Wells Fargo Bank, National Association et al v. City of Richmond, California et al

Filing 49

Declaration of John Ertman in Support of 45 Reply to Opposition/Response, 46 Opposition/Response to Motion, 45 Motion for Preliminary Injunction, 46 Motion to Dismiss filed byDeutsche Bank National Trust Company, Deutsche Bank Trust Company Americas, Wells Fargo Bank, National Association. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G, # 8 Exhibit H, # 9 Exhibit I, # 10 Exhibit J, # 11 Exhibit K, # 12 Exhibit L, # 13 Exhibit M, # 14 Exhibit N, # 15 Exhibit O, # 16 Exhibit P, # 17 Exhibit Q, # 18 Exhibit R, # 19 Exhibit S, # 20 Exhibit T, # 21 Exhibit U, # 22 Exhibit V, # 23 Exhibit W, # 24 Exhibit X, # 25 Exhibit Y, # 26 Exhibit Z, # 27 Exhibit AA)(Related document(s) 45 , 46 ) (Tsai, Rocky) (Filed on 8/29/2013)

EXHIBIT F

Community
 at
 a
 glance
Name

City
 of
 Richmond

County

Contra
 Costa

CBSA
 Name

San
 Francisco-­‐Oakland-­‐Fremont,
 CA

 (Oakland-­‐Fremont-­‐Hayward
 CBSA-­‐Div)

Population

103,701

Total
 Mortgages
 (1st's
 only)

(2010
 Census)

28,131 (total
 for
 zip
 codes)

53%

Home
 ownership
 rate

81,602 (total
 for
 zip
 codes)

35,884

Total
 Households

(2010
 Census)
(2010
 Census)

12,128

(2011
 CoreLogic)

%
 of
 Underwater
 homes
%
 of
 Underwater
 homes
 -­‐
 CBSA
%
 of
 Underwater
 homes
 -­‐
 State

46%
32%
31%

(2011
 CoreLogic)
(Q1-­‐2012;
 CBSA-­‐Div)
(Q1-­‐2012)

Foreclosure
 statistics
Foreclosures
 in
 most
 recent
 month
Foreclosure
 rate
 fraction 1
 of
 every

110
281

month
 of
 Oct
 2012
properties
 received
 FC
 notice
 in
 Oct
 2012

Mortgage
 stats
 breakdown
Total
 Mortgages
 (GSE,
 Banks,
 etc)
All
 PLS
 Mortages
PLS
 Single-­‐family,
 Owner-­‐Occ,
 1st

Total
12,128
2,077
1,468

Current

1,620
937

78%
64%

Delinquent

457
294

22%
20%

Underwater

5,579 46%
1,700 82%
1,236 84%

City
 of
 Richmond
 PLS
 Loans
 by
 Zip
 (July
 -­‐
 2012)
 *
Zip
 Code

 House-­‐
holds

 Total
 PLS

Loans

94801
94802
94804
94805
94807
94808
94850

 9,034

 -­‐

13,948

 5,149

 -­‐

 -­‐

 -­‐

 662

 2

 999

 408

 2

 3

 1

28,131

 2,077

Average

Unpaid

Principal

Balance

%
 U/W

of
 Total

PLS
$330,530

 538
81%
$129,232

 -­‐
0%
$304,867

 834
83%
$336,337

 326
80%
$432,879

 1
50%

$121,982

 -­‐
0%

$420,523

 1
100%
$318,974

 1,700

82%
Total

U/W

Underwater
 Loans
%
 of
 U/W

Total
 U/W

that
 are

&
 Current
Current
71%

 382
#DIV/0!

 -­‐
72%

 601
72%

 234
100%

 1

#DIV/0!

 -­‐

 1

100%

 1,219

72%

In
 Fore-­‐
closure

or
 REO

 74

 82

 -­‐

 -­‐

 111

 122

 53

 39

 -­‐

 -­‐

 -­‐

 -­‐

 -­‐

 -­‐

Delin-­‐
quent

 238

 243

*
 Note,
 zip
 codes
 listed
 may
 cover
 some
 areas
 outside
 of
 the
 city
 limits
 and/or
 leave
 portions
 uncovered
 resulting
 in
 variance
 versus
 census

tract
 data.
 Because
 loan
 statistics
 are
 tracked
 by
 zip
 code,
 the
 above
 number
 should
 be
 treated
 as
 an
 estimate.
 Exact
 numbers
 will
 be

determined
 from
 lien
 addresses
 at
 the
 appropriate
 time.

12/10/12

Confidential,
 Mortgage
 Resolution
 Partners,
 LLC

City
 of
 Richmond:

 Page
 1
 of
 2

Foreclosure
 statistics
 by
 zip
 code

110
 new
 foreclosures
 filed
 in
 Oct
 2012

October
 2012
 Foreclosure
 Rate
 Heat
 Map

 1
 in
 every
 281
 housing
 units
 received
 a
 foreclosure
 filing
 in
 Oct
 2012

12/10/12

Confidential,
 Mortgage
 Resolution
 Partners,
 LLC

City
 of
 Richmond:

 Page
 2
 of
 2

Saving Homes, Saving Cities
Solving the Mortgage Crisis Locally
Processes and Cash Flows

Key Steps To The MRP Process
1. The City hires MRP at no cost per the terms of the MRP Advisory Agreement as modified by
the City and agreed to by MRP. At each step in the process the City has the option to
terminate the Agreement and must approve the next step before it is taken. The City does
not pay any costs of the program. Nothing in the Agreement obligates the City to file an
eminent domain motion.
2. The City pre approves all communications with the homeowners and the community.
3. Before or after the City files an eminent domain motion the Homeowner may opt out of the
program and their mortgage will be dropped from the motion before it is purchased.
4. Qualified homeowners who opt into the program may elect to refinance for less than the
current value of their home.
5. Qualified homeowners who opt into the program may elect to sell their home in full
satisfaction of their mortgage and lease back their home with an option to purchase it in the
future.
6. Homeowners who opt into the program, but do not qualify for a refinance or a lease will be
dropped from the eminent domain motion before their mortgage is purchased.
2

Step 1. City Controls The Process
PLS Trustee
Receives offer to
purchase loan
Proceed to
prepackaged
eminent domain
settlement

yes

MRP
Identifies Possible
Homeowners

Start:

Hires MRP, Signs
Advisory Agreement
Appoints Staff

Accept
offer?
no

City

Appoints Counsel
Prepares offer to
purchase loans
Makes offer to
purchase loans

Proceed?

no

Stop

yes

Proceed?
Prepare Resolution
of Necessity
Material

Stop

yes
Proceed?

Builds community
consensus to proceed with
Eminent Domain motion.
Drops homeowners that
opt out.

no

no

Stop

yes
RON
Approved?

no

Stop

yes
File Eminent
Domain Motion

3

Step 2. Home Owner May Opt Out

City
Start:

City Files Eminent
Domain Motion

MRP
Presents program
to homeowners

Home Owner
Interested?

no

Dropped
From
Motion

yes

To
Refinance
Option

yes
City approves
presentation
materials

Qualifies
for refi?
no

Qualifies
For Lease?
no
Dropped
From
Motion

yes

To Lease
Option

Step 3: Refinance Option
PLS Trustee

Funder

Receives $160,000

Pays $160,000 Loan
Acquisition Price

Delivers Underwater
PLS Mortgage

City

FHA Lender

Home Owner
Start:

Obtains Order For
Possession of
Mortgage

Home Owner Opts
to Refinance

Receives
Underwater PLS
Mortgage

Records the new
$190,000 FHA
Mortgage

Receives $190,000

Gets a new
$190,000 FHA
Mortgage @ no cost
= 95% of home
value

Sends $190,000 to
Funder to payoff
PLS mortgage

Old Mortgage Paid
Off
Sends $9,500 to
community

Invests $9,500 to
stabilize local
housing

Receives monthly
mortgage payments
from Home Owner

Sends reduced
monthly mortgage
payments to new
FHA Lender

Pays MRP $4,500
Pays $3,260 of other
expenses

Avoids another
foreclosure

5

Step 3: Lease/Purchase Option
PLS Trustee

Funder

Receives $160,000

Pays $160,000 Loan
Acquisition Price

Delivers Underwater
PLS Mortgage

City

Home Buyer

Home Owner
Start:

Files Motion,
Possession
Granted

Home Owner Opts
For Lease/Purchase

Receives
Underwater PLS
Mortgage

Signs Lease,
Buys Home

Receives $190,000

Signs a market rate
lease with an option
to purchase. Sells
home to buyer.

Sends $190,000 to
Funder

Old Mortgage Paid
Off
Sends $9,500 to
community

Invests $9,500 to
stabilize local
housing

Credits a portion of
rent to tenant’s
purchase account

Pays rent

Pays MRP $4,500
Pays $3,260 of other
expenses

Avoids another
vacant home

Buys home or
continues to rent

6

Follow the Money
Proceeds From Refinance Of Each Loan or Home Sales Proceeds
Fair Value Paid for Each Loan (If 80% of home value)
Gain On Each Loan

$190,000
($160,000)
$30,000

Where does the $30,000 Gain On Each Loan Go?
Paid to Community For Each Loan

$9,500

Paid to Funder For Each Loan

$20,500

MRP Fee Paid By Funder

($4,500)

Eminent Domain Legal Expenses Paid By Funder

($2,000)

Cost of Homeowner Education Paid By Funder

($600)

Mortgage Servicing Costs During Holding Period Paid By Funder

($100)

Fees Paid to Investment Bankers Paid By Funder

($560)

Funder Net Income Per Loan

$13,540 (8%)

7

ADVISORY SERVICES AGREEMENT

This Advisory Services Agreement (“Agreement”) is entered into by and between
Mortgage Resolution Partners LLC, a Delaware limited liability company (“MRP”) and the City
of __________ (the “City”) and is effective as of _______________, 2012 (the “Effective
Date”).
RECITALS
A.
MRP is a community advisory firm advising public agencies on ways to
assist the agency in reducing the impact of the mortgage crisis with its communities including, if
necessary, by acquiring mortgage loans through the use of eminent domain, in order to
restructure or refinance the loans and thereby preserving home ownership, restoring homeowner
equity and stabilizing the communities’ housing market and economy by allowing many
homeowners to remain in their homes.
B.
America in general and the City in particular are each experiencing an
historic home mortgage crisis and as a result of the home mortgage crisis, many homeowners in
the City have lost significant portions of their disposable income, and some have been unable to
make timely mortgage payments on their homes. This has resulted in unprecedented rates of
default and foreclosure, loss of homeowner equity, loss of family wealth, and even loss of shelter
for some families. The home mortgage crisis has resulted in other adverse impacts within the
City such as job losses, reductions in income, consumer demand, and investment, a spiraling
reduction in property values, a reduction in property and payroll tax revenues, vandalism,
abandoned homes and a general decline in the economy and the quality of life for residents.
Restructuring or refinancing mortgage loans will benefit the City’s residents by preserving home
ownership; restoring homeowner equity; and likely also increasing income, property values,
consumer demand, investment, and property and payroll tax revenue.
C.
The City is interested in retaining MRP to act as its advisor to assist the
City in exploring potential solutions to the mortgage crisis; to assist the City by negotiating on
the City’s behalf with entities which will provide the necessary funding to the City in order to
allow the City to acquire loans; and to assist the City in negotiating contracts with third parties
including owners of loans, attorneys, lenders, data companies, other government agencies and
others as necessary to implement a program or programs to benefit the City’s residents.
NOW THEREFORE, in consideration of the foregoing, MRP and the City agree
as follows:
1.
PURPOSE. The purpose of this Agreement is to enable the City and MRP to work
together to assess and implement a program or programs designed to ease the impacts of the
mortgage crisis on the residents of the City.
2.
SERVICES. MRP agrees to provide the following services (“Services”), and the City
authorizes MRP to represent the City as described:

-1-

(a)
to advise the City on various alternatives in order to provide assistance to its
residents who are burdened with mortgage loans including assessing the possibility and benefits
of the formation of a joint powers authority;
(b)
to identify and negotiate with companies acceptable to the City, in its sole and
absolute discretion, to lend funds to the City on a fully secured, non-recourse basis if such funds
are required in order to provide the necessary relief;
(c)
to provide extensive legal research acquired by MRP on all aspects of the
acquisition and refinancing of mortgage loans including each of the legal steps necessary to
implement the necessary programs;
(d)
to identify and negotiate with law firms acceptable to the City, in its sole and
absolute discretion, to work with the City to implement the programs which the City elects to
implement;
(e)
to negotiate with other local, state and federal governments and agencies as
necessary to implement programs chosen by the City;
(f)
to negotiate on behalf of the City with the holders of mortgage loans secured by
property owned by residents of the City (and with trustees, servicers, investors and other parties
having a relationship with the holders of the loans);
(g)
criteria;

to work with the City to identify mortgage loans to target based upon the City’s

(h)
to negotiate on behalf of the City with any other third party as necessary to
implement programs which the City elects to implement; and
(i)
to work with the City to establish education and communication programs to
address residents’ questions about a program or programs the City implements.
Provided, however, in no event shall MRP have the authority to enter into any contracts
on behalf of the City.
3.
COMPENSATION. As its sole and exclusive compensation for the performance of the
Services (the “Advisory Fee”), MRP shall receive the sum of $4,500 per loan for each loan
ultimately acquired by the City or otherwise resolved in a manner which results in the
restructuring or refinancing of a loan through a program implemented by the City. The Advisory
Fee shall be paid only through the programs implemented by the City and shall not be paid
directly by the City.
4.
ASSIGNMENT. MRP shall not have the right to assign and/or delegate its duties
hereunder without the prior written consent of City, which consent may be withheld in the City’s
sole and absolute discretion.
5.
COOPERATION. Each party agrees to cooperate to carry out the purpose of this
Agreement and to perform all acts and execute all documents reasonably required to institute the

-2-

programs chosen by the City pursuant to the terms of this Agreement or as are or may become
necessary or convenient to effectuate and carry out this Agreement.
6.
RELATIONSHIP OF PARTIES. The relationship of MRP to the City shall at all times
be that of an independent contractor. MRP expressly acknowledges and agrees that it does not
have the authority to bind the City by contract or otherwise.
7.
TERM. This Agreement shall be in effect for a period of one (1) year from the Effective
Date and will be renewed automatically for successive terms of one (1) year each unless either
party gives notice to the other at least sixty (60) days prior to the termination of any term. This
Agreement will continue in effect after the end of the term of this Agreement with respect to all
programs which the City has implemented or is in the process of implementing as of the end of
the term of this Agreement.
8.

GENERAL PROVISIONS.

(a)
Execution. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original. A signature transmitted via scanning and emailing or
facsimile shall have the same effect as an original signature.
(b)
Modification of Agreement. This Agreement may be modified only by a writing
signed by MRP and the City.
(c)
Entire Agreement. This Agreement together with any Nondisclosure and/or
Common Interest Agreements entered into between the parties either prior or subsequent to the
Effective Date constitute the entire understanding and agreement between the parties concerning
this subject matter.
(d)
Severability. If a court of competent jurisdiction finds or rules that any provision
of this Agreement is invalid, void, or unenforceable, the provisions of the Agreement not so
adjudged shall remain in full force and effect. The invalidity in whole or in part of any provision
of this Agreement shall not void or affect the validity of any other provision of this Agreement.
(e)
Governing Law. This Agreement is governed by and shall be interpreted
according to the laws of the State of California.
(f)
Waiver of Breach. No waiver of breach of any term or provision of this
Agreement shall be construed to be, or shall be, a waiver of any other breach of this Agreement.
(g)
Arms-Length Transaction. This Agreement is a product of arms-length
negotiations and each party has had an opportunity to receive independent legal advice from
attorneys of its own choosing. Thus, neither party can claim that any ambiguities in any term of
this Agreement should be construed against any other party.
(h)
No Third Party Beneficiaries. This Agreement will not confer any rights or
remedies upon any person other than the parties hereto and their permitted successors and
permitted assigns.

-3-

9.
NOTICES. All notices under this Agreement shall be in writing and shall be transmitted
by personal delivery or reputable overnight courier service such as FedEx to the parties at the
following addresses:
MRP:

The City:

Mortgage Resolution Partners, LLC
33 Pier South Embarcadero, Suite 201
San Francisco, CA 9411
Attn: CEO
Such notice shall be deemed given upon personal delivery to the appropriate address or
on the next business day if sent by overnight courier service.
WHEREFORE, the parties indicate by their signatures below their entry into this
legally-binding Agreement.
The City
(signature)

(date)

Name (printed):
Mailing address:
Telephone no.:
E-mail address:
Date of Signing:

Mortgage Resolution Partners LLC
Representative:
(signature)

(date)

Name (printed):

Graham Williams

Mailing address:

33 Pier South Embarcadero, Suite 201, San Francisco, CA 94111

Telephone no.:

415-795-2031

E-mail address:

[e-mail]

Date of Signing:

-4-

Saving Homes, Saving Cities
Solving the Mortgage Crisis Locally

The Mortgage Crisis – Far From Over
American
 families:

 14
 million
 past,
 present
 and
 future
 foreclosures

Future
 foreclosures,

6,000,000

Already
 foreclosed,

4,500,000

Delinquent
 or
 in

foreclosure,

3,500,000

We are less than one third of the way through the foreclosure crisis
Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

2

The Cost of Foreclosures*
Local Governments

$19,227

- Lost Property Taxes
-

Unpaid Utility Bills
Property Upkeep
Policing
Legal costs, building inspections

- Demand for social services

Borrowers

$10,300**

Lenders

$26,230***

Close Neighbors

$14,531****

“Housing remains the biggest impediment to economic recovery, yet Washington seems
paralyzed.” -- Joseph Stiglitz and Mark Zandi

Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

*HUD
 Economic
 Impact
 Analysis
 of
 the
 FHA
 Refinance
 Program
 for
 Borrowers
 in
 NegaLve
 Equity
 PosiLon

**Household
 moving
 costs,
 legal
 fees
 and
 administraLve
 charges

***Legal
 fees,
 court
 fees,
 broker
 fee,
 structural
 loss
 surrounding
 a
 foreclosure

****NegaLve
 impact
 on
 the
 property
 value
 of
 close
 neighbors

3

The Solution – Principal Reduction
“Most
 economists
 see
 principal
 reducLons
 as
 central
 to
 prevenLng
 foreclosures.”
 Alan
 Blinder,
 former
 Vice

Chairman
 at
 the
 Federal
 Reserve
 (Oct.
 20,
 2011)

“Government
 should
 reduce
 mortgage
 principal
 when
 it
 exceeds
 110
 percent
 of
 the
 home
 value.”
 Mar@n
 S.

Feldstein,
 former
 Chairman
 of
 the
 Council
 of
 Economic
 Advisers
 under
 President
 Reagan
 (Oct.
 12,
 2011)

“Surely
 there
 is
 a
 strong
 case
 for
 experimentaLon
 with
 principal
 reducLon
 strategies
 at
 the
 local
 level.”

Lawrence
 Summers,
 former
 Treasury
 Secretary
 under
 President
 Clinton
 and
 former
 Economic
 Adviser
 under

President
 Obama
 (Oct.
 24,
 2011)

Example:
 JP
 Morgan
 Chase
 and
 Bank
 of
 America
 unilaterally
 reduce
 principal
 on
 opLon
 ARM
 porZolio
 loans
 in

order
 to

 reduce
 defaults
 and
 losses

Principal reduction will prevent future defaults and foreclosures
Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

4

Problem à Mortgages Held In Private Label Securities

• 
• 
• 
• 
• 
• 
• 

5
 million
 loans
 placed
 in
 securiLes
 not
 guaranteed
 by
 U.S.
 Government

Loans
 not
 conforming
 to
 Fannie
 Mae,
 Freddie
 Mac
 or
 FHA
 standards

Loans
 not
 eligible
 for
 15
 federal
 programs
 created
 since
 the
 housing
 crash

Loans
 are
 much
 more
 likely
 to
 be
 underwater.
 45%
 vs.
 35%
 for
 non
 PLS
 loans

Riskier
 loans
 created
 in
 2004
 to
 2007
 helped
 create
 housing
 boom

Have
 not
 been
 originated
 since
 2007

4.9
 million

 in
  PLS

Securi'es
 prohibit
 principal

 reduc'on

“If we are going to stabilize the housing market, we have to address” PLS loans.
Federal Housing Finance Agency 2009

Result à PLS Families Have Nowhere to Turn
Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

5

Fannie Mae Expects 60% of
PLS Mortgages to be Foreclosed – 3 Million Families
Fannie
 Mae
 Projected
 Future
 Foreclosure
 Rates
 And
 Losses
 For
 All
 PLS
 Families

Modified$

55%$

Variable$

à
 60%
 Loss
 Upon
 Default

58%$

Fixed$

à
 66%
 Loss
 Upon
 Default

40%$

Op3on$ARM$

70%$

Sub$Prime$

71%$

à
 64%
 Loss
 Upon
 Default

à
 74%
 Loss
 Upon
 Default

A
 DisproporLonate
 Number
 of
 These
 Foreclosures
 Will

Come
 From
 Underwater
 Loans

Default Rate For 2.3 Million Underwater PLS Loans Will be Much Higher
Default
 rate
 sources:

 Fannie
 Mae
 2Q
 2012
 Form
 10-­‐Q,
 page
 111
 projecLons
 for
 2006
 vintage
 PLS
 loans

Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

6

PLS Mortgages Are Three Times More Likely To
Be Foreclosed
10 Million Future
Foreclosures

Future$Forclosures$
10% of all mortgages
create 32% of
foreclosures
PLS$Mortgages$
32%$

Community action
can prevent them

Other$Mortgages$
68%$

PLS Mortgage Foreclosures Can Be Prevented
Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

7

Method of PLS Principal Reduction à
Communities Take Action
Securitization agreements and tax laws prohibit the sale of PLS mortgages except
when the mortgages are condemned
Local government, using their constitutional power of eminent domain,
can condemn PLS mortgages when public purpose exists by paying fair value
Then local governments can reduce the principal balance on the condemned PLS
mortgages, thereby reducing underwater PLS in their community

Governments Can Use Eminent Domain To Avoid Unnecessary Foreclosures
Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

8

Resolution Strategies – Underwater PLS

1.5
 mm

Current

underwater

PLS
 Mortgages

0.8
 mm

Delinquent

underwater

PLS
 Mortgages

Qualify
 for

Immediate

95%
 refinance

1.  Municipality reduces payoff amount on acquired mortgage to 97.5% of home’s
value.
2.  Family obtains a new mortgage
3.  Family has equity in home and 100% of home appreciation
4.  Family has significantly more disposable income

Qualify
 To
 Rent

with
 Purchase

OpLon

Not
 Qualified
 to

Rent

1.  Family rents home with an option to buy
2.  Portion of rent payments are credited to down payment

Not eligible for program

New Alternatives - Most Homeowners Can Now Avoid Foreclosure
Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

9

Homeowner Benefit
This is an illustrative example for the level of benefits that participating families may
realize. Communities benefit from greatly reduced probability of foreclosure.
Original
Loan

Today

After
Program

Home Value

$400,000

$200,000

$200,000

Mortgage Balance

$320,000

300,000

$190,000

Home Equity

$80,000

($100,000)

$10,000

80%

150%

95%

$1,798

$1,798

$907

Loan to Value Ratio (LTV)
Monthly Payment

Assumes a 6%, 30 year, fully amortizing mortgage is refinanced by a 4%, 30 year, fully amortizing mortgage. Some loan
programs may also require insurance, which may add $175 per to the After Program monthly payment.

Probability of Default Drops from ~80% to ~7.5%
Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

(FHA actuarial assumption, 95%LTV)

10

Underwater PLS Mortgages Are Worth Less Than Homes
Bank of America Merrill Lynch has published its own pricing of always performing underwater PLS
loans.

Source: Chris Flanagan, Bank of America Merrill Lynch,
Securitization Weekly (July 20, 2012) page 8 (LIBOR +700bps discount rate).

Industry recognizes loans are on average worth less than homes
Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

11

Refinance Option: Follow the Money
Proceeds
 From
 Refinance
 Of
 Each
 Loan
 (If
 95%
 of
 home
 value)

$190,000

 Fair
 Value
 Paid
 for
 Each
 Loan
 (If
 80%
 of
 home
 value)

($160,000)

Gain
 On
 Each
 Loan

$30,000

Where
 does
 the
 $30,000
 Gain
 On
 Each
 Loan
 Go?

Paid
 to
 Community
 For
 Each
 Loan

$9,500

Paid
 to
 Funder
 For
 Each
 Loan

$20,500

 MRP
 Fee
 Paid
 By
 Funder

($4,500)

 Eminent
 Domain
 Legal
 Expenses
 Paid
 By
 Funder

($2,000)

 Cost
 of
 Homeowner
 EducaLon
 Paid
 By
 Funder

($600)

 Mortgage
 Servicing
 Costs
 During
 Holding
 Period
 Paid
 By
 Funder

($100)

 Fees
 Paid
 to
 Investment
 Bankers
 Paid
 By
 Funder

($560)

Funder
 Net
 Income
 Per
 Loan

$13,540
 (8%)

Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

12

MRP is a Community Advisory Firm
MRP clients are state, county, and city governments that purchase underwater PLS
mortgages and resolve them to the benefit of their communities. In order, MRP provides,
under an advisory contract with the community, the following services:
• 

Identify and value PLS mortgages

• 

Educate the community

• 

Arrange acquisition financing

• 

Advise community in filing eminent domain motion
Demonstrate the public purpose
Determine fair market value of mortgages

• 

Arrange servicing of acquired mortgages

• 

Arrange resolution of acquired mortgages

MRP Receives Fee of $4,500 for Each Loan Purchased The Same Fee The Federal Government Pays Banks For a HAMP Restructure
Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

13

Foreclosures Reduce Property Tax Receipts
Under Proposition 13 when homes are
sold in foreclosure, the sales price sets
the base for their assessed valuation
levels and property tax receipts.
Increases in valuations are then
limited to a maximum of 2% per year.

No#Foreclosure
Year
0
1
2
3
4
5
6
7
8
9
10
Total

Prop9139Limit
$400,000
$408,000
$416,160
$424,483
$432,973
$441,632
$450,465
$459,474
$468,664
$478,037
$487,598

Assessed9Value
$200,000
$204,000
$208,080
$212,242
$224,976
$238,475
$252,783
$267,950
$284,027
$301,069
$319,133

Assumptions:
Property(tax(rate
Propostion(13(Cap(on(Annual(Increase(In(Assessed(Value
Annual(Home(Value(CAAGR(For(Next(Three(Years
Annual(Home(Value(CAAGR(Thereafter
Highest(Assessed(Value(For(Current(Owner
Assessed(Value(Today
Foreclosure(Sales(Price(Discount
Number(of(Homes(Foreclosed(Avoided

1.25%
2.0%
2.00%
6.00%
$400,000
$200,000
10%
((((((((((((((( 1,000

Estimated(Increase(in(Total(Property(Taxes(Collected
Estimated(Increase(in(Average(Property(Taxes(Collected

$6,279,571
$6,280

Foreclosure#in#Year#1

Differtial9
1000
1000
Prop9139Limit Assessed9Value
Impact
Homes
Homes
$200,000,000
$400,000
$200,000 $200,000,000
$0
$204,000,000
$183,600
$183,600 $183,600,000 $20,400,000
$208,080,000
$187,272
$187,272 $187,272,000 $20,808,000
$212,241,600
$191,017
$191,017 $191,017,440 $21,224,160
$224,976,096
$194,838
$194,838 $194,837,789 $30,138,307
$238,474,662
$198,735
$198,735 $198,734,545 $39,740,117
$252,783,141
$202,709
$202,709 $202,709,235 $50,073,906
$267,950,130
$206,763
$206,763 $206,763,420 $61,186,710
$284,027,138
$210,899
$210,899 $210,898,689 $73,128,449
$301,068,766
$215,117
$215,117 $215,116,662 $85,952,104
$319,132,892
$219,419
$219,419 $219,418,996 $99,713,896
$2,712,734,425
$2,210,368,776 $502,365,649

Next Steps
1.  The
 City
 retains
 MRP
 at
 no
 cost
 per
 the
 terms
 of
 the
 MRP
 Advisory
 Agreement
 as
 modified

by
 the
 City
 and
 agreed
 to
 by
 MRP.

2.  The
 City
 is
 in
 control,
 at
 each
 step
 in
 the
 process
 the
 City
 has
 the
 opLon
 to
 terminate
 the

Agreement
 and
 must
 approve
 the
 next
 step
 before
 it
 is
 taken.

3.  The
 City
 does
 not
 pay
 any
 costs
 of
 the
 program.

4.  Nothing
 in
 the
 Agreement
 obligates
 the
 City
 to
 file
 an
 eminent
 domain
 moLon.

Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

15

Who Supports the Program?
Broad community-focused support for the program
•  AFSCME
• 

Americans for Financial Reform

• 

Center for Popular Democracy

• 

National Community Reinvestment Coalition

• 

Federal Banking Regulators

Representing
•  1.6 million state and local government employees
•  600 local housing focused organizations
•  250 national, state and local groups working on financial industry reform

Program Addresses Concerns Of Local Homeowners And Community-focused
Organizations
Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Suite 201| San Francisco, CA 94111 | 415.795.2032

16