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TREASURY REPORT REVEALS PERFORMANCE OF LARGEST SERVICERS BORROWERS ESCAPE NEGATIVE EQUITY AS HOME VALUES GAIN negative equity in the second quarter of 2012, CoreLogic reported in mid-September. According to the company's analysis, About 600,000 borrowers rose above 10.8 million—or 22.3 percent—of residential properties with a mortgage remained underwater during the second quarter of 2012. The second-quarter figure is a decrease from the first quarter of this year when 11.4 million properties—or 23.7 percent—were underwater. Even though negative equity is said to drive default, 84.9 percent of underwater borrowers managed to stay current on payments. "The level of negative equity continues to Making Home Affordable (MHA) program report, detailing the performance of the nine largest servicers participating in the federal homeowner assistance program. The report provided data on servicers' ability to reach out to delinquent borrowers who are at least 60 days behind on their mortgage payments to inform them of the MHA program. The results were based on performance from Last month Treasury released a new August 2011 to July 2012 and revealed GMAC led the pack with a 97 percent right-party contact (RPC) ratio. Right-party contact occurs when a servicer successfully communicates with the correct homeowner about resolving the delinquency based on program guidelines. The RPC ratio is the share of homeowners the servicer established RPC with as a percent of Home Affordable Modification Program eligible loans. OneWest followed GMAC closely with to the MHA program, the largest servicers resolved issues within the required 30-day time frame. According to Treasury's report, examples of escalations include allegations that the servicer did not properly assess the homeowner according to program guidelines, inappropriately denied the homeowner for applicable MHA program(s), or initiated or continued inappropriate foreclosure actions. The servicers assessed resolved cases within 30 days in this most recent third quarter and in the second quarter of this year. To encourage servicers to modify home- When resolving borrower disputes related improve with more than 1.3 million households regaining a positive equity position since the beginning of the year," said Mark Fleming, chief economist for CoreLogic. "Surging home prices this spring and summer, lower levels of inventory, and declining REO sale shares are all contributing to the nascent housing recovery and declining negative equity." While 600,000 homes moved into positive territory, 2.3 million borrowers were in a state of near-negative equity since they had less than 5 percent equity in their home. For these borrowers, the scale can tip either way, depending on the direction of home prices. Anand Nallathambi, president and CEO of a 95 percent RPC ratio. Bank of America established a 93 percent RPC ratio followed by Homeward Residential (92 percent), which Ocwen Financial is acquiring. Wells Fargo also had a notably high RPC ratio of 90 percent. The report also revealed servicers' perfor- mance when converting eligible trials into per- manent modifications on or after June 1, 2010. Homeward Residential and OneWest had the highest conversion rates with both seeing 90 percent of trials turn into permanent modifica- tions. The report stated the average trial length is 3.5 months. 40 owners at an early stage of delinquency, mon- etary incentives are higher for servicers who complete a modification on a loan that is 120 days delinquent or less at trial start. None of the nine major servicers averaged less than 120 days for homeowner delinquency at trial start. The Obama administration's housing scorecard was also released in conjunction with the MHA report. The scorecard reiterated an assessment of the housing market seen in previ- ous reports: while the industry shows signs of a recovery, the recovery is still "fragile." The scorecard was jointly released by HUD and Treasury and provides a snapshot of the state of housing based on a wide range of data. Rising home values, which lifted 1.3 million homeowners out of negative equity since the beginning of this year, and existing home sales in August, which reached a two-year high, were mentioned as signs of a strengthening market. see significant reductions in the number of borrowers in negative equity by next year," Nallathambi said. When combining negative and near- CoreLogic, said he expects the upward trend to continue for home prices. "Were this trend to be sustained, we could negative equity mortgages, CoreLogic found 27 percent of all residential properties would be in one of the two categories. In dollar terms, the amount of negative underwater mortgages in the second quarter were Nevada (59 percent), Florida (43 percent), Arizona (40 percent), Georgia (36 percent), and Michigan (33 percent). Of the 10.8 million underwater mortgages, CoreLogic found 6.6 million without a home equity loan and an average underwater amount of $51,000. About 4.2 million underwater borrowers have first and second liens, and on average, they are underwater by $84,000. The report also stated that homes valued at less than $200,000 had a negative equity share of 32 percent compared to 17 percent for homes valued more than $200,000. equity decreased quarterly to $689 billion in Q2, down from $691 billion. The states with the highest percentage of

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