1. The Foreclosure Debacle and Why Minorities Are Disproportionately Affected Presented to The Houston Real Estate Association Maurice Jourdain-Earl Thursday, April 7, 2011 ©2011 CLC Compliance Technologies, Inc.

2. Why Minorities Were So Affected? CLEAR DIFFERENCES IN THE DISTRIBUTION OF LOAN TYPES BY RACE AFRICAN-AMERICANS AND LATINOS HAVE INCREASINGLY LESS ACCESS TO PRIME LOANS THAN WHITES COLLAPSE OF SUBPRIME GREATER INCREASE IN GOVERNMENT LOANS WITH WHITES MORE SO THAN WITH AFRICAN-AMERICANS AND LATINOS

3. Why Minorities Were So Affected? Loan type differences has a direct affect on the Cost of Credit and Loan Performance, thus a disproportionate impact with foreclosures

5. Houston MSA 2004-2009

6. Year WhiteBlackHispanicAsian Native Amer.HawaiianTotal 200463,3598,77619,7967,918416367102,636 200549,0405,59914,8516,33121424578,285 200644,0485,34914,3606,08118824172,273 200744,3395,41715,0956,37221722073,667 200832,3742,4967,2675,06812914749,489 200942,6522,0125,3766,80214612359,120 275,81229,64976,74538,5721,3101,343435,470 Houston MSA 2004-2009 Conv. Prime 1st Lien OO Home Purchase and Refinance 1-4 Family

9. YearWhiteBlackHispanicAsian Native Amer.HawaiianTotal 200410,7727,1549,4657462117430,426 200515,15910,92214,4441,15611410843,908 200614,49811,30714,8571,123919643,978 20077,5664,3777,561611545222,228 20083,3019092,7693238269,344 20091,748257790179874,998 53,04434,92649,8864,138486363154,882 Houston MSA 2004-2009 Conv. Subprime 1st Lien OO Home Purchase and Refinance 1-4 Family

12. YearWhiteBlackHispanicAsian Native Amer.HawaiianTotal 20047,6643,4244,010257826517,506 20055,5562,2053,054196333213,081 20064,2921,7372,229165263610,491 20074,7902,0532,613170332411,690 200811,1593,8045,815571495723,463 200917,2694,8437,6871,148618333,100 50,73018,06625,4082,50728429797,292 Houston MSA 2004-2009 Government 1st Lien OO Home Purchase and Refinance 1-4 Family

14. Loan Type Percent with a payment 90+ days past due Percent in foreclosure Prime*2.3%1.2% Subprime**12.9%5.9% Government***1.0%2.5% TEXAS PERCENT DEFAULT AND FORECLOSURE (November, 2010) Source: Federal Reserve Bank of New York, First American CoreLogic and Lender Processing Service (LPS)

16. Houston MSA 2004 Subprime Disparities by Race ComplianceTech RaceLoans Loans w/Spread FrequencySDI Avg. Spread AHSDI White74,13110,77214.53%1.004.211.00 Black15,9307,15444.91%3.094.371.04 Hispanic29,2619,46532.35%2.234.301.02 Asian8,6647468.61%0.594.010.95 Native Am.62721133.65%2.324.251.01 Hawaiian4417416.78%1.154.180.99 MultiRace3167824.68%1.704.191.00 Unk16,4084,27026.02%1.794.451.06 NA2675018.73%1.294.481.06 Invalid000.00%0.00 Total146,04532,82022.47%1.554.301.02 *Conv. 1 st Lien, OO, Home Purchase and Refi, 1-4 Family

17. RaceLoansLoans w/Spread FrequencySDIAvg. Spread AHSDI White64,19915,15923.611.004.871.00 Black16,52110,92266.112.805.071.04 Hispanic29,29514,44449.312.094.840.99 Asian7,4871,15615.440.654.660.96 Native Am.32811434.761.474.971.02 Hawaiian35310830.591.304.931.01 MultiRace2909934.141.455.061.04 Unk12,5084,41435.291.495.031.03 NA1119.090.394.010.82 Invalid000.00 Total130,99246,41735.431.504.921.01 Houston MSA 2005 Subprime Disparities by Race ComplianceTech*Conv. 1 st Lien, OO, Home Purchase and Refi, 1-4 Family

18. RaceLoans Loans w/Spread FrequencySDI Avg. Spread AHSDI White58,54614,49824.761.005.111.00 Black16,65611,30767.892.885.551.09 Hispanic29,21714,85750.852.155.211.02 Asian7,2041,12315.590.665.000.98 Native Am.2799132.621.385.241.03 Hawaiian3379628.491.215.301.04 MultiRace3169730.701.305.261.03 Unk14,3225,17936.161.535.411.06 NA1218.330.353.970.78 Invalid000.00 Total126,88947,24937.241.585.281.03 Houston MSA 2006 Subprime Disparities by Race ComplianceTech *Conv. 1 st Lien, OO, Home Purchase and Refi, 1-4 Family

19. Houston MSA 2007 Subprime Disparities by Race RaceLoans Loans w/Spread FrequencySDI Avg. Spread AHSDI White51,9057,56614.581.004.581.00 Black9,7944,37744.693.075.061.10 Hispanic22,6567,56133.372.294.641.01 Asian6,9836118.750.604.320.94 Native Am.2715419.931.374.440.97 Hawaiian2725219.121.314.641.01 MultiRace2685922.011.514.731.03 Unk11,6362,38320.481.404.821.05 NA600.00 Invalid000.00 Total103,79122,66321.841.504.711.03 ComplianceTech *Conv. 1 st Lien, OO, Home Purchase and Refi, 1-4 Family

20. RaceLoans Loans w/Spread FrequencySDI Avg. Spread AHSDI White35,6753,3019.251.004.021.00 Black3,40590926.702.894.531.13 Hispanic10,0362,76927.592.984.081.01 Asian5,3913235.990.653.790.94 Native Am.13785.840.633.980.99 Hawaiian1732615.031.624.231.05 MultiRace2042210.781.175.531.38 Unk7,0676949.821.064.231.05 NA12216.671.803.730.93 Invalid000.00 Total62,1008,05412.971.404.111.02 Houston MSA 2008 Subprime Disparities by Race ComplianceTech *Conv. 1 st Lien, OO, Home Purchase and Refi, 1-4 Family

21. Houston MSA 2009 Subprime Disparities by Race ComplianceTech *Conv. 1 st Lien, OO, Home Purchase and Refi, 1-4 Family RaceLoans Loans w/Spread FrequencySDI Avg. Spread AHSDI White44,4001,7483.941.00--- Black2,26925711.332.88--- Hispanic6,16679012.813.25--- Asian6,9811792.560.65--- Native Am.15485.191.32--- Hawaiian13075.381.37--- MultiRace23083.480.88--- Unk9,5382943.080.78--- NA1915.261.34--- Invalid000.00 --- Total69,8873,2924.711.20---

24. Supply Side Impediments Reactionary –Backing away of third-party originations –Collapse of subprime –Credit tightening –More conservative appraisals –Closing of bank branches in communities of color –Appears to be a change in the mindset on National Housing Policy Legislative –Restrictions on compensation of brokers –Licensing and training requirements of SAFE ACT (barriers to entry) unequal playing field favoring banks. –QRM –Greater regulatory cost as a result of new regulations from CFBP

25. Outlook 1.Outlook for borrowers and communities of color are bleak. 2.Access to credit for minorities is not good. 3.Loss of wealth. 4.Risk management efforts will have a disproportionate impact on borrowers of color and communities of color.

26. Recommendations ESTABLISH laws for the public disclosure of default and foreclosure data on the same basis as HMDA data. Require lenders/servicers to report the demographic and geographic characteristics of loans in default and foreclosure and the disposition of short sales and loan modifications. ENCOURAGE FHA to study the potential of adverse effects of the new risk management policies. IMPLEMENT Dodd-Frank in a way that promotes sustainable diverse lending. ENFORCE the fair lending laws more vigorously with particular emphasis on approval/denial disparities, pricing disparities and redlining.

27. www.compliancetech.com 27 Maurice Jourdain-Earl 202-842-3800 jourdainearl@compliancetech.com For More Information: