1. Mortgage Credit Panel Discussion 2014 Midwest Lenders Conference Chicago, Illinois * June 16-18, 2014 Moderator: Rick Sherman, Berkadia Panelists:Kelly Allen, Detroit HUD Rebecca Barber, Detroit HUD Marie Sherwood, Detroit HUD Charley Gardner, Oak Grove Capital

2. Organization Structure 1.Who is a Principal? 2.Who is a Key Principal? 3.Section 50 recommendation 4.Other Considerations: Non-profit Borrower Non-Principal individual with control of a Principal entity

3. Levels of Review 1.Principal versus Key Principal 2.Entity versus Individual 3.New Construction/Sub-Rehabilitation versus Refinance/Purchase 4.Large Loan Risk Mitigation Policies

4. Best Borrower, LLC Mortgagor 100% Owner Chiapella Enterprises, LLC Managing Member 10% Owner Barb Chiapella 100% Managing Member Anderson Investments, LLC Member 50% Owner Mary Anderson 100% Managing Member HUD Partners, LLC Member 40% Member Ben Metcalf 25% Managing Member Mark Van Kirk 25% Member Ted Toon 25% Member Dan Sullivan 25% Member Mortgagor Organizational Chart

5. Principal Documents  Resumes  HUD Forms  2530  92013-Supp  Fannie Mae Form 1006 (Request for VOD)  Trade/Credit References  Financial Statements  REO/Debt Schedule (KP only)  Credit Reports  Listing of Business Concerns  OFAC  Sponsors’ Continuing Commitment (NC/SR only)

6. (Chicago Multifamily Hub - 2013)

7. Top 10 Deficiencies 10.Insufficient explanation for “yes” answers on the 92013-Supp. 9.No evidence of funds to meet cash requirements (VODs). 8.Development team with inadequate industry/HUD experience.

8. Top 10 Deficiencies, Cont. 7.Inadequate analysis of Sponsor/Principal troubled assets and/or properties maturing in 5 years. 6.No mortgage credit review for Passive Investors. 5.Not providing CPA-reviewed financial statements.

9. Top 10 Deficiencies, Cont. 4.Occupancy and NOI underwritten higher than historical operations. 3.Cash-out requests with aggressive cap rate, inadequate repairs, and inadequate funding of the replacement reserve. 2.Not identifying correct Section 50 signatory.

11. 1.Failure to identify correct Principals for Mortgage Credit review.

12. Questions? Comments? Confusion?

13. General Contractor Documents 1.Resume (AIA 305) 2.Credit Report 3.Financial Statements 4.Joint Venture Documentation

14. Management Agent Documents 1.Resume 2.Management Agreement 3.HUD Forms: a.9832 – Management Entity Profile b.9839 – Management Certification c.935.2 – Affirmative Action Plan (NC/SR only) d.2530 e.92013 – supplement