Home Affordable Foreclosure Alternatives (“HAFA”) Eligibility and Implementation

Home Affordable Foreclosure Alternative (“HAFA”) Eligibility and Implementation Implementation April 5, 2010 Borrower must meet eligibility criteria for HAMP First lien originated prior to 2009 Delinquent or default reasonably foreseeable Unpaid principal no more that $729,750 (SFR higher for 2-4 units) Borrower total payments exceed 31% of gross income Program subject to lender guidelines Severity of loss, local market conditions, timing of pending foreclosure, borrower motivation and cooperation Short Sale Agreement (“SSA”) sent to borrower if eligible Informs as to process At time of or prior to listing Request for Approval of Short Sale (“RASS”) Sent after borrower contracts to sell Borrower submits for approval within 3 business days

HAFA Improving the Short Sale Process Complements HAMP Viable alternative for borrowers who are HAMP eligible but unable to keep their home Uses hardship information already collected Allows for pre-approved short terms prior to listing (including minimum net and costs) Requires full release from future liability for first lien no cash, note or deficiency allowed Junior liens accepting HAFA must also release borrower from future liability May not require contributions from real estate agent, borrower/seller as a condition Standard process, documents and timeframes/deadlines Provides financial incentives $3,000 for borrower relocating assistance $1,500 for servicers to cover administrative costs $Up to a $2,000 match for investors (senior) for allowing a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders (up to 6% cap per lien)

HAFA Timelines Within 3 business days of receipt of an executed offer Borrower or listing agent must submit the RASS to servicer Including (i) copy of sale contract and all addenda; (ii)buyer documentation of funds or pre-approval letter; and (iii) all information on status of subordinate liens and/or negotiations with lien holders Within 10 business days after the servicer receives the RASS and requires attachments Servicer must approve or deny the request and; Provide borrower with reasons for denial Servicer may require reasonable closing date following approval of RASS Not sooner than 45 days from the date of the sales contract unless borrower agrees Servicer to follow local and state law with respect to release of its first mortgage lien after receipt of proceeds If no deadline required servicer must release within 30 business days Investor must waive rights to seek deficiency judgment May not require a promissory note for any deficiency

HAFA Alternative Timelines Based on servicers written policy every eligible borrower must be considered Servicers must consider eligible borrowers within 30 days of the borrower doing at least one of the following: Does not qualify for HAMP Does not complete the trial period plan Misses two consecutive payments Requests a DIL or short sale If servicer has not already discussed a DIL or short sale Written notice must be given Borrower has 14 calendar days to respond Orally or in writing Borrowers failure to respond ends servicers duty to extend a HAFA offer If borrower appears to qualify for HAFA Servicer sends SSA which must be signed and returned to servicer within 14 calendar days The SSA must give borrower 120 days to sell Extensions are permitted up to 12 months (if mutually agreed)

HAFA Rules on Commission The SSA specifies the amount of commission to be paid determined by the sevicer Servicer transmits to SSA to the borrower for consideration of terms SSA requires borrower to list with a real estate professional/broker (“agent”) Borrower and prospective real estate agent may negotiate the commission with the servicer If borrower and agent agree to participate with servicer, both must sign the SSA as agreement to the terms NAR is seeking member comments on any HAFA omission related issues The rule is different if the borrower submits sales contract to the servicer for approval before a SSA is executed An Alternative Request for Short Sale is submitted along with the offer The commission in this case is the amount that was negotiated in the listing agreement Not to exceed 6% This policy recognizes the agent has already marketed property and obtained a contract thus it is not appropriate to reduce the commission below the previously negotiated amount

HAFA Rules on Commission Important notes: At the urging of NAR, the Treasury Department rescinded the 11.30.2009 policy that authorized the servicer to reduce commission by a specified amount to pay a vendor/negotiator hired to assist agent Neither buyers or seller may earn a commission in connection the short sale, even if they are licensed agents. No side deals to receive commission are permitted

HAFA Required Clauses Cancellation clause Seller may cancel without notice and without paying commission if property is conveyed to mortgage insurer or mortgage holder Contingency clause Sale is subject to written agreement of sales terms by mortgage holder or mortgage insurer

HAFA Incentive Payments Borrower Relocation Incentive $3,000 paid at closing Servicer Incentive $1,500 for administrative costs for short sale or DIL completed under HAFA Investors may provide additional incentives Investor Reimbursement for Subordinate Lien Releases Up to $2,000 in exchange for allowing up to $6,000 in short sale proceed to be paid to subordinate lien holders (up to 6% for any single lien, in order of priority not to exceed $6,000.00 aggregate cap) Must agree not to pursue deficiency

HAFA Additional Contributions & Like Treatment of Borrowers Junior lien holder are prohibited from seeking additional contributions from agent or borrower a condition of releasing lien and waiving deficiency Pursuant to Treasury Department guidelines updated March 26, 2010 Treating similarly situated borrowers the same is required However not all borrowers will qualify for a short sale or DIL Participating servicers must have written policy Consistent with investor guidelines Describing basis for decisions May include factors such as severity of loss, local market conditions, timing of pending foreclosure and borrower motivation and cooperation

HAFA and Foreclosure Servicer may initiate but not complete a foreclosure sale While determining borrowers eligibility for HAMP or HAFA Awaiting the return of SSA in the 14 day deadline During the term of a fully executed SSA while borrower tries to sell Pending the transfer of ownership based on an approved contract per the RASS or Alternative RASS Pending transfer of ownership via a DIL by the date specified in SSA or DIL Agreement

HAFA and the DIL Subject to investor requirements Servicers may accept a DIL under HAFA Requires full release from debt Waiver of all claims Borrower must vacate property by a specific date Leave in broom clean condition Deliver clear and marketable title The same monetary incentives are available

More on HAFA Transaction must be arms length Borrower cannot list the property with or sell to a relative or anyone with whom they have a personal or business relationship Amount of debt forgiven may be treated as income for tax purposes Possibly exempt under Mortgage Debt Relief Bill of 2008 (expires 2012) Servicer will report as settled for less than full Credit score will be negatively impacted Buyers may not reconvey the property within 90 days after closing Program ends 12.31.12 SSA must be executed and returned to servicer no later than 12.31.12

HAFA Prohibitions Rebates from Realtors® Under HAFA no rebates are permitted the Request for Approval of Short Sale (“RASS”) states neither borrower nor buyer will receive any funds or commissions from sale of property. Arm-length Transaction Sellers who are real estate licensees may not list with their broker nor anyone with whom they have a close business relationship Anti-fraud provision Avoids risk of seller profiting Payments to Subordinate Lien holders 6% or $6,000 is the limit to pay off subordinate lien holders It is a “hard cap” regardless of who pays the money

That’s it for now! Be Careful Out There kathy.mehringer@camoves.com kmehringer@coldwellbanker.com 15