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LPS Mortgage Monitor

Mortgage Market Performance Observations

Data as of October, 2013 Month-end

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• Focus 1: Prepayment activity, origination and property sales update

• Focus 2: Home prices and negative equity

• Focus 3: Judicial vs. non-judicial state disparities

• Focus 4: Home Equity market risks

Focus Points

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• Prepayments dropped again in October, but the decline has slowed with lower rates

• Originations were down sharply and are at the lowest point since mid-2011

• Refinances represent ~50% of originations, down from 75% at the start of the year

• Sales have followed a similar path, though distressed ratios are still improving

Focus Point 1: Prepayment activity, origination and property sales update

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Prepayments down again but decline has slowed in response to lower rates

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Originations down sharply; 43% drop since June, lowest since mid-2011

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Refinances are ~50% of originations down from over 75% in January

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Home sales declined, but distressed share continues to improve

14.2% of September transactions were REO or Short Sales – lowest  share  since  ‘07

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• Home prices are up about 9% year over year, but seasonal slowing continues

• Short sale discounts are declining as volumes decrease

• Home price improvement is driving negative equity lower

• Sand states still the most underwater

Focus Point 2: Home prices and negative equity

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Home price improvement continues; national average highest since 2008

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Short sale discounts are declining as volumes decrease

Sale Month

REO % of Distressed

Short Sale % of Distressed

Sep-2010 58% 42%

Sep-2011 54% 46%

Sep-2012 44% 56%

Sep-2013 56% 44%

Short Sale Discount: 24.5%

REO Discount: 25.9%

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Home price improvement is driving negative equity lower

Applying distressed property discounts, 11.6% of loans are underwater (down from 18.8%

in January)

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Despite performance improvements sand states still most underwater

>=20% 0%

Negative Equity %

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• Judicial states are lagging in price recovery since the national trough in January 2012

• New problem loan rates are higher in judicial states than non, and the gap has grown

• Foreclosure starts in judicial states have remained elevated, but pipeline ratios are improving as a result of increased foreclosure activity

Focus Point 3: Judicial vs. non-judicial state disparities

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Judicial states are lagging in price recovery since Jan-12 (nat’l trough)

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New problem loan rates are higher in judicial states and the gap has grown

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FC starts in judicial states have remained elevated vs. non-judicial

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Pipeline ratio in judicial states has improved due to increased FC sales

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• Overall, HE delinquencies have been trending down

• Over 75% of outstanding HEs were originated between 2004 and 2009 (where LOCs have not started amortizing)

• New problem loans in amortizing LOC vintages are increasing

• Credit scores in pre-amortizing vintages have shifted down with more UPB at risk

Focus Point 4: Home Equity market risks

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In total, the Home Equity market is experiencing lower delinquencies

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Over 75% of outstanding HEs were originated between 2004 and 2009

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New problem loans in amortizing LOC vintages* are increasing

* Assumes 10 year term to amortization

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Credit scores have shifted down for ‘04-‘08  LOCs  with  more  UPB  at  risk

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LPS Mortgage Monitor

Appendix

Data as of October, 2013 Month-end

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October 2013 Data Summary

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Seven of the top 10 states for total non-current are judicial

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Loan counts and average days delinquent

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LPS Mortgage Monitor

Disclosures: Product / Metric Definitions and July 2012 Market Sizing Revisions

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Disclosure Page: Product Definitions

*Conforming limits do not account for temporary or high-cost area increases.

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Disclosure Page: Metrics Definitions

• Total Active Count: All active loans as of month-end including loans in any state of delinquency or foreclosure. Post-sale loans and loans in REO are excluded from the total active count.

• Delinquency Statuses (30, 60, 90+, etc): All delinquency statuses are calculated using the MBA methodology based on the payment due date provided by the servicer. Loans in foreclosure are reported separately and are not included in the MBA days delinquent.

• 90 Day Defaults: Loans that were less than 90 days delinquent in the prior month and were 90 days delinquent, but not in foreclosure, in the current month.

• Foreclosure Inventory: The servicer has referred the loan to an attorney for foreclosure. Loans remain in foreclosure inventory from referral to sale.

• Foreclosure Starts – Any active loan that was not in foreclosure in the prior month that moves into foreclosure inventory in the current month.

• Non-Current: Loans in any stage of delinquency or foreclosure. • Foreclosure Sale / New REO: Any loan that was in foreclosure in the prior month that

moves into post-sale status or is flagged as a foreclosure liquidation. • REO: The loan is in post-sale foreclosure status. Listing status is not a consideration,

this includes all properties on and off the market. • Deterioration Ratio: The ratio of the percentage of loans deteriorating in delinquency

status vs. those improving.

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With the June 2012 month-end data, LPS has updated its extrapolation methodology to incorporate, among other things, improved estimates of market size, which includes higher coverage of government and subprime products and increases  LPS’  estimate  of  the  total  first  lien  residential  mortgage market by three percent to 50.4 million. To ensure consistency in trend analysis, the new methodology has been applied to all historical data and previously reported mortgage performance statistics have been adjusted accordingly. The following section contains information on market coverage and comparisons with previously reported statistics. Additional information is available upon request.

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The new scaling increases overall estimated industry loan count by approximately 1.2 million loans

Prior industry estimates declined because scaling didn’t  support current servicing transfer volumes

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New scaling reflects the higher coverage of government loans and allows for the incorporation of new servicers

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Delinquencies decline based on higher estimated coverage of FHA and subprime loans.

Converge due to new servicers and transfer issues with prior scaling

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Foreclosure inventory remains almost identical, but shifts up in recent months as transfer bias is repaired

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Foreclosure starts remain consistent, with rates shifting up slightly

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Performance Statistics Changes: Database Counts

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Performance Statistics Changes: State Level Detail