Bank of New York Mellon v. City of Richmond, California et al

Filing 34

RESPONSE (re 28 MOTION to Dismiss for Lack of Jurisdiction ) filed byBank of New York Mellon, Bank of New York Mellon Trust Company, N.A.. (Attachments: # 1 Declaration of Loretta Lundberg in Support of Plaintiffs' Opposition to Motion to Dismiss, # 2 Declaration of Brian Hershman in Support of Plaintiffs' Opposition to Motion to Dismiss, # 3 Exhibit Exhibits to Declaration of Brian Hershman in Support of Plaintiffs' Opposition to Motion to Dismiss, # 4 Declaration of Joseph L. Nardi in Support of Plaintiffs' Opposition to Motion to Dismiss, # 5 Exhibit Exhibits to Declaration of Joseph L. Nardi in Support of Plaintiffs' Opposition to Motion to Dismiss, # 6 Declaration of Bronwyn Pollock in Support of Plaintiffs' Opposition to Motion to Dismiss, # 7 Exhibit Exhibits to Declaration of Bronwyn Pollock in Support of Plaintiffs' Opposition to Motion to Dismiss)(Pollock, Bronwyn) (Filed on 10/4/2013)

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MAYER BROWN LLP
DONALD M. FALK (SBN 150256)
[e-mail]
Two Palo Alto Square, Suite 300

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3000 El Camino Real
Palo Alto, CA 94306-2112

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Tel: [phone]
Fax: [phone]

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MAYER BROWN LLP
BRONWYN F. POLLOCK (SBN 210912)
[e-mail]
NOAH B. STEINSAPIR (SBN 252715)
[e-mail]
MICHAEL D. SHAPIRO (SBN 271912)
[e-mail]
350 S. Grand Ave., 25th Floor
Los Angeles, CA 90071-1503
Tel: [phone]
Fax: [phone]

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Attorneys for Plaintiff
THE BANK OF NEW YORK MELLON (f/k/a
The Bank of New York) and THE BANK OF
NEW YORK MELLON TRUST COMPANY,
N.A. (f/k/a The Bank of New York Trust
Company, N.A.), as trustees for the trusts listed in
Exhibit A in the Second Amended Complaint

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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA

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THE BANK OF NEW YORK MELLON et al.,

Case No. 13-cv-3664-CRB

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Plaintiffs,
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v.
CITY OF RICHMOND, CALIFORNIA, a
municipality; RICHMOND CITY COUNCIL;
MORTGAGE RESOLUTION PARTNERS
L.L.C., a Delaware limited liability company;
AND GORDIAN SWORD LLC, a Delaware
limited liability company;

DECLARATION OF BRONWYN F.
POLLOCK IN SUPPORT OF
PLAINTIFFS’ OPPOSITION TO
MOTION TO DISMISS
Date:
Time:
Ctrm:
Judge:

November 1, 2013
10:00 a.m.
6, 17th Floor
Honorable Charles R. Breyer

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Defendants.

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DECLARATION OF BRONWYN F. POLLOCK ISO OPPOSITION TO MOTION TO DISMISS
CASE NO. 13-cv-3664-CRB

DECLARATION OF BRONWYN F. POLLOCK

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I, Bronwyn F. Pollock, declare as follows:

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I am a partner in the Los Angeles office of Mayer Brown LLP, counsel for

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Plaintiffs The Bank of New York Mellon (flWa The Bank of New York) and The Bank of New

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York Mellon Trust Company, N.A. (f/k/a The Bank of New York Trust Company, N.A.),

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trustees for the trusts listed in Exhibit

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captioned matter. I am an acti.ve member in good standing of the United States District Court for

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the Northern District of

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to Defendants' Motion to Dismiss. I have personal knowledge of the matters set forth in this

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as

A in the Second Amended Complaint, in the above

Califomia. This declaration is made in support of Plaintiffs' Opposition

declaration, and, if called as a witness, could and would testify competently thereto.

2.

Attached hereto as Exhibit

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is a true and correct copy of the Richmond City

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Council minutes from the Apnl2,2013 meeting in which they approved the Advisory

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Agreement with Mortgage Resolution Partners LLC ("MRP"), available at

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htp:/iwww.ci.richmond.ca.us/ArchiveCenter/ViewFile/Item/5138

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(last visited Oct.2,2013).

Attached hereto as Exhibit 2 is a true and correct copy of the MRP Advisory

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Agreement that the Richmond City Council considered and approved on April 2,2013 and

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executed by the City Manager on July 25,2013, available at

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htþ://www.ci.richmond.ca.us/documentcenterlviewl2l354

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(last visited Oct.2,2013).

Attached hereto as Exhibit 3 is a true and correct copy the webpage entitled "Fact

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or Fiction" on MRP's website, available at http://www.mortgageresolution.com/fact-or-fiction

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(last visited Oct. 2, 2013).

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5.

Attached hereto as Exhibit 4 is a true and correct copy of the webpage entitled

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"FAQs" on MRP's website, available at http://www.mortgageresolution.com/faqs (last visited

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Oct.2,2013).

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6.

Attached hereto as Exhibit 5 is a true and correct copy of a MRP power point

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presentation published by the Wall Street Joumal, available at

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http://online.wsj.com/public/resources/documents/EMINENT-powerpoint.pdf (last visited Oct.

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2,2013).
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DECLARATION OF BRONV/YN F. POLLOCK ISO OPPOSITION TO MOTION TO DISMISS
CASE NO. 1 3-cv-3664-CRB

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Attached hereto as Exhibit 6 is a true and correct copy of the MRP's "Frequently

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Asked Questions" published by the'Wall Street Joumal, available at

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http://online.wsj.com/public/resources/documents/EMINENT-faqs.pdf (last visited Oct. 2,2013).

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Attached hereto as Exhibit 7 is a true and correct copy of a presentation by MRP

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to the City of Richmond entitled "Richmond CARES," which is the name of Defendants' seizure

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program, available at

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http://sireweb.ci.richmond.ca.us/sirepub/cachel2lmbIqpzgtr4mcgl3zqu3lkl0y3/36546408062013

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071309684.PDF (last visited August 6,2013).

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9.

At my request, counsel representing Plaintiffs in the related action, Wells Fargo

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Bank, Nat'l Ass'n, et al. v. City of Richmond, el al., no. 13-cv-3663-CRB (N.D. Cal.), provided

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copies of the documents produced by the City of Richmond in response to a Public Record Act

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request ("PRA Request") pursuant to Government Code section 6250 et seq.

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of these documents.

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Attached hereto as Exhibits 8 through 11 are true and correct copies of a number

Attached hereto as Exhibit 8 is a true and correct copy of a December 12,2012

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email from Bill Higgins of MRP to Richmond City Manager Bill Lindsay attaching MRP

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marketing materials that were discussed during a meeting between MRP and the City

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Richmond the previous day.

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of

Attached hereto as Exhibit 9 is a true and correct copy of a }i4ay 17,2013 email

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from Graham Williams of MRP to Richmond City Manager Bill Lindsay and Richmond Housing

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Director Patrick Lynch attaching "corrected slides" from

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Messrs. Lindsay and Lynch.

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presentation previously sent to

Attached hereto as Exhibit 10 is a true and correct copy of an April 3, 2013 email

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from Richmond City Manager Bill Lindsay to Graham Williams of MRP regarding the City

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Council's vote to approve the Advisory Services Agreement between the City and MRP.

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Attached hereto as Exhibit 11 is a true and correct copy a June 21 ,2013 email

of

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from LaShonda White, Management Analyst in the City Manager's Office of the City

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Richmond to Nicole Valentino in the Office of the Mayor regarding a resident who wishes to
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DECLARATION OF BRONV/YN F. POLLOCK ISO OPPOSITION TO MOTION TO DISMISS
CASE NO. I 3-cv-3664-CRB

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participate in the MRP program.

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On August 73,2073, I sent a letter to Richmond City Manager Bill Lindsay on

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behalf of The Bank of New York Mellon and The Bank of New York Mellon Trust Company,

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N.4.,

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hereto as Exhibit 12 is a true and correct copy of my August 13,2013 letter.

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as trustees

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for the trusts listed in Exhibit A of the Second Amended Complaint. Attached

On September 10, 2013,I attended the Richmond City Council meeting wherein

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the City Council discussed the seizure program. I attended the entire meeting, which began at

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approximately 5:00 p.m. and ended in the early morning hours of September 1 I , 2013. The City

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Council considered two proposals that would have conditioned or terminated the seizure

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program. The first proposal was for the City to withdraw its loan purchase offers and to

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eliminate the option to use eminent domain to seize loans. The City Council rejected this

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proposal by a supermajority, 5-2. The second proposal was to cease the seizure program unless

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and until MRP provided insurance to protect the

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proposal. The City Council approved a third proposal to work to establish a Joint Powers

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Authority with other municipalities to implement MRP's plan, and to continue to work with

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MRP to resolve legal issues with the seizure program.

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City. The City Council

also rejected this

Attached hereto as Exhibit 13 is a true and correct copy of the Richmond City

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Council minutes from the September 10, 2013 meeting, available at

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htþ://www.ci.richmond.ca.us/ArchiveCenter/ViewFile/Iteml5412

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The minutes do not accurately reflect the council vote on the f,rrst proposal to withdraw the loan

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purchase offers. The minutes state that Councilman Rogers voted in favor of the proposal, but in

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fact he did not. The video of the September 10 meeting is available at

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http://richmond.granicus.com/MediaPlayer,php?view_id:1 1&clip_id:3345 (last visited October

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4,2073). The vote on the first proposal occurs at approximately the 6:02 mark. The video

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accurately reflects my recollection of the meeting. Councilman Bates and Vice Mayor Booze

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voted in favor of withdrawing the loan purchase offers. The remaining five council members,

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including Councilman Rogers, voted against it.

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I declare under penalty of perjury of the laws of the United

(last visited Oct. 2,2013).

States that the foregoing is

-4DECLARATION OF BRON\ryYN F. POLLOCK ISO OPPOSITION TO MOTION TO DISMISS
CASE NO. l3-cv-3664-CRB

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true and correct.
Executed at Denver, Colorado on the fourth day of October,2013.

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Bronwyn F. Pollock

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-5DECLARATION OF BRONWYN F. POLLOCK ISO OPPOSITION TO MOTION TO DISMISS
CASE NO. I 3-cv-3664-CRB

Exhibit

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RICHMOND, CALIFORNIA, April 2' 2013
The Richmond City Council Evening Open
Session was called to order aI 5:32 p.m.

ROLL CALL
Present: Councilmembers Beckles, Butt,
Myrick, and Mayor Mclaughlin. Absent:
Councilmember Bates, Rogers, and Vice Mayor Boozé
arrived after the City Council adjourned to Closed
Session.

PUBLIC COMMENT
The deputy city clerk announced that the
purpose of the Evening Open Session was for the City
Council to hear public comments on the following
items to be discussed in Closed Session:

CITY COUNCIL
CONFERENCE \ryITH LEGAL COUNSEL ANTICIPATED LITIGATION (Initiation of
litigation pursuant to Subdivision (c) of Government
Code Section 54956.9):
One Case

There were no public speakers.
The Evening Open Session adjoumed to
Closed Session at 5:33 p.m. The Closed Session
adjourned at 6:28 p.m.
The Regular Meeting of the Richmond City
Council was called to order at 6:30 p.m. by Mayor
Mclaughlin who led the Pledge of Allegiance to the
F1ag.

ROLL CALL
Present: Councilmembers Bates, Beckles, Butt,
Myrick, Rogers, and Mayor Mclaughlin. Absent: Vice
Mayor Boozé, was absent during Roll Call..

READING OF THE CODE OF ETHICS
Deputy City Clerk Ursula Deloa read the Code

of Ethics.

STATBMENT OF CONFLICT OF INTEREST
None.

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AGENDA RBVIEW
Removed ltems l-4, I-5, l-8, I-9, and I-l I frorn
the Consent Calendar; continued ltem I- l0 to April I 6,
2013; and withdrew ltem J-l from the agenda to be
agendize on the April 16,2013, City Council Agenda
under Closed Session.

OPEN FORUM FOR PUBLTC COMMENT
Yolanda Jones expressed disappointment that
her business was not included on the small business
certifi ed contractor's list.
Charlie Walker expressed disappointment that
black contractors are not given the opportunities to
work on projects in Richmond.

Antwon Cloird gave comments that another
councilmember apologized for comments made by a
councilmember. He stated that councilmembers must
respect one another.
Henry Parker invited everyone to the Second
Annual "Reach for the Stars" Full Inclusion Fashion
Show and Showcase working with children on the
Autism specÍum, being held April,27,2013, at
Lavonya Dejean Middle School, 3400 Macdonald
Avenue, from 5:30p.m. to 9:00 p.m. tickets are $10.00.
Joseph Puleo gave comments regarding the
behavior of Human Resources Director and Assistant
City Manager Leslie Knight and the lack of discipline
for her behavior due to double-standards.

Etta Jones expressed disappointment that
Yoìanda Jones Construction Company was omitted
frorn the small business certified cont¡actor's list. She
encouraged the city council to make sure that it does not
happen again.
Kathleen Wimer stated that those on the public
payroll mtrst act above not ouly impropriety but above
the appealance of irnpropriety. Ms. Wimel stated that
the City of Richmond cannot have a reputation as being
corrupt for our own future together. Therefore,
wlratever discipline was imposed on Ms. Knight's
employment has to corect and extinguish this
appearing of irnpropriety without grantiug any
prefelential treatrnent.

Alpha Buie gave comrnents regarding the plight
of young African Arnericans seeking employrnent
specifically ex-offenders retuming to the community.
She stated that rnany African Alnerican contractors are
excluded florn lists to bid for funding for their
programs.

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Paul Rodgels stated the residents living near
Booker T. Anderson Park were not able to use the park
because ofthe continuous use ofthe fields for soccer.
He encouraged the City Council to exam the issue so
that residents in the area were able to enjoy the park
also.
Stacie Plummer gave comments regarding the
Richmond Charter. She stated that charter was created
by the Richmond vote¡s based on an unwavering
foundation of public trust. Ms. Plummer stated that the
chafter starts with where the city manager must live, the
prosecntorial duties ofthe city attorney, and entrust
povr'ers and duties ofthe City Council, and Personnel
Board. She also stated that trust cannot be off-limits to
the people. Ms. Plummer also stated that a debate
regarding public trust began with City Manager Bill

Lindsay's press release.
Jackie Thompson stated that permits for soccer
were issued for ceftain sections of Booker T. Anderson
Park; however, the entire park was being used for
soccer. Ms. Thompson also stated that bullying can be
physical, mental, and emotional. She encouraged the
City Council to ¡eview the Personnel Rules. She also
stated that deparlment heads should establish employee

anti-bullying training.
Wesley Ellis stated that Councilmember Beckles
should not flatter herselfby thinking she could hurt his
feelings. He stated that the rift between he and
Councilmember Beckles began when she told him that
he did not have a clue about anything, and called his
name out arnong all the citizens seated in the Cottncil
Charnbers.
Stan Fleury thanked Mayor Mclaughlin and
Couucihnember Beckles for having the courage to start
a discussion among the leadership of the City of
Richmond regarding current issues taking place within
the City of Richmond. Mr. Fleury stated that it was
with great peril that issues were brought fourth to the
City Council, and he encouraged the City Council to
help ernployees and continue to listen to what they have

to say.
Niechelle Gordan stated that she was trying to
acquire a new business license within the City of
Richrnond and left a message with the appropriate
depârtmerlt; however, no one retunled her call. Mr.
Lindsay will follow-up with the departtnent.
Lalo Hene¡a gave commeltts regarding Httman
ResouLces Director and Assistance City Manager Leslie
Knight stating she was the worst offender of the City's
policies and procedr,rres.

Andre Soto congratulated Councilmember
Beckles fol apologizing to the public for hurtful
comrneuts she nrade. He also thanked Mayor
Mclaughlin aud Courtcihnember Beckles for
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dernanding accountability, justice, and equality for all
employees within the City of Richmond. Mr. Soto also
stated that the kind offavoritisr¡ that has been shown
undennines the credibility of management and he hopes
that issues are resolved in a fair and equitable manner
that preserves the integrity ofcity goventrnettt.
Raymond Dryer thanked the City Council for
pulling the resolution regarding Human Resou¡ces
Director and Assistance City Manager Leslie Knìght
and taking the issue to Closed Session to hear the report
in its entirety. Mr. Dryer stated that as children you
leanr that taking sotnething that does not belong to you
was theft, and encouraged the City Council to following
through with a proper decision.

Michael Beer stated that there will not be a Silly
Parade this year and thanked the many organizations
and individuals for past support.
Bea Roberson encouraged citizens to attend the
Marine Clean Energy (MCE) Meeting, Monday,
April 22,2013, from 6:30 p.m. to 8:30 p.m. in the
Multipurpose Room at Levone De Jean Middle School,

3400 Mac Donald Avenue; citizens will leam and be
able to ask questions regarding their options when MCE
rolls out its program.
Sam Casas encouraged the City Council to
establish an ethics commission and also to demarid a
detailed budget to restore public trust.

Bishop Andre Jackson invited everyone to a
public meeting with Senator Loni Hancock, Friday,
April 5, 2013; l:30 to 3:30 p.m. in the Richmond
Council Chambers, regarding the findings of the
Chevron fire.

Marill.n Langlois stated that according the
investigative repott summily released there has been a
violation of public trust by Hulnan Resources Director
and Assistance City Manager Leslie Knight; a top
leader that should be a role-model to all employees and
should be held accountable. Ms. Langlois stated that
since the infomation that was shared indicated a
misuse of public funds, the pubic wants and needs to
know what would be done about it. Ms. Langlois also
stated that she supports the residents and city employees
that are calling for honesty, integrity, and fairness.
Juan Reardon stated that Richmond residents
pay taxes to pay salaries of city staff, and it was
essential that residents could trust the people speuding
the troney. Mr. Reardon stated that those that manage
others should be held to the highest standalds of
accountability. Mr. Reardorr also reminded everyorle
that when Mayor Mclaughlin learned that an individual
in her office was ernbezzling funds, she imrnediateìy
terminated the individual and initiated crirninal charges.
He also stated that an investigation t'evealed that
Hurnan Resources Director and Assistance City
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Manager Leslie Knight knowingly took money that she
was not entitled to from the City of Richmond and has
been given a pass by City Manager Bill Lindsay. He
encouraged the Mr. Lindsay to following the example
of Mayor Mclaughlin and imlnediately stop tolerating
fraud and relnove those committing it.

Texanita Bluitt thanked the City Council for
holding the joint meeting with the West Cont¡a Costa
County School Board and promoting renovations to the
Kennedy Swim Center and schools throughout the City
of Richmond. Ms. Bluitt stated that the community
needs to work together to improve the quality of
education for our children.
Rodney Ferguson stated that justice delayed was
justice denied and that it was time for the City Council
do the right thing. He encouraged the City Council to
be an example to all people that were trying to get their
lives together and if the City Council could not make
the hard decisions, then it would be difficult for others
to make the hard decisions.
Charles Smith started his address to the City
Council by quoting from a speech by President Obama
that stated "everyone plays by the same set of rules."
Ms. Smith stated that everyone playing by the same
rules was one of the most cherished values. Mr. Smith
stated that he would suggest that if Mr. Lindsay does
not believe that Human Resources Director and
Assistant City Manager Leslie Knight has committed
crimes that merit the termination of her contract, then
he was ethnically challenged.

Mike Parker thanked Stacie Plummer for the
courage to demand that the City live up to the standards
of integrity that citizens want. He also stated that a city
only works when the citizens have trust in city
government and that public trust in the City of
Richmond leadership must be restored. Mr. Parker also
stated that the City of Richmond must find a way to
make it clear that there would be zero tolerauce for any
lrauagers of the City of Richmond who believes that
they are above the rules.

REPORT FROM THE CITY ATTORNEY OF
FINAL DECISIONS MADE AND NONCONFIDENTIAL DISCUSSIONS HELD DURING
CLOSED SESSION
City Attorney Bruce Reed Goodmiller stated
that there were no reporlable actions.

CITY COUNCIL CONSENT CALENDAR
On rnotion of Councillnember Rogers, seconded
by Councilmember Beckles all iterns marked with an
(*) were approved by the unanimous vote of the

Council.

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*- Authorized the library and cultural services
director to accept federal Library Services and
Technology Act (LSTA) Reimbnrsement Funds in the
amount of $6,000, and approve an amendment to the
Fiscal Year 201211r3 operating budget, increasing
library fund revenue and expenditures in the amount of
$6,000, allowing these LSTA funds to be used to
purchase literacy materials for the Literacy for Every
Adult Program (LEAP).
*-Approved a contract with CPS HR Consulting
to develop and administer promotional examinations for
Fire Captain, Fire Engineer, and Fire Inspector I in an
amount not to exceed $55,000 and for a term of April 3,
2013,to June 30,2015.
*-Adopted Resolution No. 25-13 amending the
City of Richmond's Position Classification Plan to add
the new classification of Duplicating/Mail Specialist I/ll
and delete the classifications of Duplicating/Mail
Assistant and Senior Duplicating/Mail Assistant.
The matter to introduce an ordinance fôr first
reading establishing the wages, salary, and
compensation for the new classification of
Duplicating/Mail Specialist I (Salary Range No. 12:
$3,403 - $4,137lmonth) and, the new classification of
Duplicating/ Mail Specialist II (Salary Range No. 18:
53,743 - $4,551/month) was presented by City Manager
Bill Lindsay. Diane Canepa gave bomments. The
matter was continued to April 76,2013, to gather

more information.
The matter to approve an amendment to the
cont¡act with Strongbuilt Construction Company for
building repair work performed at 1350 Kelsey Street in
the amount of 55,912.77, increasingthe total cost of the
project to $12,792.77, and extending the tem through
March 31, 2013, was presented by Project Manager
Craig Munay. On motion of Vice Mayor Booze,
seconded by Councilmember Myrick approved an
amendment to the contract with Strongbuilt
Construction Company by the following vote: Ayes:
Councilmembers Bates, Butt, Myrick, Rogels, Vice
Mayor Booze, and Mayor Mclaughlin. Noes: Notte.
Abstentions: None. Absent: Councilmember
Beckles.

*-Approved an amendrnent to the lease of
property located at 500 23rd Street (RichmondBUILD
III), extending the term for the six¡notrths ending Jttne
30,2013, at a cost of $5,000 per mortth, for a total lease
payment of $30,000.
*-Approved an amendment to the colitract with
The Glen Price Group to develop the Richmond
Workforce hrvestment Board Strategic Plan for 20132017 and various grant applications by the agreed r"rpon
target dates. The arnended cor'ìtract term will be
Septernber 20, 2012,through December 3 l, 201 3. The

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contract amount will be increased by $46,000 for an
amount not to exceed $55,500.
The matter to app¡ove a one-year coutract with
Regina Almaguer, LLC for services as project manager
of the Port of Richmond Public Art Ptoject in an
amount not to exceed S33,750 was presented by Arts
Director Michele Seville. Angel Perez, Bruce Beyaert,
Tom Leatheman, and Fletcher Oakes gave comments.
A motion was made by Councilmember Bates,
seconded by Councilmember Beckles to approve a oneyear contract with Regina Ahnaguer, LLC fo¡ services
as project manager of the Port of Richmond Public Art
Project. A substitute motion was made by
Councilmember Butt to direct the Port Department to
contribute the entire cost of$600,000 and contribute
$225,000 to the Arts Advisory Committee and another
$225,000 to finish the Bay Trail Project failed for lack
ofa second. The original motion passed by the
following vote: Ayes: Councilmembers Bates, Beckles,
Rogers, Vice Mayor Booze, and Mayor Mclaughlin.
Noes: Councilmember Butt. Abstentions:
Councilmember Myrick. Absent: None.
The matter to approve the following
reappointments to: Commission on Aging: Myrtle
Braxton, incumbent, term expiring May 19,2015;
Delores Johnson, incumbent, term expiring May 19,
2015; Beverly Wallace, incumbent, term expiring May
19,2014; Eli'Williams, incumbent, term expiring May
19,2014; Human Relations and Human Rights
Commission: Betty Burrus-Wright, incumbent, term
expiring March 30,2016; Point Molate Citizen
Advisory Committee: Charles Smith, incumbent, term
expiring May 3,2015; Recreation and Parks
Commission: Pam Saucer-Bilbo, ittcumbent, term
expiring October 26, 2015; Economic Developmeut
Commission: Qiana Riley, incumbent, term expiring
March 30,2016, was pulled for public comments by
Jackie Thompson. Following public comment on
motion of Vice Mayor Booze, seconded by
Councilmember Bates approved the reappointrnents by
the unanimous vote of the City Council.

*-Adopted Ordinance No. 4-13 establishing the
wages, salary, and compensation for the new
classification of Sou¡ce Cont¡ol Superintendent (Salary
Range No. 064D: $'/,277 - $8,829/month).
The matter to approve an Advisory Services
Agreernent with Mortgage Resolution Partners, LLC to
assist the City of Richrnond in reducing the irnpact of
the mortgage crisis, by advisirtg on the acquisition of
mortgage loans through the use of emittent dotnaiu, in
order to restructure or refinance the loans and thereby
preserving hor¡e ownership, restoring lromeowtteL
equity and stabilizing the comrnunities' hottsitrg market
and econorny by allowing many homeowuers to retnain
iu their homes was preseuted by City Manager Bill
Lirrdsay. (At I1:00 p.nt. on nolìon of Councílmentber

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Myrick, seconded by Møyor McLauglrlìn exlcnded the
nreeting lo jìnìsh the current itent wÍth
Cottttcìlmember Bull votÌng Noe), Councilmenber
Butt lelt the neetíng at Il:15 p.m. Leland Chan and
Melvin Willis gave comments. A motiorl was made by
Councilmernber Beckles, seconded by Councihnember
Myrick to approve an Advisory Services Agreetnent
with Mortgage Resolution Partners, LLC.
Councihnember Myrick requested a repoft back from
staffregarding loan c¡iteria and specifics. A substitute
motion was made by Vice Mayor Booze, seconded by
Councilmember Bates to hold the item over for 30 days
to gather more information. Following dìscussion,
Councilmember Bates withdrew his second. The
original motion to app¡ove an Advisory Services
Agreement with Mortgage Resolution Partners, LLC
passed by the following vote: Ayes: Councilmembers
Bates, Beckles, Myrick, Rogers, Vice Mayor Booze,
and Mayor Mclaughlin. Noes: None. Abstentions:
None. Absent: Councilmembe¡ Butt.

RESOLUTIONS

Withdrew from the agenda the matter to adopt
resolution calling for restoration ofpublic trust
through the removal of an executive City employee
from cur¡ent position.
a

The matter to adopt a resolution in support ol

AB 218 (Dickinson) to expand the "Ban the Box"
policy to state employment to eliminate the inquiry
about criminal history on any initial employment
application was presented by Councihnember Beckles
and Mayor Mclaughlin. Jackie Thompson, Marìlyn
Langlois, and Eduardo Martinez gave comments. On
motion of Councilmember Beckles, seconded by
Councilmember Myrick adopted Resolution No. 26-13
by the unanimous vote of the City Council.

COUNCIL AS A \ilHOLE
The matter to review the proposed Tenr Sheet

for post-collection services as negotiated between
RecycleMore and Republic Services and authorize an
agreemellt based on this Term Sheet and review the
proposed solid waste collection services based on the
Tenn Sheet, and other possible modifications to
collection services, and authorize staffto develop a
proposed agreement with Republic Services legarding
these service modifications for subsequent CoLrncil
approval was presented by Sustainability Associate
Jennifer Ly and Rob Hilton, fronr HF&H Consultants.
A rnotion was made by Vice Mayor Booze, seconded by
Councillnember Myrick to review the proposed Tenn
Sheet for post-collection services as negotiated between
RecycleMore and Republic Services aud autlrorize au
agreement based on this Tenr Sheet and review the
proposed solid v/aste collection services based on the
Term Sheet, and other possible modifications to
collectiou services, and autliorize staffto develop a

ccl 3Ap12

PagcSo[10

proposed agreement with Republic Services regarding
these service modifications for subsequent Council.
Councilmelnber Myrick offered a friendly amendment
to negotiate the best deals for the citizens for Richmond
as details a¡e worked out. The friendly amendlnent was
accepted. Councilmember Bates requested that staff
prepare an analysis ofthe benefits ofkeeping the JPA.
The motion including the friendly amendlnettt was
approved by the unanirnous vote o the City Council.
The matter to discuss and give direction to staff
regarding the Code Enforcement Department's use of
contractors outside the City of Richmond for Code
Enforcement demolitions was presented by Vice Mayor
Boozé and Code Enforcement Manager Tim Higarres.
This item was referred to the Public Safety Cornmittee,
and Vice Mayor Boozé also requested that a staff fonr
a committee in addition to the Public Safety Committee
specifically to discuss the issue.
The matter to collsider directing the city
manager to prepare a plan to publicize aud to assist
residents to take advantage ofprograms for free or
reduced cost access to the Inter¡et, including seeking
out grants was presented by Councilmember Rogers and
Mayor Mclaughlin. Councilmember Bates suggested
that staff outreach to the Richr¡ond Neighborhood
Councils to inform citizens. Jackie Thompson and Ken
Maxey gave comments. On motion of Councihrember
Rogers, secbnded by Mayor Mclaughlin directed the
city manager to prepare a plan to publicize and to assist
¡esidents to take advantage ofprograms for free or
reduced cost access to the Intentet, including seeking
out grants by the unanimous vote of the City Council.
The matter to receive a report from staff on tlte
status ofproposed solar powered streetlights along
Richmond Parkway was presented Courrcihnember
Beckles. City Manager Bill Lindsay gave an oral

report. Councilmember Beckles directed staff to subrnit
feasibility study of solar powered streetlights. Vice
Mayor Booze stated that the installation of ìighting on
the Richrnoud Parkway was currently ttnderway. Sirns
a

Thompson gave comments.

REPORTS OF OFFICERS: STANDING
COMMITTEE REPORTS. REFBRRALS TO
STAFF. AND GENERAL REPORTS (INCLUDING
AB 1234 REPORTS)
Councilmember Bate announced that Richrnond

citizen Myrtle Hunt passed and requested that Mayor
Mclaughlin adjor,rrn the rneeting irr honol of her
melnory.

ccl 3Ap12
Pagc 9 ot l0

ADJOURNMENT
There being no further business, the meeting
adjourned at I I :31 p.m. in memory of Richmond
resident Myrtle Hunt, to meet again ou Tuesday,
April 16, 2013,at 6:30 p.m.

City Clerk

(sEAL)
Approved:

Mayor

ccl3;\p12
l0 of l0

Page

Exhibit 2

ADVISORY SERVICES AGREEMENT

This Advisory Services Agreement ("Agteement") is entered into by and between
Resolution Pa¡tners LLC, aDelaware limjted liability company (.'MRP') and the City
Mortgage
a municipal co¡poration and chnrter city (the "City') and is effective as of
2013 (the "Effective Date"),

RECITALS

A.

a communify advisory firm advising public agencies on ways to
the impact of the mortgage crisis with its communities including,
assist the agency in reducing
necossary, by acquiring mortgage loans through the use of eminent domain, in order to
restmcture or refrnance the loans and thereby preseiving home ownership, restoring homeowner
equity and stabilizing the communities' housing market and economy by allowing many

MRP is

if

homeowners to remain in theirhomes.

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 incomg and some have been unable to
make timely mortgage payments on their homes. This has rezulted in unprecedented ratqs of
default and foreclosure, loss of homeowner equity, loss of family wealth, ancl 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.
Restnrcturing or refinancing mortgage loans will benefit the City's residents by preserving home
ownership; restoring homeowner equity; and likely also increasing income, property values,
eÆnsumer demand, investment, and property and payroll tax revenue.

C. The City is interasted in retaining MRP to act as its advisor to assist the
City in ørploring 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 úo the City in order to
allow the City to acquire loans; and to assist the City in negotiating contacts with third parties
including owners of loans, attorneys, lenders, data companies, other governm€,nt agencies and
others as necessary to impleme,lrt a program or programs to benefit the

Cþ's

residents.

NOW THEREFORE, in consideration of the foregoing, MRP and the City agree
as

follows:

l.

PURPOSE. The purpose of this Agreernent 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 criòis ól the residents of the City,

-l-

2.

SERVICES. MRP agrees to provide the following services ("Services'), and the City
authorizes MRP to represent the City as described:

(a)

to advise the City on various altematives in order to provide assistance to its
residents who are burdened with mortgage loans including assessing tlre possibility and benefis
of the formation of a joint powers authority;

O)

to identiff and negotiate with companies acceptable to the City, in City's sole and
absolute discretion, to lend funds to the City on a fully secured, non-recourse basis if such fi¡nds
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 City's sole and
absolute discretion, to workwiththe 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 progtams chose,n by the City;

(Ð

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, senicers, investors and otherparties
having a relationship with the holders of the loans);

(g)

to work with the City to identify mortgage Ioans to target based upon the City's

criteria;

(h)

to negotiate on behalf of the City with any other third party as necessary to
programs which the City elects to implement; and
implement

(l)

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, MRP shall not take action or implement programs or tasks set fortl in
subsection (b), (d), (e), (Ð and (h) hereof without the express writte,n consent of City in advance,
which consent may be withheld in the City's sole and absolute discretion. Provided further,
however, in no event shalt MRP have the authority to enter into any contracts on behalf of the

City.

3.

COMPENSATION. As iæ 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
trltimately acquired by the Cit¡l or-otherwise resolved in a manner which resulrc in the
restn¡cturíng 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. City shall not be responsible for any cost or expense arising out of orrelated
to this Agreement or any program or prograrns the City implements.

-2-

4.

ASSIONMENT. MRP shall not have lhe right to assign and/or delegate íts 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
programs chosen by the City pwsuant to the terms of this Agreement or as are or may become
necessary or convenient to effectuate nnd 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 (l ) year from the Effective
Date a¡d will be renewed automatically for successive terms of one (l) year each unless either
party gives notice to the other at least sixty (60) days prior to the termination of any term. Upon
any such termination, this Agreement shall be null and void and of no ñ¡rther force or efïect,
except as to those provisions which expressly survive the termination of the Agreement.

8.

INDEMNITY.

(a)

Except to the extent caused by the sole active negligence o¡ willfirl misconduct of
City, City and City's representatives shall not be liable for any liability, penalties, costs, Iosses,
damages, expenses, causes of action, claims or judgments, including attorney's fees and other
defense costs (collectively, "Claims"), resulting from injury to or death sustained by any person,
or damage to property of any kind, or any other injury or damage whatsoever, which Claims
arise out of or a¡e in any way connected with this Agreement or any programs or tasks
implemented pursuant to this Agreement,

(b)

Except to the extent caused by the sole active negligence or

willful misconduct of

City, MRP shall inde'rnniff, protect, defend and hold the City and its representatives, harmless of
and from any and all Claíms arising out of or in any way related to or resulting directly or
indirectly from (i) this Agreement, (ii) the programs or tasks implemented pursuant to this
Agreement, (üi) any failure to comply with any applicable law, and (iv) any default or breachby
MRP in the performance of any obligation ofMRP under this Agreernent.

(c)

The provisions of this Section 8 shall survive the expiration or soon€tr termination

of this Agreement.

9.

INSIIRANCE. Upon receiving approval from the City to take action or implement
programs or tasks set forth in subsection (b) of Section 2, MRP, at its own cost and expense,
shall provide and maintain insurance coverage as required in Exhibit A, "City of Richmond
Insurance Requirements - Type II: Professional Services". I,ßP shall submit culr€,nt certificates
of inswance forthe policies re.quircd in this Section 9 before taking action or implernenting any
progrtuns or tasks set forth in subsections (b), (d), (e), (Ð and (h) ofSection 2.

-3-

IO.

CËNERALPROVISIONS.

(a)

Execution. Thís Agreønent may bc excouted in ono or morc counterpsrts, eaoh of
which chall bc deemed an originol. A signature trnsmittcd via scanning and emailing or
facsimilc shall have the snme effect as an original signaturc.

(b)

Modification of Agreement. This Agrcement may be modified only by a writing

signed by MRP and tbe City.

(o)

Entire Agreement. T)tis Agreernent together wiú any Nondisclosure and/or
Common lnterest.Agteements entered into between the parlies either prior or subsec¡uent to the
Effective Date constitute the entire understanding and agreement between the parties concerning
lhis subjeot matter.

(d)

Severability. If a court of competentjurisdiction finds orn¡les that anyprovision
of this Agreement is invalicl, void, or unenforceable, tbe provisions of the Agteement not so
adjudged shall remain in full force and efíect. Ttre invatidity 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)

Goveming [¿w. This Agreement is governed by and shall be interpreted
according to the laws of the State of Califomia. This Agreement is macle in Contra Costa
County, Califomia, and any action relating to this Agreement shall be instituted and prosecuted
in the courts of Contra Costa County, Califomia.

(Ð

Waiver of Breach. No waiver of breach of any term orprovision 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
attomeys of its own choosing. Thus, neither party can claim that any ambiguities in any term
this Agreement should be construed against any otherparty.

of

(h)

No Third Pafy Beneficiarie.s. This Agreement will not confer any rigbts or
remedies upon any person other than the parties hereto and their permitted successors and
permitted assigns.

L

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

4-

MRP:
Mortguge Resolution Partners, LLC
33 Pier South EmbarcRdero, Suite 201
Son Francisco, CA 941 I I
Attn: CEO

The Cify:
450 Civic Center Pluza
Richmond, CA 94804
Attn:City Manager

Witlr copy to:
450 Cívic Center Plaza
Richnrond, CA 94804

Attn: City Attorney
Such notice shall be deemed given upon personal clelivery to the appropriate address or
on the next business clayifsent by overnight courier service.

WHEREFORE, the parties indicate by theír signatures below their entryinto this
legal ly-binding Agreement.

The City

tlúl,t

(,

(date)

signature)
Name (printed):

l¡Jü¿hn fr,

Mailing address:

'(rò c¡utr Crn¡|ølr /,-+zt,

tnrtrytttj

iro^62d-G{lL

Telephone no.:

årl I

E-mail address:

* llnlt-r¡Q cÌ, r" Ic l.rni-Jl , f r, . v\.,

Date of Signing:

Attest

City Clerk

A

-5-

Mortgnge.Rcsolutiort Partners L,LC

â ^/
| - l-5- t7

Roplescntative:

Williams

Name þrintcd):

Mailing

nddre.ss:

33 Pier South'Elnbarcoclerq Suite 201, San Francisco, CA 941I

Telephone Uo.:

41.

E-mail address:

gwill iam [e-mail]

Date of Signingr

Q't(-ttl

a-4;-lT

-6-

t

I

Exhibit A
lnsurance Requircmerrts

-7-

_
City of Richmond - fnsurance Requlrements - Type
Professional Senr¡ces

Exhlblt A

2z

In all lnstances where CONTRACTOR or lts representatlves wlll p¡ovlde professlonal serylces (archltects, englneers,
constructlon management counselors, medlcal professlonals, hospltals, cllnlcs, attomeys, consultants,
accountants, etc.) to the Clty of Rlchmond (Clty), the clty requlres the followlng MTNIMUM lnsurance requlrements
and llmlts.
CONTRACToR shall procure and malntaln for the duratlon of the contract, agreement, or other order

for work,

servlces or supplles, lnsurance agelnst clalms for lnJurles to persons or damages to property whlch may Êrlse Fom
or ln connectlon wlth the performance of the work hereunder and the results of that work by the CONTRACTOR, lts

agents, representatlves, employees or subcontractors. MalntcnEncê of proper ln¡uranco coverage lc e

materlal element of the contract, Fallure to malnt¡ln or renew coverage or to prcvlde evtdance of
renewol môy be treatsd by the Clty ä6 a mat€rlrl breach of contract,
that ln the event of loss due to any of the perlls for whlch lt has agreed to provlde
Commerclal General Uablllty lnsurance, CONTRACTOR shall look solely to lts lnsurance for recovery,
CONTRACTOR hereby grants to CIW, on behalf of any lnsurer provldlng Commerclal General Llablllty lnsurance to
elther CONTRACTOR or CITY wlth respect to the servlces of CONSULTANT hereln, a walver of any rlght to
subrogatlon whlch any such lnsurer of sald CONTRACTOR may acqulre agalnst the CITY by vlrtue of the payment of
any loss under such lnsurance,
CONTRACTOR agrees

Orlglnal, slgned certlflcates and orlglnal, separate pollcy endorsements, namlng the Clty as an addltlonal lnsured
for general llablllfy coverage, as well as a walver of subrogatlon for Worke¡s'Compensatlon lnsurance, shall be
rccelved and approved by the Clty before any work may begln. However, fallure to do so shall not operate as a
walver of these lnsurance requlrements,
Clty reserves the rlght to modlfy or requlre adclltlonal coveri¡ges for speclflc rlsk exposures dependlng on scope of
CONTRACTORS work,
Mlnlmum coverage is detalled below. The policy llmits of coverage shall be made available to the full llmlts of the
reduce the pollcy llmlts of coverage of CONTRACTOR,

pollcy. The mlnlmum llmlts stated hereln shall not serve to
Mlnlmum Scope of lnsurance
the following:

L
2,
3.
4,

-

the followlng forms shall be provided and coverage shãll be at least as broad as

lnsurance Servlces Office Commerclal General Llablllty coverage (ISO Occurrence Form CG 0001), and
lncludlng coverage for bodlly and personal lnjury, property damage, and products and completed
operatlons (if appllcable).
Insurance Serylces Offlce Automoblle Uab¡llty coverôge (ISO Form CA 0001, Code 1, Any Auto).
Orlglnal and separate Addlt¡onal Insured Endorsement for General Uabllity (ISO Form CG 20 10 t1l85 or
Its equlvalent) with primary and non-contrlbutory language.
Workers'Compensatlon Insurance as requlred by the State of Callfornla lncludlng Employer's Uablllty
coverage.

5,
6,

Orlglnal and Separate Walver ot Subrogation for Workers' Compensatlon insurance.
Professlonal Uablllty o¡ Errors & Omlsslons Llablllty Insurance approprlate to the CONTRACTOR'S
professlon (lf requlred.)

Rcquired Coverage

Mininrum Limits

Workers' Compensation and
Employers' lJablllty

Statutory llmlts as requlred by the State of Callfornla lncludlng g1 mllllon
Employers' Llablllty per accldent, per employee for bodlly lnjury or dlsease,
If CONTRACTOR ls self-lnsured, provlde a certlflcate of Pemlssion to SelfInsure, slgned by the Callfornla Depaftment of Industrlal Relatlons and SelfInsur¿nce, If contractor ¡s a sole proprletor (has no employees) than
contractor must slgn "Contractor Release of LJablllty" found at:

General Llabllity
(primary and excess llm¡ts
comblned)

$2r0OOrOOO per occurrence for bodlly lnjury, personal.lnjur.y-and property.
damage. If the pol¡cy lncludes a general aggregate, elther the general
aggregate shall apply separately to thls proJect, servlce or locatlon or the

m¡nlmum r€qulred aggregatê llmlt shall be twlce the per occ¡¡rnenoê
limit ($4 mllllon aggregate limit).
to name the Clty of Rlchmond as an addltlonal
lnsured per the condltlons detalled below,
Pollcy shall be endorsed

Type2-Pagelof3
Revised; September 2011

_

Exhlblt A

City of Rlchmond - Insurance Requirements - Type 2;
Professional Servlces
Automoblle LlablllW

pcr occurrence

ryð

property damage,

Professlonal Llablllty or Errors &
omlsslons Llablllty Requlred lor

oll professlonals

lncludlng archltects. englnee,s,
consultants, construcvon
m a na g eme nt, cou nsele ß, mecl lca I
professlonal s, hosplta ls, cl ln I cs,

attorneys and accountants, & othar
consultants as may be rcqulred by
the clty,

Rcr¡uirerl Policy Conditions
Addltlonal Insured Endorsement

Appllcable to General Llablllty coveraoe.
The Clfy of Rlchmond, lts offlcers, offlclals, employees, agents and
volunteers are to be named as addlt¡onal lnsureds for all llablllty arlslng out

of the operatlons by or on behalf of the named lnsured tncludlng bodlty
lnJury, deaths and property damage or destructlon arlslng ln any respect
dlrectly or lndlrectly ln the performance of th¡s contract.

ISO form CG 20 lO (f VgS) oÌ IB equtvelen¿.ts requtr?,d. If ìhe
Conl¡aêtot Is supplylng thølr prcduct or prcvldlng a sê¡ylce ¡hon thø
e n do tsam e n t nøtlÃgi ex ct u d e p r1',d u cts a n d co m p leted o pe ra tl o n s
coverage, ffßdoes, thên CG 20 37 (rO/Ot) ¡s als'o rcquhed,
SAÌ'IPLE EndotÊemonts can be found a6
http: / / www.cl -¡lch@ond, ce. qs I f nde-.aso- ?n Id = 6 t.
Prlmary and Noncont¡lbutory

The contractor's lnsurance coverage must be prlmary coverage as lt pertalns
to the Clty, lts offlcers, offlclals. employees, agents and volunteers, Any
lnsurance or selt lnsurance malntalned by the Clty ls wholly separate f¡om
the lnsurance of the contractor and ln no way relleves the contractor from lts

responslblllty to provlde lnsurance.
Walver of Subrogatlon
Endorsement Form

Contractor's lnsurer wlll provlde a Walver of Subrogatlon ln favor of the Clty
for Workers' Compensation Insurance durlng the llfe of thls contract,
SAMPLE Endorsemçnts can be found at
httø ¡ / / wW w.ci, rích mond - ca. us / index.asø2t ?n íd = 6 7.

Deductlbles and Self-Insured

Any deductlble or self-lnsured retentlon must be declared to and approved
by the Clty. At the opt¡on of the Clhy elther the lnsurer shall reduce or
ellmlnate such deductlbles or self-lnsured retentlon as respects the Clty or
the CONTRACTOR shall procure a flnanc¡al guarantee in an amount equal to
the deductlble or self-lnsured retentlon guaranteelng payment of losses and
related lnvestlgatlons, clalms admlnlstratlon and defense expenses,
Contractor ls responslble for satlsfactlon of the deductlble and/or self-lnsured
retentlon for each loss.

Retentions

A. M. Best Rating

A:VII or Better. If the A.M. Best Ratlng falls below the requtred ratlng,
CONTRACTOR must replace coverage immedlately and provlde notlce to Clty

Umbrclla/Excess Llablllty Pollcles
If an Umbrella or Excess Uablllty Pollcy ls used to meet the llablllty llmlts, coverage shall be as broad as speclfled

for underlying coveraget and cover those lnsured ln the underlylng pollcies,

Type2-Page2of3
Revised: September 2011

_

Exhlblt A

City of Richmond - fnsurance Requlrements - Type 2:
Professlonal Serv¡ces
Clalme-Made Polleleo

lf

any lnsurance pollcy ls wrltten on a clalms-made form¡ l) the relroactlve date must be shown, and must þe
before the däte of the contract or the beglnnlng of contråct work. 2) Insurance must be malntalned and evldence
of lnsuronce must Þe provlded for at least flve (5) years after completlon of the contract of work, 3) If coverage ls
canceled or rìon.renewed, and not replaced wlth another clålmstmÐde pollcy form wlth a retroactlve date pdor [o
the contract effectlve date, the Contractor must purchase an extended'perlod coverage fur a mlnlmum of itve (S)
years after completlon of contrsct work.

Subcontractorg
CONTRACTOR shall lnclude all subcontractorc as lnsured under

lts pollcles or shall furnlsh to the ctty for revlew and
approval, separðte certlflcates and endorsements for each subcontractor. All coverage for subcontråctors shall be
subJect to all of the requlrements stated hereln,
CONTRACTOR ogrees to defend and lndemnlfy the Clty of Rlchmond tor any damage resulung to lt from failure of
elther CONTRACTOR or any subcontractor to take out or maintaln the requlred lnsurance po¡lcles. The fact that
lnsurance ls obtalned by CONTRACTOR, and/or CONTRACTOR'S subcontractors, wlll not be deemed to release or
dlmlnlsh the llablllty of CONTRACTOR, lncludlng, wlthout llmltatlon, llablllty under the lndemnlty provlstons of thts
contmct' Damages recoverable by CITY from CONTRACTOR or any thlrd party wlll not be llmlted by the amount of
the requlred lnsurance coverage.

Verlflcåtlon of Coverô9e
All orlglnal certlflcates and endorsements shall be rccelved and approved by the Clþ befo¡e wot* mav begln.
The Clty of Rlchmond reserves the rlght to requlre complete, certlfled coples of all requlred lnsurarrce pollcles
lncludlng endorsements affectlng the coverage at any flme.

olglnal insurance cort¡flcates and rcgulred policy endorsementc shall be nailed or dellvered to the
Dêslgnãtsd ProJ€ct Mänage' for thG Ctty of Rlchmond.

lnsurance certlficates and endorsements may be faxed to the Deslgnated project Manger. However, CONTRACTOR
must mall the orlglnal certlflcates and endorsements to Deslgnated Project Manager once laxed,

Contlnuous Coverage
the requlred lnsurance for the llfe of the contract. Should the CONTRACTOR cease to
have insurance as requlred durlng thls tlme, all work by the CONTRACTOR pursuant to thls agreement shall cease
untll lnsurance acceptable to the Clty ls provlded. In the event that CONTI(ACTOR Fôlls to comply wlth the clty,s
lnsurance reguirements, the Clty may take such actlon as lt deems necessary to protect the Oty,s lnterests. Such
actlon may lnclude but ls not llmlted to termlnatlon of the contrac! wlthholdlng of payments, or other acflons as
the Clty deems approprlate.
CONTRACTOR shall malntaln

If servlces.or the scope of wgrk extend beyond the explratlon dates of the requlred lnsurance pollcles lnlually
approved by the ClU, CONTRACTOR must provlde updated certlflcates and endorsements lndlcatlng that dhe
requlred coverage, terms and condltlons are stlll ln place, Renewal certtflcatea and updatcd endoÞem6ntc

shall be malled to the Deslgnated ProJect Manager,
Cancellatlon

cONTRAcToR shall ensure that coverage shall not be cancelled, reduced or otherwlse materlally changed except
after thlrty (30) days' prlor wÍltten notlce has been glven to the Clty.

Rêport¡n g Requ irements
Any fallure to comply wlth reportlng or other provlslons of the pollcles lncludlng breaches of warrôntles shall not
affect coverage provlded to the Clty, lts omcers, offlclals, employees or volunteers.

Conslstent wlth Publlc Pol¡cy
The lnsurlng provlslons, lnsofar as they may be Judged to be agalnst publlc pollcy shall be vold and unenforceable
only to the min¡mum extent necessary so that the remalnlng terms and provlslons hereln may be conslstent wlth
publlc pollcy and thus enforceable.

Type 2

Revised: September 201

I

- Page3

of 3

Exhibit 3

Fact or Fiction I mortgageresolutionpartners.com

Page

I of3

Mortgage Resolution

PARTIIIRS

Home

A number of special interests publicly oppose keeping American families in their homes
through purchasing and refinancing their loans using eminént domain. They use fictitious

MRP Blog

arguments in a transparent attempt to intimidate local governments. Here are their fictions,
and the actual facts.

Press Room

Fiction: Using eminent domain to acquire and refinance deeply underwater mortgage loans
is "appalling" and "an abhorrent misuse of the power of the state."ru

FAQs

Fact or Fiction

Fact: lt is appalling and abhorrent that our opponents plan to needlessly foreclose on millions of
American families and evict them from their homes. Using eminent domain to help families remain in

How You Can Help

their homes ¡s appropriate and may be the only way to stop the underwater mortgage crisis from
continuing to devastate local communit¡es. Opponents believe that it is appropriate to use eminent

The Team

domain to acquire a house to widen a road, moving a couple out of the home in which they raised a
family and a neighborhood of lifelong friends, but it is appall¡ng and abhorrent to purchase loans to
save that very home and neighborhood from destruction

Contact Us

ln fact, it is appalling and abhorrent to elevate mere fìnancial assets above the safety and well-being
of families, neighbors and communities. Our opponents simply wish to evict families and cherry pick

the best houses to buy at steep foreclosure discounts to rent to others for large profits, leaving
communities to deal with the discarded homes that remain.¡21

Fiction: Using eminent domain to purchase undervvater moftgage loans violates

the

Contract Clause of the U.S. Constitution.

Fact: The Contract Clause does not apply when communities purchase underuater mortgage loans
by eminent domain. The communities will purchase loans outright, not impair them. Once the
community owns a loan it is free to restructure the loan as it sees

fìt The U.S. Supreme Court has

unanimously rejected the Contract Clause argument, stating that it has no merit because no one has

ever thought that the Contract Clause protects anyone against the sovereign power of eminent
rcl ln fact, the Supreme Court has prescribed the use of em¡nent domain in our current
circumstances "lf the public interest requires, and peÍmits, the taking of property of individual
domain

mortgagees in order

to relieve the necessities of individual mortgagors, resort must be had

proceedings by eminent

domain

to

,"141

Fiction: A law firm has witten an opinion concluding that the use of eminent domain to
acquire moftgage /oans ls highly likely to be unconstitutional on several grounds.
Fact: The proposal is entirely constitutional and will withstand any legal challenge. The fìrm

has

merely written an outline of potent¡al constitut¡onal arguments that m¡ght be made, and it does not in
factopine thatthe program is unconstitutional on any ground. ln addition, the outline acknowledges
that any conclusion will difier if the assumed facts are incorrect

-

which they are.

Fiction: You propose to cherry pick the best loans.
Fact: The best loans ¡n private securitizations are ones that are current and above water. They
have lower default rates, equity to protect the lender, and above market interest rates that the

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3

borrowers have failed to refinance Local governments will not pick these cherries lnstead, they
might purchase deeply underuater loans that are highly likely to default and cause further losses to
both the securitization trusts and the communities.

Fiction: There is no reason to believe that deeply underwater loans in private securitizations
will default.

Fact: Fannie Mae projects remaining cumulative default rates of 40-69% on typical loans originated
in the peak bubble years for private securitizat¡ons And Amherst Securities, a respected fìrm that
covers the mortgage market, projects a future default rate of 55% even for loans that already have
been modifìed. The very high expected default rates of deeply underwater securitized mortgage
loans are highly publicized and well documented by the mortgage industry.

Fiction: There is no public purpose to acquire and refinance cunent, deeply underwater,
securitized loans. Governments should purchase defaulted loans to help those most in
need

Fact: The purpose of acqu¡ring and resolving underwater loans is to protect neighbors and the
broader community from defaults, foreclosures, and the losses that they cause. The Federal
Housing Finance Agency has concluded that the single best best way to reduce losses is to
proactively fix loans that are current, deeply underwater, and securitized. Once a borrower stops
paying, the abil¡ty to mitigate loss falls dramatically. Each local government has the power to
determine whether to acquire loans, and if so which loans. lt might rightly purchase loans that are
current, delinquent or in default lt chooses the public goals and methods that it wants to pursue
not private f¡nancial interests who want taxpayers to bail them out of their holdings of defaulted

-

loans

Fiction: lt is impossible to determine the value of deeply underwater mortgage loans; local
govemments.w¡ll have to litigate pice all the way to fhe U

S

Supreme Court

Fact: Mortgage loans are simple fìnanc¡al assets, Financial firms of all kinds price these assets
every day using consistent, standard methodologies and data from actual market transactions ln
fact, on any given day the market values even more complicated f¡nancial assets like long term,
underwater European government debt denominated in euros - even for governments that are likely
to abandon that currency Anyone who claims that Wall Street cannot pr¡ce a mortgage loan is
misrepresenting the facts
Moreover, the value of a loan is an issue of fact for a jury to determine. California appellate courts
defer to a jury's factual determination except in the most exlraordinary circumstances, and the U S
Supreme Court does not review such facts California law gives eminent domain priority over all
other civil matters, Trial courts will expeditiously hear these cases, and appellate courts will not
review a jury's decision on value

Fiction: lt is not econom¡cally poss/b/e to cover adm¡n¡strat¡ve and capital cosfs unless fhe
local govemment pays less than fair value for the loans
Fact: The local government can cover these costs because the public-private partnership will invest
additional money, time and effort to refìnance the loans into more valuable, fully documented loans
with a far lower probability of default. ln fact, the public-private partnership will be more successful at
refinancing the loans then a private enterprise would be acting alone, without the cred¡bility and
participation of the local government and community This is precisely the same as when a
government purchases a farmer's land and develops it into a toll road or an airport. The project can
cover its costs (and more) because the toll road or airport produces far more revenue than the
farmland

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Fiction: Private lenders will shun communities that use eminent domain to prevent defaults.
Fact: Wall Street firms are raising billions of dollars to buy houses cheaply in foreclosure sales to
convert into profìtable rentals they don't care that Hawaii used its power of eminent domain to

-

purchase rental homes from landlords to sell to tenants throughout the state.

-

These same firms are selling bonds backed by the foreclosed homes to fìnance themselves
they
don't care that Connecticut used its power of eminent domain to condemn bondholder rights in $4
billion of its own state debt

Wall Street fìnanciers regularly start new businesses, issue and trade stock in corporations, and go
hunting together
they don't care that American governments have used their powers of eminent
doma¡n to purchase business franchises, corporate stock, and hunting rights.

-

The fact is that private lenders will always seek to earn profits from loans. They are cunently
shunning communities precisely because they expect the debt overhang to continue to drive home
prices down. Communities that use eminent domain to clear out a dangerous inventory of
underwater mortgages will be more attractive to lenders as a result, not less and will get there
sooner than communities that do nothing. Using eminent domain in this cr¡sis will not affect lending
in a normal market, in which there will be no public purpose for acquiring mortgage loans. The

-

mortgage lending market is broad, deep and competitive when home prices are stable

Fiction: MRP is a venture capital firm that will make an enormous profit on buying and
ref¡n anc¡ ng

Fact:
domain

u

nderwater moñg age s.

MRP is a community advisory firm that will assist commun¡ties that choose to use eminent
to purchase undeMater mortgages, MRP will earn a government approved flat fee per

- the same fee that any major bank earns today if it successfully modifies a loan under the
federal government's Home Affordable Modification Program MRP is not a venture capital fìrm and
will not earn any prof¡t share.
mortgage

[1] "C¡ties Consider Seizing l\ilortgages," Wall Street Journal, July 4, 2012 (quoting Scott Simon of Pll\ilCO
describing the proposal as "appalling"),
; letter from SIFMA to

theHons BenBernanke,TimothyGeithner,andShaunDonovan,datedJuly2l,2ol2(describingtheproposal
as "an abhorrent m¡suse of the power of the state ")

[2] "Private equity bets bill¡ons on foreclosures," Businessweek, July 26, 2012, quoting Scott Simon of Pll\ilCO
a noted opponent of helping homeowners through eminent doma¡n

(

); "Ex-lVorgan

Stanley housing chief launches foreclosed home fund," Reuters, Aug 1, 2012
(

l3l Hawaii Housing Author¡ty

v

Midk¡ff, 467 U

l4l Louisv¡ile Joint Stock Land Bank

S

229, 243

v Radford,295

U

S

n 6 (1984)
555, 602 (1935)

Copyright O 20 1 2 Mortgage Resolution Partners I All rights reserued

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:

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Exhibit

4

Page 1 of3

FAQs I mortgageresolutionpartners.com

Mortgage Resolution
PARII{IRS

OPEN

Home

MRP Blog

Press Room
FAQs

ALL

CLOSEALL

Doesn't eminent domain only apply to real estate?
No. The power of eminent domain applies to every kind of property, including real estate, tangible
personal property (goods), and intangible personal property (loans and other contracts)

Can the local government acquire both performing loans and defaulted loans?

As long as ¡t is acting to further a public purpose, a local government may acquire any kind of
loan including performing, delinquent or defaulted loans. A government may purchase underwater

Fact or Fiction
How You Can Help

The Team
Contact Us

performing loans to further a number of purposes -- as years of crisis have proven, negative
equity is the single greatest predictor of future default, and it creates harm even absent default
(including reduced homeowner investment in property maintenance and dislocation in the local
property sales market and worker mobility because of restrictions on short sales). Each local
government will determine which types of loans to acquire to further the public purposes it wants
to serve.

Why do you need eminent domain? Why don't you just buy loans in the market?
Private securitization trusts hold approximately $'l .1 trillion of loans; we could offer to buy their
undeMater loans, but their trust agreements do not allow for voluntary sales. Eminent domain
allows us to purchase those loans as well as related second mortgage loans if the holders of the
seconds are also unable (or unwilling) to sell. Eminent domain is a way to successfully
consolidate ownership of a homeownefs mortgage loans in the hands of someone w¡th the
economic incentive and freedom to modify or otherwise resolve them.

Doesn't the Contract Clause of the U.S. Constitution forbid purchasing contracts (like
loans) through eminent domain?
U S Supreme Court expressly considered this question and unanimously rejected it in
Hawaii Housing Authority v Midkiff, saying that "the Contract Clause has never been thought to

The

protect against the exercise of the power of eminent domain."

lsn't it novel and unprecedented to consider using eminent domain to acquire debt?
Not at

all. Connecticut has used its power of eminent domain to condemn bondholder rights in $4

billion of tax-exempt state debt, converting it to taxable debt. New York State law expl¡citly
authorizes the Long lsland Power Authority to use eminent domain to acqu¡re debt. ln addition,
Congress has considered using eminent domain to acquire underwater debt owed by railroads,
and Florida has considered forming a state board with the authority to use eminent domain to
acquire debt owed by Florida municipalities.

Who will choose the mortgages?
Local governments will choose, They will determine which loans to acquire and in which areas in
order to make a meaningful difference to their communities We will partner with these committed
local governments to screen loans for eligibility and inclusion in their programs.

What rights and obligations will homeowners have when the local government acquires
their loans? What happens to homeowners who do not refinance?

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Homeowners will have the same rights and the same obligations that they have now under their
loan agreements. This program simply changes the owner of their loans, not the terms of the
loans. The program does not create any additional risk for the homeowners. lf they do not
refinance then they simply continue to pay on their existing loans

ls your program a giveaway to the undeserving who borrowed more than they should
have to purchase houses they never should have owned?
No. Everyone ¡n California has the opportunity to purchase a home by borrowing from a lender
who is willing to take a loss if home prices decl¡ne by more than the homeowner's down payment
The lender willingly takes the risk when making the loan, and the fair market value of the loan
reflects that risk. By purchasing the loan at fa¡r value, the local government gives the lender the
benefìt of its bargain. By accepting an economically rational refìnancing or other resolution with
homeowners, the local government affords them the benefìt of their bargain without forcing them
to default and flood the local housing market with additional foreclosed homes

Regardless of the legal niceties, is it just wrong and a moral hazard to let these
homeowners stay in their homes?
No. We protect our neighbors' homes, even allowing them to keep the equity in their homes while
canceling the¡r debts in bankruptcy, because it is the right thing for them and the right thing for us

ln the U.S. we do not put our neighbors into debtor's prison, or make them homeless
unnecessarily. America is facing an economic crisis and the solution requires practical action that
keeps people in their homes which benefìts the entire community. The real moral hazard is that
the system is forcing homeowners to default in order to achieve rational solutions

How much will the local government pay for the loans? Will the purchase create losses
for the trusts that hold the loans?
The local government will pay the fair value of the loans, as both state and federal law require.

The purchase w¡ll not create any losses for the trusts that hold the loans; the fair value of the
loans reflects losses that have already occurred because of the extraordinary collapse of real
estate pr¡ces in affected communities.

What is the fair market value of a loan, and how will you determine it?
Fair market value is the price that a willing buyer would pay a willing seller, neither under any
obligation to buy or sell Similar sales of troubled loans in the secondary market exist and are
good evidence of fair value These sales occur at a significant d¡scount to the fair value of the
home because of the "foreclosure discount" - the market's recognition of the cost in time, money
and effort to foreclose on the homeowner and thereafter to mainlain and sell the property We will
use these market data points and supplemental methods including discounted cash flow
modeling.

Who really owns the loans?
Securitization trusts typically hold the fìrst mortgage loans that will be purchased by eminent
domain. A variety of investors including hedge funds and mutual funds own interests in the trusts
and thus the ultimate right to payments for the loans. Third party banks service the loans, and
third party trustees monitorlhe servicers Bankstypically hold the second mortgage loans.

What rights will the loan owners have?
The trusts that currently hold the mortgage loans will have the right to receive the fair market
value of the loans. This includes the right to a trial to determine the fair value of the loans if the
trusts disagree with the local government's valuation

Who pays the costs of legal challenges to the Program?
Mortgage Resolution Partners

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How is MRP paid?
The community does not pay MRP. The funder pays MRP a fee for each loan acquired by the
community. This fee is very similar to the fee paid by the federal government to banks that modify
mortgages under federal programs. The MRP fee does not depend on the price the community
pays for the acquired loans. MRP is not a private equig firm, a hedge fund or a mortgage lender
or servtcer.

How is the Funder paid?
The Funder lends money that is used to acquire underwater mortgages to the community and
earns interest income. The Funder's collateral is the underwater mortgages and the lender has no
other recourse to the community.

Copyright

@

2012 Mortgage Resolution Partners I Al rights reserved

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Exhibit

5

I

E
E

o i-'*' ElRsa¡b/Tr¿d

Homeownership Protect¡on Program
A Solution to a Critical Problern
Mortgage Resolution
PARIIIfRS

Homeownershi p Protection Progra m
This presentation has been prepared for discussion purposes only and does not
constitute a legally binding commitment or obligation of any of the referenced entities
herein to enter into the transactions described, The terms and conditions outlined
herein are not a comprehensive statement of the applicable terms and conditions that
would be contained in the definitive documentation for the transactions contemplated
herein. This presentation should not be deemed a comprehensive disclosure of risks
or other implications of the transactions discussed herein.
A program term sheet and FAQ is intended to be part of this presentation and
contai ns additional information,

2

Mortgage Resolution
PANTilTRI

The Real State of U.S. Housing Today
Home prices continue to deteriorate, jeopardizing
mortgage loans and homeowners
In June of 2006, U.S. resÍdential housing prices hit their peak. Now, nearly six years later, the
market is once again at a record post-2006 low (down 33.8olo from peak as of year-end zAIt).
a

Over 22o/o of the 52.5 million U.S. homesthatare mortgaged had "unden¡/ater" mortgage loans
at the beginning of 20t2.
Such mortgages are generally concentrated in states that experienced acute housing price
increases during the bubble -- Arizona, California, Florida and Nevada, to name but a few.

After short-lived and shallow periods of home price appreciation in mid 2010 and again ín 2011,
recent pricing trends have turned decidedly negative (the S&P Case Shiller 20 C¡ty Index is down
7.5o/o nationwide from its previous post-crash high in May of 2010).
a

The National Association of Realtors, in its December 2OL1 survey, found that foreclosure sales
averaged a discount of 22o/o compared with non-dÍstressed home sales (up from 2Oo/o a\ear
earlier). Short sales, with the cooperation of the lender, averaged L3o/o below market value.
RealtyTrac found even larger differences ín 2011.

Despite hopes to the contrary, the situation is not materíally improving'
3

Mortgage Resolution
PÂT1[EPS

a

The Homeownership Protection Program
W¡ll Help End this National Nightmare
Empowering communities to do what Washington
and the private sector have been unable to
The Program employs the ultimate right of local communities and governments - through the
constitutionally guaranteed power of eminent domain - to retake control over the welfare of
their neighborhoods and their fiscal solvency.
Organized by Mortgage Resolution Partners - in public/private ventures w¡th cit¡es and counties
that have been most affected by the mortgage and housing crisis - the Program will force
lenders to surrender their mortgage loans to governments for full and fair value as determined
by local courts in condemnation proceedings.
a

As the current fair market value of such moftgage loans is considerably less than the face
amount thereof, governments will be able to restructure the mortgage loans acquired though
eminent domain and refinance severely underwater homeowners (with the ability and
creditworthiness to make payments on their restructured loans) into new loans to be sold to

large, private sector investors as FHA GinnieMae securities.
I

No taxpaver funds will be used in connection with the Program and the Program
reguires no state or federal Ieqislation, or administrative action.

4

Mortgage ResolutÍon

PANTilERt

Communities are the Principal Drivers of
the Homeownership Protection Program
Municipalities have enormous incentives to adopt
and execute the Program
a

Defaulted mortgages are typically associated with the cessation of real estate tax payments
and other ratable and usage charges payable to localities. This stresses local budgets and
fina n cin g.

a

Throughout the mortgage crisis, underwater loans have demonstrated high default levels regardless of other borrower circumstances, This tendency poses a threat to areas continuing
to see price depreciation.
Large volumes of defaulted mortgages result in neighborhood blíght, abandonment, unkempt
property and transience. These factors exacerbate the already compromised housing
economics in affected areas and accelerate price depreciation.
Municipal, county and state governments, and agencies, have a public interest in halting
defaults and consequent neighborhood deterioration.

The Program provides a practical and efficient solution to this intractable dilemma'

5

Mortgage Resolutíon
DANTilENS

A Grass Roots Crisis That Demands a Solution
The impact on cities must be resolved locally as
broader national policies have proven inadequate
a

Post-crash, cities and towns have suflered greatly, often in seldom understood ways:
For example, when a foreclosed home is sold by a lender in foreclosure, the homels
respective tax assessment is permanently reset in many communities.
LJ

Conside4 for example, a home that was purchased for $400,000 with a $360,000
mortgage and has a current tax assessment of the purchase prlce.

If that home sells in foreclosure for $200,A00, its tax assessment

is reset, and can
year in many communities, The rate of
only increase by a small amount each
increase may be tied to inflation, which erodes tax revenues until the home ís again

sold.
o

Conversely, consider what would happen if the same homeowner refinanced the
mortgage and (quite reasonably) contested its real estate tax assessment.
The home's assessment may be reduced to $20Ar000, but fhe assessment could float
freely back up to $400,000 as markets recover. Of course, once fhe assessment
reaches 9400,000, the rate of increase will be limited on an annual basis Ìn many
communities.

6

Mortg age Resolution
PANTHTRS

A Half-Decade of Partial Mortgage
Resolution Solutions have Come up Short
Why does the mortgage crisis still burden the U.S.,
given the plethora of other programs to end ¡t?
Private- and government-sponsored modification programs generally have not worked because
they do not emphasize significant principal reduction. Overall, fewer than 50% of the 2.26
million mortgages modified from 2008 - 2Ol1 were current at year-end 2011. The majority of
modifications have merely capitalized missed payments or reduced monthly payments by less
than 10%.
a

While encouraging tenders and servicers to pursue loan modifications in lieu of foreclosure/
government programs (together with aftermath of the late 2010 "document-gate" foreclosure
scandal) have cuftailed the pace of foreclosures and liquidations. As a result, Q3 2011 saw a
backlog of 394,000 repossessed homes awaiting liquidation, plus an additional 2.86 million homes
securing mortgages that were 12 months or more delinquent, for a total "shadow inventory" of
homes well down the foreclosure pipeline of 3.25 million. This excludes another approximately 1.4
million loans that are between 60 days and 11 months delinquent.
As of January 2Ot2, based on current default rates for various categories of loans, Amherst
Securities estimated that betweenT.4 million and 9.4 million additional home mortgage loans are in
danger of defaulting over the next six years, assuming no furthçr price declines or chanqes to
interest rates.

7

Mortsas"

FFìîli!,?î

A Half-Decade of Partial Mortgage Resolution
Solutions have Come up Short (cont'd)
Systemic problems in the housing and mortgage
industries have diluted other solutions' effectiveness
At its post-bubble peak, the excess inventory of vacant housing rose to nearly 2.1 million units.
That number has declined somewhat - particularly in the case of rental housing. Legacy excess
unutilized vacant housíng remains at over one million units.
$873 billion of 2nd lien/HELOC (Home Equity Lines of Credit) mortgage loans exist behind a
large portion of the most heavily underwater first mortgage loans. This has made resolution of
underwater first mortgages by methods other than foreclosure and liquidation nearly
impossible; second mortgage lenders (most of which are large banks) are not willing to offer
proportionate relief, despite their subordinate lien status.
a

Ironically, many borrowers continue to pay their second-lien lenders even as they are in default
on their first mortgâg€, in order to maintain revolving lines of credit.
The g1.1 trillion of remaining "private-label" residential mortgage backed securities
pose extraordinary additional problems by virtue of contractual documentation that
never envisioned a housing price meltdown. Servicers are paralyzed by restrictive
servicing contracts generally forbidding loan sales and limiting loan modifications' With
shrinking margins and continued risks of litigation, servicers act only when forced to'

I

Mortgage Resolution

pÀtIlltRs

The Homeownership Protection Program:
A Practical Solution that Works
Why will the Program succeed where other
solutions have failed?
a

a

The Program operates at at the local level to acquire underwater mortgages through eminent
domain, which is a public - not a private - right.
Mortgage Resolution Partners (MRP) acts as manager and forms partnerships with local
governments to facilitate the eminent domain and mortgage restructuring process.
- MRP coordinates with local officiafs to identify subject moftgages and refine program structure.
' MRP and third-parties preliminarily screens for loans qualifying for modification and refinancing.
. MRP earns a fair, flat and transparent per-loan fee for its services.
Not all borrowers will qualify for Program. Only borrowers who appear likely to repay their loans
will be accepted. The Program will initiatly acquire foans that are (i) significantly underwater and
(ii) relatively current (not in default)-emphasizing loans held by private-label securitization trusts.
Loans and liens will be acquired through eminent domain
than the market value of the home.

alfairvalue, which is expected to be less

The Program will partner with institutional investors that fund the condemnation action
in order to obtain access to attractively priced, GinnieMae-backed mortgage securities
that will result from the restructuring and refinancing of the mortgages acquired under
the Program. Investors will approve acquired moftgage pools and will earn all
payments received on the acquired mortgages prior the re-securitization thereof'
9

Mortgage Resolution
PÀTTTENI

The Program Begins Where it is Most
Urgently Needed - The State of California
A $5 b¡llion, iÍìitial series to kickoff an up-to$500 billion , 3,000,000-home/ multi-state effort,

California has one of the highest percentages and the highest dollar amount of at-risk loans.
It ¡s a natural and efficient first state for the program.
a

t

California lgqa! orecedent and political posture favorthe Program and constitute an ideal
proving ground.
Counties and cities should have the authority under California and Federal law to acquire by
eminent domain residential mortgage loans secured by real property when the debtor and the
secured property are within its jurisdiction.
A consortium of the county and city governments in San Bernardino Count¡ California (the
largest county in the United States, outside of Alaska) is promulgating a "Joint Powers
Authority" to undertake the first series of the Program together with MRP.

The Program has obtained supporting legal opinions of national counsel specializing in
constitutional law and financial regulation. At the California and local level, the Program relies
on firms wÍth expertise and experience in local eminent domain law and litigation. San
Bernardino County has conducted its own legal review before proceeding with the Program.

In addition, Robert Hockett, Cornell University Law School Professor of Financial and
Economic Law has authored a memorandum-of law and white oaoer on the issue of
public taking of mortgage loans and liens for the purposes of the Program.

10

Mortsas"

rîìîliï?'l

The Program's "Five Stages of Relief"
The Program's five stages for resolving underwater
mortgages at the local level

loan

to

Whole
loan Is held by
sCrOW

document custodian.

and mun¡cipalityfiles
eminent domain
l¿wsuit.

Evaluation of
Publlcally and
Privately Available
City Mortæge
Data. The

municipality
fnforms qualifoing
borrowers

LL

Mortgage Resolution

PÀTTHERS

A Step-by-Step Analysis of the Program's
Operationa I Methodolo gy
Transaction Activity

lnvestor Collateral
Pre-funding Tranche
Commitment
Compensation
Escrow Receipt

n lnal
Loans and
Reserve Cash

UntÍl FinalValue
Determination

Refinanced
Whole Loan
and Reserve
Cash

Ginnie
Mae

Mortgagees or P re-

desþnated Charity
upon Court Order

L2

g

à

GNMA
RMBS

Mortgage ResolutÍon

PANTflTRS

Program Contacts
Steven Gluckstern (Mortgage Resolution Partners, LLC)
sq

I

u

ckstern

@mo

rtg a gereso lutio

n pa

rtners.

co

m

e77 s6L 6503 (m)
4tS 678 513a (o)

Donald H. Putnam (Mortgage Resolution Partners, LLC)
d

putna m @ mo rtga geresolutio npaft ners. com

41s 350 5266 (m)
4L5 677 5898 (o)
Daniel AlpeÉ (Westwood Capital, LLC)
loert@westwood capita l. com
9t7 453 6640 (m)
2L2 953 6448 (o)

da

Len Blum (Westwood Capital, LLC)
lb lu m

@westwoodcap ita l. com

9L7 699 3597 (m)
2L2972 2455 (o)

13

Mortgage ResolutÍon
PANIilTRS

Exhibit

6

Mortgage Resolution

PARTTEXS

FneeuexrY Asxeo QuesrþNs
TABLE OF CONTENTS

5

SECTION FOUR: ECONOMIC1S.......

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SECTION SIX: ORGANIIZATION/FOUNDERlS,.....,.r¡....,.,,¡¡r.r'.....r,....,..,.,.....,.,........,........

Itli¡rig¡go Rotolutlofl

Pirheð

LLC

l2

1750 Montgomery Street, Ste 127 | San Franclsco, CA 94111 I 415.954,8527

1

Frequently Asked Questions

SECTION ONE: LEGAL

1. Doesn't em¡nent domain only apply to real estate? No. The power of em¡nent domain
applies to every kind of property, lncludlng real estate (like land), tangible personal property (llke
goods), and lntangible personal property (like loans),
2.

Can the government condemn property by eminent domain and transfer it to a private
person to use to earn a profit? Yes, in Californla and many other statês, as long as the
government finds that the prlvate use rnay serve a public interest, Governments do so all the time,
selling condemned property to developers who proflt from bulldlng offlces, shopping malls, or
housing. In fact, in limited cases a government can even authorlze prlvate partles to directly
exercise eminent domaln to acqulre propefty for their business use without any government

lnvolvement at all,

Are borrowers morally and legally obligated to pay the entire balance of their purchase
money mortgage? No, particularly in California. Reckless lending standards in the past have
caused real estate bubbles and crashes resultlng ln defaults that have harmed homeowners,
destroyed the local economy and overwhelmed the state judicial system, As a consequence,

3.

Callfornla has deliberately allocated purchase money mortgage loan risk to the lender by enacting
laws that allow a borrowerto walk away from a purchase money home loan and effectively limitthe
lender's remedy to foreclosing on the home, This is a fundamental public policy in California and a
fundamental part of the homeowner's bargain in taklng out a purchase money home loan. Lenders
are fully aware of their share of the rlsk of maklng a purchase money home loan ln Californla.

4.

Can the government acquire performing loans, or only defaulted loans? As long as it ls
acting to further a public purpose, a government can acquire any kind of loan including perforrning,
delinquent or defaulted loans. A government can purchase underwater performing loans to further a
number of purposes -- negative equity is the single greatest predictor of future default, and it creates
harm even absent default (includlng reduced homeowner lnvestment in property maintenance and
dlslocatlon ln the local propefty sales market because of restrictions on short sales).

5. What makes you trust the legal advice you have received? Mortgage Resolution Partners
(MRP) has received the advice of counsel with national or statewide reputations for excellence and
expertlse ln lit¡gatlon, emlnent domain law and constitutional law. Both clients and other lawyers
regularly select the same counsel to handle cases raising emlnent domaln, constltutlonal and publlc
policy issues, and we have great confidence in their advice. Ultimately, each city will rely on its own
legal review before proceeding with eminent domain actions.

6. What

rights will the homeowners have when you provide notice? Homeowners wlll have

the same rlghts and the same obligations that they have now undertheir loan agreements, This
program simply changes the owner of their loan, not the terms of the loan. But more importantly,
they will gain an opportunity -- the opportunily to work wlth a new loan holder that is not bound Þy
the limitations of any securitization contract and lacks the conflicts of interest that current loan
servlcers have. Also, current plans provide for the homeowners to opt in to the MRP program on a

Mortgog8 R€Eolut¡on Perlners LLC

1750 Montgomery Street, Ste 127 | San Ffancisco, CA 94,111 | 4L5 954 8527

2

Frequently Asked Questions

voluntary basis,

7. What rights will the loan owners have?

The trusts that currently hold the mortgage loans will
have the right to receive the fair market value of the loans. This includes the rlght to a trial to
determine the fair value of the loans if the trusts disagree wlth our valuation,

E. What about second mortgage holders?

We expect to negotiate directly with holders of
to acquire those loans, in order to comprehensively deal wlth
second loans, or use emlnent domain
the homeowner's total mortgage debt, If a second loan has significant value because it is full
recourse it may be necéssary to acquire only the mortgage lien or a lesser lnterest ln the loan,
Unlike existing lenders, we will be able to deal wlth all loans encumberlng a property
comprehenslvely at the fair value of each.

Why do you need eminent domain? Why don't you jsst buy loans in the market? Private
securltlzation trusts hold approximately $1,4 trillion of loans; we could offer to buy thelr underwater
loans, but their frust agreements forbid them to voluntarily sell the loans. Eminent domain allows us
to purchase those loans as well as related second mortgage loans if the holders of the seconds are
also unable (or unwllling) to sell. Eminent domain is a way to successfully consolidate ownership of a
homeowner's mortgage loans ln the hands of someone with the economic incentive and freedom to
modify or otherwise resolve the loans,

9.

10. How do you plan to address the legal backlash that could occur? Calllornia has a well
defined judicial process for adjudicating eminent domaln actlons and gives them prlority in court.
Loan owners (or Servicers on their behalf) might lltlgaÈe the rlght to purchase the loans and the
amount of compensation due, We are confident that the communities have the authorlty to purchase
the loans, and we will provide resources to defend against any legal challenge to that right. We will
stand willing to negotiate over price wlth the goal of reaching agreement on fair value. Absent
agreement, there will be a flnal jury determination of fair value in the condemnation actíon.
11. Isn't there a legal step where judges must agree to the em¡nent domain plea? What ¡f
they don't? As long as the community has the authority, as confirmed by the court, to purchase the
loan and pays fair value, the court must permit the acquisition. There is a process under which the
community may request the court's permission to purchase the loan first and finally determine fair
value later (a "quick take"). We expect that the quick take will be a necessary component of the
plan,

12. Who really owns the toans? Securitization trusts typically hold the first mortgage loans that
will be purchased by eminent domain. A variety of investors including hedge funds and mutual funds
own interests in the trusts and thus the ult¡mate rlght to payments for the loans, Third party banks
service the loans, and third party trustees monitor the servicers. Banks typically hold for their own
account the second mortgage loans.

13. Who goes to court? Assuming the purchase requires court action, the communlties will go to
court, as will the securit¡zation trust and holder of the second moftgage loan,

Mortgage Resolulion Partnsrs LLC

1750 Montgomery Street, Ste 127 | San Francisco, CA 94111 | 4I5 954,8527

3

Frequently Asked Questions

May

4,2012
of 12

Page 4

14. What happens if they quest¡on your valuat¡on of the loan? The trust or bank may seek
hlgher valuatlon in the legal proceeding. They and we will provide evidence of value; initially the
judge, and ultlmately the Jury, wlll determlne falr value,

a

15. How will you deal with missing notes, incomplete records in MERS, and similar
mistakes that create havoc in the foreclosure process? Many loan originators and servlcers
lost lmportant documents or failed to record transfers in their haste to securltize and re-securltlze
loans. Borrowers rarely deny that they owe their debts; they Just need to be sure that they pay the
rlght person, and courts need to be sure that anyone who tries to foreclose actually has the rlght to
do so, Eminent domaln resolves these lssues. It transfers complete ownershlp of the loan to the
city, regardless of missing paperwork. Anyone who claims to own the loan can prove lt ln the action
and receive the proceeds. Emlnent domain settles once and for all who owns the loan (the city) and
who has the right to receive payment. Clearing up the paperwork disaster is not a purpose of our
program, but it is a fortunate side benefit.

Mortgage R€solution Pertnsrs LLc

1750 Montgomery Street, Ste 127 | San Francisco, CA 94111 | 415 954,8527

4

Frequently Asked Questions

SECTION TWO: FAIRNESS

1. fs your program

a g¡veaway to the undeserving who borrowed more than they should
purchase houses they never should have owned? No. Everyone ln Callfornia has the
have to
opportunlty to purchase a home by borrowing from a lender who is willing to take a loss if home
prlces decllne by more than the homeowner's down payment (see Legal FAQ 3 above). The lender
willlngly takes the rlsk when making the loan, and the fair market value of the loan reflects that risk,
By purchas¡ng the loan at fair value, we give the lender the benefit of lts bargain. By doing an
economlcally ratlonal modification or other resolutlon with the homeowner, we respect the
homeowner's benefit of his or her bargain.

of the legal niceties, is it just wrong and a moral hazard to let these
homeowners stay in their homes? No, We protect our neighbors' homes, even allowing them to
keep the equity in their homes whlle canceling their debts in bankruptcy, because lt is the right thing

2. Regardless

for them and the right thing for us. We do not put our neighbors into debtor's prlson, or make them
homeless unnecessarlly. Amerlca is faclng an economic crisis and the solution requires practical
action that keeps people in their homes. We are all ln this together, for our neighborhoods, our
states and our natlon. The real moral hazard ls that the system is forcing homeowners to default in
order to achleve rational solutions.

3.

Won't those who don't qualify think this is unfair?

As with many soc¡etal issues that have

challenged us in the past, solutlons do not always provide a direcl benefit to everyone, In this case,
success will benefit even those who do not qualify by stabilizlng home values, restoring
neighborhoods and promoting the local economy. Together wlth the state and the participating
communities we will actlvely address public concerns and educate the public on the benefits to all of
stemmlng the default crisis,

Mortgage ReÊolut¡on Partners LLC

1750 Montgomery Streeù, Ste L27 | Sar| Francrsco, CA 9411 1 | 415.954.8527

5

Frequently Asked Questions

SECTION THREE: BUSINESS

1. What is the fair market value of a loan, and how will you determine it? Fair market value
is the price that a wllling buyer would pay a willing seller, nelther under any compulslon to transact.
Slmilar sales of troubled loans ln the secondary market exist and are good evidence of iair value,
These sales occur at a significant discount to the falr value of the home because of the foreclosure
discount -- the market's recognltion of the cost in time, money and effort to foreclose on the
homeowner and thereafter to maintain and sell the property. We will use these market data points
and supplemental methods including discounted cash flow modellng,

2. How will MRP make money?

wlll paftner with communltles to purchase all loans (or
interests in seconds) encumbering a property through emlnent domain at fair value, which will be
signifÌcantly less than the fair value of the home, We will then proactively work with borrowers to
modify or refinance the loans, or possibly take other actlon (such as a deed In lieu of foreclosure and
rent-back or a short sale). Current plans provlde for MRP to charge a slmple, fair, and transparent
flat fee (pald for by investors) for lts servlces,
MRP

3. Why hasn't

anyone else tried this, or have they? Governments have used eminent domain
past to address housing dislocations. For example, Hawaii used a statewide program of
in the
emlnent domain to purchase homes from landlords to sell to tenants when concentrated land
ownershlp had made it difficult for people to buy their own homes, Some have advocôted uslng
eminent domain to purchase mortgage loans ln the current crlsis, lncluding people ln the home
building, governmenl and academic communities. MRP has simply taken up the idea and run wlth it
because we believe that it is a positive solution to this crisis, particularly for securitized mortgage
loans,

4. What other solutions

are being offered? Are they working? what makes this proposal
any better? There are a number of government programs designed to encourage loan
modifications. However, these apparently do not provide sufflcient incentives for securltized loan
servicers who bear the cost and the risk of modifying a loan, with the trust investors reaping the
benefits of a successful modification. Moreover, the existing programs do not adequately deal with
confllcts of lnterest among servicers, securltlzat¡on trust investors, and second mortgage holders, As
a result, few modifications have occurred, and most have been unsuccessful, paftlcularly for
securitized loans, Our proposal is better because we will cause the purchase of all loans encumbering
a home, with the freedom to effect any modification, including write-downs.

5. How

does this affect the borrower's credit? The effect on a borrower's credít will depend
upon the resolution oF the mortgage loan that he or she agrees to, We expect that the effect will be
no worse than it would be without eminent domain and will þe better for the borrower if MRP is able
to affect a refinancing or a modification that the exlstlng servicer would not have permitted.

6.

How will this help home values, or will ¡t? We expect that the program will stabilize home
prices by reducing defaults and the resulting forced sales of homes and by reducing the overhang of
Future expected foreclosures,

lvlortgage Rosolut¡on Partners LLC

1750 Montgornery Street, Ste 127 | San Francisco, CA 94111 | 415 954 8527

6

Frequently

As ked

May

questions

4,2072

Page 7

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12

7. Do you really

believe this is go¡ng to work? Yes, so much so that we have personally risked
our time, our money and our rePutatlons to get thls program up and running.

8.

Why California? California has one of the highest percentages of at-risk loans and the highest
dof lar amount of at-risk loans oF any state, It is a natural and efflcient first state for the program.
We expect to expand the program to other states once it is up and runnlng.

you choose the mortgages? We will partner with committed local governments that
have a sufflclent volume of at-rlsk loans to allow us to make slgnlflcant investments and make a
meaningful dtfference to the community. The local government offices will help to ldentlfy whlch
areas we assist, and each potentlal mortgage will then go through the regular underwrltlng and

9. How will

eligibility process.

10. What are your plans after the California pilot? Other cities? Other states?

We plan to

expand beyond the pilot, both in Callfornla and in other states. There ls much opportunity both instate and out-of-state to build on the program's potential value.

11. How many borrowers have second mortgages (like HELOCs). and how will you handle
them? We expect that a slgnificant percentage of borrowers will have second mortgages' We
expect to reduce or elimlnate the balance of the homeowner's second mortgage loan at the same
time as the first, elther ln a voluntary transactlon with the holder of the second or (lf necessary) by
purchasing it through emlnent domain.

12. What react¡ons do you expect from the major bank servicers? We expect the

servlcers to

lnltlally oppose the program. However, we hope that they wlll come to recognize that the program
the best way !o resolve the troubled loans in the securltizatlon trusts for the benefit of all parties
involved in the trust, lncluding the trust lnvestors, the trustee, and the servicer.

13. Who w¡ll underwrite the new loans --

MRP,

is

third parties, or both? Both. MRP will

determine the underwriting criterla for selectlng loans based on the requirements of third party
lenders, Fannie Mae, Freddle Mac, the FHA, and other parties who will ultimately acqulre, refinance or
guarantee the loans. We expect to work with thlrd party mortgage professionals in each participatlng
communlty to underwrlte the new loans. This will bring local expertise to the underwriting process
and support to the local economy.

14. Won't you have to lend to unqualified borrowers in order to keep peoPle in their
homes? How will you manage cred¡t risk? We wlll noL reflnance or modify loans for borrowers
who do not quallfy. We will manage credit riskthrough underwrltlng to the requirements otthlrd
party lenders and guarantors, who will provide the ultimate take-out for the loans, We may offer
other resolutions For homeowners who no longer quality for loans, such as expedlted conslderatlon of
proposed short sales and accepting a deed ln lieu of foreclosure and potentially rentlng the home
back to them (vla an appropriate partner), In addition, a portlon of the returns will be dedicated to
communities, whlch may use the funds to finance community houslng or other needs.

Mortgege Resolution Pãrtnors LLC

1750 fvlontgomery Street, Ste 127 I San Francisco, CA 94111 | 475 954 8527

7

Frequently Asked Questions

l4ay

4,2072

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12

15. tlow w¡ll you deal with çompet¡tion from the major banks once you announce your
program? We belleve that clty and state governments may be unwilling to work with maJor banks
or other potentlal competitors because of their or their affiliates' roles ln creating or prolonging the
mortgage crlsls. Other companies could ln tlme create similar mortgage resolut¡on businesses,
However, the inventory of dlstressed mortgage loans ls unfortunately so great and so widespread
that there ls room and need for other companies to operate in the space without adversely affecting
our business model.

16. W¡ll you partner with existing lenders? Why or why not? We expect to work with
selected exlstlng lenders as well as independent real estate professionals to reflnance the
homeowner's loans.
17. What criteria will you use to select loans to acquire? We will work wlth each government
agency to determlne the crlterla that best meet the community's needs - with the goal of keeping
homeowners in their homes. We expect initially to acqulre loans that are significantly underwater,
but which are current (not in default). Subsequently, we may expand the program to acquire loans
that are in default, but where the homeowner can afford a refinanced loan wlth a reduced prlnclpal
amount,

18. If you are successful in modifying loans and reducing principal, won't the homeowner
be taxed on the reduction? Through 2012, both federal and Californla laws forglve the tax for
debt used to purchase or improve the home. If the borrower used the proceeds for other purposesr
like buying a boat, then the reductlon may be taxable, Even after 2012, debt forgiveness generally
may not be taxable to the extent the borrower's total debt exceeded total assets, which we expect
will be the case for many homeowner participants. The program will be voluntary for'homeowners,
so they will determine whether to participate based on their own circumstances, includ¡ng thelr own
tax posltlon, MRP will not provide tax advice, and will urge potential partlclpants to seek such advice

19. How tong will this take? We expect a period of 4 to 12 months from the beginning of the
borrowers' opt-in period until completlon of loan reflnancing,
2O. We've seen what outsourcing did to loan modification programs with the big banks.
you are goang to outsource, how can you ensure quality? Many of the problems with

If

outsourcing have come from confllcts of interest that the large bank servicers have, They bear the
h¡gh costs of servicing troubled loans and negotlatlng modiflcations, but they do not get the benefits
of a successful modlflcatlon. This has led them to outsource to firms that wlll foreclose as quickly and
cheaply as possible. We intend that our program's lnvestors wlll acquire all of a homeowner's
moÉgage loans and bear the rlsk and returns of restructurlng the loans, so our program will not have
this conflict of interest. We wlll closely monitor all service providers because ¡t is in our lnterest for
them to do their jobs rlght,

Mortgags Resolution Partnsrs LLC

1750 Montgomery Slreel, Ste 127 | San Francisco, CA 94111 | 475,954.8527

8

Frequently Asked Questions

May 4,2OL2
Page 9 of 12

SECTION FOUR: ECONOMICS

1. How can the loan purchasers earn a profit if they pay fair value for a loan - and won't
the trusts have a free look back to demand more compensat¡on in court? MRP and the loan
purchasers can pay falr value and still earn a proflt because they will take the risks and earn the
returns of acquiring underwater loans and then refinanclng them, Many lnvestment funds purchase
dlstressed whole loans from bank portfollos ln consensual transactlons and then profit by working
them out; we expect our loan purchasers to pay the same prlce that they do. We will seek to provlde
appropriate reserves for look back rlsk based on the court's ultlmate determlnation.

2. How will

MRP make money? MRP intends to earn fees that are slmple and transparent based
in part on its success in obtainlng control over and modifying or otherwise resolving the loans.

3. W¡ll you share profits with the communities? We expect to contrlbute to the communlties (or
not-for-profit organizations) a fixed amount per loan acqulred, which may support community

houslng needs.

4.

How have you structured th¡s to create the various profit margins you will need?
Who pays for the legal fees? The structure of the loan acquisitions and the expected loan
resolutions will create the necessary profìt marglns to pay for program costs, includlng fundlng costs
and legal fees.

Mortgags Rcsolutfon Partnsrs LLC

1750 lvlontqomery Street, Ste 127 I San Francisco, CA 94111 | 415,954,8527

9

Frequently Asked Questions

May 4,2OL2
Page 10

of

12

SECTION FIVE: GOVERNMENT

1. Em¡nent domain is already so controvers¡al, Are you concerned about how this will be
perce¡ved? Emlnent domaln ls controverslal when lt dlsplaces homeowners to help unrelated
investors. The program wlll use eminent domain to help homeowners, and we expect lt to show that
local governments are part of the solution, not part of the problem,

2. What about the bigger picture? Isn't th¡s going one step further to disempower private
businesses and empower the governm€nt? No, Eminent domain is an inherent power of
American governments, one that they have used throughout our natlon's history. It ls such a
fundamental part of government that the US Constitution expressly permits it, as long as the
government has a public purpose and pays falr value for the property. Moreover, the government
entities will not enter the mortgage loan business or displace any mortgage companies.

3. Is there an ulter¡or political motive here? No, Eminent domaln ls a governmental action to
achleve governmental objectlves, and the objectives are clear -- to reduce the harm that the
resldential home loan crisis is causlng our communities, to stabilize neighborhoods, and to suppott
local economtc actlvity.

4. I read something in the WSJ about a program that President Obama was considering.
Is this it? No. Our program is a local one controlled by local clty and county governments,
supported by private investment funds.

5.

How will this affect property taxes? By resolving underwater loans more efficlently wlth
fewer foreclosure sales, we expect the program to stabilize the property tax base and to help collect
delinquent property taxes.

6. If this

is such a good solution, why didn't the government do this instead of the bank
bailouts? Our program addresses a dlfferent problem and offers a different solution. The federal
government acted to prevent a national financial collapse; that problem required a national solution
at a scale that only the federal government could provlde, The resldential mortgage loan crisls
affects indivldual communities differently and requires a local solution, We can implement the
sofutlon on a local scale, funded wlth prlvate capit'al,

7. Will participating cities be blackballed? We regard it as unlikely that lending institut¡ons
would "redline" or "blackball" a city for exercising a soverelgn rlght. Banks are ln the business of
maklng interest margin, and we believe that they will seek to do so wherever the oppodunity arises
Punlshlng communlties ls not good for buslness. Also, there are legal strictures that may prevent
such retallatlon (such as the Community Reinvestment Act).

8.

How have you planned to budget for all of the legal costs that will come out of this?
Especially for the participating municipalities, how will you put their fears at rest
regarding this? We have budgeted for extensive legal fees. MRP's financial model provides that

Mortgage Resolutlon PartnBrs LLC

1750 Montgonrery Street, Ste 127 I San Franc¡sco, CA 94111 | 475.954.4527

10

Fr€quently Asked Questions

May 4,2Ot2
Page 11 of 12

funding sources and the marglns from the loan acqulsltlons and reflnanclngs will dlrectly pay all legal
costs of condemnatlon and valuatlon actlons.

9. What llability

do the partlclpatlng municipalities have? The paftlclpatlng governments or
powers authorltles wlll be llable to pay the falr value of the loans as well as ceÊaln legal costs
Jolnt
and fees. MRP and lts fundlng sources wlll pay for these costs as described ln the answer to FAQ 8.

Morlgago Rôrolution Pârtno?! LLC

1750 Montgomery Street, Ste 127 | San Franclsco, CA 94111 14L5,954,8527,

11

May

Frequently Asked Questions

Page

4,2012
!2 of 12

SECTION SIX: ORGANIZATION/ FOUNDERS

1. Who ¡s MRP? MRP ls the manager.of this resolutlon program, It wlll obtain the fundlng to pay
for the acquired loans, and lt will manage the process of resolvlng the loans,
2. Where will your corporate offices and operations be based? MRP's offlces and operatlons
are based in 5an Franclsco. As we implement the program we wlll work with the independent real
estate service community in each part¡cipating communlty, whích should contrlbute to the local
economy. MRP may open additlonal offlces ln other citles and states as the program expands.

3.

Who is Gordian Sword and what role does it play? Gordlan Sword ls the company that the

program's founders set up to help create the program and to manage MoÊgage Resolutlon Partners,

4.

Why LLCS? Limited liabÌlity companies are a typical form of organizatlon for lnvestment and
investment management businesses, They operate wlth the flexlbillty ol partnershlps whlle provldlng

all lnvestors wlth llmlted liabillty llke shareholders in a corporat¡on.

Mortgågo Resolutlon Pañners LLc

1750 lvlontgomery Street, Ste 127 | Sðn Francisco, CA 94111 | 4I5,954.8527

12

Exhibit

7

Richmond CARES
Community Action to Resto re Equity and Stability
Saving Hom€s, Saving Cities
Solving the Mortgage Crisis Locally

Mortgage Resolution
PART

il ERS

Summary
o

An average foreclosure costs the local government

o

An average foreclosure costs adjacent neighbors St+,S31 (HUD)

a

L,468 first mortgages in Richmond are in Private Label Securities

o

734 of these will be foreclosed (Fannie Mae estimate)

O

These foreclosures will cost Richmond S25 million

a

Reducing principalto below home values will stop foreclosures

a

Richmond has the power to reduce principal

O

No one else hos ony incentive to prevent foreclosures

o

Mortgage Resolution Partners can help

Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Su¡te 2011 San Francisco, CA 94111

| 4L5.795.2032

|tg,2l7

(HUD)

2

Mortgage Resolution

PARÏ]IERS

The Cost of a Foreclosurex

Local

Governments $19,227

- Lost Property

Taxes

- Unpaid Utility Bills
- Propefty Upkeep
- Policing
- Legal costs, building inspections
- Demand for social services
10,300x x

Borrowers

$

Close Neig h bors

$t4,531r<*r<

Mortgage Resolut¡on Partners LLC
Pier 33 South Embarcdero, Su¡te 2011 San Franc¡sco, CA 94111

| 415.795.2032

+HUD Economic lmpactAnalysis of the FHA Refinance Program
**Household moving costs, legal fees and administrative

for Borrowers in Negative Equity Pos¡t¡on

charges

***Negative impact on the property value ofclose neighbors

3

Mortgage Resolution

PARÏIIERS

Richmond Foreclosures
Cost of Foreclosures

#of

Private Label
Mortgages

Housing

Units*

Owneroccupied

18,659

Renteroccupied

Future
Foreclosures Of
Private Label

mond

Adjacent
Neighbors

St+ m¡ll¡on

Stt m¡ll¡on

Rich

Mortgages**

L7,434

xxFannie Mae Predicts that

Mortgage Resolut¡on Partneß LLC
P¡er 33 South Embarcadero, Su¡te 2011 San Francisco, CA 94111

734

1,468

| 415.795.2032

5Oo/o

of PLS Will Result in Foreclosures

*Source: 2010 Census
** Source: Fannie Mae 2011 10k

4

Mortgage Resolution
PARI

Problem

il ERS

>

o [.5 million loans placed in securities not guaranteed by U.S. Government

'
.
.
.
.

Loans not eligible for L5 federal programs created since the housing crash
Loans are much more likely to be underwater.

Riskier loans created in 2004 to 2007 helped create housing boom
Have not been originated since 2007

Securities prohibít príncipal reduction

"If we are going to stabilize the housing market, we have to address"

PLS loans.

Federal Housing Finance Agency 2009

Result

)

Fannie Predicts that 50o/o of PLS Will Result in Foreclosures

Mortgage Resolution Partners LLC
P¡er 33 South EmbarGdero, Su¡te 2011 San Franc¡sco, CA 941L7

| 475.795.2032

5

Mortgage Resolution

PARTlIERS

The

Solution Principal Reduction

"Most economists see principal reductions as central to preventing foreclosures." Alan Blinder, former Vice
Choirmqn ot the Federal Reserve (Oct. 20, 2011)
"Government should reduce mortgage principal when it exceeds LL0 percent of the home value." Martin
Feldstein, former Choirman of the Council of Economic Advisers under President Reagan (Oct. 1-2, 20L1,)

S

"surely there is a strong case for experimentation with principal reduction strategies at the local level."
Lowrence Summers, former Treasury Secretary under President Clinton and former Economic Advíser under
President Obomo (Oct. 24, 2011.)
Example: JP Morgan Chase and Bank of America unilaterally reduce principal on option ARM portfolio loans in
order to reduce defaults and losses

Principal reduction will prevent future defaults and foreclosures
Mortgage Resolut¡on Partneß LLC
Pier 33 South Embarcadero, Su¡te 2011 San Franc¡sco, CA 94111

| 415.795.2032

6

Mortgage Resolution
PART t ERS

Why Does Principal Reduction Help?
This is an illustrative example for the level of benefits that participating families may
realize. Communities benefit from greatly reduced probability of foreclosure.
Orig ina

Today

I

Loa n

After
Prog ra m

Home Value

$400,000

$200,000

$200,000

Moftgage Balance

$320,000

300,000

$190,000

Home Equity

$80,000

($100,000)

$10,000

8Oo/o

150o/o

95o/o

$1,799

$1,798

$s07

Loan to Value Ratio (LTV)

Monthly Payment

Assumes a 60/o, 30 year, fully amortizing mortgage is refinanced by a 4o/o, 30 year, fully amortizing mortgage. Some loan
programs may also require insLtrance, which may add $175 per to the After Program monthly payment.

Probability of Default Drops from -B0o/o to -7,5o/o
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Pier 33 South Embarcadero, Su¡te 2011 San Francisco, CA 94111

| 415.795.2032

(FHA actuariat assumption, 95%LTV)

7

Mortgage Resolution
PARÏ t ERS

Method of PLS Principal Reduction
Communities Take Action

)

Securitization agreements and tax laws prohibit the sale of PLS moftgages except
when the moftgages are condemned
Local government, using their constitutional power of eminent domain,

can purchase PLS mortgages when public purpose exists by paying fair value

Then local governments can reduce the principal balance on the condemned
mortgages, thereby reducing underwater PLS in their community

PLS

Governments Can Use Eminent Domain To Avoid Unnecessary Foreclosures
Mortgage Resolution Partners LLC
Pier 33 South Embarcdero, Su¡te 2011 San Franc¡sco, CA 94111

| 4L5.795.2O32

8

Mortgage Resolution
PARÏ

E

R

s

Who Supports the Program?
Broad community-focused suppoft 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
Orga nizations
Mortgage Resolut¡on Partners LLC
P¡er 33 South Embarcadero, Su¡te 2011 San Francisco, CA 94111

| 4L5.795.2032

9

Mortgage Resolution
PART]IERS

MRP is a Community Advisory Firm
that purchase underwater PLS
mortgages and resolve them to the benefit of their communities. In order, MRP provides,
MRP clients are state, county, and city governments

under an advisory contract with the community, the following services:
o

Identify and value PLS mortgages

a

Educate the community

a

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

a

Arrange resolution of acquired moftgages

MRP Provides These Services No Cost To Cities
Mortgage Resolut¡on Partners LLC
Pier 33 South Embarcadero, Suite 2011 San Francisco, CA 94111

| 475.795.2032

or Homeowners

1-0

Communities That Have Engaged MRP

a

El Monte, CA

a

La Puente, CA

a

San Joaquin, CA

a

Orange Cove, CA

MRP is in active discussions with these communities and many more
Mortgage Resolut¡on Partners LLc
P¡er 33 South Embarcaderb, Suite 2011 San Franc¡sco, CA 94111

| 475.795.2032

IL

Mortgage Resolution
PART]IERS

Next Steps
L.

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 option 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 motion.

Mortgage Resolution Partners LLC
Pier 33 South Embarcadero, Su¡te 2011 San Francisco, CA 94111

| 475.795.2032

L2

Mortgage Resolution

PARIIIERS

Key Steps To The MRP Process
t.

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 backtheir home with an option to purchase it in the
futu re.

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.

T3

Step 1. City Controls The Process
PLS Trustee
Receives offer

to

purchase loan
Proceed to
prepackaged

eminent domain

yes

MRP
ldentifies Possible
Homeowners

Mortgage Resolution
PARTIIERS

W
Sta

rt:

Hires MRP, Signs

Advisory Agreement

Appoints Staff

Accept
offer?

Appoints Counsel

settle me nt
no
Prepares offer to
purchase loans

Makes offer to
purchase loans

no
Proceed?

Stop

yes
no
Proceed?

Builds community
consensus to proceed with

yes

Eminent Domain motion.
Drops homeowners that
opt out.

no
Proceed?

Prepare Resolution
of Necessity

yes

Material

no

RON
?

File Eminent
Domain Motion

Sto p

L4

Step 2. Home Owner May Opt Out
Citv

Start:
City Files Eminent

Domain Motion May be consensual

MRP/Local Realtors

Presents program

to homeowners

Mortgage Resolution

PARÏIIERS

Home Owner

no

lnterested?

Dropped
From
M

otion

yes

City approves

homeowner
presentation
materials

Qualifies
for refi?

yes

To
Refinance

Option

no

Qualifies
For Lease
no

Dropped
From

Motion

yes

To Lease

Option

Mortgage Resolution

Step 3 : Lease/Pu rchase Solution
PLS

Trustee Funder

çIy

PARIIIERS

Mortgage
Home Buver
Servicer/
Title Companv

Home Owner
Selects a Local
Realtor as advisor

Receives S160,000

Agreed Upon Fair
Market Value of
Underwater PLS
Mortgage

Funds S160,000
Loan Acquisition
Price

Sta

Obtains Order For
Possession

of

Home Owner Opts
For Lease/Purchase

Mortgage
Holds

Underwater PLS
Mortgage For
City/Funder

Delivers Underwater
PLS

Mortgage

Receives Srgo,oOo

I

nvests S9,500 to

stabilize local

U

Signs Lease,
Buys Home When

City Owns

PLS

Mortgage

Signs a market rate
lease with an option

to purchase. Sells
home to buyer.

sends SL90,000
home purchase
price to servicer

nderwater

Mortgage Paid Off
Credits a portion of

housi ng

Applies for CHFA
Grant

rt:

Sends 59,500 to City
(s%)

Sends 54,750

rent to tenant's

Pays rent

purchase account

to

Realtor representing
Seller (2.5%)

Pays S3,260

of

other expenses
Pays 54,500

Sends SL75,750
Fu

to

May buy home or
continues to rent

nder

to
1_6

Mortgage Resolution

Step 3: Refinance Solution
PLS

Trustee

Receives S1-60,000
Agreed Upon Fair

Market Value of
Undenivater PLS
Mortgage

Funder

PARTTERS

Mortgage
Servicer

çÍy

Funds S160,000
Loan Acquisition

Obtains Order For

Price

FHA Lender Home Owner

Mortgage

Possession

Sta

of

rt:

Home Owner Opts
to Refinance

Gets a new
Holds

si_90,000 FHA

Underwater PLS
Mortgage For
City/Funder

Delivers Underwater
PLS Mortgage

Recordsthe new
s1_90,000 FHA

Mortgage @ no cost
= 95/o of home
value

Receives SL90,000

Mortgage

Sends SLgo,ooo

to

payoff old mortgage

nderwater
Mortgage Paid Off
U

lnvests 59,500 to

stabilize local
housi ng

Sends 59,500 to City
(s%)

Receives monthly

mortgage payments
from Home Owner
Applies for CHFA
Grant

Pays 53,260

of

other expenses
Pays 54,5oo

to

Sends SL80,500

Sends reduced

monthly mortgage
payments to new
FHA Lender

to

Funder

T7

Mortgage Resolution

Follow the Money
Sale and Leaseback

Solution

PARTIIERS

Who is Paid?

When?

Who Pays?

Cash Flow

MRP Cash
Bala nce

(300)

Legal Expenses

MRP

Before eminent domain motion is filed

Atty's selected by City

50% of MRP Fee

Funder

Eminent domain motion filed

MRP

(2,zso)

Legal Expenses

Fu

After eminent domain motion is filed,
pr¡or to possession being awarded

Atty's selected by City

(r.,700)

Fair Value Paid For Loan

Funder

Possession of mortgage awarded to city

PLS

Real Estate Commission

Home Buyer

Home sold

Realtors selected by home owner

Home Buyer

Home sold

Home Buyer

Home Sold

Funder

Funder

Home Sold

Citv

(s,s00)

Home Sold

MRP

(2,250)

Home Sold

MRP's investment bank

ng Costs

Home Sales Proceeds

Community Hous¡ng Reserve

Funder

50% of MRP Fee

lnvestment Banking Fee
Reimbursement of MRP Advances

Refinance

nder

Solution

Funder

owner/realtor

(4,7s0)
(2,000)
21,000
11,500

2,500

(s6o)
(2,000)

Who is Paid?

When?

Pays?

(162,2s0],

183,250

MRP

Home Sold

Funder

who

Vendors selected by home

Cash Flow

(300)

50%

MRP Cash
Ba lance

Atty's selected by City

MRP

Before eminent domain mot¡on is f¡led

Vendor approved by City

(3oo)

Eminent domain motion filed

(2,2501

r.,65C

Atty's selected by City

Homeowner Education

MRP

After eminent domain motion is filed,
prior to possession being awarded

Vendor approved by City

Fair Value Paid For Loan

Funder

Possession of mortgage awarded to c¡ty

PLS

Mortgage Servicing

Funder

Refinance Proceeds

FHA Lender

Reserve

of MRP Fee
Investment Banking Fee
Reimbursement of MRP Advances

Balance

(1,6s0)

qfter eminent domain motion is filed,

MRP

Housi

Funder Cash

(600)

MRP

Legal Expenses

mu

6,690

(300)

Before eminent domain motion is filed

Funder

of MRP Fee

9,250
8,690

4,500

IVIRP

omeowner Education

(2,2s0)

254

(160,000)

Trust

Balance

(300)
1,950

Funder Cash

Funder

prior to possession being awarded

After possession of mortgage by city until
resolution
Refinance Completed
Refinance Completed

(300)

(2,2s1l

(300)

(160,000)

(t62,2s1l

(100)

(r.62,3s0)

190,00c

27,654

3ity

(9,s00)

18,150

(2,2s1l

Trust

Servicer of underuvater mortgage
Funder

Funder

Refinance Completed

MRP

Funder

Refinance Completed

MRP's investment bank

Funder

Refinance Completed

MRP

1,95C

L5,340

(s6o)
(2,ss0)

15,900

4,50C

L21úO