1. 1 Enhanced Loss Mitigation Strategy October 21, 2014

2. 2 Our Mission: Minnesota Housing finances affordable housing for low- and moderate-income households while fostering strong communities.

3. 3 Enhanced Loss Mitigation Strategy Goal: To develop a new strategic loss mitigation approach to reduce foreclosure losses and increase the number and success rate of permanent, affordable loan modifications among identified high loss, high risk delinquent loans.

4. 4 Whole Loan Portfolio Characteristics June, 2012 Portfolio size: 14,426 loans, $1.320 Billion Last origination in September, 2009 58% Government, 42% Conventional DQ rate of 6.91%, spiked at 8.85% by year end FC rate of.67 ran up to 2.2% by Feb, 2013 Net losses on Conventional loans averaging $54,919, $65,900 in some neighborhoods

5. 5 2009 – 2012 Loss Mitigation Program US Bank as local sub servicer since 2005 Loan Modification Tools: – 0% Deferral loans – Capitalization of past interest – Extended maturity – Interest rate reductions Modification success rate- 71% current

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7. 7 Research: Locations of High Loss Loans Narrowed to 2009 – 2011 period as most like current market conditions 708 total loans with booked loss, analysis focused on top 20% Mapped by zip code, fell into largely inner city neighborhoods Cross referenced with market data on high price decline areas

8. 8 Metro Areas with High Average Booked Loss and Significant Home Sales Price Declines

9. 9 Research: Added Risk Characteristics Conventional (insured or uninsured) Originated between 2003 and 2007 Between $100,000 and $200,000 Used Entry Cost Assistance

10. 10 Research: Booked Losses Loans in price decline area showed a 61% higher loss Loans in price decline areas + risk characteristics = added 44% higher loss 30% of all losses were from price decline areas + risk characteristics 72% probability that a loss for loans in decline areas + risk characteristics – over $50K

11. 11 Developing ELMS Form a target list, applied location/risk characteristics to current 60 day + DQ and FC Review US Bank’s current collections and loss mitigation processes ELMS “Specialist” concept, embed at US Bank Use new contact, communication, and counseling techniques Added Principal Reduction (capped @ 90% of projected REO loss), and offer aggressively

12. 12 US Bank’s Role Positive “partner attitude” Experience with our portfolio and mission Joint development of criteria and process Willingness to integrate Specialist role and authority

13. 13 ELMS Results 2 phase program, 350 total eligible borrowers Program term August 1, 2012 to December 31,2013 (Ph 2 launched May 1, 2013) 17 brought current w/out modification 108 received a modification (48 with PR), 77% still current PR investment $1.6 million, saved $2.4 million in proj REO loss

14. 14 Takeaways Personal contact key in gaining borrower commitment Principal Reduction gave borrowers a “fresh start” Impact of Specialist counseling skills Mission impact for urban neighborhoods

15. 15 For More Information Contact: Gene Aho gene.aho@state.mn.us 651.297.3129 www.mnhousing.gov