Lender Processing Services 1

ON

E S

OU

RC

E.

PO

WE

RF

UL

SO

LU

TIO

NS

. O

NE

SO

UR

CE

. P

OW

ER

FU

L S

OL

UT

ION

S.

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

LPS Mortgage Monitor

September 2013 Mortgage Performance Observations

Data as of August, 2013 Month-end

Lender Processing Services 2

• Focus 1: Prepayment activity and refinance

opportunities

• Focus 2: Home price improvement and HE

potential

• Focus 3: Foreclosure sales and pipeline

update

September 2013 Focus Points

Lender Processing Services 3

• Prepayment rates declined sharply in

August as mortgage rates continued to rise

• Over 50% of borrowers are now “out of the

money” for refinancing

• 5.7M loans have “refinancible”

characteristics, down from ~10M in Dec-12

• HARP activity has declined, but still about

30% of GSE originations

Focus Point 1: Prepayment activity

and refinance opportunities

Lender Processing Services 4

Prepayments down over 30%

since May with ~100bp rate rise

Lender Processing Services 5

Originations were strong through

July but prepayments signal decline

Lender Processing Services 6

Over 50% of borrowers are now

“out of the money” for refinancing

Lender Processing Services 7

5.7M loans have “refinancible”

characteristics vs. 10M in Dec-12

Lender Processing Services 8

~30% of today’s GSE

originations are HARP

Bubble Crisis HARP

Lender Processing Services 9

• National home prices continue to improve,

though most regions have had small gains

relative to losses

• Recent vintages have very few second liens

as compared to earlier years

• Higher mortgage rates and home prices

may lead to new opportunity for HEs

Focus Point 2: Home price

improvement and HE potential

Lender Processing Services 10

Home prices are at their

highest levels since 2009

Lender Processing Services 11

Most regions have had small home

price gains relative to their losses

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

-80% -60% -40% -20% 0% 20%

Peak-to-Trough HPI Change (7/2006 - 1/2012)

Peak-t

o-T

od

ay H

PI

Ch

an

ge

(7/2

006 -

5/2

013)

Austin

New York Phoenix

San Jose

Las Vegas

Hardest hit areas

are up marginally

from the bottom

Lender Processing Services 12

Recent vintages have very few

seconds compared to earlier years

0%

10%

20%

30%

40%

50%

60%

2003 2005 2007 2009 2011 2013

Fir

st

Lie

n M

ort

gag

es W

hic

h

Have a

Seco

nd

Lie

n

2003 vintage used

seconds to take

cash out

Bubble vintages took

out second liens at

origination.

2010

2003

2006

Lender Processing Services 13

Higher rates and home prices may

lead to new opportunity for HEs

0%

10%

20%

30%

40%

50%

60%

70%

2000 2002 2004 2006 2008 2010 2012

Vintage

Fir

st

Lie

n M

ort

gag

es W

hic

h

Have a

Seco

nd

Lie

n

Today

At Origination

By 2017, if recent

vintages follow

the pattern of the

2003 vintage.

Lender Processing Services 14

• Foreclosure sales have been increasing, but

monthly average for ’13 is lower than ‘12

• Foreclosure starts continue to decline

• National foreclosure pipelines are shrinking,

but pressure is still growing or extreme in

several states

Focus Point 3: Foreclosure

sales and pipeline update

Lender Processing Services 15

FC sales up, but avg 61k/mo in ‘13 vs.

73k in ‘12; starts continue to decline

Lender Processing Services 16

National foreclosure pipelines

continue to shrink

Lender Processing Services 17

Pipeline pressure is still growing or

extreme in many states

+68% since

Q4 2012

+136% since

Q2 2012

+56% since

Q4 2011

Lender Processing Services 18

ON

E S

OU

RC

E.

PO

WE

RF

UL

SO

LU

TIO

NS

. O

NE

SO

UR

CE

. P

OW

ER

FU

L S

OL

UT

ION

S.

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

LPS Mortgage Monitor

September 2013 Appendix

Data as of August, 2013 Month-end

Lender Processing Services 19

August 2013 Data Summary

Lender Processing Services 20

Seven of the top 10 states for total

non-current are judicial

Lender Processing Services 21

Loan counts and

average days delinquent

Lender Processing Services 22

ON

E S

OU

RC

E.

PO

WE

RF

UL

SO

LU

TIO

NS

. :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

: :

:

LPS Mortgage Monitor

Disclosures: Product / Metric Definitions and

July 2012 Market Sizing Revisions

Lender Processing Services 23

Disclosure Page: Product Definitions

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

increases.

Lender Processing Services 24

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.

Lender Processing Services 25

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.

Lender Processing Services 26

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

Lender Processing Services 27

New scaling reflects the higher coverage of government

loans and allows for the incorporation of new servicers

Lender Processing Services 28

Delinquencies decline based on higher

estimated coverage of FHA and subprime loans.

Converge due to new

servicers and transfer

issues with prior scaling

Lender Processing Services 29

Foreclosure inventory remains almost identical, but

shifts up in recent months as transfer bias is repaired

Lender Processing Services 30

Foreclosure starts remain consistent, with

rates shifting up slightly

Lender Processing Services 31

Performance Statistics Changes: Database Counts

Lender Processing Services 32

Performance Statistics Changes: State Level Detail