Current Mortgage Performance Observations. January 31, 2009 Performance Data Prepared as of February 20, 2009

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1 LPS Mortgage Monitor Current Mortgage Performance Observations January 31, 2009 Performance Data Prepared as of February 20, 2009

2 February 2009 Mortgage Performance Package Data as of January 31, released Feb 15, 2009 Outline / Agenda Delinquency and Foreclosure overall industry perspective for January Focus on Jumbo Prime deterioration: Product Market share comparison by count vs. balance with a focus on Jumbo prime deterioration Putting the problems in context Foreclosure starts and inventories vs. foreclosure sales / completions: Where is the impact of foreclosure preventions efforts? Update on recidivism rates for modified loans. State focus: Overview of foreclosure inventory and timeline trends for selected states. A return to prepayments: Prepayment rates have increased significantly over the last couple months. Is it helping the borrowers who need it? Roll rates and bankruptcies: Looking past the top level delinquency figures. Lender Processing Services 2

3 Total delinquency leveling off in January but increasing despite seasonality effect January Total Delinquencies = 8.40% Month over Month Increase of 1.16%, Year over Year Increase of 46.18% 3

4 Foreclosure inventories continue to trend upward across all products January 09 Foreclosure Rate = 2.06% Month over Month Increase of 7.79%, 79% Year over Year Increase of 72.80% 4

5 Foreclosure starts continue to increase across product types over the past several months in spite of moratoria and mitigation. Non-Agency Jumbo Prime starts have increased almost 125% since January 2008, the most of any product 5

6 Foreclosure inventory pace of growth is highest for Jumbo Prime and Option ARMs 6

7 Even over a shortened time horizon, acceleration of deterioration in Jumbo Prime exceeds all other product 7

8 New Origination Jumbo Prime are underperforming Agency product despite higher FICOs and comparable interest rates Q3 2008: FICO = 761 Jumbo vs. 748 FN/FH, Interest Rate = 6.14 Jumbo vs FN/FH Lender Processing Services 8

9 Distributions display the disproportionate impact of the Non-Agency Jumbo Prime and Option ARM Product. However, despite high rates of deterioration Non-agency jumbo prime delinquencies remain relatively low. Lender Processing Services 9

10 Headline foreclosure percentage reductions are focused on foreclosure sales where the impact of moratoriums and loss mitigation are most pronounced. Lender Processing Services 10

11 The trend for Foreclosure starts remains higher and in the case of FNMA and FHLMC (Agency product) rates are actually accelerating in recent months. Lender Processing Services 11

12 As a result, foreclosure pre-sale inventories continue to rise Lender Processing Services 12

13 Seasonality may be positively impacting 30 and 60 day defaults. However, the record levels of new DQs from November are just now nearing foreclosure and new DQs (Current to 30 rolls) in the LPS AA universe have been 500,000+ for six months. Loan counts are based on LPS Applied Analytics Servicing Database of over 34 million mortgages. 13

14 Recidivism Rates And Total Volume of Loans Modified in % of Q Modifications were delinquent as of January month-end (up from 10% in December 2008) Volume of Modifications based on data compiled by LPS Applied Analytics for the HOPE NOW Alliance. 14

15 Loss Mitigation Activity - Status of Loans Prior to Modification Efforts are focused primarily on seriously delinquent loans, only 15% of modifications in 2008 were on loans in foreclosure 15

16 Florida foreclosure inventories are extremely high and continue to increase. After improving briefly in Q3 2008,California foreclosure rates have hit a new high. Lender Processing Services 16

17 National Foreclosure Timelines have increased from 133 days in January to 194 days in December Lender Processing Services 17

18 When viewed as a factor vs. January 2008, National Foreclosures have increased almost 150%. California and Florida have increased more or less in-line with the national average. Lender Processing Services 18

19 Lower rates and increased refinances are manifesting with a return to higher prepayment rates. CPR increased significantly across all FICO ranges. Lender Processing Services 19

20 However this wave of refinances is impacting only borrowers who are current on their mortgages: Troubled borrowers are not getting help. Lender Processing Services 20

21 More loans deteriorated than improved in each of the last ten months Better rates include loans improved through pay-offs and modifications. Worse rates are held artificially low by moratoriums in foreclosure sales. 21

22 Thirty Day and Sixty Day Loans continue to show declining rates of cures to an improved delinquency status. Lender Processing Services 22

23 Interesting trend in bankruptcies as it appears that more are occurring on current loans, pointing to potential problems down the road not reflected in the current delinquency rates. Lender Processing Services 23

24 Conclusions: January 2009 Month-end data Overall Delinquencies continue to increase, achieving another all-time high. Relative short term stabilization at current high levels is not viewed as a positive, particularly since seasonality should be lowering rates. Headline improvements in foreclosure rates refer only to sales. Foreclosure starts and inventories continue to increase despite moratoria and loss mitigation efforts. Recidivism rates show no signs of improvement in the quality of modifications during the fourth quarter of In prior reports, the deterioration in the Alt-A dominated 5/1 hybrid product has been an area of focus. This month we turn to the most traditionally reliable product jumbo prime. Though it should be noted that delinquency rates remain relatively low in comparison, over the last 12 months the rate of deterioration in jumbo prime has exceeded all other product. Deterioration rates for foreclosures are highest for jumbo prime and Option ARM product. These two products represent only 6% of outstanding mortgages based on loan count, but 17% based on unpaid principal balance. Newly originated non-agency jumbo prime loans are performing worse than FNMA and FHLMC originations which may be cannibalizing some of the jumbo product through higher loan limits. Prepayments have increased significantly in January and December, but increase in liquidity is concentrated most in borrowers who need help least. Lender Processing Services 24