Sub-Prime Mortgage Legislation and Regulatory Environment in 2004 Presented by: James Nedved June 17, 2004

Sub-Prime Historical Overview Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) Home Ownership and Equity Protection Act of 1994 (HOEPA) Recent State Laws Examples North Carolina – 1999 Georgia – 2002 Office of Comptroller of the Currency – 2004

Macroeconomic Implications 11% of GDP is Real Estate Financing 2003 Total Mortgage Originations were $4.6 Trillion 2004 Estimates are $2.6 Trillion Sub-Prime lending increased 160% in total origination volume from 1994 to 1999 (and still increasing today)

Sub-Prime Predatory Lending Practices Section “32” Fee Structures of HOEPA North Carolina changes in 1999 Subsequent Origination Volume Implications – 43% Change ** OCC preempting 2002 Georgia Law HUD – Treasury Joint Executive Summary

Predatory Lending Signals Property “Flipping” Single Premium Credit Life Insurance Lending without Income Verification Fraud Third Party Violations Pre-Payment Penalties Balloon Mortgage Amortization Schedules Credit Reporting Misinformation Mandatory Arbitration

Sub-Prime Mortgage Recommendations to Curb Predatory Lending Actions National Pre-Payment Penalty Limits Maximum Origination Points and Fee Structure Mandatory High School Mortgage and Budgeting Curriculum

Final Comments Evolution of Sub-Prime Lending since I started my career in the industry in 1995 Personal Future Outlook Questions or Comments