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70 total surplus funds reached a record-high $324.5 million; however, the lower numbers in 2020 were due largely to side effects of the foreclosure moratoria: much higher concentration of vacant or abandoned properties—which are less likely to have equity. Still the long-term trend in surplus fund sales is clearly on the increase, with the 44% share of surplus fund sales in 2020 more than triple the 12% in 2012. Some of the increase in surplus funds comes thanks to the overall home price recovery that has lifted all boats. is is evident in the rising share of foreclosure sales where the foreclosing lender's credit bid is total debt owed—indicating the perceived potential for equity. e share of foreclosure sales with total debt bids more than doubled between 2012 and 2020, from 11 to 24%. Meanwhile, the share of total debt sales with surplus funds stayed consistently between 98 and 100% over that six-year period—indicating lenders did not substantively change their methodology for determining the potential for home equity. However, even among sales where there was no perceived potential for home equity, the share of surplus fund sales has been skyrocketing. Among foreclosure sales where the lender lowered the credit bid below total debt owed, also known as specified bid sales, the share with surplus funds increased by eightfold between 2012 and 2020—from just 2 to 16%. ese specified bid foreclosure sales that end up generating surplus funds are a prime example of how a transparent foreclosure marketplace can fully leverage the power of buyer demand to uncover hidden home equity. Neither the distressed homeowner nor the foreclosing lender perceives that the property has any equity, but a free and open marketplace of more than 6 million buyers proves otherwise—benefitting both the mortgage servicer and the distressed homebuyer. INNOVATION THAT INSULATES Lastly, innovation leading to more widespread adoption of pre-foreclosure sales will help speed the post-pandemic recovery of the U.S. housing market. Pre-foreclosure sales were already increasing as a percentage of distressed dispositions leading up to the pandemic, thanks in large part to more home equity. In 2019, pre-foreclosure sales represented 33% of all distressed dispositions, up from 30% in 2018 and more than double the 16% in 2009, during the Great Recession. (at according to an Auction.com analysis of public record data from ATTOM Data Solutions.) Mortgage servicers like Specialized Loan Servicing (SLS) are gearing up for more short sales and other pre-foreclosure sales in the aftermath of the pandemic-induced recession, according to Toby Wells, CEO. "With the pandemic, there are going to be a lot of tools that are available to consumers to stay in their homes, but inevitably there are going to be some cases where that may not make sense, and a short sale is an appropriate transaction," Wells said, whose company services a $120 billion mortgage portfolio for 80 clients across a wide variety of mortgage products. According to Wells, since August 2020, SLS has been leveraging the online auction environment to help overcome some of the common obstacles that can trip up traditional short sales. e company has been participating in the Auction.com market validation program (MVP), which exposes pre-foreclosure sale properties to Auction.com's potential buyer base of more than 6 million registered users in a transparent and competitive marketplace. Wells said running pre-foreclosure properties through MVP has improved pricing Pre-Foreclosure Sales Foreclosure Sales Transfer to Lender (REO) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Pre-Foreclosure Sales as Share of Total Distressed Market 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 12% 14% 14% 12% 16% 18% 19% 21% 20% 20% 20% 23% 28% 30% 33% Source: ATTOM Data Solutions Average Highest MLS Offer Average Highest Online Auction Bid Percent Lift with MVP $172,000 $183,095 $184,498 $210,756 $155,360 $194,356 Q3 2020 Q4 2020 2021 YTD 14% 25% 6%

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