br />

$38.31<br />

$36.80<br />

$36.40<br />

$33.20<br />

$32.30<br />

$31.21<br />

$30.07<br />

$29.92<br />

$29.00<br />

$27.80<br />

$27.67<br />

$25.49<br />

$22.29<br />

Share<br />

1.4%<br />

1.4%<br />

1.3%<br />

1.2%<br />

1.2%<br />

1.1%<br />

1.1%<br />

1.0%<br />

1.0%<br />

1.0%<br />

1.0%<br />

0.9%<br />

0.9%<br />

0.8%<br />

0.7%<br />


Less than Half of 2007 Top Lenders<br />

Rank<br />

1<br />

2<br />

3<br />

4<br />

5<br />

6<br />

7<br />

8<br />

9<br />

10<br />

11<br />

12<br />

13<br />

14<br />

15<br />

Lender<br />

Countrywide Financial, CA<br />

Wells Fargo Home <strong>Mortgage</strong>, IA<br />

Washington Mutual, WA<br />

Citi<strong>Mortgage</strong> Inc., MO<br />

Chase Home Finance, NJ<br />

Bank of America Mtg., NC<br />

Wachovia Corporation, NC<br />

Residential Capital Group, MN<br />

IndyMac, CA<br />

GMAC Residential. PA<br />

EMC <strong>Mortgage</strong>, TX<br />

New Century Financial Corp., CA<br />

American Home <strong>Mortgage</strong> Corp., NY<br />

SunTrust <strong>Mortgage</strong> Inc., VA<br />

HSBC Finance, IL<br />

Still Left in 2008<br />

Volume<br />

$462.50<br />

$397.64<br />

$195.70<br />

$183.48<br />

$172.90<br />

$167.90<br />

$104.74<br />

$102.50<br />

$89.95<br />

$74.60<br />

$72.43<br />

$59.80<br />

$58.90<br />

$56.45<br />

$52.77<br />

Share<br />

15.5%<br />

13.3%<br />

6.6%<br />

6.2%<br />

5.8%<br />

5.6%<br />

3.5%<br />

3.4%<br />

3.0%<br />

2.5%<br />

2.4%<br />

2.0%<br />

2.0%<br />

1.9%<br />

1.8%<br />

Rank<br />

16<br />

17<br />

18<br />

19<br />

20<br />

21<br />

22<br />

23<br />

24<br />

26<br />

26<br />

27<br />

28<br />

29<br />

30<br />

Lender<br />

National City <strong>Mortgage</strong> Co., OH<br />

PHH <strong>Mortgage</strong>, NJ<br />

ABN AMRO <strong>Mortgage</strong> Group, MI<br />

Aurora Loan Services, CO<br />

GreenPoint <strong>Mortgage</strong>, CA<br />

WMC <strong>Mortgage</strong> Corp., CA<br />

Fremont General Corp., CA<br />

First Horizon Home Loans, TX<br />

First Magnus Financial, AZ<br />

<strong>Mortgage</strong>IT, Inc., NY<br />

<strong>Mortgage</strong>IT, Inc., NY<br />

First Franklin Financial, CA<br />

Option One <strong>Mortgage</strong>, CA<br />

Taylor, Bean, & Whitaker, FL<br />

US Bank Home <strong>Mortgage</strong>, MN<br />

Volume<br />

$43.12<br />

$41.26<br />

$38.31<br />

$36.80<br />

$36.40<br />

$33.20<br />

$32.30<br />

$31.21<br />

$30.07<br />

$29.00<br />

$29.00<br />

$27.67<br />

$27.35<br />

$24.80<br />

$22.29<br />

Share<br />

1.4%<br />

1.4%<br />

1.3%<br />

1.2%<br />

1.2%<br />

1.1%<br />

1.1%<br />

1.0%<br />

1.0%<br />

1.0%<br />

1.0%<br />

0.9%<br />

0.9%<br />

0.8%<br />

0.7%<br />


Left Us with ‘Super 4’ <strong>Mortgage</strong><br />

Market Players<br />

(As of June 30 – Dollars in Billions)<br />

Servicing Market Originations Market<br />

Rank Servicer 2Q08 Share 6M 2008 Share<br />

1 Bank of America $2,097.1 18.6% $206.8 22.6%<br />

Countrywide Financial $1,485.3 $132.0<br />

Bank of America Mtg. & Affiliates $540.8 $74.8<br />

Home Loan Services (Merrill Lynch) $43.0<br />

Wilshire Credit (Merrill Lynch) $28.0<br />

2 JPMorgan Chase $1,515.5 13.5% $146.9 16.1%<br />

Chase Home Finance $829.1 $116.4<br />

Washington Mutual $604.0 $30.5<br />

EMC <strong>Mortgage</strong> (Bear Stearns) $82.4<br />

3 Wells Fargo & Company $1,496.1 13.3% $133.7 14.6%<br />

4 Citigroup $1,017.9 9.0% $110.7 12.1%<br />

Citi<strong>Mortgage</strong> Inc. $816.8 $72.7<br />

Wachovia Corporation $201.1 $37.9<br />

Top Four Lenders $6,126.7 54.4% $598.1 65.4%<br />

Total Market $11,254 100.0% $915.0<br />

Source: Inside <strong>Mortgage</strong> Finance, Copyright 2008<br />


Where Are We in the<br />

Housing Cycle?<br />

• Home prices are still falling in most parts of the<br />

country and may continue for another year.<br />

• Housing inventories are showing signs of<br />

leveling off – but that may change as rising<br />

foreclosures add more properties into mix.<br />

• Housing demand is way below housing supply<br />

and it is hard to predict any recovery until they<br />

become more balanced.<br />


Are Declining Markets Underwriting<br />

Policies Appropriate?<br />

• If you expect housing values in most markets to<br />

decline at least 10% in coming year, higher<br />

downpayment requirements are necessary.<br />

• But requiring 20% downpayments and 750 FICO<br />

scores is probably overkill and unnecessary.<br />

• Better balance between true credit risks and<br />

mortgage underwriting is needed.<br />


Are Media Portrayals of <strong>Mortgage</strong><br />

Crisis Accurate?<br />

• Most media reports of housing and mortgage<br />

market troubles are based on some facts, but<br />

generally don’t put problems in perspective.<br />

• Media emphasis on bad news and who is likely<br />

to be next mortgage crisis victim.<br />

• Daily barrage of bad housing and mortgage<br />

news helps drive market and public fears.<br />


Changing the Consumer Psychology<br />

Around Homeownership<br />

• Consumers need to start looking at a<br />

home as a places to live and raise families<br />

– not as an investment like stocks.<br />

• Homeowners need to accept that home<br />

values can go down as well as up. There<br />

are no guarantees.<br />

• It’s a great time for consumers to buy<br />

homes that make economic sense.<br />


Market Psychology Around<br />

Homeownership:<br />

Perceptions versus Realities<br />

October 17, 2008

Perceptions p<br />

• During g an otherwise mundane hearing g on the federal<br />

takeover of Freddie Mac and Fannie Mae, Republicans,<br />

specifically Rep. Michele Bachmann (R-MN 6th District),<br />

focused on the Clinton administration and “it’s push to<br />

provide loans to low-income minorities as a key reason<br />

for the downfall of the housing g market”.<br />

• The Clinton administration turned Freddie Mac and<br />

Fannie Mae into “a semi-nationalized monopoly”<br />

Bachmann argued. Specifically, that administration<br />

decided to make loans through the Community<br />

Reinvestment Act “ on the basis of race and often on<br />

little else”.<br />

Roll Call, Call September 26, 26 2008 by Emily Heil and Elizabeth Brotherton, Brotherton Roll Call Staff<br />


Reality 2004-2007 2004 2007<br />

• IIn each h year dduring i th the period i d of f 2004 2004-2007, 2007<br />

non-Hispanic Whites had more subprime rate<br />

l loans* * th than all ll minorities i iti combined. bi d<br />

• Vast majority of subprime rate loans were<br />

originated in largely white census tracts, i.e.,<br />

census tracts less than 30% minority.<br />

• The volume of subprime rate loans made to<br />

non-Hispanic p Whites dwarfs the volume of<br />

subprime rate loans made to minorities.<br />

* Conventional, 1st , lien, , owner-occupied, p , home p purchase/refinance, , 1-4 family y<br />


11,400,000 400 000<br />

1,200,000<br />

1,000,000<br />

800,000 ,<br />

600,000<br />

400,000<br />

200,000<br />

0<br />

2004-2007 Number of Subprime Rate Loans by Race<br />

Source: HMDA data from ComplianceTech <strong>Lending</strong>Patterns<br />

White Black Hispanic Asian<br />

Native<br />

American<br />

Hawaiian<br />

2004 727,790 218,665 190,335 25,033 7,916 5,816<br />

2005 1,227,554 385,952 451,231 64,115 9,423 13,661<br />

2006 1,108,679 , , 378,244 , 445,739 , 56,136 , 7,902 , 11,494 ,<br />

2007 609,352 176,973 182,837 24,752 4,133 4,683<br />


2004-2007 Share of Subprime Rate Loans by Race<br />

Source: HMDA data from ComplianceTech p <strong>Lending</strong>Patterns g<br />

2004<br />

White Black Hispanic Asian<br />

13.81%<br />

15.86%<br />

1.82%<br />

52.80%<br />

2006<br />

White Black Hispanic Asian<br />

19.29%<br />

16.37%<br />

2.43%<br />

47.99%<br />

2005<br />

White Black Hispanic Asian<br />

18.01%<br />

15.40%<br />

2.56%<br />

48.99%<br />

2007<br />

White Black Hispanic Asian<br />

15.92%<br />

15.41%<br />

2.16%<br />

53.06%<br />


$250,000,000<br />

$200,000,000<br />

$150,000,000<br />

$100,000,000<br />

$50 $50,000,000 000 000<br />

$0<br />

2004 - 2007 Subprime Rate Loans by Race ($000)<br />

Source: HMDA data from ComplianceTech <strong>Lending</strong>Patterns<br />

White Black Hispanic Asian<br />

Native<br />

American<br />

Hawaiian<br />

2004 $99,703,308 $28,911,912 $31,037,451 $5,886,295 $1,204,080 $1,214,914<br />

2005 $210,108,97 $65,067,816 $99,423,144 $19,359,711 $1,717,950 $3,669,466<br />

2006 $211,754,27 $70,963,632 $108,435,18 $19,318,804 $1,578,007 $3,635,413<br />

2007 $117,011,30 $32,261,377 $42,344,445 $9,200,995 $756,755 $1,499,182<br />


• In each year, the White proportion of subprime<br />

rate loans was lower than all minorities, except<br />

Asians Asians.<br />

•Compared p to all other racial ggroups, p , blacks and<br />

Hispanics had the largest percentage buildup of<br />

subprime rate loans and the highest average<br />

spreads.<br />

• Year after year, subprime rate loans were<br />

increasingly originated in higher proportion in<br />

census tracts that are inhabited by minorities.<br />


Perceent<br />

60.00<br />

50.00<br />

40.00<br />

30.00<br />

20.00<br />

10 10.00 00<br />

0.00<br />

2004-2007 Proportion of Subprime Rate Loans by Race<br />

Source: HMDA data from ComplianceTech <strong>Lending</strong>Patterns<br />

Whit White Bl Blackk Hi Hispanic i AAsian i<br />

Native<br />

American<br />

HHawaiian ii OOverall ll<br />

2004 8.38 30.84 17.55 5.42 21.12 13.65 11.06<br />

2005 19.19 50.96 37.78 15.57 32.06 29.56 24.36<br />

2006 21.78 52.76 40.91 17.43 33.82 31.46 27.42<br />

2007 14.21 37.32 26.46 9.22 23.08 18.98 17.41<br />


Average A Spread<br />

6.00<br />

5.00<br />

4.00<br />

3.00<br />

2.00<br />

1.00<br />

0.00<br />

2004-2007 Subprime Rate Loans by<br />

Race and Average Spread<br />

Source: HMDA data from ComplianceTech <strong>Lending</strong>Patterns<br />

White Black Hispanic Asian<br />

Native<br />

AAmerican i<br />

Hawaiian<br />

2004 4.23 4.28 4.03 3.88 4.17 4.00<br />

2005 4.75 4.97 4.70 4.61 4.81 4.68<br />

2006 5.09 5.50 5.18 4.95 5.21 5.18<br />

2007 4.60 5.00 4.58 4.27 4.71 4.57<br />


700,000<br />

600,000<br />

500,000<br />

400,000<br />

300 300,000 000<br />

200,000<br />

100,000<br />

0<br />

2004-2007 Count of Subprime Loans by Tract % Minority<br />

Source: HMDA data from ComplianceTech <strong>Lending</strong>Patterns<br />

$120,000,000<br />

$100,000,000<br />

$80,000,000<br />

$60,000,000<br />

$40,000,000<br />

$20,000,000<br />

$0<br />

2004-2007 Dollar Volume of Subprime Rate Loans by Census Tract<br />

Percent Minority ($000)<br />

Source: HMDA data from ComplianceTech <strong>Lending</strong>Patterns<br />

Percent<br />

50.00<br />

45.00<br />

40.00<br />

35.00<br />

30.00<br />

25.00<br />

20 20.00 00<br />

15.00<br />

10.00<br />

5.00<br />

0.00<br />

2004-2007 Percent of Subprime Rate Loans within Tract % Minority<br />

Source: HMDA data from ComplianceTech <strong>Lending</strong>Patterns<br />

•Upper U iincome borrowers b had h d the th<br />

highest share of subprime rate<br />

loans during each year except<br />

2004, 00 , where e e middle dd e income co e<br />

borrowers had the highest share.<br />

•Contrary to popular belief, low<br />

income borrowers had the lowest<br />

share of 2006 subprime rate loans.<br />


45.00%<br />

40.00%<br />

35.00%<br />

30.00%<br />

25.00%<br />

20.00%<br />

15.00%<br />

10.00%<br />

5.00%<br />

0.00%<br />

2004-2007 Percent of Subprime Rate Loans by Borrower Income<br />

Source: ComplianceTech-<strong>Lending</strong>Patterns<br />

2004 2005 2006 2007<br />

Low 11.30% 8.52% 7.51% 9.04%<br />

Moderate 27.75% 24.06% 20.91% 22.13%<br />

Middle 30.34% 29.64% 27.56% 27.04%<br />

Upper 28.60% 35.12% 39.59% 37.01%<br />


250,000<br />

200,000<br />

150,000<br />

100,000<br />

50,000<br />

0<br />

2007 Subprime Rate Loans by Race and Income<br />

Source: ComplianceTech-<strong>Lending</strong>Patterns<br />

White Black Hispanic Asian Nat. Am Hawaiian<br />

Low 55,102 22,629 11,148 691 373 150<br />

Moderate 133,066 48,583 34,920 2,420 876 624<br />

Middle 165,091 49,086 48,645 4,582 1,048 1,075<br />

Upper 221,559 48,819 81,031 14,397 1,493 2,349<br />


Reality 2004 2004-2007 2004 2007<br />

2007<br />

• Male and Female with no co-<br />

applicants li t made d up more<br />

than 2/3rds than 2/3 of subprime loan<br />

recipients p<br />

• Refinance was the dominate<br />

loan purpose<br />


1,000,000<br />

900,000<br />

800,000<br />

700,000<br />

600,000<br />

500,000<br />

400 400,000 000<br />

300,000<br />

200,000<br />

100,000<br />

0<br />

2004-2007 Gender Distribution of Subprime Rate Loans<br />

Source: HMDA data from ComplianceTech <strong>Lending</strong>Patterns<br />

Male<br />

Primary<br />

Female<br />

Primary<br />

Female (no<br />

co-app.)<br />

Male (no<br />

co-app.)<br />

Same<br />

Gender<br />

UUnk k<br />

2004 373,684 112,689 377,600 442,521 20,216 51,138<br />

2005 590,208 199,441 699,481 878,358 38,519 99,292<br />

2006 513,352 174,539 654,186 822,990 35,008 109,999<br />

2007 284,212 93,293 308,894 391,623 19,382 50,711<br />


40.00%<br />

35.00%<br />

30.00%<br />

25.00%<br />

20.00%<br />

15.00%<br />

10.00%<br />

55.00% 00%<br />

0.00%<br />

2004-2007 Gender Percent Distribution of Subprime Rate Loans<br />

Source: HMDA data from ComplianceTech <strong>Lending</strong>Patterns<br />

Male Primary<br />

Female<br />

Pi Primary<br />

Female (no<br />

co-app.) )<br />

Male (no coapp.)<br />

)<br />

Same<br />

GGender d<br />

2004 27.11% 8.18% 27.39% 32.10% 1.47%<br />

2005 23.56% 7.96% 27.92% 35.06% 1.54%<br />

2006 22.22% 7.55% 28.31% 35.62% 1.52%<br />

2007 24.75% 8.12% 26.90% 34.10% 1.69%<br />


Peercent<br />

2004-2007 Subprime Rate Loans by Loan Purpose<br />

Source: HMDA data from ComplianceTech <strong>Lending</strong>Patterns<br />

80.00%<br />

70 70.00% 00%<br />

60.00%<br />

50 50.00% 00%<br />

40.00%<br />

30.00%<br />

20.00%<br />

10.00%<br />

0.00%<br />

2004 2005 2006 2007<br />

Purchase 32.74% 43.23% 42.67% 35.84%<br />

Refinance 67 67.26% 26% 56 56.77% 77% 57 57.33% 33% 64 64.16%<br />

16%<br />


Reality 2004 2004-2007, 2004 2007, cont<br />

• According to HMDA data Fannie Mae<br />

and Freddie Mac were NOT major<br />

purchasers of subprime rate loans<br />

from approved seller/servicers.<br />

• Non-Agency investors purchased the<br />

vast majority of subprime rate loans<br />


2,000,000<br />

1,800,000<br />

1,600,000<br />

1,400,000<br />

11,200,000 200 000<br />

1,000,000<br />

800,000<br />

600,000<br />

400,000<br />

200,000<br />

0<br />

2004-2007 Number of Subprime Rate Loans by Investor<br />

Source: ComplianceTech-<strong>Lending</strong>Patterns<br />

Fannie<br />

Mae<br />

Ginnie<br />

Mae<br />

Freddie<br />

Mac<br />

Farmer<br />

Mac<br />

Non-<br />

Agency<br />

Not Sold<br />

2004 28,874 0 2,917 5 906,401 440,248<br />

2005 64,739 0 3,345 99 1,864,17 573,237<br />

2006 71 71,979 979 0 99,498 498 9 11,696,95 696 95 531 531,951 951<br />

2007 118,860 0 22,121 4 610,659 396,696<br />


• While many conservatives believe the current<br />

crisis is a “minority” problem, the data show that<br />

the subprime lending crisis has had a bi-racial<br />

impact impact. Non-Hispanic Whites in fact have far<br />

more subprime rate loans than all the minority<br />

groups combined.<br />

• Income-wise, middle and upper income families<br />

were hit much harder in the aggregate than<br />

low/mod low/mod.<br />

• The proportion of subprime rate loans that<br />

minorities i iti receive i as a percentage t of f ttotal t l llending di<br />

in is way out of line and suggest a serious credit<br />

supply, consumer choice and/or a steering<br />

problem problem.<br />


MMaurice i JJourdain-Earl d i E l<br />

202-842-3800<br />

jourdainearl@compliancetech.com<br />

www.compliancetech.com<br />




Trends in Loss Mitigation - Maximizing Home Retention Strategies<br />

1:15 p.m. – 2:30 p.m.<br />

Azalea 3<br />

Homeownership cultivates and upholds the viability of urban communities and provides a legacy<br />

of wealth creation that can be passed on from one generation to the next. In today’s housing<br />

market helping homeowners stay in their homes is a priority as is preserving generational wealth.<br />

<strong>Mortgage</strong> servicers are facing major default challenges and some have developed creative<br />

strategies for contacting distressed borrowers to help them avoid foreclosure. This panel will<br />

discuss the importance of working with borrowers, the role of non-profits, and available<br />

government assistance programs.<br />

Moderator: Buz Mertes<br />

Segment Marketing Manager for Corporate Accounts<br />

Genworth <strong>Mortgage</strong> Insurance<br />

Speakers: Patrick Carey<br />

Chief Executive Officer<br />

Titanium Solutions<br />

Phil Comeau<br />

President and Chief Executive Officer<br />

Phillip Comeau Company, Inc.<br />

Alan Goldberg<br />

Vice President Default Services<br />

Genworth <strong>Mortgage</strong> Insurance<br />

Joseph (Joe) Ohayon<br />

Vice President, Community & Client Relations<br />

Default & Retention Operations<br />

Wells Fargo Home <strong>Mortgage</strong>

Patrick Carey<br />

Chief Executive Officer (CEO)<br />

Titanium Holdings<br />

Patrick Carey is the chief executive officer of Titanium Holdings, the holding company<br />

that owns Titanium Solutions. Titanium Solutions is the premier provider of loss<br />

mitigation outreach services in the mortgage industry. Prior to joining Titanium<br />

Holdings, Carey was the executive vice president, Default/ Retention Operations for<br />

Wells Fargo Home <strong>Mortgage</strong>, Inc. in the Carolinas campus in Fort Mill, S.C.. Carey was<br />

responsible for all Default functions including collections, loss mitigation, foreclosure,<br />

bankruptcy, service support, claims, property preservation, loss analysis, default<br />

information management & analytics (DIMA), and Premier Asset Services (PAS), for<br />

prime, non-prime and sub-serviced products. Carey’s operations included locations in<br />

Fort Mill, S.C., San Bernardino, Calif., Des Moines, Iowa., Milwaukee, Wis., Frederick,<br />

M.D., and Minneapolis, Minn.<br />

Carey joined Wells Fargo on April 14, 2003 after nearly 20 years experience in mortgage<br />

and consumer lending. Prior to joining the company, Carey spent three years at Century<br />

21 Gold Medal Realty where he headed the company’s commercial real estate division.<br />

He also has served as senior manager of the regional claims centers for UnumProvident<br />

Life Insurance Company of America. In addition, he was first vice president and chief<br />

quality officer for First Card Corporation. He also held several leadership positions with<br />

Chase Manhattan Bank N.A., including vice president for the northeast collections region<br />

with the Chase bank Company, and vice president of customer support & Default<br />

Operations for Chase Home <strong>Mortgage</strong> Corporation.<br />

Carey has a bachelor’s degree in business administration from Georgia State University<br />

and holds the designation of Accredited <strong>Mortgage</strong> Professional (AMP) with the <strong>Mortgage</strong><br />

Bankers Association (MBA).

Alan Goldberg<br />

Alan Goldberg has over 30 years of experience in default management and loss<br />

mitigation. He currently serves as Vice President, Homeowner Assistance for Genworth<br />

<strong>Mortgage</strong> Insurance. Alan is responsible for Genworth’s Homeowner Assistance<br />

program, which assists borrowers with financial and other hardships.<br />

Alan began his career with General Electric Company in 1977. He has held various<br />

senior positions in consumer loan finance and servicing, wholesale finance, commercial<br />

loan servicing, mortgage servicing and mortgage insurance. Alan’s positions have been<br />

concentrated in default management, loss mitigation, asset disposition and homeowner<br />

assistance.<br />

Alan became part of Genworth Financial in 2004 when Genworth became an independent<br />

company and moved away from General Electric through an IPO. He is a graduate of<br />

City University of New York, Queens College, and currently resides in Raleigh, N.C.

TAB<br />




Non Profit’s Role in Early Intervention Foreclosure Prevention<br />

2:45 p.m. – 3:45 p.m.<br />

Azalea 2<br />

There are several critical stages in the mortgage default life cycle, from a borrower’s first<br />

delinquency to foreclosure. Creating hope and assistance awareness among potential borrowers<br />

are logical keys to success. If homeownership is to be preserved, appropriate intervention<br />

strategies need to be implemented at key points in the life cycle. Panelists will discuss<br />

intervention strategies and inter-personal implementation styles that are effective in preserving<br />

homeownership.<br />

Moderator: Norman Edwards<br />

Senior Director<br />

Corporate Relations<br />

<strong>Mortgage</strong> Bankers Association<br />

Speakers: David Berenbaum<br />

Executive Vice President<br />

National Community Reinvestment Coalition<br />

Charmaine Brown<br />

Program Managaer<br />

Fannie Mae<br />

Larry Gilmore<br />

Deputy Director<br />

HOPE NOW Alliance<br />

Jim Griffin<br />

Director of Operations<br />

HomeFree USA

Larry L. Gilmore<br />

5502 Willow Grove Court ■ Bowie, MD 20720 ■ (240) 353-1233 ■ nupemd3@hotmail.com<br />

Larry has been actively involved in developing solutions to providing affordable housing to<br />

underserved communities throughout his career.<br />

Larry currently serves as the Director of the HOPE NOW Alliance where he assists in managing<br />

a comprehensive strategy to preserve homeownership. This includes executing strategies<br />

specific to consumer outreach, education, and ensuring borrower’s access to long-term<br />

solutions.<br />

Larry served as Vice President of Emerging Markets and VP of Government, Housing, and<br />

<strong>Industry</strong> Relations for Option One <strong>Mortgage</strong> Corporation (a subsidiary of H & R Block<br />

Corporation), where he had direct responsibilities for directing sales strategies to increase<br />

lending opportunities among growing segments, expanding the company brand by managing<br />

ongoing relationships with community organizations, consumer advocacy groups, industry trade<br />

associations, regulators, legislators and GSEs. Larry also worked on specific strategies to<br />

increase cultural diversity and served as the Chair for the <strong>Mortgage</strong> Bankers Association of<br />

America’s Diversity Task Force.<br />

Prior to Option One, Larry served as the Associate Director of <strong>Industry</strong> Relations at the<br />

<strong>Mortgage</strong> Bankers Association of America (MBA) with core responsibilities of managing<br />

outreach and policy issues. Larry served as MBA’s liaison for the Association’s Expanding<br />

Markets Committee and the Non Conforming Credit <strong>Lending</strong> Committee, which served as the<br />

voice of MBA member firms and assisted in developing MBA’s position on affordable housing<br />

and nonprime lending issues. In addition, Larry was responsible for coordinating MBA<br />

conferences, launching an industry cultural diversity initiative, and facilitating MBA’s<br />

development of numerous affordable housing efforts.<br />

Larry joined Norwest <strong>Mortgage</strong> in 1996 (which merged with Wells Fargo in 1999) where he<br />

developed much of his experience in single-family affordable housing while serving as the<br />

Manager of Market Opportunities. At Wells Fargo, Larry managed a research division that<br />

identified market opportunities and developed strategic plans to increase affordable home<br />

lending across the country. In addition, Larry assisted in the development of national programs<br />

and identified partnership opportunities.<br />

Prior to Norwest, Larry managed multi-family affordable housing, assisted in research studies to<br />

better understand minority and low-to-moderate income markets, and worked as a planner to<br />

provide economic, community, and housing develop strategies to rural communities. Larry has<br />

and continues to serve on numerous boards that provide services specific to affordable housing<br />

and other underserved communities.<br />

Larry graduated from Iowa State University with a Bachelor’s of Science Degree in Community<br />

and Regional Planning with an emphasis in affordable housing and later received his Masters of<br />

Public Administration Degree with an emphasis in organizational development and public policy<br />

from Drake University. He has received a number of certifications specific to affordable housing<br />

management, planning, and real estate finance, including receiving his designation as an<br />

Accredited <strong>Mortgage</strong> Professional and Certified <strong>Mortgage</strong> Banker.

The HOPE NOW Alliance<br />

Larry L. Gilmore<br />


2007….What Happened?<br />

� Lack of Liquidity & <strong>Mortgage</strong> Availability -The subprime mortgage industry<br />

collapses, and a surge of foreclosure activity (twice as bad as 2006) and rising<br />

interest rates depressed prices further as problems in the subprime markets spread<br />

to the near-prime and prime mortgage markets. The U.S. Treasury secretary calls the<br />

bursting housing bubble "the most significant risk to our economy.<br />

� Fall in HomeSales - Home sales continued to fall. The plunge in existing-home sales<br />

is the steepest since 1989.<br />

� Price Depreciation - In Q1/2007, S&P/Case-Shiller house price index records first<br />

year-over-year decline in nationwide house prices since 1991.<br />

� February–March: Subprime industry collapse; more than 25 subprime lenders<br />

declaring bankruptcy, announcing significant losses, or putting themselves up for<br />

sale.<br />

� August: worldwide "credit crunch" as subprime mortgage backed securities are<br />

discovered in portfolios of banks and hedge funds around the world, from BNP<br />

Paribas to Bank of China. Many lenders stop offering home equity loans and<br />

"stated income" loans. Federal Reserve injects about $100B into the money<br />

supply for banks to borrow at a low rate.<br />

� October 10: Hope Now Alliance was created by the US Government and private<br />

industry to help some sub-prime borrowers.

2008….What’s Happening?<br />

� March 16 : Bear Stearns gets acquired for $2 a share by JPMorgan Chase in a<br />

fire sale avoiding bankruptcy. The deal is backed by Federal Reserve providing<br />

up to $30B to cover possible Bear Stearn losses.<br />

� July 11: FDIC took over Indymac; has taken over a total of 13 banks total since<br />

� September 7 : Federal takeover of Fannie Mae and Freddie Mac<br />

� September 14 : Merrill Lynch sold to Bank of America amidst fears of a liquidity<br />

crisis and Lehman Brothers collapse<br />

� September 15 : Lehman Brothers files for bankruptcy protection<br />

� September 16 : Moody's and Standard and Poor's downgrade ratings on AIG's<br />

credit on concerns over continuing losses to mortgage-backed securities,<br />

sending the company into fears of insolvency.<br />

� September 17 : The US Federal Reserve loans $85 billion to American<br />

International Group (AIG) to avoid bankruptcy.<br />

� September 19 : Paulson financial rescue plan unveiled after a volatile week in<br />

stock and debt markets.<br />

� September 25 : Washington Mutual was seized by the Federal Deposit<br />

Insurance Corporation, and it's banking assets were sold to JP MorganChase<br />

for $1.9bn.<br />

� September 26 th : Wachovia possibly at risk<br />

� September 28 th : Treasury Rescue Plan Reached

2,500,000<br />

2,000,000<br />

1,500,000<br />

1,000,000<br />

500,000<br />

0<br />

Jan-07<br />

Growth in Foreclosures<br />

Mar-07<br />

May-07<br />

Jul-07<br />

Sep-07<br />

Nov-07<br />

Jan-08<br />

Mar-08<br />

May-08<br />

Jul-08<br />

Monthly Foreclosure<br />

Starts<br />

Monthly Completed<br />

Foreclosure Sales<br />

Foreclosure Starts Total<br />

Foreclosures Completed<br />


Mission<br />

� Maximize the preservation of homeownership while minimizing<br />

the rate of foreclosure. Assist borrowers who have the<br />

willingness and wherewithal to remain in their homes, but need<br />

some help to do it. Our goal is to keep people in their homes and<br />

when that is not possible, prevent foreclosure.<br />

� HOPE NOW’s strategy focuses on:<br />

� Reach Homeowners in need - through assertive outreach campaigns<br />

� Counsel Homeowners in need – accessible counseling services and<br />

efficient communication between counselors and servicers<br />

� Assist Homeowners in need – working with servicers and investors<br />

ensure borrowers have access to appropriate workout solutions

HOPE NOW Alliance Membership<br />

Counselors<br />

� Consumer Credit Counseling Service of Atlanta<br />

� Homeownership Preservation Foundation<br />

� Housing Partnership Network<br />

� NeighborWorks America<br />

� HUD Intermediaries<br />

<strong>Mortgage</strong> Market Participants<br />

� Assurant, Inc.<br />

� Aurora Loan Services<br />

� Avelo <strong>Mortgage</strong>, LLC.<br />

� Bank of America<br />

� Carrington <strong>Mortgage</strong> Services<br />

� Citigroup, Inc.<br />

� Countrywide Financial Corporation<br />

� EMC <strong>Mortgage</strong>, Inc.<br />

� Fannie Mae<br />

� First Horizon Home Loans and First Tennessee<br />

Home Loans<br />

� Freddie Mac<br />

� GMAC ResCap<br />

� Home Loan Services, Inc. (d/b/a First Franklin Loan<br />

Services & NationPoint Loan Services)<br />

� HomEq Servicing<br />

� HSBC Finance<br />

� IndyMac Bank<br />

� JPMorgan Chase & Co.<br />

� Land American / Loan Care<br />

� MERS<br />

� National City <strong>Mortgage</strong> Corporation<br />

� Nationstar <strong>Mortgage</strong>, LLC.<br />

� Ocwen Loan Servicing, LLC.<br />

� Option One <strong>Mortgage</strong> Corporation<br />

� PMI <strong>Mortgage</strong> Insurance Co.<br />

� Saxon <strong>Mortgage</strong> Services<br />

� Select Portfolio Servicing, Inc.<br />

� State Farm Insurance Companies<br />

� SunTrust <strong>Mortgage</strong>, Inc.<br />

� Washington Mutual, Inc.<br />

� Wells Fargo & Company<br />

� Wilshire Credit Corporation<br />

Trade Associations<br />

� American Bankers Association<br />

� American Financial Services Association<br />

� American Securitization Forum<br />

� Consumer Bankers Association<br />

� Consumer <strong>Mortgage</strong> Coalition<br />

� The Financial Services Roundtable<br />

� The Housing Policy Council<br />

� <strong>Mortgage</strong> Bankers Association<br />

� Securities <strong>Industry</strong> and Financial Markets<br />


Servicer Principles<br />

� Early contact to borrowers facing reset – Outreach to borrowers with adjustable rate<br />

mortgages 120 days (minimum) prior to interest rate reset.<br />

� Port of Entry for Counselors – Servicers establish 1-800 numbers, fax, and email as<br />

direct port of entry available to all HUD-certified housing counseling agencies and their<br />

counselors.<br />

� Servicers Funding Counseling – Servicers agree to fund counseling sessions through<br />

the Homeownership Preservation Foundation’s HOPE Hotline through May 31, 2008.<br />

� Outreach to at-risk borrowers who have not been in contact – Monthly, servicers send<br />

outreach letters to at-risk borrowers, those that are 60+ days delinquent and have no<br />

previous contact with their servicer.<br />

� ASF Framework and Project Lifeline<br />

� Commitment to Report Results – Servicers reporting data on:<br />

� Foreclosure sales, Foreclosure starts, Modifications, Repayment plans, Effectiveness of outreach<br />

letters<br />

� ASF Fast Track Efforts<br />

� Other as needed<br />

� Commitment to Borrower and Counselor Response<br />

� Notice of Application Receipt within 5 days<br />

� Periodic correspondence within at least 30 days<br />

� Providing definitive response to full application within 45 days<br />

� Agreement to provide borrower’s a uniform timeline<br />

� Automatic subordination of 2 nd liens

Borrower Outreach Letters<br />

� Servicer Outreach Letters -<br />

� Letters sent by servicers on HOPE NOW<br />

Letterhead<br />

� All 60+ Delinquent Borrowers<br />

� Results:<br />

� Averaging nearly 200,000 letters per month<br />

� Over 1.85 million letters sent since November 2007<br />

� Average monthly response rate of 20%

HOPE NOW Homeownership<br />

Preservation Workshops<br />

� Borrowers at risk of foreclosure can meet face-to-face<br />

with their mortgage servicer and/or a local counselor<br />

� <strong>Mortgage</strong> Servicers have direct mail campaign to<br />

delinquent borrowers and massive radio and print<br />

marketing campaign initiated<br />

� Over 12,000 counseled in last 6 months<br />

� Collaborative between servicers and counselors;<br />

NeighborWorks America has been a key partner<br />

� Other key partners have included Governors,<br />

Legislators, Federal Reserve Banks, State AG Offices,<br />


Date Cities State Servicers Borrowers Reached<br />

March 3rd Riverside CA 10 227<br />

March 5th Anaheim CA 10 267<br />

March 7th Stockton CA 12 411<br />

March 30th Columbus OH 12 170<br />

April 1st Philadelphia PA 14 328<br />

April 19th Atlanta GA 13 696<br />

April 21st Milwaukee WI 10 501<br />

April 22nd Indianapolis IN 14 312<br />

April 24th Chicago IL 17 642<br />

May 3rd Memphis TN 9 232<br />

May 5th Jacksonville FL 12 237<br />

June 9th Dallas TX 22 469<br />

June 10th San Antonio TX 11 150<br />

June 13 & 14 Las Vegas NV 15 1328<br />

July 25 & 26 Newark & Mount Laurel NJ 12<br />

August 12 Fox borough, MA MA 20 2176<br />

August 21 Orlando FL 20 1008<br />

August 22 Estero FL 20 614<br />

August 23 Miami FL 20 1695<br />

September 13<br />

20<br />

Prince Georges . Fairfax County MD<br />

VA<br />

11<br />

11<br />

438<br />

214<br />

183<br />

Total 12,298

Upcoming Workshops<br />

October 21 Firm Tucson AZ<br />

23 Firm Phoenix AZ<br />

November 6 In progress Miami FL<br />

7 In progress Miami FL<br />

15 In progress Houston TX<br />

19 In progress Cleveland OH<br />

Dates to be<br />

Scheduled Pending Detroit MI<br />

Not Started Los Angeles CA<br />

Not Started Denver CO<br />

Not Started Sacramento CA

HOPE Hotline...888-995-HOPE<br />

� National Ad Council TV campaign to encourage borrowers to<br />

contact their lenders, or contact HOPE – 1.888.995-HOPE<br />

� National, toll-free hotline provides counseling for foreclosure<br />

prevention<br />

� Free to homeowners and available 24/7/365<br />

� Staffed by over 450 highly trained foreclosure prevention<br />

specialists at 10 HUD-approved credit counseling agencies<br />

� Results:<br />

� Currently receiving over 2,700 calls per day<br />

� Over 830,000 calls received & 282,000 counseled<br />

� In the 2 nd quarter of 2008, over 198,000 calls received & nearly<br />

69,000 counseled

Increasing Efficiency<br />

through Technology<br />

� Early Resolution Counseling Portal (ERCP) which will connect<br />

counselors with servicers and produce dramatically more<br />

workouts for homeowners<br />

� In Pilot Phase with Bank Of America, Wells Fargo, CountryWide,<br />

and CCCS of Atlanta<br />

� An invoice management system for processing fee for service<br />

invoices<br />

� A permanent triage solution which combines the best of high tech<br />

with the best of high touch to give every caller prompt service<br />

and satisfaction with the service<br />

� A call distribution system to identify the next available counselor<br />

and increase the conversion rate.

HOPE NOW Results<br />

� Since July 2007 through June 2008, over 2 million homeowners<br />

avoided foreclosure through the efforts of HOPE NOW members.<br />

� Increase loan workouts: HOPE NOW lenders are increasing the<br />

number of modifications, repayment plans, and refinances every<br />

month.<br />

� Streamline: Current borrowers with subprime ARM loans may be<br />

eligible for streamlined modification or refinance as outlined by the<br />

American Securitization Forum.<br />

� Project Lifeline: HOPE NOW lenders are working to reach most atrisk<br />

borrowers (90-day plus delinquent), work with the borrower, and<br />

if appropriate, put a 30-day “pause” on foreclosure.

HOPE NOW Data Reporting<br />


2007 Q3 2007 Q4 2008 Q1 2008 Q2 Total<br />

RepaymentPlans 322,909 333,393 312,225 301,894 1,270,421<br />

Prime 120,254 136,364 146,586 141,126 544,330<br />

Subprime 202,656 197,029 165,639 160,768 726,091<br />

Modifications 75,326 140,401 170,090 220,100 605,917<br />

Prime 29,999 37,162 48,022 55,907 171,089<br />

Subprime 45,327 103,239 122,068 164,193 434,828<br />

Workout Plans 398,236 473,794 482,315 521,994 1,876,338<br />

Prime 150,253 173,526 194,607 197,033 715,419<br />

Subprime 247,983 301,244 287,708 324,961 1,160,919<br />


2007 Q3 2007 Q4 2008 Q1 Apr-08 Total<br />

Foreclosure Sales 135,330 151,403 202,970 245,688 735,390<br />

Prime 53,760 59,750 82,819 107,661 303,989<br />

Subprime 81,570 91,653 120,151 138,027 431,401<br />

Worklout Plans = Repayment Plans + Modifications<br />

Repayment Plans: A plan that allows borrower to become current and catch up on missed payments that<br />

are appropriate to the borrower’s circumstances, which involves deferring or rescheduling payments but<br />

the full amount of the loan is expected ultimately to be paid and within the original maturity of the loan.<br />

Modifications: A modification occurs any time any term of the original loan contract is permanently altered.<br />

This can involve a reduction in the interest rate, forgiveness of a portion of principal or extension of the<br />

maturity date of the loan.

Percent<br />

Increase in Loan Modifications<br />

60.0%<br />

50.0%<br />

40.0%<br />

30.0%<br />

20.0%<br />

10.0%<br />

0.0%<br />

Modifications as a % of Total Workouts<br />

Jul-07<br />

Aug-07<br />

Sep-07<br />

Oct-07<br />

Nov-07<br />

Dec-07<br />

Jan-08<br />

Feb-08<br />

Mar-08<br />

Apr-08<br />

May-08<br />

Jun-08<br />

Month<br />

Total<br />

Prime<br />


HOPE NOW Tomorrow<br />

� Anticipate continued delinquencies and focus on housing loss<br />

mitigation through 2009, Prime and Subprime<br />

� Creative partnerships with third parties<br />

� “Operationalize” “Fee for service” model to pay for foreclosure<br />

counseling (ASF, FNMA, Freddie Mac, HUD)<br />

� Creation and adoption of enhanced loss mitigation standards by<br />

industry<br />

� Improve communication and transparency among servicers,<br />

lenders, non-profits and investors. Long term model change for<br />

industry<br />

� Improve transparency on loss mit process for consumer<br />

� Improved work flow to meet unprecedented demand<br />

� Creation of comprehensive data base around loss mitigation



Responsible Sustainable <strong>Lending</strong> across the Credit Spectrum<br />

2:45 p.m. – 3:45 p.m.<br />

Azalea 3<br />

This session will describe what responsible non-prime lending should look like going forward. It<br />

appears that subprime lending as we knew it is gone, perhaps forever. Nevertheless, many argue<br />

that some aspects of this type of lending were positive in supporting minority homeownership.<br />

Credit policy decision makers are grappling with where to stratify credit tiers along with other<br />

qualification criteria.<br />

Moderator: Debbie Johnson<br />

Senior Vice President<br />

Compliance<br />

Genworth <strong>Mortgage</strong> Insurance<br />

Speakers: Shelly Metz-Galloway<br />

Vice President Diverse Segments<br />

Wells Fargo Home <strong>Mortgage</strong><br />

Catherine Godschalk<br />

Washington Branch Director<br />

Self Help Credit Union<br />

Ernest Baskette<br />

Senior Vice President<br />

Strategic Business Alliances<br />

Neighborhood Housing Services of America (NHSA)

Ernest E. Baskette, Jr.<br />

Mr. Baskette currently serves as Senior Vice President of Neighborhood Housing<br />

Services of America’s Strategic Business Alliances Group. Mr. Baskette is responsible<br />

for the development of increased business activity and product development.<br />

Starting with the Architects Renewal Committee in Harlem (ARCH), in New York City<br />

in 1972, Mr. Baskette has worked in the community development field for 35 years. For<br />

the last 27 years, he has held progressively responsible positions within NHSA. Before<br />

joining NHSA in 1980, he served, for a three-year period, as executive director of the<br />

Neighborhood Housing Services of Newark, New Jersey. His notable accomplishments<br />

at NHSA have included: creation and direction of a statewide construction loan program<br />

from 1989 through 1996 in New Jersey, which produced over $200 million in facilitated<br />

housing development loans. His most recent responsibilities with NHSA have included:<br />

head of loan operations, and business and loan product development.<br />

Mr. Baskette’s work experience prior to joining the NeighborWorks ® network included:<br />

extensive work in the sales of computer technology and services; teaching computer<br />

operations; management and training of temporary office personnel; and teaching a<br />

course in Urban Problems as an adjunct professor for Marymount Manhattan College in<br />

New York City. Mr. Baskette holds a Masters in Urban Planning from Hunter College in<br />

New York City.

Catherine Van Dusen Godschalk<br />

Catherine Godschalk is the Branch Director for Self-Help’s Washington, DC office and<br />

manages Self-Help’s commercial real estate and affordable housing lending in the<br />

Washington, DC region. Prior to joining Self-Help in 2005, Catherine was a senior<br />

policy analyst in the Housing and Community Development Division of Fannie Mae,<br />

where she managed a team of analysts focused on policy and program development<br />

related to expanding minority and low-income homeownership. Catherine holds a<br />

Bachelor of Arts in History from Columbia University and a Masters of Public Policy<br />

from the Kennedy School of Government at Harvard University. She lives in the<br />

Washington, DC area with her husband and two young children.<br />

Self-Help is a community development lender and real estate developer that works with<br />

qualified individuals, organizations and communities traditionally underserved by<br />

conventional markets in pursuit of its mission to create and preserve ownership and<br />

economic opportunity. Through direct and secondary market lending, Self-Help has<br />

provided more than $5 billion in financing to more than 55,000 homebuyers and small<br />

businesses nationwide.

Shelley Metz-Galloway<br />

Vice President/CRA/HMDA Manager<br />

Wells Fargo Home <strong>Mortgage</strong><br />

Shelley Metz-Galloway is Vice President/CRA and HMDA Manager Wells Fargo Bank<br />

N.A. In this capacity, she is responsible for positioning leadership to effectively manage<br />

the business implications related to the management and reporting of WFHM’s CRA and<br />

HMDA data. Metz-Galloway leads a cross-enterprise team in all aspects of CRA and<br />

HMDA data management, analysis and reporting and in the development of strategic<br />

plans and internal/ external communications.<br />

As the Wells Fargo CRA Manager, Metz-Galloway is also responsible for developing,<br />

implementing and supporting strategies/initiatives that drive LMI and Minority market<br />

share growth for the Diverse Segments division. She also managers the development and<br />

implementation of GSE partnership plans that support GSE’s HUD Goal and Sub-Goal<br />

requirements.<br />

Having joined Wells Fargo & Company in 2002, Metz-Galloway has served as the<br />

Director of Special Projects and Strategic Planning for Emerging Markets, National<br />

Operations Manager and Project Manager for the WFHM Diversity Council. Metz-<br />

Galloway is currently a member of the enterprise wide Corporate Diversity Council.<br />

Prior to joining Wells Fargo, Shelley Metz-Galloway was President and Chief Operating<br />

Officer of Equinta Corporation, San Diego, CA, an internet based residential transaction<br />

platform. From 1998 – 2000 Metz-Galloway served as a Corporate Strategist to the<br />

Office of the Chairman of Fannie Mae where she conducted corporate, division and<br />

functional level strategic and emerging business/industry analyses. She was President of<br />

CAF, Inc., Washington D.C. from 1991-1993 and a Senior Investment Officer for Aetna<br />

Bond Investors, Hartford, CT from 1983-1991.<br />

Shelley Metz-Galloway holds an MBA degree with finance concentration from the<br />

University of Michigan, a certificate in Senior Executive Leadership from Georgetown<br />

University, and a Bachelor of Arts Degree in Political Science from Edinboro University

Responsible/Sustainable <strong>Lending</strong> Across<br />

the Credit Spectrum<br />

Shelley Metz-Galloway<br />

Vice President<br />

Diverse Segments<br />

Draft<br />

October 7, 2008

What is…<br />

“the art of influencing and directing others in<br />

such a way that will win their obedience,<br />

confidence, respect and loyal cooperation<br />

in achieving common objectives”<br />

“ welded to performance”<br />


Destination<br />

� Fair and Responsible <strong>Lending</strong> - Wells<br />

Fargo’s Past, Present and Future…<br />

� Fair and Responsible <strong>Lending</strong> – It’s the<br />

Right Thing to Do<br />

� Fair and Responsible <strong>Lending</strong> – the<br />

Principles that Guide Us<br />


Wells Fargo<br />

Our Commitment is Past, Present and<br />

Future…<br />

To always do what is right for our customers. Wells<br />

Fargo is fully committed to responsible lending and<br />

servicing in all communities.<br />


Wells Fargo<br />

Fair and Responsible <strong>Lending</strong><br />

The Right Thing to Do…<br />

September 4, 2008 – Global Finance magazine released its annual<br />

ranking of the World Safest Banks in which Wells Fargo was listed<br />

among the top 10.<br />


Groupe Caisse des Dépôts (CDC) France<br />

Bank Nederlandse Gemeenten (BNG) Netherlands<br />

Landwirtschaftliche Rentenbank Germany<br />

Rabobank Netherlands<br />

Landeskreditbank Baden-Wuerttemberg-Förderbank Germany<br />

Lloyds TSB United Kingdom<br />

BNP Paribas France<br />

Dexia Belgium<br />

Wells Fargo United States<br />

NRW Bank Germany<br />


Wells Fargo<br />

Sustaining the History of Service and<br />

Success<br />

As one of the nation’s largest lenders and servicers of<br />

residential real estate loans and lines of credit, we believe<br />

it is important for our company to be an industry leader in<br />

fairly and responsibly lending to all customers<br />

So in 2004 Wells Fargo was one of the first lenders in the<br />

industry to adopt affirmative lending principles in our real<br />

estate transactions…<br />


Wells Fargo’s Responsible <strong>Lending</strong><br />

Principles – The Principles that Guide Us<br />

1. Ability to Repay<br />

2. Benefit to the Borrower<br />

3. Informed Choices<br />

4. Wide range of terms and features<br />

5. Product Selection<br />

6. Appropriate Loan Pricing<br />

7. Limits on prepayment fees<br />

8. Customer service<br />


Why Responsible <strong>Lending</strong>?<br />

Responsible <strong>Lending</strong> = Sustainable <strong>Lending</strong><br />

� Supports our Goals of positive, long-term relationships<br />

� Enables us to earn more of our customers business<br />

� Helps our customers to succeed financially<br />

� Encourages them to recommend us to others<br />

It is consistent with our commitment to always do what is<br />

right for our customers.<br />


Fair and Responsible <strong>Lending</strong>…<br />

Wells Fargo’s –<br />

Past, Present and Future<br />

The Right Thing to Do<br />

A Sustainable Strategy for Success...<br />


Thank you<br />

Shelley Metz-Galloway<br />

Vice President, Diverse Segments<br />

Wells Fargo Home <strong>Mortgage</strong><br />

301-562-2555<br />

Shelley.Metz-Galloway@wellsfargo.com<br />


Catherine Godschalk<br />

Self-Help Foreclosure Lease-Purchase Program<br />

Diversity <strong>Conference</strong><br />

October 7, 2008<br />


What is Self-Help?<br />

• Self-Help is a nonprofit Community Development<br />

Financial Institution (CDFI) that was formed in 1980<br />

• Mission: to provide economic opportunity and wealthbuilding<br />

strategies for low income families<br />

• Direct Services<br />

– Assets of $1 billion<br />

– Home lending (in NC and Washington DC MSA)<br />

– <strong>Lending</strong> to small businesses and nonprofits<br />

– Real estate development<br />

– Nonpartisan policy research on abusive financial<br />

services (Center for Responsible <strong>Lending</strong>)<br />

• Secondary Market (nationwide)<br />

www.self-help.org<br />


Secondary Market Overview<br />

Loan Originations:<br />

• Roughly $4.5 billion in purchased loans<br />

• 48 states via partnership with major banks<br />

• Over 49,600 loans<br />

Borrower Profile:<br />

• Average Income is 64% of borrower’s Area<br />

Median Income (AMI)<br />

• 40% minority<br />

• 42% female heads of household<br />

www.self-help.org<br />


www.self-help.org<br />

4<br />


Program Guidelines<br />

• 100% LTV until recently; 97% LTV now<br />

• No mortgage insurance<br />

• Flexible underwriting guidelines<br />

• Affordable for the borrower<br />

• 38/41% qualifying ratios<br />

• 20% FICO < 620; now 620 floor<br />

• Retail originations only<br />

www.self-help.org<br />


Lease-Purchase <strong>Mortgage</strong> Product<br />

� Variation on Self-Help/Fannie Program (30-yr fixed)<br />

� Initial borrower is local nonprofit partner<br />

� Self-Help recourse in place of individual qualification<br />

� Target for tenant to purchase home and assume loan<br />

within 5 years<br />

� Tenant lease payments cover mortgage and operating<br />

expense during rental period (and will not exceed FMR)<br />

� Tenants screened for affordability at origination<br />

� Affordability and credit capacity evaluated at assumption<br />

� Credit and homeownership counseling required<br />

www.self-help.org<br />


Lease-Purchase Program Goals<br />

� Neighborhood Goals<br />

� Minimize cost of foreclosures and vacant homes<br />

� Turn foreclosures into wealth building assets for<br />

low-income families and communities<br />

� Household Goals<br />

� Provide path to homeownership for first-time<br />

homebuyers and credit-impaired homeowners<br />

� Program Path<br />

� Test multiple pilots then pursue scalability<br />

www.self-help.org<br />


Lease-Purchase Pilot Structure<br />

Loan<br />

Servicers<br />

Foreclosed<br />

Properties<br />

Neighborhood<br />

Redevelopment<br />

Bulk<br />

Purchase<br />

REOs<br />

Open Market<br />

Purchases<br />

Long-term<br />

Affordable<br />

rentals<br />

Local<br />

Non-profit<br />

Developer<br />

Resale<br />

Lease to buy<br />

Funding Strategy<br />

Acquisition<br />

Rehab<br />

CRA/PRI<br />

Lease to buy<br />

mortgage<br />

Purchase<br />

<strong>Mortgage</strong><br />

Local Bank<br />

Loss<br />

Reserve<br />

Capital<br />

Funding<br />

SECM<br />

Purchase<br />

www.self-help.org<br />

Financing Structure<br />

Self-Help<br />

Sell mortgage<br />

w/ credit<br />

enhancement<br />

Fannie<br />

Mae<br />


Lease-Purchase Critical Issues<br />

Vacant REO<br />

Neighborhood &<br />

Property Selection<br />

• Find location where<br />

economics work (or<br />

subsidy is there) and<br />

capacity exists<br />

• Price/market stability<br />

• Volume/efficiency<br />

• Selectivity<br />

Acquisition/Rehab<br />

• Acquisition<br />

strategy<br />

(bulk vs.<br />

retail)<br />

• Capacity<br />

• Financing<br />

• Costs<br />

www.self-help.org<br />

Program/Asset<br />

Management<br />

• Broad skill set<br />

(counseling,<br />

asset & prop<br />

mgmt.)<br />

• Value proposition<br />

for nonprofit<br />

• Counterparty risk<br />

Wealth-<br />

Building Asset<br />

Tenant<br />

Assumption &<br />

Beyond<br />

• Value proposition for<br />

tenant<br />

• Qualifying tenants<br />

• Turnover capacity of<br />

nonprofit<br />

• Lacking L-P loan<br />

performance<br />


Pilot in Peachtree Hills, Charlotte<br />

� Reverse recent neighborhood deterioration<br />

� Occupy vacant foreclosed properties<br />

� Acquisition and rehab of up to 25 vacated properties<br />

� Begin sales & leasing by early fall 2008<br />

� Up to five-year lease-purchase period, though<br />

targeting three-year lease period<br />

� Monthly one-on-one counseling and budgeting<br />

� Financial literacy workshops throughout program<br />

www.self-help.org<br />


Charlotte – Foreclosure Distribution<br />

www.self-help.org<br />


Peachtree Hills –<br />

Foreclosure Distribution<br />

www.self-help.org<br />


Peachtree Hills – Ownership<br />

Red – Investorowned<br />

Black – Owneroccupied<br />

Blue – HOAowned<br />

common<br />

space<br />

Green – vacant<br />

lots<br />

www.self-help.org<br />


Homes are still in decent<br />

shape<br />

Expected repairs are<br />

relatively minor with a few<br />

major upgrades and<br />

replacements<br />

Neighborhood completed<br />

approximately five years ago<br />

Needed improvements to<br />

landscaping and common<br />

areas<br />

Homeowners Association exists<br />

but is struggling

Sales & Lease Price Ranges<br />

� Home prices will average $80,000, previously sold for<br />

$150,000.<br />

� Average mortgage payment will be approx. $650/mo<br />

� Average lease payment will be around $850 a month<br />

for 3bd/2bth<br />

� Homeownership fund will be available to participants who<br />

successfully complete the program<br />

� If tenants do not assume mortgage, homeownership fund will<br />

be available to the nonprofit for unit turnover, etc.<br />

www.self-help.org<br />


Supportive Services<br />

• Homebuyer counseling services<br />

• Neighborhood liaison/organizing and work with HOA<br />

• Community policing<br />

• Code enforcement<br />

• Infrastructure improvements<br />

• Landscaping upgrades<br />

• Attention to solid waste and general clean up<br />

• Funds to support rehab of homes and future homebuyer<br />

down payment assistance<br />

www.self-help.org<br />


Conclusion<br />

• 2 to 6 million completed foreclosures will occur from<br />

2007 through 2012.<br />

• $400 billion minimum of vacant properties to be<br />

redeployed or torn down.<br />

• One option is to match vacant properties with families<br />

that can lease-purchase, but are not qualified to<br />

purchase today.<br />

• $10 billion investment could leverage $100 billion of<br />

lease-purchase redeployment (500,000 units).<br />

• Public sector investment will occur because the<br />

spillover neighborhood costs will be devastating.<br />

www.self-help.org<br />


4 th Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Strategic Markets<br />

Diversity <strong>Conference</strong><br />

Ernest Baskette<br />

Neighborhood Housing Services of America<br />

October 7, 2008<br />


• <strong>Mortgage</strong> Market Dislocation – Regulatory Intervention<br />

• Many Lenders exiting business via bankruptcy<br />

• Over supply of homes/downward pressure on home prices<br />

• Loose/easy credit has brought destruction on the mortgage<br />

markets<br />

• Markets are freezing up<br />

• Non Traditional credit<br />

MLI Emerging Markets and Diversity <strong>Conference</strong><br />

Where to Focus to Help Borrowers<br />

The Perfect Storm??<br />

We’ve decided to focus and address<br />

one aspect of the problem:<br />

The Challenges of Stabilizing Markets &<br />

Non Traditional Credit <strong>Lending</strong><br />


MLI Emerging Markets and Diversity <strong>Conference</strong><br />

Over 1,000,000 Applicants Per Year Have<br />

“Thin Thin Files” Files or No or Low FICO ® s<br />

Potential Opportunity for Thin – No Credit File <strong>Mortgage</strong> <strong>Lending</strong><br />

Based on Number of Inquiries Q4 ’05 – Q3 ‘06<br />

(Inquiries in 1,000s) Q4 '05 Q1 '06 Q2 '06 Q3 '06 Total<br />

Total Credit Bureau Inquiries (<strong>Mortgage</strong> Applications) 4,663 4,494 5,016 4,755 18,928<br />

No-Score Files (no score provided by bureaus) 54 52 58 55 220<br />

No-Hit Files (no file found at bureaus) 10 10 11 11 44<br />

Thin-Data Files (insufficient data for standard decision) 186 179 200 190 757<br />

Total Opportunity<br />

(based on volume of inquiries - individual market opportunities<br />

vary by lender, loan program and particular marketing efforts)<br />

251 242 270 256 1,022<br />

� <strong>Industry</strong> averages for thin/no-file population based on total credit bureau inquiries<br />

(mortgage application related):<br />

– No Score population (1.2%)<br />

– No Hit population (0.23%)<br />

– Thin file population (4.0%)<br />

Source: Thompson Financial <strong>Mortgage</strong> Market Date overlaid with First American CREDCO Scoring Data<br />

Market Opportunity<br />


MLI Emerging Markets and Diversity <strong>Conference</strong><br />

Current Issues<br />

� Time-consuming, laborious to process for major lenders<br />

• Historically had no real appeal to <strong>Mortgage</strong> Loan Officers, REALTORS, and<br />

Builders, due to long approval process & high rate for declines<br />

• Manual, time consuming process required the creation of a paper file prior<br />

to an Underwriting review, where loan stipulations were uneven<br />

� Limited non profit borrower support activity in this space<br />

� Historically, Thin File Customers received higher cost loans via:<br />

• Teaser rates, Option ARMs, Interest Only, prepayment penalties, etc.<br />

• Can lead to resets, payment shocks, etc.<br />

� No widely accepted industry standards for evaluating non<br />

traditional creditworthiness and ability to repay<br />

� Limited market liquidity for non traditional credit products<br />


A new, innovative, comprehensive and cost-effective<br />

cost effective<br />

way to meet the needs of “thin thin file” file applicants<br />

Issue<br />

Time-consuming,<br />

manual<br />

processing<br />

Non profit<br />

origination<br />

Higher<br />

Cost Loans<br />

Credit Evaluation<br />

and Limited<br />

Market Liquidity<br />

MLI Emerging Markets and Diversity <strong>Conference</strong><br />

Solutions<br />

“R” Solution Is….<br />

Is<br />

� Automated, Internet-based platform: Decisions returned<br />

in minutes. Verification process is thorough, valid, and<br />

timely as well.<br />

� Support in the community for these new homebuyers: Upfront<br />

certified HUD approved counseling coupled with ongoing<br />

support vastly increases their successful homeownership<br />

� Growing Partnership with local governments which need to<br />

stabilize local real estate markets<br />

� Near Prime, 30-Year Fixed-Rate Conventional <strong>Mortgage</strong>s.<br />

� <strong>Industry</strong> leading credit evaluation model: New, proven credit<br />

model for evaluating nontraditional credit<br />

� Large Global Financial institutional support: Backing of Financial<br />

Giants (Fortune 50 financial services companies participating)<br />


MLI Emerging Markets and Diversity <strong>Conference</strong><br />

Introducing…<br />

Introducing<br />


MLI Emerging Markets and Diversity <strong>Conference</strong><br />

Introducing R-HOME OME<br />

� The mortgage industry’s newest, responsible lending technology<br />

innovation designed to help creditworthy consumers, with<br />

limited or no credit history, become homeowners<br />

� Unprecedented non profit/for-profit partnership, bringing new<br />

buyers to market; recycling bank owned properties<br />

� Leading edge technology driven loan origination platform to help<br />

non profits and lenders serve the traditional underserved thin file<br />

consumers better and more efficiently<br />

� Upfront and ongoing financial counseling and support to help thin<br />

file consumers get ready for homeownership with support<br />

throughout the life of the loan<br />


MLI Emerging Markets and Diversity <strong>Conference</strong><br />

Key Features of R-HOME HOME Program<br />

� Immediate Conditional <strong>Mortgage</strong> Pre-Qualification based on<br />

Non-Traditional Credit<br />

� “Rapid-Recheck” Assistance to Validate Credit Accuracy for<br />

Borrowers with Thin-File Credit<br />

� Works with local low- to moderate-income subsidy programs to<br />

enhance affordability<br />

� Product Flexibility<br />

� Lifetime Borrower Support<br />

� $20 million funded in the difficult markets of 2008; more<br />

committed and coming<br />


MLI Emerging Markets and Diversity <strong>Conference</strong><br />

Recently Added to R-HOME HOME Program<br />

� BestFIT and Social Compact loan<br />

resolution technology to help<br />

communities deal with the crisis of<br />

mortgage foreclosures<br />

� Web-based technology connects<br />

borrowers, committed to staying in their<br />

homes, with loan servicers in a<br />

transparent and efficient manner<br />

� Validates a borrower’s capacity to pay<br />

� Determines current market values for<br />

properties in distressed markets<br />

� Provides for refinance, modification, short<br />

sale and REO redeployment<br />

� As with R-HOME Loan programs, the loss<br />

mitigation programs provide continued<br />

Borrower Support<br />


MLI Emerging Markets and Diversity <strong>Conference</strong><br />

The R-HOME HOME Team<br />


MLI Emerging Markets and Diversity <strong>Conference</strong><br />

The R-HOME HOME Alliance<br />

� NHSA<br />

– Loan aggregation and special servicing platform<br />

� First American’s ANTHEM<br />

– Alternative credit evaluation<br />

� Just Price Solutions<br />

– Technology platforms<br />

� State Farm and Fannie Mae<br />

– Investors<br />

Network of HUD-certified Counselors<br />

– Homeownership counseling<br />

� Citi<strong>Mortgage</strong><br />

– National Funder and Exclusive Loan Servicer<br />


MLI Emerging Markets and Diversity <strong>Conference</strong><br />

Strategic Focus<br />

� ACCESS – A streamlined and automated process means more<br />

qualified homebuyers with non traditional credit histories will<br />

have access to mortgages<br />

� INNOVATION – State-of-the art technology, Internet-based<br />

mortgage platform that can deliver approval decisions (multiple<br />

layered risks) in minutes<br />

� SAVINGS – Conforming, near prime 30-year fixed-rate<br />

mortgages<br />

� PEACE OF MIND – Stable, affordable fixed-rate mortgages<br />

alleviate worries that often plague first-time homebuyers<br />


MLI Emerging Markets and Diversity <strong>Conference</strong><br />

Visit the R-HOME Booth<br />

To Learn More/Sign-Up<br />

More/Sign Up<br />






Tactics and Strategies to Preserve Minority Homeownership<br />

4:00 p.m. –5:00 p.m.<br />

Annapolis Ballroom 1 & 2<br />

There are a variety of creative techniques that can be employed to preserve minority<br />

homeownership. Many of these techniques involve working with minority origination sources,<br />

mortgage servicers and perhaps foreclosures counselors to prevent foreclosure through short<br />

sales, lease purchase and shared equity arrangements. These same sources may also be able to<br />

help liquidate bank REO in the communities they represent. Alternative strategies to drive new<br />

home financing may involve working builder’s inventories. The panelists will discuss these and<br />

other strategies that can be used to stabilize minority homeownership.<br />

Moderator: Tim Sandos<br />

President<br />

National Association of Hispanic Real Estate Professionals<br />

Speakers: Gary E. Acosta<br />

President/Chief Executive Officer<br />

New Vista President<br />

Marc Cormier<br />

Realtor<br />

Remax Allegiance<br />

Craig Nickerson<br />

Lead Consultant/Project Director<br />

National Community Stabilization Trust

Tim Sandos<br />

Tim Sandos Before joining NAHREP as CEO, Tim Sandos was Vice President of<br />

Emerging Markets for Principal Residential <strong>Mortgage</strong>, Inc., where he is responsible for<br />

the organization’s Emerging Markets programs and initiatives throughout the country.<br />

Tim most recently served as State Vice President & Chief Operating Officer for QWEST<br />

Communications (formerly U S WEST) and its 3,200 Nebraska employees in the state of<br />

Nebraska. His responsibilities included managing the company’s operations, sales and<br />

marketing initiatives, and directing regulatory, legislative and community affairs for the<br />

organization.<br />

Before joining U S WEST as Director of Government Affairs in 1998, Tim served as<br />

Vice President of the Education Division for Telecommunications, Inc. Prior to this, he<br />

was Executive Assistant to Denver’s former mayor, Federico Peña, which culminated in<br />

his election to the Denver City Council in 1991. In 1996, he ran for Congress in<br />

Colorado’s 1st Congressional District. He attended the University of Colorado and the<br />

Kennedy School of Government at Harvard University.<br />

Tim has an extensive background in community service. While in Nebraska he served on<br />

the boards of the Greater Omaha Chamber of Commerce, United Way of the Midlands,<br />

the Joslyn Art Museum, The Nebraska State Chamber of Commerce, and the Omaha<br />

Performing Arts Society. He was also Chairman of the Board for the Boys and Girls<br />

Clubs of Omaha. In Denver Tim served as a trustee at University Hospital and the Denver<br />

Convention and Visitors Bureau. He was a member of the Board of Trustees for the<br />

Denver Health and Hospitals Authority, and the Carnegie Foundation Task Force on<br />

Adolescent Development. Sandos has received many awards for his work including<br />

recognition from such organizations as Mile High United Way, I Have A Dream<br />

Foundation, Downtown Denver Partnership, and the National Hispanic Chamber of<br />

Commerce.<br />

Tim’s national service is extensive as well. He served as Chair-elect of the Omaha<br />

Branch of the Federal Reserve Bank, and was a member of the National Academy of<br />

Sciences Board on Children and Families, advising the White House and Congress on<br />

issues related to the healthy development of children. In 2001, Tim was selected by<br />

Secretary of Defense Donald Rumsfeld to participate in the Joint Civilian Orientation<br />

<strong>Conference</strong> (JCOC), reviewing the U. S. military compliment and its five branches. He<br />

was a founding member of the National Hispanic Caucus of State Legislators.

TAB<br />



Joseph J. Murin<br />

Joseph J. Murin was sworn in as President of the Government National <strong>Mortgage</strong> Association<br />

(Ginnie Mae) on July 1, 2008. Nominated by President George W. Bush and confirmed<br />

unanimously by the Senate, Murin will oversee Ginnie Mae’s mission to make affordable<br />

housing a reality for millions of low- and moderate-income households across America.<br />

Mr. Murin brings more than 35 years of diverse experience in the mortgage and banking<br />

industry to the U.S. Department of Housing and Urban Development. Prior to his<br />

appointment, Mr. Murin led the strategic direction of <strong>Mortgage</strong> Settlement Network, LLC. As<br />

Managing Partner, he was the driving force behind the company’s long-range plans and<br />

objectives. Mr. Murin sold <strong>Mortgage</strong> Settlement Network, LLC as of August 31, 2007.<br />

Prior to establishing <strong>Mortgage</strong> Settlement Network, LLC, Mr. Murin served as President and<br />

Chief Operating Officer and later Chief Executive Officer of Basis100, a Toronto-based<br />

technology company, which is responsible for the development of the Canadian Bond Trading<br />

system, as well as the current Automated Property Valuation (AVM).<br />

He also has significant experience on the trading and lending side of the industry. Before<br />

Basis100, Mr. Murin led the transformation of Lender’s Service, Inc. (LSI) from an appraisal,<br />

title, and closing management company to a provider of new technologies and business<br />

solutions for the national marketplace. LSI was later sold to Merrill Lynch, where Mr. Murin<br />

served as CEO upon the recapitalization of LSI in 1998.<br />

Mr. Murin began his career with Pittsburgh National Bank, now PNC Bank, in the early 1970s<br />

as a loan officer. From 1979 to 1982, he served as President of Murin Brothers, Inc., a<br />

family-owned business, which built single-family residential and multifamily housing<br />

primarily for low- and moderate-income families.<br />

Mr. Murin received his degree in business from National Louis University. Currently, he<br />

serves on the Board of Point Park University in Pittsburgh, PA.<br />

He and his wife, Angela, will reside in the Washington Metropolitan area. They have two<br />

married daughters and three grandchildren.


Wednesday, October 8, 2008<br />

Fourth Annual Minority <strong>Lending</strong> Awards Announced<br />

WASHINGTON, D.C. -- The <strong>Lending</strong> <strong>Industry</strong> Diversity <strong>Conference</strong>, Inc. today announced the<br />

winners for its 2008 Best in <strong>Industry</strong> Awards. Based on the recently released 2007 Home<br />

<strong>Mortgage</strong> Disclosure Act (HMDA) data, the “Best in <strong>Industry</strong> Awards” distinguish companies that<br />

have demonstrated superior performance in minority lending and minority market penetration.<br />

The <strong>Lending</strong> <strong>Industry</strong> Diversity <strong>Conference</strong> (LIDC) uses ComplianceTech to perform the analyses<br />

for the awards, using its www.<strong>Lending</strong>Patterns.com platform to analyze HMDA loan application<br />

registers (LARs).<br />

“This year we wanted to recognize those lenders that have made responsible lending a hallmark<br />

in the way they do business. Therefore, we studied the 2007 HMDA data to uncover those<br />

lenders that engaged in a high proportion of lower cost lending while maintaining a significant<br />

volume of minority loans,” says Mike Taliefero, managing director of ComplianceTech, the<br />

organization that founded the non-profit DC-based <strong>Lending</strong> <strong>Industry</strong> Diversity <strong>Conference</strong>, Inc.<br />

(LIDC). ComplianceTech is also one of the lead organizers of the Fourth Annual <strong>Mortgage</strong><br />

<strong>Lending</strong> <strong>Industry</strong> Strategic Markets & Diversity <strong>Conference</strong>, which is being held October 6-8,<br />

2008 at the Gaylord National Resort and Convention Center in National Harbor, MD.<br />

The LIDC analyses identified the following companies as this year’s winners for their respective<br />

performance categories:<br />

Best in Minority Market Penetration Award goes to Wells Fargo, NA. This award<br />

recognizes the lender that has the greatest proportion of minority applications compared<br />

to the national minority population percentage (according to the 2000 census). To be<br />

eligible for this award the lender must have reported at least 50,000 HMDA applications,<br />

have less than a 51% HMDA reportable spread frequency, and report no more than 10%<br />

of total applications as race unknown. Remarkably, Wells Fargo, NA had 24% of its<br />

applications come from minorities.<br />

Minority <strong>Lending</strong> Awards by Regulatory Peer Group These awards recognize<br />

mortgage lenders operating primarily in the continental USA that demonstrated<br />

responsible low-cost lending overall, with a high number of loans to minorities within a<br />

specified category based on the regulator to which the lender reports its HMDA data. The<br />

criteria for all of these awards are the number of originations and maintaining a maximum<br />

HMDA reportable spread rate of less than 10%.<br />


Fourth Annual Minority <strong>Lending</strong> Awards Announced<br />

Page 2<br />

Regulatory<br />

Peer<br />

Group<br />

OCC<br />

OCC<br />

Minority <strong>Lending</strong> Awards for<br />

High Volume, Low-Cost Lender<br />

More than 50,000 minority loans with<br />

rate spread of less than 10%<br />

Less than 50,000 loans but more than<br />

10,000 loan with rate spread of less<br />

than 10%<br />

Winner<br />

Rate<br />

Spread<br />

# of<br />

Minority<br />

Loans<br />

Bank of America 5% 153,402<br />

ABN AMRO <strong>Mortgage</strong> Group 1.4% 13,952<br />

FRB Rate spread of less than 10% SunTrust <strong>Mortgage</strong>, Inc. 6.2% 42,139<br />

FDIC Rate spread of less than 10% Bank of the West 7% 2,098<br />

OTS Rate spread of less than 10% USAA Federal Savings Bank 1.7% 11,545<br />

NCUA Rate spread of less than 10% Navy Federal Credit Union 0.7% 8,038<br />

HUD<br />

HUD<br />

More than 25,000 minority loans with<br />

rate spread of less than 10%<br />

Less than 25,000 minority loans with<br />

rate spread of less than 10%<br />

Taylor, Bean, and Whittaker 0% 29,964<br />

Provident Funding Assoc. 1.4% 15,382<br />

The achievements of these lenders will be recognized at the “Best in <strong>Industry</strong>” Awards Dinner to<br />

be held in the Washington, DC area in conjunction with the Fourth Annual <strong>Mortgage</strong> <strong>Lending</strong><br />

<strong>Industry</strong> Strategic Markets and Diversity <strong>Conference</strong>.<br />

“In these troubling economic times it’s important to recognize lenders who behaved well and who<br />

did not contribute to this current crisis,” says Maurice Jourdain-Earl, co-founder of<br />

ComplianceTech. ComplianceTech provides lending related consulting services with specialties<br />

in database analysis to identify marketing opportunities and legal/regulatory compliance<br />

weaknesses for the lending industry, especially related to fair lending.<br />


Fourth Annual Minority <strong>Lending</strong> Awards Announced<br />

Page 2<br />

About <strong>Lending</strong> <strong>Industry</strong> Diversity <strong>Conference</strong>, Inc.<br />

The <strong>Lending</strong> <strong>Industry</strong> Diversity <strong>Conference</strong>, Inc. is a not-for-profit District of Columbia-based<br />

corporation that is organized for the following specific purposes:<br />

• To conduct conferences that promote the link between racial and ethnic diversity in the<br />

workforce and racial and ethnic diversity in lending/credit allocation.<br />

• To increase the racial and ethnic diversity of the lenders’ workforce and suppliers in all<br />

lending and credit-granting sectors.<br />

• To researching and publicize ways to capitalize on racial and ethnic diversity as a<br />

mechanism to increase minority loan originations.<br />

• To teach lenders, credit providers, credit enhancers and real estate industry participants<br />

about effective strategies to increase homeownership opportunities for minorities.<br />

• To strengthen and develop business relationships among lending companies who are<br />

committed to closing the homeownership gap.<br />

• To promote the exchange of knowledge and information to members of the credit and<br />

lending industry.<br />

• To provide relief for credit distressed or under-served populations.<br />

• To promote social welfare by increasing minority homeownership rates, which in turn,<br />

increases economic development and minority household wealth.<br />

• To lessen the barriers of entry for minority-owned companies and contractors.<br />

<strong>Lending</strong> <strong>Industry</strong> Diversity <strong>Conference</strong>, Inc<br />

1325 G Street, NW, Suite 500 Washington, DC 20005<br />

Tel: 202-842-3800 Fax: 202-842-3808<br />

http://www.mortgageindustrydiversity.com/<br />

For media inquiries contact:<br />

Laura Siebold, Media Relations Specialist, Martopia<br />

Colleen Makare, Senior Account Executive, Martopia<br />

(630) 587-9944<br />



HOUSING, CRA &<br />


Affordable Housing, CRA & Strategic Markets<br />

9:00 a.m. – 10:15 a.m.<br />

Annapolis Ballroom 1 & 2<br />

Notwithstanding the current crisis, the lending standards for CRA, affordable lending, and fair<br />

lending have not been lowered. It is likely to be more difficult to achieve these mandated<br />

objectives without special measures and unique relationships. This session will discuss the<br />

following: state and local housing agency solutions; role of non profits in community lending;<br />

strategic markets and affordable housing origination strategies; role of the GSE's in supporting<br />

affordable lending.<br />

Moderator: Victor Galloway<br />

Market Segment Manager<br />

Genworth <strong>Mortgage</strong> Insurance<br />

Speaker: Don Cohen<br />

Vice President<br />

Community Development and <strong>Lending</strong><br />

Landmark Credit Union<br />

Terri Fowlkes<br />

Director, Consumer Segment Management<br />

REL Strategic Markets<br />


Donald A Cohen<br />

Don has worked with the Low to moderate income community for over 30 years, first as<br />

a Real Estate broker and then in banking. He is now the Vice President of Community<br />

<strong>Lending</strong> for Landmark Credit Union in Milwaukee, Wisconsin, the largest credit Union<br />

in Wisconsin.<br />

Over the last nearly 20 years in banking, Don has taken two banks from “low<br />

satisfactory” on their CRA exams to” high satisfactory” and to “outstanding”. He helped<br />

one bank open a branch in the largest Hispanic owned grocery store in Wisconsin.<br />

Don has worked the last 5 years to bring the banking industry to the Hispanic market. He<br />

has developed programs using ITIN’s and Government issued ID’s (Matricula consular<br />

card) to help people use the financial systems to open accounts and to obtain personal,<br />

car, and home loans without Social Security numbers.<br />

Don was the chair of the <strong>Mortgage</strong> group for the New Alliance Task Force for the FDIC<br />

in Chicago, which helped develop mortgage products for immigrants without Social<br />

Security numbers. Don is involved heavily in the Hispanic, African American and<br />

Hmong markets in the Milwaukee area.

Affordable Housing, CRA & Strategic Markets<br />

<strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong> Strategic Markets<br />

and Diversity <strong>Conference</strong><br />

October 8, 2008

Current Environment<br />

More restrictive products: Higher credit scores, additional overlays<br />

(declining markets), lower debt to income<br />

ratios allowed, higher down payment<br />

Slower market: Supply and demand; declining home<br />

prices<br />

Struggling Economy: Ripple effect<br />

creative loan products more qualify higher demand<br />

less stock available higher prices<br />

seller concessions needed etc…<br />

Maxed out sellers: Many took out all the equity and now prices<br />

have declined<br />

Higher cost of living Less to save; impossible environment for<br />

ARMs<br />

No seller paid DPA: Where does this leave the new homebuyer?<br />

IMPACT:<br />

Fewer<br />

Homebuyers<br />

&<br />

Fewer<br />


What is ACCESS?<br />

Standard First <strong>Mortgage</strong> + Amortizing Second for Down Payment / Closing Costs<br />

• Variety of First Loan Types & Terms<br />

– MyCommunity<strong>Mortgage</strong>, HP, FLEX, and Standard Products<br />

– 97% LTV Max<br />

– First Loan Priced Daily<br />

• Second Loan<br />

– 20-Year Fixed<br />

– < 2% above First Loan Note<br />

– Proceeds for Any Cash-to-Close Needs<br />

– 103% CLTV Max (100% in Declining Markets)

ACCESS: A Solution for homeownership<br />

No Seller DPA<br />

as of Oct. 1<br />

Funds<br />

Consistently<br />

Available<br />

Easy to Use<br />

& Delegated<br />

Underwriting<br />

More Restrictive Products<br />

Don’t Have to be<br />

A First-Time<br />

Homebuyer<br />

Based on<br />

Qualifying Income<br />

(Not Household)<br />

Higher Income<br />

Limits<br />

100%-103%<br />

Financing<br />

is Possible<br />

Slower Market<br />

More Restrictive Products<br />

Maxed out Sellers<br />

Higher Cost of Living<br />

Struggling Economy

Create a Competitive Edge<br />

• Second Loan Funds Available Consistently<br />

– Lock First & Second Loan at Same Time<br />

– Available in 45 States!<br />

– Learn one program nationally<br />

• Easy Program to Use<br />

– Delegated Underwriting Available<br />

– No Additional “Compliance Review” Step<br />

• NHF Website<br />

– ACCESS Guideline Library<br />

– Alerts (updates, news)<br />

– Web-Training Calendar<br />

This presentation contains program highlights only.<br />

Please see complete program guidelines at www.nhfloan.org for all program guidelines, or call NHF Toll-Free (866) 643-4968.

Expand Your Reach<br />

• Higher Income Limits<br />

– 140% HUD AMI<br />

– Qualifying Income Only<br />

• Flexible Borrower/Property Eligibility<br />

– No First-Time Homebuyer Requirement<br />

– 1- or 2-Unit<br />

• Little-to-no money down from borrower’s own funds<br />

• Financing up to 103% CLTV (FHA up to 105% CLTV—CA & NV only)<br />

• 20% Tax Credit <strong>Mortgage</strong> Credit Certificates (MCC) may be used in<br />

conjunction with the ACCESS program<br />

• Minimum 580*<br />

• Non-Traditional Credit and Income Allowed (under MCM)<br />

Over $7.2 B in<br />

First & Second Loan<br />

Financing since 1993<br />

(53,000 Properties)<br />

*PMI Restrictions require 720 in CA

Leverage MI to Create a Competitive Edge<br />

• Lower MI Requirements Available for<br />

MCM, HP & FLEX<br />

• Single, Split or Monthly Premiums<br />

• Second Loan Proceeds May be Used<br />

to Finance All or Part of MI<br />

• Specific Provisions / Rates through<br />

Certain MI Providers

Leverage ACCESS Materials to Maximize Marketing Budget<br />

• “Homebuyer Materials” to Help You Reach Your “Niche” Customers<br />

– Samples & Guidelines at www.nhfloan.org<br />

– English & Spanish Available<br />

– Pre-Printed – READY TO ORDER<br />

– Blank Area – FOR YOUR CONTACT INFO<br />

NOTE:<br />

“"Homebuyer Materials"<br />


the states of Arizona,<br />

Delaware or Pennsylvania.

ACCESS is Easy for You and Your Customers.<br />

• ACCESS Rate Sheet Distributed through Servicer<br />

• Origination is Easy<br />

– Lock First & Second Loans with Servicer<br />

– Lender Funds & Services First & Second Loans<br />

– Lender Completes Program Checklists (2)<br />

– Lender Submits Loan Package to Servicer, for Sale of<br />

First & Second Loans<br />

– Borrower Receives “Single-Statement” Servicing

To Get Started<br />

Real Estate Professionals<br />

Find an NHF Approved Lender in Your Area<br />

– Call NHF at 1-866-643-4968, or<br />

– Call Citi<strong>Mortgage</strong> Special Programs, 1-800-967-2205, Options 1, 0, 1<br />

Lenders / Bankers<br />

Become an NHF Approved Lender<br />

– Call NHF at 1-866-643-4968, or<br />

– Call Citi<strong>Mortgage</strong> Special Programs, 1-800-967-2205, Options 1, 0, 1<br />

– Rate Sheets Distributed Daily

Questions:<br />

National Homebuyers Fund, Inc.<br />

801 12th Street, Ste 600<br />

Sacramento, CA 95814<br />

(866) NHF-4YOU (866) 643-4968<br />

E-mail: info@nhfloan.org<br />

Website: www.nhfloan.org<br />

Citi<strong>Mortgage</strong> Special Programs<br />

Phone: (800) 967-2205, Options 1, 0, 1<br />

E-mail: csp.dallas@citi.com<br />

Website: http://correspondent.citimortgage.com/SpecialPrograms



Town Hall Meeting: Consumer Protection<br />

10:30 a.m. – 12:00 p.m.<br />

Annapolis Ballroom 1 - 3<br />

There are some who argue that the current crisis in lending could have been prevented entirely if<br />

the mortgage origination process respected and protected the mortgage consumer. In this Town<br />

Hall Meeting you will hear from a cross section of industry professionals on their views on what<br />

has been wrong with consumer protection to date, how current and future consumer protection<br />

measures may affect minority home shoppers and borrowers, and ideas for enforcement of<br />

consumer protection laws.<br />

Moderators: Lori Jones Gibbs<br />

Vice President<br />

Affordable Housing/ <strong>Industry</strong> Affairs<br />

Genworth <strong>Mortgage</strong> Insurance<br />

Michael Taliefero<br />

Managing Director<br />

Compliance Tech<br />

Speakers: Stella J. Adams<br />

Founder and CEO<br />

S J Adams Consulting<br />

Cathy Cloud<br />

Senior Vice President<br />

National Fair Housing Alliance<br />

Nathan Farrior<br />

Vice President of Business Development<br />

Generations Community Credit Union<br />

Calvin Haggins<br />

Director<br />

Compliance Policy<br />

Office of the Controller of Currency (OCC)

Speakers continued:<br />

Town Hall Meeting: Consumer Protection<br />

10:30 a.m. – 12:00 p.m.<br />

Annapolis Ballroom 1 - 3<br />

Joy Jamison<br />

President and Founder<br />

National Association of Black <strong>Mortgage</strong> Brokers<br />

Maurice Jourdain Earl<br />

Managing Director<br />

Compliance Tech<br />

Maria Kong<br />

President<br />

National Association of Real Estate Brokers<br />

Tim Sandos<br />

President and CEO<br />

National Association of Hispanic Real Estate Professionals<br />

Larry Gilmore<br />

Deputy Director<br />

HOPE Now Alliance

Lori Jones Gibbs<br />

Lori Jones Gibbs is Vice President of Affordable Housing/<strong>Industry</strong> Affairs for<br />

Genworth Financial’s mortgage insurance business, one of the nation’s leading mortgage<br />

insurers. She is responsible for developing strategies to increase home ownership in<br />

diverse, under-served markets nationwide, specifically targeting low-to-moderate income,<br />

ethnic minority and New American constituencies.<br />

A 20-year housing industry veteran, Lori held various positions at Peoples Bank,<br />

Mechanics and Farmers Bank, the North Carolina Community Development Initiative<br />

and SELF-HELP Credit Union prior to joining the General Electric Company in 1998.<br />

Lori serves on numerous boards, including the Congressional Black Caucus With<br />

Ownership Wealth (WOW) National Advisory Board, National Bankers Association<br />

Corporate Advisory Board, North Carolina Low Income Housing Coalition, <strong>Mortgage</strong><br />

Bankers Association Of The Carolinas, the North Carolina Council of Housing<br />

Counselors, the City/County of Durham Merger Task Committee, the National Housing<br />

Council and North Carolina Central University Foundation.<br />

A graduate of the University of Connecticut, Lori holds a Masters degree from the<br />

University of Bridgeport.<br />

Genworth is a leading insurance holding company, serving the lifestyle protection,<br />

retirement income, investment and mortgage insurance needs of more than 15 million<br />

customers, with operations in 20 countries, including the U.S., Canada, Australia, the<br />

U.K. and more than a dozen other European countries. For more information, visit<br />


Town Hall Meeting on Consumer Protection<br />

Questions for Consideration<br />

1. When it comes to consumer protection, is the industry capable of policing<br />

itself? Explain your answer.<br />

2. Should the principle of caveat emptor (“let the buyer beware”) be the<br />

starting point for consumer protection? Related question: do you believe<br />

the subprime lending crisis would have been avoided if borrowers had been<br />

financially literate?<br />

3. How should the industry or government protect consumers from<br />

dangerous mortgage products?<br />

4. How do we protect consumers from unscrupulous lenders?<br />

5. Do you believe loan product steering contributed to the subprime lending<br />

problem? If so, how can consumers be protected from steering?<br />

6. Do we need more consumer protection laws? If so, which ones would you<br />

suggest? Alternatively, would more aggressive enforcement of existing<br />

laws be better for the consumer.<br />

7. Should certain loan originator compensation schemes be outlawed or<br />

restricted to remove economic incentives to take advantage of certain<br />

consumers?<br />

8. Do we need a new regulatory framework for mortgage lending? If so, what<br />

should that look like?<br />

9. What are the consumer protection issues associated with helping<br />

delinquent homebuyers?<br />

10.Who should be most responsible for providing financial education to the<br />

next generation - School System/Teachers, Financial Community,<br />

Government, Non-profits, or Parents? List in order of priority.

Stella Adams<br />

Stella Adams is the founder and CEO of S J Adams Consulting which performs research<br />

and policy development in the areas of fair housing, and fair lending. The firm also<br />

conducts civil rights and mortgage fraud investigations and fair lending audits.<br />

Ms, Adams is the former Executive Director of the award-winning North Carolina Fair<br />

Housing Center. Under her leadership, the NC Fair Housing Center recovered over $57<br />

million from predatory lenders for over 27,000 North Carolinians. In addition, the Center<br />

recovered $3 million dollars for victims of unlawful discrimination.<br />

Ms. Adams has testified before Congress on many occasions and is the recipient of the<br />

2006 Individual Achievement Award of the International Association of Official Human<br />

Rights Agencies, 2005 Civil Rights Award granted by the National Association of<br />

Human Rights Workers and has received the 2004 HUD FHEO Pioneer Award for her<br />

work in fighting predatory lending and the 2004 National Fair Housing Alliance Fair<br />

<strong>Lending</strong> Advocacy Award.<br />

Ms. Adams served on the Federal Reserve Board Consumer Advisory Council (1/05-<br />

12/07), which advises the Board on the exercise of its responsibilities under the<br />

Consumer Credit Protection Act (Ms. Adams served as the Chair of the Community<br />

Affairs and Housing subcommittee and lead the discussions on strengthening HOEPA to<br />

protect consumers from Predatory Lenders. Ms. Adams also currently serves on the<br />

following Boards and Commissions: The National Community Reinvestment Coalition;<br />

The North Carolina Advisory Committee to the US Civil Rights Commission; The NC<br />

Legislative Commission on Racial, Ethnic and Religious Discrimination; and The NC<br />

<strong>Conference</strong> of the NAACP.

Cathy Cloud<br />

Cathy Cloud is Senior Vice President of the National Fair Housing Alliance. Ms. Cloud<br />

joined NFHA in January of 1991, shortly after it opened its first office. As Senior Vice<br />

President, she is responsible for supervising NFHA programs in the areas of compliance,<br />

membership services, education and outreach, consulting, community development,<br />

finances, and administration. Ms. Cloud is responsible as well for the development and<br />

implementation of Fair Housing School8, NFHA=s comprehensive training and<br />

education program for fair housing personnel.<br />

During her tenure at NFHA, Ms. Cloud has been responsible for supervision of national<br />

testing and investigation programs in the areas of homeowners insurance and mortgage<br />

lending. These efforts led to settlement agreements with many of the nation=s largest<br />

homeowners insurance companies who changed their underwriting guidelines and<br />

implemented compliance programs. Ms. Cloud has provided training and consulting<br />

services to public and private fair housing organizations, the housing industry, federal<br />

financial regulatory agencies, mortgage lending institutions, homeowners insurance<br />

providers, and national retail chains. She has served as a member of the Consumer<br />

Advisory Council of the Board of Governors of the Federal Reserve System and on the<br />

national advisory board of the Federal Reserve Banks= <strong>Mortgage</strong> Credit Partnership<br />

Project. Ms. Cloud was featured on the 1992 PBS special "Frontline" -- Your Loan is<br />

Denied. She is also the author of articles on mortgage lending discrimination and coauthor<br />

of chapters in books on mortgage lending and insurance discrimination.<br />

Prior to joining the National Fair Housing Alliance, Ms. Cloud served as Assistant<br />

Director of HOPE Fair Housing Center which serves the western suburbs of Chicago.<br />

She coordinated HOPE=s testing program; worked with the private bar, HUD, and<br />

Department of Justice in the filing and resolution of complaints; provided training to the<br />

housing industry; monitored consent orders for compliance; counseled clients on fair<br />

housing, tenant-landlord, and affordable housing issues; and helped create educational<br />

programs on the issues of fair and affordable housing. Ms. Cloud also served as the<br />

Research Chair of the Chicago Area Fair Housing Alliance, a coalition of public and<br />

private fair housing agencies working cooperatively on fair housing/fair lending issues in<br />

the Chicago metropolitan area. In this capacity, Ms. Cloud obtained a grant from the<br />

John D. and Catherine T. MacArthur Foundation to conduct a pilot mortgage lending<br />

discrimination research and testing program. She also supervised the 1989 HUD-funded<br />

Housing Discrimination Study in the Chicago metropolitan area.<br />

Ms. Cloud received an M.A. in Public Policy from the University of Chicago and a B.A.<br />

in Political Science from the University of Illinois (Urbana).

Maria Kong<br />

Maria Kong has been a dynamic and innovative force in the real estate industry for over<br />

26 years and serves as a senior associate with Barrington Consultants, Inc. Her<br />

accomplishments are many, but at the core, she has guided her clients toward economic<br />

empowerment and wealth creation. She can count among her successes generating more<br />

than $500 million in real estate sales and mortgage placements. Although based in the<br />

active south Florida marketplace, Maria serves an enviable client base located throughout<br />

the country and internationally including entertainers, sports figures, politicians,<br />

corporate leaders, investor groups and others seeking a knowledgeable professional.<br />

Throughout her impressive career, Maria’s reputation as a savvy real estate expert<br />

positioned her to write first-time homebuyer’s mortgage programs for industry leaders<br />

such as Fannie Mae and Freddie Mac.<br />

In 1991, Maria formed Markon Realty & Management, Inc. that now, is a recognized<br />

company in the real estate industry with Maria being approved as a Resolution Trust as<br />

well as a Fannie Mae REO Broker. Prior to establishing the company, Maria spent 10<br />

years with InveRealty, Inc. serving as broker and subsequently, the company’s president.<br />

Located in Ft. Lauderdale, Florida’s luxury Inverrary community, Maria mastered the<br />

coveted market where entertainers, including the famed Jackie Gleason, made his home<br />

hosted his annual Golf Classic.<br />

Maria’s civic involvement leaves little doubt that she believes in sharing her knowledge,<br />

her commitment to her community, and to her profession. Ms. Kong has worked with<br />

Congresswoman Meek as one of the “Women for Carrie Meek,” served as fundraising<br />

chair for commissioners Hazel Rogers and Barrington Russell, is one of the founders of<br />

Afri-Pac, a non-partisan political action committee, and has actively participated in a<br />

number of successful political campaigns. She has served as treasurer of the Florida<br />

Netball Association, and board member for the Teddy Pendergast Foundation.<br />

Professionally, she has served as vice president of the Women’s Council of the National<br />

Association of Real Estate Brokers, and on the City of Lauderhill’s Code Enforcement<br />

Board and its Housing Advisory Board. She sits on the South Florida Fannie Mae<br />

Partnership Office Advisory Board; Dade County Anti-Predatory <strong>Lending</strong> Task Force;<br />

Caribbean American Elected Leaders and Officials National Board; past president of the<br />

South Florida Realtist Women’s Council; board member and past president of the South<br />

Florida Board of Realtists, and past board member, Lauderhill Kiwanis Club. Ms. Kong<br />

chaired the luncheon of “Women of Color in Possession of Power” honoring five of the<br />

top women of power in Atlanta including the mayor of Atlanta. Nationally, Maria was<br />

appointed by President Bush to serve on the Small Business Advisory Board.

Kong continued:<br />

Currently, Maria Kong holds the position of president of the National Association of Real<br />

Estate Brokers (NAREB), the nation’s oldest minority trade organization. Maria is the<br />

second female president in NAREB’s 60 year history, the first Floridian and person of<br />

Caribbean descent to hold this position. Always an active NAREB member, Maria has<br />

served on numerous occasions, as NAREB’s convention chair including the one<br />

convened in Jamaica attended by more than 1,000 members, government ministers and<br />

real estate leaders.<br />

A recipient of many local and national awards, Maria has been featured in the News and<br />

Sun-Sentinel as well as several Caribbean newspapers and in Black Diaspora Magazine.<br />

Maria has been given proclamations from Broward County and the City of Lauderhill, as<br />

well as Honorary Citizen of the City of Huntsville, Alabama. Born and raised in Jamaica,<br />

Ms. Kong earned a Bachelor of Arts and MBA degrees from American Intercontinental<br />


Strategic Markets and Diversity <strong>Conference</strong><br />

Emerging Markets and Diversity <strong>Conference</strong><br />

www.<strong>Mortgage</strong><strong>Industry</strong>Diversity.com<br />

4th Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Strategic Markets and Diversity <strong>Conference</strong><br />

Emerging Markets and Diversity <strong>Conference</strong><br />

www.<strong>Mortgage</strong><strong>Industry</strong>Diversity.com<br />

4th Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Strategic Markets and Diversity <strong>Conference</strong><br />

Emerging Markets and Diversity <strong>Conference</strong><br />

www.<strong>Mortgage</strong><strong>Industry</strong>Diversity.com<br />

4th Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Strategic Markets and Diversity <strong>Conference</strong><br />

Emerging Markets and Diversity <strong>Conference</strong><br />

www.<strong>Mortgage</strong><strong>Industry</strong>Diversity.com<br />

4th Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Strategic Markets and Diversity <strong>Conference</strong><br />

Emerging Markets and Diversity <strong>Conference</strong><br />

www.<strong>Mortgage</strong><strong>Industry</strong>Diversity.com<br />

4th Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Strategic Markets and Diversity <strong>Conference</strong><br />

Emerging Markets and Diversity <strong>Conference</strong><br />

www.<strong>Mortgage</strong><strong>Industry</strong>Diversity.com<br />

4th Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong><br />

Strategic Markets and Diversity <strong>Conference</strong><br />

Emerging Markets and Diversity <strong>Conference</strong><br />

www.<strong>Mortgage</strong><strong>Industry</strong>Diversity.com<br />

4th Annual <strong>Mortgage</strong> <strong>Lending</strong> <strong>Industry</strong>

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