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LPS Mortgage Monitor

October 2013 Mortgage Performance Observations

Data as of September, 2013 Month-end

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• Focus 1: Prepayment activity; response to rising mortgage rates

• Focus 2: Hybrid ARM resets and potential payment impact

• Focus 3: Delinquency and Foreclosure trends

• Focus 4: Home prices and sales activity

October 2013 Focus Points

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• Prepayments are at their lowest levels since May 2011 as mortgage rates continue to rise

• GNMA loans experienced the largest drop

• Prepayment speeds in HARP-able cohorts have also dropped sharply

• Origination activity is down due to declining refinance incentives

Focus Point 1: Prepayment activity and response to rising mortgage rates

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Prepayment rates are at the lowest level since May 2011

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GNMA loans have seen the largest drops in prepayment speeds

Investor Vs. May-13

GNMA -55%

GSE -50%

Portfolio -39%

Private -19%

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Prepayment speeds in HARP-able cohorts have also dropped sharply

LTV Vs. May-13

<80 -39%

80-100 -37%

100-120 -43%

120+ -41%

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Origination activity is down due to declining refinance incentives

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• Most outstanding Hybrid ARMs have already reset

• Over 75% of pre-reset hybrids were originated post-crisis (where loan quality is pristine)

• Indices would need to rise significantly for rates to increase on pre-crisis originated hybrids

Focus Point 2: Hybrid ARM resets and potential payment impact

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Most outstanding Hybrid ARMs have already reset

Pre-reset: 36% Post-reset: 63%

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Over 75% of pre-reset hybrids were originated post-crisis

More than 60% of originations

since 2010 have 760+ credit scores

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Indices would need to rise 300bps for most pre-crisis hybrid rates to increase

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• Delinquencies increased, but in-line with seasonal pattern

• Foreclosure inventories continue to improve with first time foreclosure starts at multi-year lows

• New problem loan rates remain close to pre-crisis levels

Focus Point 3: Delinquency and foreclosure trends

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DQ increases are in-line with seasonal patterns; FCs continue to drop

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First time foreclosure starts continue to drop to multi-year lows

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New problem loan rates are close to pre-crisis levels

New problem loan rates in judicial states are

higher than non-judicial (1.0% vs. 0.8%)

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Non-current rates are highest in the Northeast and Southeast

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Foreclosure inventory issues are very state specific

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• Home prices are up about 9% year over year, but increases are starting to slow due to seasonality

• Sales remain high with lower share of distressed

• Short sale volumes are decreasing, but remain historically high

Focus Point 4: Home prices and sales activity

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Home prices are up 9% YoY, but seasonal slowing is beginning

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Home sales remain at the highest levels since 2007

Year Distressed % 2010 31%

2011 33%

2012 29%

2013 19%

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Short sale volumes are decreasing, but still historically high

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LPS Mortgage Monitor

October 2013 Appendix

Data as of September, 2013 Month-end

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September 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