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60 needed. Certain compliance results for the largest servicers are also published through the quarterly servicer assessments, fostering further servicing improvements. Taken together, the creation of robust loss mitigation infrastructure and the implementation of homeowner protections have resulted in a transformation of the servicing industry from one in which the primary focus was on collecting payments for mortgage investors to one more focused on the homeowner and the desire to find win-win solutions for homeowners and investors alike. MHA has been a proud leader in this space. Interestingly, there is evidence that the processes put in place by MHA may be making a positive difference in modification performance. According to Treasury's analysis, even after controlling for borrower credit characteristics and payment reduction, HAMP modifications out-perform non-HAMP modifications. In other words, if one took a group of similar delinquent loans made to similar borrowers and randomly assigned the loans to HAMP and non-HAMP modification programs, the HAMP modifications would perform better. As shown in the chart above, this finding appears to be true across multiple payment- reduction buckets. e evidence so far suggests there is something about participating in HAMP that has a positive influence on the borrower's performance in the modification. e program's consistency, standardization, and homeowner protections likely play a role, as do the incentives HAMP offers both homeowners and servicers for borrower success. Regardless, this area warrants further research, especially on more recent vintages of modifications made after some of the processes initiated by MHA migrated across the industry. CONSOLIDATING PROGRESS GOING FORWARD As the housing market continues its recovery, it is critical that the mortgage servicing industry draw from the lessons learned over the past six years. Many homeowners still need help, and we want to prepare the industry for any future downturns. We also need to ensure homeowners who already received MHA help have the information and resources they need to succeed during and after their modification. Most recently, we have taken steps to make sure homeowners and servicers are prepared for future interest rate step-ups on modifications. HAMP was designed to give homeowners a lengthy reprieve so they could get back on their feet. HAMP modifications reduce interest rates to as low as 2 percent for five years, after which the interest rate gradually increases to the market rate at the time of the modification. We want to help ensure homeowners are prepared for any interest rate step-ups and servicers have the right tools to help those experiencing problems as a result. e first interest rate step-ups have already started for 2009 and 2010 modifications, and volumes will grow throughout 2015. Roughly 80 percent of HAMP "Tier 1" borrowers will experience at least one interest rate step-up, and the majority will experience two or three. e first interest rate step-up will result in a median monthly payment increase of $95. e final will result in a total median monthly payment increase of $211. Of course, there is significant geographic variation; in Ohio that number is $105 while in California it is $318. We know homeowners who work with housing or financial counselors say they find the counseling process extremely useful, so we are working with servicers to make sure homeowners in modifications have access to financial counseling, at no cost to the homeowner, to assist them in staying current on the HAMP modification. We also know some HAMP Tier 1 borrowers with a pending interest rate step- up may not be able to afford the step-up, so we are taking steps to make it easier for qualifying borrowers to apply for HAMP Tier 2 and have also made enhancements to the terms of Tier 2 modifications to increase payment relief. For borrowers who can not sustain their modification, including HAMP Tier 1 modifications, we recently required servicers to actively solicit them for HAMP Tier 2. Finally, we learned from our survey of homeowners in HAMP that MHA's homeowner incentives have motivated homeowners to stay current on their modified loans. Consequently, we have increased these incentives and extended them for an additional year. ese incentives are applied in repayment of borrowers' outstanding principal balance. Servicers will also begin to offer to recast the homeowners' unpaid balance, at no cost, which will lower their monthly payments. It's hard to overstate either the magnitude of the housing crisis six years ago or the changes it brought to the lives of those it hit the hardest. One of the most important things we can do is to draw on the experience of our efforts to address the crisis and to incorporate what we have learned into the fabric of the mortgage servicing industry. MHA has been just one part of those efforts, but it offers a window on critical issues that persist even as the housing market recovers. As that recovery continues, we will continue to look at practical, concrete steps that make sense for homeowners still struggling and for the servicers, counselors, and others seeking to help them. HAMP NON-HAMP 2010 MODIFICATIONS 10-20% PAYMENT REDUCTION 21-30% PAYMENT REDUCTION 31-40% PAYMENT REDUCTION 40-50% PAYMENT REDUCTION 0% 5% 10% 15% 20% 25% 30% 35%

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