Case 8:08-cv DKC Document 18-5 Filed 10/07/2008 Page 1 of 8. Exhibit A

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1 Case 8:08-cv DKC Document 18-5 Filed 10/07/2008 Page 1 of 8 Exhibit A

2 Case 8:08-cv DKC Document 18-5 Filed 10/07/2008 Page 2 of REV-5 SECTION 3: BORROWER'S CASH INVESTMENT IN THE PROPERTY 2-10 FUNDS TO CLOSE. The cash investment in the property must equal the difference between the amount of the insured mortgage, excluding any upfront MIP, and the total cost to acquire the property including prepaid expenses and closing costs as described in paragraph 1-9. All funds for the borrower's investment in the property must be verified and documented. Acceptable sources of these funds include the following: A. Earnest Money Deposit. If the amount of the earnest money deposit exceeds 2 percent of the sales price or appears excessive based on the borrower's history of accumulating savings, the lender must verify with documentation the deposit amount and the source of funds. Satisfactory documentation includes a copy of the borrower's cancelled check. A certification from the deposit-holder acknowledging receipt of funds and separate evidence of the source of funds is also acceptable. Evidence of source of funds includes a verification of deposit or bank statement showing that at the time the deposit was made the average balance was sufficient to cover the amount of the earnest money deposit. B. Savings and Checking Accounts. A verification of deposit (VOD), along with the most recent bank statement, may be used to verify savings and checking accounts. If there is a large increase in an account, or the account was opened recently, the lender must obtain a credible explanation of the source of those funds. C. Gift Funds. An outright gift of the cash investment is acceptable if the donor is the borrower s relative, the borrower's employer or labor union, a charitable organization, a governmental agency or public entity that has a program to provide homeownership assistance to low- and moderateincome families or first-time homebuyers, or a close friend with a clearly defined and documented interest in the borrower. The gift donor may not be a person or entity with an interest in the sale of the property, such as the seller, real estate agent or broker, builder, or any entity associated with them. Gifts from these sources are considered inducements to purchase and must be subtracted from the sales price. No repayment of the gift may be expected or implied. (As a rule, we are not concerned with how the donor obtains the gift funds provided they are not derived in any manner from a party to the sales transaction. Donors may borrow gift funds from any other acceptable source provided the mortgage borrowers are not obligors to any note to secure money borrowed to give the gift.) This rule also applies to properties of which the seller is a government agency selling foreclosed properties, such as the Veterans Administration or Rural Housing Services. Only family members may provide equity credit as a gift on a property being sold to other family members. These restrictions October

3 Case 8:08-cv DKC Document 18-5 Filed 10/07/2008 Page 3 of REV-5 on gifts and equity credit may be waived by the jurisdictional HOC provided that the seller is contributing to or operating an acceptable affordable housing program. FHA deems the payment of consumer debt by third parties to be an inducement to purchase. While FHA permits sellers and other parties to make contributions of up to six percent of the sales price of a property toward a buyer's actual closing costs and financing concessions, this policy applies exclusively to the provision of mortgage financing. Other expenses paid on behalf of the borrower must result in a dollar-for-dollar reduction to the sales price. The dollar-for-dollar reduction to the sales price also applies to gift funds not meeting the requirement that the gift be for downpayment assistance and is provided by an acceptable source. When someone other than a family member has paid off debts, the funds used to pay off the debt must be treated as an inducement to purchase and the sales price must be reduced by a dollar-for-dollar amount in calculating the maximum insurable mortgage. Documentation Requirements. The lender must document the gift funds by obtaining a gift letter, signed by the donor and borrower, that specifies the dollar amount of the gift, states that no repayment is required, shows the donor s name, address, telephone number and states the nature of the donor s relationship to the borrower. In addition, the lender must document the transfer of funds from the donor to the borrower, as follows: 1. If the gift funds are in the homebuyer's bank account, the lender must document the transfer of the funds from the donor to the homebuyer by obtaining a copy of the canceled check or other withdrawal document showing that the withdrawal is from the donor's account. The homebuyer's deposit slip and bank statement that shows the deposit is also required. 2. If the gift funds are to be provided at closing: a. If the transfer of the gift funds is by certified check made on the donor's account, the lender must obtain a bank statement showing the withdrawal from the donor's account, as well as a copy of the certified check. b. If the donor purchased a cashier's check, money order, official check, or any other type of bank check as a means of transferring the gift funds, the donor must provide a withdrawal document or canceled check for the amount of the gift, showing that the funds came from the donor's personal account. If the donor borrowed the gift funds and cannot provide documentation from the bank or other October

4 Case 8:08-cv DKC Document 18-5 Filed 10/07/2008 Page 4 of REV-5 savings account, the donor must provide written evidence that those funds were borrowed from an acceptable source, i.e., not from a party to the transaction, including the lender. "Cash on hand" is not an acceptable source of the donor's gift funds. Regardless of when the gift funds are made available to the homebuyer, the lender must be able to determine that the gift funds ultimately were not provided from an unacceptable source and were indeed the donor's own funds. When the transfer occurs at closing, the lender remains responsible for obtaining verification that the closing agent received funds from the donor for the amount of the purported gift and that those funds came from an acceptable source. NOTE: FHA does not approve down payment assistance programs in the form of gifts administered by charitable organizations (i.e., nonprofits). Mortgage lenders are responsible for assuring that the gift to the homebuyer from the charitable organization meets the appropriate FHA requirements and the transfer of funds is properly documented. In addition, FHA does not allow nonprofit entities to provide gifts to homebuyers for the purpose of paying off installment loans, credit cards, collections, judgments, and similar debts. D. Collateralized Loans. Funds can be borrowed for the total required investment as long as satisfactory evidence is provided that the funds are fully secured by investment accounts or real property. Such assets may include stocks, bonds, real estate (other than the property being purchased), etc. In addition, certain types of loans secured against deposited funds, such as signature loans, the cash value of life insurance policies, loans secured by 401(k)s, etc., in which repayment may be obtained through extinguishing the asset; do not require consideration of a repayment for qualifying purposes. However, in such circumstances, the asset securing the loan may not be included as assets to close or otherwise considered as available to the borrower. An independent third party must provide the borrowed funds. The seller, real estate agent or broker, lender, or other interested third party may not provide such funds. Unacceptable borrowed funds include signature loans, cash advances on credit cards, borrowing against household goods and furniture and other similar unsecured financing. October

5 Case 8:08-cv DKC Document 18-5 Filed 10/07/2008 Page 5 of REV-5 E. Sales Proceeds. The net proceeds from an arms-length sale of a currently owned property may be used for the cash investment on a new house. A fully executed HUD-1 Settlement Statement must be provided as satisfactory evidence of the cash sales proceeds accruing to the borrower. If the property has not sold by the time of underwriting, loan approval must be conditioned upon verifying the actual proceeds received by the borrower. The lender must document both the actual sale and the sufficiency of the net proceeds required for settlement. F. Trade Equity. The borrower may agree to trade his or her real property to the seller as part of the cash investment. The amount of the borrower's equity contribution is determined by subtracting all liens against the property being traded (along with any real estate commission) from the lesser of that property's appraised value or sales/trade price. Value must be determined by a residential appraisal no more than six months old. Evidence of ownership also is required. Additionally, if the property being traded has an FHA-insured mortgage, assumption processing requirements and restrictions apply (see Chapter 4 for additional information). G. Sale of Personal Property. If the borrower intends to sell personal property items (cars, recreational vehicles, stamps, coins, baseball card collections, etc.) to obtain funds required for closing, the borrower must provide a satisfactory estimate of their worth, in addition to conclusive evidence the items have been sold. The estimated worth of the items being sold may be in the form of published value estimates, such as those issued by automobile dealers, philatelic or numismatic associations, or a separate written appraisal by a qualified appraiser with no financial interest in the loan transaction. Only the lesser of this estimate of value or the actual sales price is considered as assets to close. H. Employer's Guarantee Plans. If the borrower s employer guarantees to purchase the borrower's previous residence as the result of relocation, the borrower must submit evidence of the agreement and the net proceeds must be guaranteed. I. Employer Assistance Plans. If the employer, to attract or retain valuable employees, pays the employee's closing costs, mortgage insurance premium, or any portion of the cash investment, this payment is considered employee compensation and no adjustment to the maximum mortgage amount is required. If the employer provides this benefit after loan settlement, the borrower must provide evidence of sufficient cash for closing. A salary advance, however, cannot be considered as assets to close since it represents an unsecured loan. October

6 Case 8:08-cv DKC Document 18-5 Filed 10/07/2008 Page 6 of REV-5 J. Savings Bonds, Etc. Government issued bonds are counted at original purchase price, unless eligibility for redemption and redemption value are confirmed. Actual receipt of funds at redemption must be verified. K. IRAs, Thrift Savings Plans, 401(k)s & Keogh Accounts. Assets such as IRAs, thrift savings plans, and 401(k)s, etc., may be included in the underwriting analysis up to only 60 percent of value unless the borrower provides conclusive evidence that a higher percentage may be withdrawn after subtracting any federal income tax and any withdrawal penalties. Evidence of redemption is required. L. Stocks and Bonds. The monthly or quarterly statement provided by the stockbroker or financial institution managing the portfolio may be used to verify the value of these securities. Actual receipt of funds must be verified and documented. M. Cash Saved At Home. Borrowers who have saved cash at home and are able to demonstrate adequately the ability to do so are permitted to have this money included as an acceptable source of funds to close the mortgage. To include such funds in assessing the homebuyer's cash assets for closing, the money must be verified whether deposited in a financial institution or held by the escrow/title company and the borrower must provide satisfactory evidence of the ability to accumulate such savings. The asset verification process requires the borrower to explain in writing how such funds were accumulated and the amount of time taken to do so. The lender must determine the reasonableness of the accumulation of the funds based on the borrower's income stream, the time period during which the funds were saved, the borrower s spending habits, documented expenses and the borrower s history of using financial institutions. (All other factors being equal, individuals with checking and/or savings accounts are less likely to save money at home than an individual with no history of such accounts.) N. Rent Credit. The cumulative amount of the rental payments that exceed the appraiser's estimate of fair market rent may be considered accumulation of the borrower's cash investment. Both the rent-withoption-to-purchase agreement and the appraiser's estimate of market rent must be included in the endorsement package. Conversely, if the sales agreement reveals that the renter has been living in the property (or one owned by the seller) rent-free, or that an agreement was made allowing the renter to occupy at a rental amount considerably below fair market value in anticipation of eventual purchase of the property, this situation must be treated as an inducement to purchase with an appropriate reduction to the mortgage. Exceptions may be granted in October

7 Case 8:08-cv DKC Document 18-5 Filed 10/07/2008 Page 7 of REV-5 situations, such as when a builder fails to deliver a property at an agreed-to time and then permits the borrower to occupy that or another unit for lessthan-market rent temporarily until construction is complete. O. Sweat Equity. Labor performed or materials furnished by the borrower before closing, on the property being purchased, may be considered as the equivalent of a cash investment, to the extent of the estimated cost of the work or materials. (Sweat equity may be "gifted" subject to the gift requirements and additional requirements shown below.) Additionally, the following apply to sweat equity: 1. On existing construction, only the repairs or improvements listed on the appraisal are eligible for sweat equity. Any work completed or materials provided before the appraisal is made are not eligible. On proposed construction, the sales contract must indicate the tasks to be performed by the homebuyer during construction. 2. The borrower's labor may be considered as the equivalent of cash, if the borrower can demonstrate his or her ability to complete the work in a satisfactory manner. The lender must document the contributory value of the labor through either the appraiser's estimate or a cost estimating service. 3. Delayed work (on-site escrow), clean up, debris removal, and other general maintenance cannot be included as sweat equity. 4. There can be no cash back to the borrower in these transactions. 5. Sweat equity on a property other than the property being purchased is not acceptable. Compensation for work performed on other properties must be in cash and be properly documented. 6. Evidence of the source of funds used to purchase and the market value of the materials must be provided if the borrower furnishes these. P. Commission from Sale. If the borrower is a licensed real estate agent entitled to a real estate commission from the sale of the property being purchased, that amount may be used for the cash investment with no adjustment to the maximum mortgage required. A family member entitled to the commission also may provide gift funds to the homebuyer. Q. Disaster Relief Grants and Loans. Grants or loans from state and federal agencies [e.g., Federal Emergency Management Agency (FEMA)] that provide immediate housing assistance to individuals displaced due to natural disaster may be used for the borrower's cash investment. Secured October

8 Case 8:08-cv DKC Document 18-5 Filed 10/07/2008 Page 8 of REV-5 or unsecured disaster relief loans administered by the Small Business Administration (SBA) also may be used. However, if the SBA loan will be secured against the property being purchased, it must be clearly subordinate to the FHA-insured mortgage. Any monthly payment arising from such a loan must be included in the qualifying ratios. R. Cash Accumulated with Private Savings Clubs. Some borrowers may choose to use non-traditional methods of saving money by making deposits into private savings club. Often, these private savings clubs pool resources for use among the membership. If a homebuyer claims that the cash to close an FHA-insured mortgage is from savings held with a private savings club, the borrower must be able to adequately document the accumulation of those assets with the club. While such clubs are not supervised banking institutions, the clubs must at a minimum have account ledgers, receipts from the club, verification from the club treasurer, and identification of the club so that the lender can reverify the information provided. The underwriter must be able to determine that it was reasonable for the borrower to have saved the money claimed and that there is no evidence these funds were borrowed with an expectation of repayment. October

9 Case 8:08-cv DKC Document 18-6 Filed 10/07/2008 Page 1 of 11 Exhibit B

10 Case 8:08-cv DKC Document 18-6 Filed 10/07/2008 Page 2 of 11 AN EXAMINATION OF DOWNPAYMENT GIFT PROGRAMS ADMINISTERED BY NON-PROFIT ORGANIZATIONS FINAL REPORT HUD CONTRACT NO: C-OPC-22550/M0001 SUBMITTED TO: THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT MARCH 1, 2005 PREPARED BY: 733 Fifteenth St. NW, Suite 340; Washington, DC * (202)

11 Case 8:08-cv DKC Document 18-6 Filed 10/07/2008 Page 3 of 11 An Examination of Downpayment Gift Programs Administered by Non-Profit Organizations HUD Contract No: C-OPC-22550/M0001 FOREWORD The Office of Housing, in the U.S. Department of Housing and Urban Development, commissioned an examination by Concentrance Consulting Group, Inc., a Washington, D.C., based management consulting firm, of downpayment gift programs administered by non-profit organizations. This report is the culmination of a ten-month effort, beginning in January, 2004, to understand the influence of seller-funded nonprofit downpayment assistance on the origination of FHA-insured home loans. The study involved travel to ten cities and interviews of over 400 persons involved in mortgage transactions from homebuyers and sellers to realtors, appraisers, underwriters, loan officers, builders, and downpayment assistance providers. The report concludes that seller-funded downpayment assistance for mortgage downpayments has led to underwriting problems that require immediate attention, and HUD is already acting upon recommendations made in this report. President George W. Bush and Secretary Alphonso Jackson are committed to expanding homeownership opportunities while providing adequate protections to low- and moderate-income homebuyers. This report advances these goals, and I commend it to all readers who share these objectives. John C. Weicher Assistant Secretary for Housing/FHA Commissioner Concentrance Consulting Group, Inc. ii

12 Case 8:08-cv DKC Document 18-6 Filed 10/07/2008 Page 4 of 11 An Examination of Downpayment Gift Programs Administered by Non-Profit Organizations HUD Contract No: C-OPC-22550/M0001 Table of Contents EXECUTIVE SUMMARY...IV I. INTRODUCTION/BACKGROUND... 1 II. KEY OBSERVATIONS... 4 III. METHODOLOGY IV. COLLECTIVE ASSESSMENT AND CROSS SECTIONAL ANALYSES V. INTERVIEW RESULTS BY SUBJECT GROUP NON-PROFITS LENDERS AND UNDERWRITERS HOMEBUYERS INDIVIDUAL SELLERS BUILDERS REAL ESTATE AGENTS APPRAISERS OTHER RESPONDENTS VI. ANALYSIS OF FINDINGS AND RECOMMENDATIONS APPENDIX I RESEARCH OBJECTIVES APPENDIX II LINES OF INQUIRY APPENDIX III QUANTIFIABLE INTERVIEW RESULTS APPENDIX IV DETAILED FLOW CHART OF A DOWNPAYMENT ASSISTANCE TRANSACTION APPENDIX V 2002 IRS FORM 990 HIGHLIGHTS APPENDIX VI COMPARATIVE FINANCING SCENARIOS Concentrance Consulting Group, Inc. iii

13 Case 8:08-cv DKC Document 18-6 Filed 10/07/2008 Page 5 of 11 An Examination of Downpayment Gift Programs Administered by Non-Profit Organizations HUD Contract No: C-OPC-22550/M0001 EXECUTIVE SUMMARY The U.S. Department of Housing and Urban Development (HUD) Office of Evaluation engaged Concentrance Consulting Group, Inc. (Concentrance) to conduct an examination of non-profit seller-funded downpayment assistance programs that provide gifts to Federal Housing Administration (FHA) borrowers. A previous study conducted by the Office of Inspector General (OIG) (Audit Case Number 2000-SE ) concluded that mortgages involving non-profit downpayment assistance where the non-profit directs seller funds to homebuyers should be ineligible for FHA insurance. This examination provides input to HUD s investigation of how it might continue to promote downpayment assistance programs while containing the risk of default and foreclosure to acceptable levels. The purpose of this examination was to gather and analyze data on: Characteristics of seller-funded downpayment assistance programs; Structural and ownership features of seller-funded downpayment assistance providers; Relationships among parties involved in seller-funded downpayment assistance transactions; and Characteristics of seller-funded downpayment assistance transactions that may increase risks of default and foreclosure. The Concentrance team conducted one-on-one and focus group interviews with 401 respondents in ten Standard Metropolitan Statistical Areas (SMSAs) including Atlanta, Charlotte, Dallas, Denver, Detroit, Indianapolis, Phoenix, Riverside, Salt Lake City and Seattle. These SMSAs were selected by the HUD Government Technical Monitor (GTM) as cities with significant seller-funded downpayment assistance activity in the FHA market. Interviews were conducted between April and July HUD provided the Concentrance team with a file containing information on all loans insured by FHA where the Computerized Home Underwriting Mortgage System (CHUMS) indicated that the downpayment assistance (DA) came from a non-profit entity and the loan was endorsed in the FY period and the property securing these loans is located in the ten subject SMSAs. The construction mix in this sample data set was 71% existing construction and 29% newly constructed homes. The Charlotte and Indianapolis SMSAs had the highest concentration of new homes with seller-funded DA at 64% and 63%, respectively. The respondents included: downpayment assistance providers real estate agents appraisers mortgage lenders (e.g., mortgage company executive management, loan officers and mortgage brokers) underwriters builders homebuyers sellers Concentrance Consulting Group, Inc. iv

14 Case 8:08-cv DKC Document 18-6 Filed 10/07/2008 Page 6 of 11 An Examination of Downpayment Gift Programs Administered by Non-Profit Organizations HUD Contract No: C-OPC-22550/M0001 The team interviewed representatives of two types of downpayment assistance programs (DAPs). The primary interview focus was on DAPs whose funding source was property sellers. However, we also interviewed representatives of traditional DAPs where the source of funds for the assistance offered was the government or a charitable organization. Throughout this report these downpayment assistance programs are referred to as sellerfunded DAP or non-seller-funded DAP respectively. We often will also refer to downpayment assistance simply as DA. When referring to a program or programs we will use DAP or DAPs respectively. This is a qualitative study and thus the data has more depth and greater richness of context than quantitative studies. Qualitative studies have smaller numbers of respondents than quantitative studies, and do not have the same properties of representativeness as largerscale field studies. Some of our key observations as they relate to the examination objectives are as follows: Program Characteristics Seller-funded DA providers serve primarily as conduits for the transfer of downpayment funds between buyers and sellers in order to meet HUD s gift eligibility requirements. The assistance from the non-profit is contingent upon a written guarantee of reimbursement by the seller. There is rarely any direct interaction between the seller-funded DA provider and the borrower. Without the requirement for a conduit to comply with HUD guidelines for arms-length funding sources, seller-funded DA provider would no longer have a purpose in the transaction. The existence of seller-funded DAPs creates demand for single-family housing from first-time buyers who typically have very little understanding of the mortgage lending process or the basic responsibilities of homeownership. Most respondents recommended homebuyer counseling as a way to better prepare these buyers for their homeownership responsibilities. The DA providers themselves said that counseling/borrower education should be mandatory. Sellers reported that they were able to sell their homes faster if they used a seller-funded DAP and they always received their targeted amount of net proceeds. Buyers believed that the seller-funded DAPs provided them with the opportunity to become homeowners and without the assistance they could not have purchased a home at that time. Concentrance Consulting Group, Inc. v

15 Case 8:08-cv DKC Document 18-6 Filed 10/07/2008 Page 7 of 11 An Examination of Downpayment Gift Programs Administered by Non-Profit Organizations HUD Contract No: C-OPC-22550/M0001 Seller-Funded DA provider Structural and Ownership Features Many seller-funded DA executives reported that there were instances in the industry where the officers and directors of the seller-funded DA provider were also owners and officers of for-profit marketing and gift application processing entities. These entities were captive vendors of the seller-funded DA provider and many of the executives were receiving compensation from both entities. Interviews with seller-funded DA representatives and parties that work with them revealed that these organizations do not have the structure or capacity to offer risk-mitigating services such as face-to-face homebuyer counseling. In most cases offering such services is not part of their business plan. Relationships Among Parties in the Seller-Funded DA Transaction Many appraisers reported that they often felt more pressure from mortgage brokers or loan officers to bring in the value for property transactions where a seller-funded DAP was involved. Similar pressures were also reported by underwriters who advised that they were strongly encouraged by their management to be more flexible when underwriting loans using sellerfunded DAPs. The mortgage broker or loan officer was described by many respondents as having the most power in the transaction yet the least amount of management control or oversight. Default and Foreclosure Risks Associated With Seller-Funded DA Some mortgage company executives reported that, based on their experience, many seller-funded DA loans had lower credit quality and higher default rates than other FHA loans. Over 50% of the respondents in each subject group including appraisers, mortgage lenders, underwriters, seller-funded DA providers and real estate agents, indicated that seller-funded DAPs inflated the property sales price and appraised value. The Concentrance team analyzed these key observations as well as other data and findings gleaned from our research in terms of three factors for analysis outlined in the contract statement of work. These factors focus on: The effect seller-funded DAPs may have on the incentives of various agents in the homebuying and mortgage underwriting process; Concentrance Consulting Group, Inc. vi

16 Case 8:08-cv DKC Document 18-6 Filed 10/07/2008 Page 8 of 11 An Examination of Downpayment Gift Programs Administered by Non-Profit Organizations HUD Contract No: C-OPC-22550/M0001 Safeguards built into seller-funded DAP designs that serve to mitigate any increased default risk that may result from minimizing the direct equity investment of the homeowner; and Seller-funded DAP designs or incentives created by individual programs that lessen the underwriting quality of mortgages and/or increase effective homeownership costs to downpayment gift recipients. Based upon the results of our analysis, implications for risk to the FHA Insurance Funds were identified and options for mitigating such risks were offered for consideration by HUD. Incentives The Concentrance team concluded that incentives were affected by the presence of sellerfunded DA for several agents within the typical transaction structure, including the sellers, underwriters, and appraisers. The seller incentive is to increase the sales-price in order to recoup their cost associated with providing downpayment assistance. This inflated sales price is not necessarily reflective of similar homes sold without such assistance. The higher than market sales price resulting from the seller-funded DA exacerbates subjective motivations of the participants in the transaction. While these motivations are inherent in any typical home purchase transaction, we have concluded that the pressures on these participants are greater when seller-funded DA is involved. The primary individuals responsible for these pressures are the loan officer or individual mortgage brokers who sometimes threaten the appraiser with non-payment, or reduction in business if their appraisal results do not support the sales price. Loan officers also complain to management about the perceived inflexibility of underwriters. These practices discourage underwriters and appraisers from carrying out their duties as effective risk managers. Their primary concern becomes sustaining their income source Safeguards The Concentrance team also concluded that the overwhelming majority of seller-funded DA providers did not build any safeguards into their programs in order to mitigate any increased default risk that may result from minimizing the direct equity investment of the homeowner. We have determined that because the sales price is increased as a result of the seller-funded DA, it is in essence financed and as such the borrower has no real equity in the property. Seller-funded DA providers offer or in other words make available borrower counseling and homeownership education to borrowers broadly. This offering is not a pre-requisite for receiving seller-funded DA. Therefore, most borrowers who benefit from the counseling and/or homeownership education offered are not the same borrowers receiving the sellerfunded DA. Most of the borrowers in our focus groups did not remember the name of their DA provider and were not aware of any education or counseling programs their DA provider may have offered. In fact, the seller-funded DA providers reported having extremely limited contact with the borrower. Unlike non-seller-funded DA providers; the vast majority of seller-funded DA providers do not offer face-to-face counseling as they Concentrance Consulting Group, Inc. vii

17 Case 8:08-cv DKC Document 18-6 Filed 10/07/2008 Page 9 of 11 An Examination of Downpayment Gift Programs Administered by Non-Profit Organizations HUD Contract No: C-OPC-22550/M0001 typically do not have the ability to deliver grassroots services based on local needs. In all but a couple of cases seller-funded DA providers that offer borrower focused services such as counseling and homeownership education provide the service through a web-based environment or over the telephone. While several prominent seller-funded DA providers endorsed local, face-to-face borrower education or homeownership counseling as the preferred and most effective delivery method, such comprehensive services did not appear to be inherent in their business plans. Seller-funded DA providers also offer mortgage payment protection insurance. However due to the standard exclusionary clauses in these policies; the protection afforded to the mortgage lender or the borrower is minimal. In addition, we were unable to identify a clearly defined claims process for borrowers to follow. The lack of a process for claims adds to the ineffectiveness of the policy as a risk mitigation tool. The seller-funded DA providers suggested that the claim rates on these policies are very low and complained that the few claims paid by the mortgage payment protection insurance provider were disproportionately small relative to premiums paid for the insurance. Some seller-funded DA providers confided that the mortgage payment protection insurance was more of a marketing tool than a risk mitigation benefit. They also reported that participation in these insurance programs was limited because of the additional cost to the property seller. The cost of the insurance is in addition to the seller s contribution to the non-profit for the downpayment and the associated application processing fee. The structure of the seller-funded DAPs does not provide for any safeguards from a lending perspective as these programs are underwritten using the same criteria as loans where the borrower has met FHA s minimum 3% statutory investment. However, since the indirect source of the gift is the seller and not a disinterested party to the sales transaction, many respondents in the industry questioned whether the FHA s statutory investment requirement was met. And, because the sales price is increased to accommodate the seller-funded DA, the resulting loan amount is the same as would be realized if the financing program were a zero downpayment program similar to the program proposed in the President s FY2005 and FY2006 budget submissions to the Congress. Underwriters also reported that the credit quality of seller-funded DA loans was inferior to other loans in their FHA portfolio. While some underwriters reported requiring additional compensating factors for loans with sellerfunded DA, the majority did not impose any additional requirements. Underwriting Quality and Homeownership Costs Finally, the Concentrance team concluded that the seller-funded DAP structure leads to a lessening of loan underwriting quality. Our conclusions are based upon underwriter reports of inferior borrower credit profiles relative to other FHA loans, and risk layering practices to include maximum ratios, premium interest rates and, until recently, the use of temporary interest rate buydown accounts. These risk factors are in addition to the risks associated with the lack of a direct investment in the transaction by the borrower. Another factor supporting our conclusions was the lack of borrower readiness to undertake the responsibilities of homeownership, as reported by underwriters, realtors and the borrowers themselves. Furthermore, the effective costs of homeownership are increased even more by Concentrance Consulting Group, Inc. viii

18 Case 8:08-cv DKC Document 18-6 Filed 10/07/2008 Page 10 of 11 An Examination of Downpayment Gift Programs Administered by Non-Profit Organizations HUD Contract No: C-OPC-22550/M0001 the processing fees charged by the seller-funded DA providers which get passed through to borrowers in higher property prices. In some counties the inflated sales price results in higher settlement fees as well. Based upon the above conclusions, the Concentrance team identified the following risk implications: Higher FHA claim amounts due to inflated appraised values that result from a breakdown of risk management controls designed to segregate duties and responsibilities necessary to ensure that each of the professionals in the transaction are allowed the opportunity to act with prudence in carrying out their functions. The insuring of loans that pose increased default and foreclosure risk to the FHA Insurance Funds without the benefit of any additional risk mitigating requirements such as compensating factors, or increased mortgage insurance premiums. Increased cost of homeownership to borrowers receiving seller-funded DA without realizing any tangible benefit associated with the increased costs. These costs include seller-funded DAP processing fees, mortgage payment protection insurance premiums and higher settlement costs when the expense items are calculated based on a percentage of the sales price. In order to mitigate these risks Concentrance is recommending that HUD consider the following risk management options: Work with the mortgage and appraisal industries to establish standards and guidelines for lenders to follow for ordering and managing the appraisal process. Reinforce existing HUD guidelines requiring the separation of production and risk management personnel. This is necessary to ensure that the decisions of underwriters and appraisers are not influenced or controlled by production pressures. Adjust underwriting policies to include the seller-funded DA in the 6% seller contribution limit. Better align the incentives of the production area with the risk management functions of mortgage lending by adding a registration requirement for loan officers. Require additional underwriting requirements or eligibility criteria in order for these loans to be eligible for FHA insurance. Apply the same enhanced, risk-based premium structure to these loans as in the proposed zero downpayment program. Implement the proposed zero downpayment program. Concentrance Consulting Group, Inc. ix

19 Case 8:08-cv DKC Document 18-6 Filed 10/07/2008 Page 11 of 11 An Examination of Downpayment Gift Programs Administered by Non-Profit Organizations HUD Contract No: C-OPC-22550/M0001 not also acting as an interested party to the sales transaction. As noted earlier, HUD s underwritting standards clearly prohibit any party to the sales transaction from being the source of the downpayment, directly or indirectly. The MPPI appears to offer more value as a marketing tool. It gives the impression that the borrower, mortgage lender and FHA are protected in the event of default, but in reality, the plan offers very little protection for any party in the transaction. Risk Implications: The influence of seller-funded DA is causing unprepared borrowers to commit to homeownership without fully understanding the financial impacts. This leads to increased borrower costs, poor loan performance and the potential for increased losses to the FHA Insurance Funds due to default and foreclosure. Risk Management Options: Allow the seller to provide DA directly to the borrower without the seller-funded DA providers as an intermediary. This policy change would solve the confusion around whether or not the seller-funded DA is a seller contribution or concession. It adds clarity to the valuation process. Appraisers reported being clear on the treatment of seller contributions in the valuation process. This proposal to allow the seller to provide DA directly to the borrower without the seller-funded DA provider reinforces their existing training and understanding. Acknowledge that downpayment funded by the seller is a valid risk factor that must be considered in underwriting. These loans share the same risk profile of loans that would be eligible under the proposed zero downpayment program. Therefore, the same risk controls and underwriting requirements proposed for loans originated under the proposed zero downpayment program should be applied to seller-funded DA loans. Explore risk-mitigating options to better prepare borrowers receiving seller-funded DA for sustainable homeownership. It is clear based upon our interviews that borrowers receiving downpayment assistance are not as prepared for the responsibilities of homeownership as those who do not. Options to consider to better prepare borrowers include but are not limited to the use of pamphlets, courses, marketing campaigns and housing fairs to increase borrower awareness and to sensitize them to the importance of understanding the responsibilities of homeownership. In addition, real estate agents, lenders and seller-funded DA providers should be encouraged to make borrowers receiving DA more aware of counseling and homeownership programs available. HUD has an entire network of trained and experienced counseling organizations that are available to assist borrowers in becoming more aware of the responsibilities of homeownership. Concentrance Consulting Group, Inc. 104

20 Case 8:08-cv DKC Document 18-7 Filed 10/07/2008 Page 1 of 21 Exhibit C

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42 <! - [if gte I E ]> <! [e n d if ] - > 10/3/2008 IRS Targets Down-Payment-Assistance Scams; Seller-Funded Programs Do Not Qualify As Tax... Page 1 of 1 Case 8:08-cv DKC Document 18-8 Filed 10/07/2008 Page 2 of 2 IRS Targets Down-Payment-Assistance Scams; Seller-Funded Programs Do Not Qualify As Tax Exempt IR , May 4, 2006 WASHINGTON Organizations that provide seller-funded down-payment assistance to home buyers do not qualify as tax-exempt charities, the Internal Revenue Service said in a ruling released today. Down-payment-assistance programs provide cash assistance to homebuyers who cannot afford to make the minimum down payment or pay the closing costs involved in obtaining a mortgage. Such programs can qualify as tax-exempt charitable and educational organizations under Internal Revenue Code section 501(c)(3) when properly structured and operated. In Revenue Ruling , released today, the IRS provides a detailed discussion of the guidelines including two examples that meet and one that fails to meet the tests for exemption. The ruling makes it clear that seller-funded programs are not charities because they do not meet the requirements of section 501(c)(3). Increasingly, the IRS has found that organizations claiming to be charities are being used to funnel down-payment assistance from sellers to buyers through self-serving, circular-financing arrangements. In a typical scheme, there is a direct correlation between the amount of the down-payment assistance provided to the buyer and the payment received from the seller. Moreover, the seller pays the organization only if the sale closes, and the organization usually charges an additional fee for its services. A March 2005 report entitled, An Examination of Downpayment Gift Programs Administered By Non-Profit Organizations, commissioned by the U.S. Department of Housing and Urban Development (HUD), found that seller-funded down-payment assistance has led to underwriting problems and resulted in an increase in the effective cost of homeownership. A report from November 2005 entitled, Mortgage Financing: Additional Action Needed to Manage Risks of FHA-Insured Loans with Down Payment Assistance, conducted by the U.S. Government Accountability Office (GAO) found similar results. The IRS is increasingly concerned with organizations that are taking advantage of homebuyers who need assistance for a down payment to realize the American dream of homeownership, said IRS Commissioner Mark W. Everson. So-called charities that manipulate the system do more than mislead honest homebuyers and ultimately jack up the cost of the home. They also damage the image of honest, legitimate charities. The IRS is examining 185 organizations that operate down-payment-assistance programs. A particular organization s tax-exempt status can be verified using the on-line database at irs.gov (click on Charities & Non-Profits and then click on Search for Charities ). In addition, the agency has denied applications for tax exemption from over 20 organizations that seek to provide this service and is considering applications from a number of other downpayment assistance organizations. Revenue Ruling will be published in Internal Revenue Bulletin , dated May 22, Links: Rev. Rul Subscribe to IRS Newswire

43 Case 8:08-cv DKC Document 18-9 Filed 10/07/2008 Page 1 of 18 Exhibit E

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61 Case 8:08-cv DKC Document Filed 10/07/2008 Page 1 of 4 Exhibit F

62 Case 8:08-cv DKC 1:07-cv PLF Document Filed 04/03/ /07/2008 Page 1 of 2 of 3 4 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA PENOBSCOT INDIAN NATION, et al. ) ) Case No.: (PLF) Plaintiffs, ) ) v. ) ) UNITED STATES DEPARTMENT OF ) HOUSING AND URBAN ) DEVELOPMENT, et al., ) ) Defendants. ) ) STIPULATION TO RESOLVE REMAINING CLAIMS AND DISMISS ACTION WHEREAS, the Amended Complaint filed in this action on October 9, 2007 (dkt. no. 15) contains both claims directed toward the final rule entitled Standards for Mortgagor s Investment in Mortgaged Property, 72 Fed.Reg.56,002 (Oct. 1, 2007)( Final Rule ), and claims relating to other alleged conduct by employees of the United States Department of Housing and Urban Development ( HUD ) pre-dating and independent of the Final Rule; WHEREAS, the Court by Order and Opinion of March 5, 2008 (dkt. nos. 39, 41) granted plaintiffs motion for summary judgment on their claims directed toward the Final Rule, and vacated and remanded the Final Rule to HUD; WHEREAS, by separate Order of March 5, 2008 (dkt. no. 40), the Court directed the parties to meet and confer and discuss settlement of plaintiffs remaining claims; WHEREAS, plaintiffs remaining claims relate to allegations that HUD employees have told third-party lenders that plaintiffs Grant America Program ( GAP ) was not acceptable and/or did not comply with HUD s policies governing the use of

63 Case 8:08-cv DKC 1:07-cv PLF Document Filed 04/03/ /07/2008 Page 2 of 3 of 3 4 down payment assistance ( DPA ) for Federal Housing Administration ( FHA ) insured home purchase loans; and WHEREAS, the parties believe that plaintiffs remaining claims can be most efficiently resolved consensually without the need for judicial intervention; NOW, THEREFORE, the parties hereby stipulate and agree as follows: 1. The United States Department of Housing and Urban Development s ( HUD s ) current policy governing permissible sources of down payment assistance for FHA-insured home purchase loans is contained in 2-10.C of HUD Handbook , Rev. 5, Mortgage Credit Analysis of Mortgage Insurance, One to Four Family Properties, which states in pertinent part: Gift Funds. An outright gift of the cash investment is acceptable if the donor is the borrower s relative, the borrower s employer or labor union, a charitable organization, a governmental agency or public entity that has a program to provide homeownership assistance to low- and moderateincome families or first-time homebuyers, or a close friend with a clearly defined and documented interest in the borrower. The gift donor may not be a person or entity with an interest in the sale of the property, such as the seller, real estate agent or broker, builder, or any entity associated with them. 2. Based upon the Penobscot Indian Nation s ( PIN s ) continued status as a Federally Recognized Indian Tribe with inherent sovereign powers, acknowledged by the Secretary for the Department of Interior and indicated by the Bureau of Indian Affairs in the Notice published in the Federal Register at 72 Fed. Reg. 13,648, 13,650 (March 22, 2007), HUD finds that PIN s Grant America Program ( GAP ) meets HUD s current policies pertaining to the source of gift funds for the borrowers required cash investment for obtaining FHA insured mortgage financing. Accordingly, HUD will insure

64 Case 8:08-cv DKC 1:07-cv PLF Document Filed 04/03/ /07/2008 Page 3 of 4 of 3 4 mortgages that meet FHA requirements in which home buyers obtain downpayment assistance provided by PIN for the borrower s required cash investments. 3. In light of the foregoing representations, plaintiffs agree to dismiss with prejudice all claims that were not adjudicated by the Court s March 5, 2008 Order and Opinion (dkt. nos. 39, 41). Therefore, the parties hereby stipulate to the dismissal of plaintiffs remaining claims with prejudice. Dated: April 3, 2008 Respectfully submitted, JEFFREY S. BUCHOLTZ Acting Assistant Attorney General _/s/ Robert J. Katerberg MICHAEL SITCOV TAMARA ULRICH CHRISTOPHER HALL ROBERT J. KATERBERG (D.C. Bar ) SCOTT RISNER Attorneys for Defendants United States Department of Justice 20 Massachusetts Avenue, N.W. Washington, D.C Telephone: (202) Fax: (202) Robert.Katerberg@usdoj.gov KANTROWITZ, GOLDHAMER & GRAIFMAN, P.C. _/s/ Michael L. Braunstein MICHAEL L. BRAUNSTEIN Attorneys for Plaintiffs 747 Chestnut Ridge Road Chestnut Ridge, NY (845) MBraunstein@kgglaw.com

65 Case 8:08-cv DKC Document Filed 10/07/2008 Page 1 of 17 Exhibit G

66 Case 8:08-cv DKC Document Filed 10/07/2008 Page 2 of 17 IB Union Calendar No TH CONGRESS 2D SESSION H. R [Report No ] To revise the requirements for seller-financed downpayments for mortgages for single-family housing insured by the Secretary of Housing and Urban Development under title II of the National Housing Act and to authorize risk-based insurance premiums for certain mortgagors under such mortgages. IN THE HOUSE OF REPRESENTATIVES JULY 31, 2008 Mr. AL GREEN of Texas (for himself, Mr. GARY G. MILLER of California, Ms. WATERS, and Mr. SHAYS) introduced the following bill; which was referred to the Committee on Financial Services OCTOBER 2, 2008 Additional sponsors: Mr. SIRES, Ms. MATSUI, Mr. TERRY, Mr. CARDOZA, Ms. LEE, Mr. TIBERI, Ms. EDDIE BERNICE JOHNSON of Texas, Mr. WILSON of Ohio, Mr. CLAY, Mr. CLEAVER, Mr. CARSON, Mr. ROTHMAN, Mr. PASCRELL, Ms. WASSERMAN SCHULTZ, Mr. BACA, Mr. DANIEL E. LUN- GREN of California, Mr. LARSEN of Washington, Ms. ZOE LOFGREN of California, Mr. SHIMKUS, Mr. WALSH of New York, Mr. GORDON of Tennessee, Mr. LINCOLN DIAZ-BALART of Florida, Ms. SUTTON, Mr. TOWNS, and Mr. BERMAN OCTOBER 2, 2008 Reported from the Committee on Financial Services with an amendment pwalker on PROD1PC71 with BILLS VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6652 E:\BILLS\H6694.RH H6694

67 Case 8:08-cv DKC Document Filed 10/07/2008 Page 3 of 17 2 [Strike out all after the enacting clause and insert the part printed in italic] [For text of introduced bill, see copy of bill as introduced on July 31, 2008] pwalker on PROD1PC71 with BILLS HR 6694 RH A BILL To revise the requirements for seller-financed downpayments for mortgages for single-family housing insured by the Secretary of Housing and Urban Development under title II of the National Housing Act and to authorize riskbased insurance premiums for certain mortgagors under such mortgages Be it enacted by the Senate and House of Representa- tives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE. This Act may be cited as the FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authoriza- tion Act of SEC. 2. FHA SELLER-FINANCED DOWNPAYMENT PROGRAM. Paragraph (9) of section 203(b) of the National Hous- ing Act (12 U.S.C. 1709(b)(9)) is amended (1) in subparagraph (C), by striking In no case shall the funds required by subparagraph (A) and inserting the following: Except in the case of a mort- gage described in subparagraph (D), the funds re- quired by subparagraph (A) shall not ; and (2) by adding at the end the following new sub- paragraphs: VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6203 E:\BILLS\H6694.RH H6694

68 Case 8:08-cv DKC Document Filed 10/07/2008 Page 4 of (D) EXCEPTIONS TO PROHIBITED SOURCES. A mortgage described in this subparagraph is any of the following mortgages: (i) A mortgage under which the mortgagor has a credit score equivalent to a FICO score of 680 or greater. (ii) A mortgage under which (I) the mortgagor has a credit score equivalent to a FICO score of at least 620 but less than 680; and (II) mortgage insurance premiums charged are established (aa) at levels necessary, but no higher than needed, to allow such class of loans to be insured without resulting in a need for an appropriation for a credit subsidy, which may exceed the maximum amount permitted under section 203(c)(2)(B); (bb) in the case of the single premium collected at the time of insurance, in an amount not exceeding 3.0 percent of the amount pwalker on PROD1PC71 with BILLS HR 6694 RH VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6203 E:\BILLS\H6694.RH H6694

69 Case 8:08-cv DKC Document Filed 10/07/2008 Page 5 of 17 pwalker on PROD1PC71 with BILLS 4 1 of the original principal obliga- 2 tion of the mortgage; and 3 (cc) in the case of the an- 4 nual premium for a mortgage 5 under which the mortgagor has a 6 credit score equivalent to a FICO 7 score of at least 640 but less than 8 680, in an amount not exceeding percent of the remaining in- 10 sured principal balance (exclud- 11 ing the portion of the remaining 12 balance attributable to the pre- 13 mium collected at the time of in- 14 surance and without taking into 15 account delinquent payments or 16 prepayments). 17 (iii) For mortgages insured in fiscal 18 year 2010 or thereafter, a mortgage under 19 which the mortgagor has a credit score 20 equivalent to a FICO score of 619 or less, 21 but only if the Secretary certifies that such 22 loans can be insured without resulting in a 23 need for an appropriation for a credit sub- 24 sidy. For such mortgages, the Secretary 25 may charge premiums at levels authorized HR 6694 RH VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6203 E:\BILLS\H6694.RH H6694

70 Case 8:08-cv DKC Document Filed 10/07/2008 Page 6 of 17 pwalker on PROD1PC71 with BILLS 5 1 under items (bb) and (cc) of clause (ii)(ii) 2 and may establish a credit or FICO score 3 limitation or impose such other require- 4 ments as are necessary to meet the condi- 5 tions for certification under this clause (E) REQUIREMENTS FOR DOWNPAYMENT ASSISTANCE ENTITIES. Any entity participating in a program that provides downpayment assistance for a mortgage described in subparagraph (D) pursuant to the exception under subparagraph (C), which programs shall include programs of governmental agencies and private nonprofit organizations, shall, before the closing for the loan involved in the mortgage in connection with which such assistance is provided (i) offer to make available, to the mortgagor, counseling regarding the responsibilities and financial management involved in homeownership; (ii) if such offer is accepted by the mortgagor, make such counseling available for the mortgagor; and (iii) in the case of any such entity that is a private nonprofit organization, implement a conflict of interest policy that HR 6694 RH VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6203 E:\BILLS\H6694.RH H6694

71 Case 8:08-cv DKC Document Filed 10/07/2008 Page 7 of 17 pwalker on PROD1PC71 with BILLS 6 1 prohibits directors, officers, employees, and 2 immediate family members from receiving 3 financial benefits from any entity that is 4 providing the program with goods or serv- 5 ices other than the homeownership assist- 6 ance program entity itself or its wholly 7 owned affiliate (F) CIVIL MONEY PENALTIES FOR IMPROP- ERLY INFLUENCING APPRAISALS. The Secretary may impose a civil money penalty, in the same manner and to the same extent as for a violation under section 536, for compensating, instructing, inducing, coercing, or intimidating any person who conducts an appraisal of the property to be subject to a mortgage described in subparagraph (D) and under which any part of the funds required by subparagraph (A) are provided to a party described in subparagraph (C), or attempting to compensate, instruct, induce, coerce, or intimidate such a person, for the purpose of causing the appraised value assigned to the property under the appraisal to be based on any other factor other than the independent judgment of such person exercised in accordance with applicable professional standards.. HR 6694 RH VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6203 E:\BILLS\H6694.RH H6694

72 Case 8:08-cv DKC Document Filed 10/07/2008 Page 8 of 17 pwalker on PROD1PC71 with BILLS SEC. 3. LIMITATIONS ON RISK-BASED PRICING. HR 6694 RH VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6203 E:\BILLS\H6694.RH H Section 203(c) of the National Housing Act (12 U.S.C. 1709(c)) is amended by adding at the end the following new paragraphs: (3) LIMITATIONS ON RISK-BASED PRICING. Except as provided in paragraph (4), the Secretary of Housing and Urban Development shall not take any action on or after October 1, 2008, to implement or carry out (A) risk-based premiums, which are designed for mortgage lenders to offer borrowers an FHA-insured product that provides a range of mortgage insurance premium pricing, based on the risk that the insurance contract represents, as set forth in the Notice published in the Federal Register on May 13, 2008 (Vol. 73, No. 93, Pages through 27711) (effective July 14, 2008); or (B) any other risk-based premium product related to the insurance of any mortgage on a single family residence under this title, where the premium price for such new product is based in whole or in part on a borrower s Decision Credit Score, as that term is defined in the Notice referred to in subparagraph (A), or any successor thereto.

73 Case 8:08-cv DKC Document Filed 10/07/2008 Page 9 of 17 pwalker on PROD1PC71 with BILLS HR 6694 RH VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6203 E:\BILLS\H6694.RH H (4) FLEXIBLE RISK-BASED PREMIUMS. Not- withstanding paragraph (3) of this subsection and section 2133 of the FHA Modernization Act of 2008 (Public Law ): (A) AUTHORITY. In the case only of a mortgage under which the mortgagor has a credit score equivalent to a FICO score of less than 600, the Secretary may establish a mortgage insurance premium structure involving a single premium payment collected prior to the insurance of the mortgage or annual payments (which may be collected on a periodic basis), or both, under which the rate of premiums for such a mortgage may vary according to the credit risk associated with the mortgagor and the rate of any annual premium for such a mortgage may vary according to such credit risk during the mortgage term as long as the basis for determining the variable rate is established before the execution of the mortgage. The Secretary may change a premium structure established under this subparagraph but only to the extent that such change is not applied to any mortgage already executed. PREMIUM (B) ESTABLISHMENT AND ALTERATION OF STRUCTURE. A premium structure

74 Case 8:08-cv DKC Document Filed 10/07/2008 Page 10 of shall be established or changed under subparagraph (A) only by providing notice to mortgagees and to the Congress, at least 30 days before the premium structure is established or changed. (C) ANNUAL REPORT REGARDING PRE- MIUMS. The Secretary shall submit a report to the Congress annually setting forth the rate structures and rates established and altered pursuant to this paragraph during the preceding 12- month period and describing how such rates were determined. (D) CONSIDERATIONS FOR PREMIUM STRUCTURE. When establishing and collecting premiums for mortgages insured under a premium structure established under this paragraph, the Secretary shall consider the following: (i) The effect of the proposed premiums or structure on the Secretary s ability to meet the operational goals of the Mutual Mortgage Insurance Fund as provided in section 202(a). (ii) Underwriting variables. (iii) The extent to which new pricing under the proposed premiums or structure pwalker on PROD1PC71 with BILLS HR 6694 RH VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6203 E:\BILLS\H6694.RH H6694

75 Case 8:08-cv DKC Document Filed 10/07/2008 Page 11 of 17 pwalker on PROD1PC71 with BILLS 10 1 has potential for acceptance in the private 2 market. 3 (iv) The administrative capability of 4 the Secretary to administer the proposed 5 premiums or structure. 6 (v) The effect of the proposed pre- 7 miums or structure on the Secretary s abil- 8 ity to maintain the availability of mortgage 9 credit and provide stability to mortgage 10 markets (E) AUTHORITY TO BASE PREMIUM PRICES ON PRODUCT RISK. (i) AUTHORITY. In establishing premium rates under this title, the Secretary may provide for variations in such rates according to the credit risk associated with the type of mortgage product that is being insured under this title, which may include providing that premium rates differ between fixed-rate mortgages and adjustable-rate mortgages insured pursuant to section 251, between mortgages for condominiums and mortgages for other interests in properties, between mortgages having different ratios of the principal obligation under the mortgage HR 6694 RH VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6203 E:\BILLS\H6694.RH H6694

76 Case 8:08-cv DKC Document Filed 10/07/2008 Page 12 of 17 pwalker on PROD1PC71 with BILLS 11 1 to the appraised value of the property, and 2 between such other products as the Sec- 3 retary considers appropriate (F) PAYMENT INCENTIVES. (i) AUTHORITY. With respect to mortgages for which insured the Secretary is authorized to establish a premium structure under this paragraph, the Secretary shall provide that the payment incentive under subparagraph (ii) applies upon the expiration of the 5-year period beginning upon the time of insurance of such a mortgage, and the Secretary may provide that the payment incentive under clause (ii) applies upon the expiration of the 3-year period beginning upon the time of insurance of such a mortgage. The Secretary may limit such discretionary authority to mortgages prepaid or paid in full during the 2- year period beginning 3 years after the time of insurance of such a mortgage. (ii) PAYMENT INCENTIVE. In the case of any mortgage to which the payment incentive under this subparagraph applies, if, during the period referred to in clause HR 6694 RH VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6203 E:\BILLS\H6694.RH H6694

77 Case 8:08-cv DKC Document Filed 10/07/2008 Page 13 of 17 pwalker on PROD1PC71 with BILLS 12 1 (i), all mortgage payments, including insur- 2 ance premiums, for such mortgage have 3 been paid on a timely basis, upon the expi- 4 ration of such period the Secretary shall re- 5 fund to the mortgagor, upon payment in 6 full of the obligation of the mortgage, all or 7 a portion of 8 (I) the amount by which the sin- 9 gle premium payment for such mort- 10 gage collected at the time of insurance 11 exceeded the amount of the single pre- 12 mium payment chargeable under para- 13 graph (2) at the time of insurance for 14 a mortgage of the same product type 15 having the same terms, but for which 16 the mortgagor has a credit score equiv- 17 alent to a FICO score of 600 or more; 18 and 19 (II) in the case only of mortgages 20 for which annual premiums are estab- 21 lished and collected under subpara- 22 graph (G), the amount by which the 23 cumulative amount of annual pre- 24 miums paid exceeded the amount of the 25 maximum annual premium that other- HR 6694 RH VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6203 E:\BILLS\H6694.RH H6694

78 Case 8:08-cv DKC Document Filed 10/07/2008 Page 14 of wise may be established and collected notwithstanding such subparagraph. (G) OPTION FOR HIGHER ANNUAL PRE- MIUM IN LIEU OF HIGHER UP-FRONT PRE- MIUM. In the case only of mortgages for which the Secretary is authorized to establish a premium structure under this paragraph, notwithstanding paragraph (2)(B) of this subsection, the Secretary may establish and collect, for a period not exceeding the first 5 years of the term of the mortgage, annual premium payments in an amount not exceeding 0.75 percent of the remaining insured principal balance of the mortgage (excluding the portion of the remaining balance attributable to the premium collected under paragraph (2)(A) and without taking into account delinquent payments or prepayments), except that (i) the Secretary may utilize such authority only for such classes of mortgagors that the Secretary determines would otherwise be subject to a single premium payment collected at the time of insurance exceeding 2.25 percent of the amount of the pwalker on PROD1PC71 with BILLS HR 6694 RH VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6203 E:\BILLS\H6694.RH H6694

79 Case 8:08-cv DKC Document Filed 10/07/2008 Page 15 of original insured principal obligation of the mortgage; and (ii) for such mortgages, the Secretary may not establish or collect a single premium payment collected at the time of insurance exceeding 2.25 percent of such original insured principal obligation.. pwalker on PROD1PC71 with BILLS HR 6694 RH VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6652 Sfmt 6203 E:\BILLS\H6694.RH H6694

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81 Case 8:08-cv DKC Document Filed 10/07/2008 Page 17 of 17 Union Calendar No TH CONGRESS 2D SESSION H. R [Report No ] A BILL To revise the requirements for seller-financed downpayments for mortgages for single-family housing insured by the Secretary of Housing and Urban Development under title II of the National Housing Act and to authorize risk-based insurance premiums for certain mortgagors under such mortgages. OCTOBER 2, 2008 Reported from the Committee on Financial Services with an amendment pwalker on PROD1PC71 with BILLS VerDate Aug :46 Oct 02, 2008 Jkt PO Frm Fmt 6651 Sfmt 6651 E:\BILLS\H6694.RH H6694

82 Case 8:08-cv DKC Document Filed 10/07/2008 Page 1 of 3 Exhibit H

83 10/3/2008 Forbes.com - Magazine Article Page 1 of 2 Case 8:08-cv DKC Document Filed 10/07/2008 Page 2 of 3 OutFront Going Tribal Asher Hawkins , 12:00 AM ET The government keeps trying to crack down on down-payment assistance programs. But Christopher Russell is one step ahead of the law After celebrating their first anniversary in May, Jeffrey and Tina Giurato were eager to move out of their apartment and into a house. They found an eight-year-old, $198,000 duplex with three bedrooms in Lake in the Hills, Ill. But the couple, insurance agents, needed to buy furniture and would be shy of cash. Their loan officer told them an Indian tribe in central Maine would pony up the $5,940 they needed for the down payment. After the sale closed, the seller of the real estate would reimburse the tribe and also give it a little extra ($395) for its trouble. The matchmaker between the couple and the tribe was Christopher Russell, president of Global Direct Sales LLC in Gaithersburg, Md. He skates on thin ice. The U.S. Department of Housing & Urban Development wants to put down-payment middlemen like Russell out of business. But so far Russell has been winning the legal battles. HUD is involved because the federal government insures mortgages that banks grant to buyers like the Giuratos. Under present HUD rules, a home buyer can get help with the requisite 3% down payment from friends, relatives, a union, a charity or a government entity. But the money isn't supposed to come from anyone with an economic stake in the transaction. When it does, the stated transaction price is something of a fiction, and the requirement that buyers start out with positive equity is evaded. No-equity loans are a source of trouble. That's what the trillion-dollar mortgage crisis is all about. So, did the down payment come from the property seller? Follow the ball as it's passed among six players on the field. First, Russell wired $5,940 of what was ostensibly Penobscot Indian Nation money from an account he controls to a title company assisting at the closing. The lender, a bank taking advantage of a federal loan guarantee, put up $192,060. The eager seller, a homeowner (Russell doesn't usually work for builders or banks), was selling the home for $198,000 but collected only $191,665 (before the real estate agent's and other fees). What happened to the other $6,335? The title company wired that money right back to the Russell/Penobscot bank account. When the dust settled, the Indians had their "down payment" back, plus that extra $395. The vigorish was divided: $79 was kept by the Penobscots and $316 went to Russell's Global Direct. Global Direct is losing money now, but it's a for-profit company, and Russell, 39, aims to make a pile off it once volume picks up. Recently, he says, business has "exploded." Could it go up in smoke? In the sweeping housing legislation that President Bush signed in July in a move to end the housing crisis, there are provisions aimed at people like Russell. An existing HUD rule already discounts down payments coming as gifts from home sellers, real estate agents, home builders and other parties with an economic stake in a closing. Over the years HUD has tried to strengthen this rule. Russell and others tied up the most recent attempt in court with procedural challenges. The new legislation cuts those challenges off. Russell's new game plan: He will soon start working with at least one other entity, perhaps even a church. (Now we have seven players tossing the ball.) One group in the "alliance" will give the money to a home buyer. The other will collect repayment from the seller. For the next transaction, they will switch roles so that they take turns collecting money. That way the down-payment donors can say with a straight face that they aren't being reimbursed out of the transaction they are funding. "We're going forward," Russell says. "We believe in the program because it gets people into homes, it's economically viable--and it will be profitable for us." Russell got rich off this racket once before. A decade ago Russell and Ryan Hill, a former mortgage loan officer now acting as Global Direct's financial officer, created a tax-exempt charity called AmeriDream that would help home buyers come up with

84 10/3/2008 Forbes.com - Magazine Article Page 2 of 2 Case 8:08-cv DKC Document Filed 10/07/2008 Page 3 of 3 down payments. This outfit teamed up with a for-profit firm called Synergistic Marketing. From the seller AmeriDream got, besides reimbursement of its down payments, a fee averaging $800. It kicked 40% of that fee over to Synergistic, in which Russell and Hill were minority investors. By 2002, Russell's last year as chief executive, the charity called AmeriDream cleared $6 million on $182 million in revenues. When he cashed out of Synergistic that year he collected $3 million. Hill, who left AmeriDream with Russell, made $11 million off his Synergistic stake, which he sold in After a few years of not very successful real estate ventures Russell and Hill decided to go back into down-payment brokering. After it dawned on Russell that Native American tribes, as government entities, were still approved sources for down-payment gifts, he approached the Penobscot tribe and lent it money to create a housing-grant program. Together Russell and Ryan own 64% of Global Direct Sales. Their strategy has caught on. At least four other tribes have since gone into the down-payment assistance business with other middlemen. The Penobscot operation was barely up and running when HUD, which blames down-payment assistance for $4.6 billion in losses on its mortgage guarantees, announced last year it was going to disregard down payments coming from any entity that gets reimbursed. (You'd think that this was already covered by the rule against having an economic stake in a sale, but hairsplitting lawyers can argue otherwise.) Russell and others in this racket put up a fight, and in March a federal judge put the reimbursement rule on ice by declaring that HUD hadn't allowed enough time for public comment. The July legislation makes that court battle moot by codifying the rule into a statute. Now what? HUD could presumably enact a regulation to ban the kind of pass-along game that Russell has in mind. But that move might be tied up in court for years. In the meantime weeds are growing in the driveways of unoccupied houses, $192,000 houses with federally guaranteed mortgages are at risk of collapsing in value to $160,000, and Russell can argue that he is helping people with moderate incomes buy homes. The authorities might be inclined to look the other way. "I've never claimed this was entirely altruistic, but any business you do you have to feel good about," says Russell. "And I truly believe this does help people." Subscribe to Forbes and Save. Click Here.

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86 Case 8:08-cv DKC Document Filed 10/07/2008 Page 2 of 2 From: WordPress <wordpress@whistleblower.ml-implode.com> Subject: [The Mortgage Whistleblower] Please moderate: "The Penobscot Indian Tribe Down Payment Grants" Date: September 10, :21:19 AM PDT To: kraileyus2@aol.com A new comment on the post #91 "The Penobscot Indian Tribe Down Payment Grants" is waiting for your approval Author : Christopher Russell (IP: , c hsd1.md.comcast.net) iam_oy@hotmail.com URL : Whois : Comment: If you are going to throw stones, you shouldn't live in a glass house. First, you need to immediately remove the word "scam" in connection to the Penobscot Indian Nation. Your bitter diatribe does not need to include them, they have done nothing wrong nor do they deserve this attack. Now, let's start with the "secret" testimony of "Mr. House". His perjured testimony was completely discredited four years ago!! We were suing Mr Brandon for embezzling over $660,000 when this joke of a hearing took place. He had attempted to blackmail us for another $250,000, threatening to turn us into the IRS. Since we did nothing wrong, nor did we do any of the things he accused us of doing, we refused to pay the hush money he was demanding. As a result, James was able to trick the incompetent, grandstanding Senator Shelby into including him as a witness in that sham hearing. You should have watched the video, where he testified behind a screen with a voice modulator and two US Marshalls by his side. The hearing was nothing but political grandstanding and if there was any truth to his accusations, I would have had a visit from the FBI by now. So, you need to remove your libelous article here. For your information, I will seek damages, as I have now collected nearly a quarter million from Mr. Brandon so far. (We allow him to make monthly payments. I won't be so generous with your "scam" blog.) I don't have the time or patience to go line by line through every factual error and lie in your article. Let's just say, you need to remove it or bear the consequences of your actions because you have made repeated "statements of fact" which are untrue and if you had done a shred of investigation, you would know that. Also, you failed to tell everyone that I readily participated in your joke of an interview. If you actually cared about reporting the truth, you would have simply asked me about the things you wrote about but since you never asked me a single question about AmeriDream and even acted surprised when I told you I was the Founder of AmeriDream, it!s obvious that this is a hit piece written by an amateur hack. Real and credible news organizations like, the Washington Post, Wall Street Journal, Forbes and others have all investigated this to the nth degree and they never reported the bullshit you are reporting because they found most of it to be gossip and innuendo which was completely untrue. Incompetent and irresponsible armchair sleuths like you are why the internet is full of lies, half truths and down right bullshit. Fortunately, our judicial system offers a way for me to seek recompense for the harmed caused by a fraud, such as you. Spend the money for a good lawyer because I use the best and I am coming after you hard. I would have answered you truthfully on anything you could have asked me about but instead, you thought you were being so slick with me. Now, you have reported a bunch of lies and factually false statements which have harmed me professionally and personally. Approve it: Delete it: Spam it: Currently 1 comment are waiting for approval. Please visit the moderation panel:

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88 9/18/2008 The Mortgage Whistleblower» Blog Archive» What the SFDPA Administrators Don t Want Yo... Page 1 of 7 Case 8:08-cv DKC Document Filed 10/07/2008 Page 2 of 8 Expand Your FHA Footprint FHA/HUD and Mortgage Broker/Banker Licensing Nationwide (800) Ads by Google The wake up call for the mortgage industry Home About Do_the_Math The Truth About DPAs About Do_the_Math The FHA Seller-Funded Down Payment Grants Information Page The Seller-Funded DPA Organizations The Penobscot Indian Tribe Down Payment Grant Program House Financial Services Committee Approves Markup of H.R > ML's FHA Forum ML Implode Home What the SFDPA Administrators Don t Want You To Know: Part 1, The Penobscot Indian Tribe Down Payment Grant Program September 15, :28 pm In researching sovereign nation down payment payment grants, I was expecting nothing more than a bunch of boring stuff on down payment grants. Surprisingly, what I found was a trail of intrigue which had nothing to do with the Penobscot Indian Tribe, and everything thing to do with the business history of the program administrators, and nature of the down payment grant business itself. The content of the article is so explosive as to yield a scathing comment from Penobscot Indian Nation Grant America Program administrator, Christopher Russell which included this statement: (Click here to read entire comment) So, you need to remove your libelous article here. For your information, I will seek damages, as I have now collected nearly a quarter million from Mr. Brandon so far. (We allow him to make monthly payments. I won't be so generous with your "scam" blog.) After seriously considering Mr. Russell s statement, I decided to comply with one request, and that is to remove the word scam. I will not, however, back down from publishing this article or the content therein which is all a matter of public record. I have, however, added more links and additional information. This article is crucial for the public and the media because it involves the history of the individuals who created the sovereign grant program, administer the program, and who have sued the Department of Housing and Urban Development to prevent the program from being terminated. So pull up a chair, sit down, and prepare for enlightenment. First, a bit of background the Penobscot's Grant America Program founders Russell & Hill: The Penobscot Indian Nation Grant America program is the brain child of Ameridream founders, Christopher Russell and Ryan Hill who according to an article in Forbes netted a combined $14,000,000 from their business interests involving Ameridream. You may recall the 2004 scandal involving Russell and Hill s purported misallocation of Ameridream assets as revealed by the testimony of Mr. House during the June 22, 2004 Congressional Hearing on Charity Oversight and Reform. Click here to view the entire transcript of the Congressional Hearing that is posted on the Senate Finance Committee website and is a matter of public record. Among other things, Mr. House provided testimony that the founders of Ameridream, referred to as Mr. Red and Mr. White, used their position and control over the charity to divert millions to their private business interests. According to Mr. House, Mr.'s Red and White (Russell and Hill), participated with a third party (Mr. Blue) to create Synergistic Marketing, LLC which funneled millions from the charity. Mr. House s statements appear to correlate with information shown on Ameridream s IRS Return of Organization Exempt from Income Tax (form 990) for years 2000 to The returns for this period show $26,483,916 in payments from Ameridream to Synergistic Marketing, LLC. The returns also contain disclosures that two officers in Ameridream were members of Synergistic Marketing, LLC. After Russell and Hill left the company, the disclosure was changed to state that two former officers were members of Synergistic Marketing. Additionally, Ameridream's 990 returns for 2002 and 2003 include the following disclosure: In 2003, AmeriDream s current Board of Directors and Management became aware of certain transactions and arrangement from prior years that present potential for excess benefit within the meaning of section 4958 of the Internal Revenue Code. At that time, AmeriDream voluntarily sought guidance from the IRS. As of this filing, the specific nature and scope of those transactions is under review. Once the review is completed and if any excess benefit transactions are identified, AmeriDream will make the required disclosure on either an amended return for 2003 or a return for a subsequent year as appropriate.

89 9/18/2008 The Mortgage Whistleblower» Blog Archive» What the SFDPA Administrators Don t Want Yo... Page 2 of 7 Case 8:08-cv DKC Document Filed 10/07/2008 Page 3 of 8 Hence, this portion of Mr. House s testimony appears to be substantiated, at least in regard to Russell and Hill's participation in Synergistic Marketing, LLC. Please note that payments to Synergistic Marketing from 2000 to 2003 ranged between 36% to 40% of Ameridream s gross income less actual funded grants. Click here for a link to Ameridream's IRS returns (990's) from 1999 to The testimony also accused the founders of Ameridream of creating an investment company, Valao Mortgage, and funding the company with a $4,000,000 loan from Ameridream. Mr. House stated that Avalar Properties, another LLC of Russell's, borrowed $1,000,000 through Valao. This, too, was supported by information on Ameridream s 2002 IRS return (990) which shows a $4,000,000 loan to Valao Mortgage. While an affiliation between Russell and Hill and Valao was not confirmed, the Maryland Secretary of State filing for Valao shows the same business address at the time of filing as Ameridream. The Maryland Secretary of State filings, however, confirm Christopher Russell as the Agent for Service for Avalar Properties, and the address listed for Avalar Properties is the same address shown for Valao in various business listings. Mr. House s testimony also included an allegation that Russell and Hill (aka Mr.'s Red and White) purchased a jet using Ameridream as loan guarantor. The jet was purportedly used for Russell and Hill's personal enjoyment including golf trips to Mexico. While it is difficult to trace the liability on the Ameridream returns (form 990), the 2002 return notes a loan guaranty in exchange for a 10% interest in Rycho, LLC which was organized by Russell and Hill. Both Russell and Hill are showing current affiliation with Rycho Funding and Rycho Aviation which are one in the same. There is also a settled lawsuit involving Ameridream, Russell, Hill, and Rycho Aviation LLC as defendants against plaintiff American Flight Group. In addition to the purported misallocation of Ameridream funds and inappropriate loans and guaranties, Mr. House also speaks of Mr. Red s (Russell s) sheltering of approximately $3,000,000 in income by establishing residency in the US Virgin Islands and becoming a shareholder in a U.S. Virgin Islands company. According to Mr. House, the company acquired an economic development certificate from the U.S. Virgin Island government which provided a tax credit of over 95% of the taxable income. While this statement is unconfirmed, Russell is open regarding his investments in St. Croix and prior partnership with International Asset Management. Aside from minor lawsuits, there has been no verifiable recourse against Russell and Hill except for a Federal Tax Lien of $1,104,575 against Hill in 2006 for the 2001 tax year. It is interesting to note that in 2006, Ameridream won an arbitration decision against Christopher Russell regarding Russell s registration of the domain name: ameridreamprogram.com. According to the National Arbitration Decision, Russell registered the domain name one day prior to the expiration of a binding non-compete agreement. In addition to the copy cat web site, the decision states Russell registered additional web sites utilizing the F word along with the name Ameridream as a protest site which accused Ameridream of fiscally irresponsible policies and squandering of public benefit funds. This is especially ironic coming from Russell who has been accused of the exact same thing with Ameridream. In addition to allegations that Russell acted in bad faith by registering copycat and defamatory domain names, Ameridream claimed Russell attempted to extort $5,000 per domain from Ameridream by requesting that Ameridream purchase the domains rather than incur thousands in legal expenses. The actions of Russell were ultimately found to be made in bad faith, and the decision rendered was in favor of Ameridream. Following this fiasco, Russell and Hill created a new venture known as the Dp Funder Program and the Owner s Alliance. The Dp Funder is another type of seller-funded down payment program which involves payment of earned commission to the buyer instead of gift or grant. The program is simple. The buyer signs with Global Direct Sales, LLC and becomes a dealer. As a dealer, the buyer s job is to convince the seller to purchase a membership in the Owner s Alliance which offers various discounts and costs between 3% to 22% of the sales price plus processing fee. Once the seller enrolls in the Owner s Alliance program, Global Direct Sales, LLC transfers the commission to a savings account which Global opens in the borrower s name at Sandy Springs Bank of Maryland. Of course, Global is the primary account signor, and maintains absolute control of the account. In the event that the transaction does not close, funds revert back to Global unless the seller pays a $295 fee to extend the contract. Click here to see documents. At closing, funds for the membership fee is remitted to Rycho Funding, LLC and is shown as a payoff on the HUD-1. Global Direct Sales Dp Funder web site gives explicit instructions to show the source of buyers down payment as cash on the loan application, and to show Global Direct Sales, LLC as secondary employment on the application using the position title of Independent Dealer. Revenue for Global Direct Sales, LLC ranges between 1% to 2% of the sales price plus $300 processing fee. The latest version by Russell & Hill: Russell and Hill's current venture involves the administration of Sovereign Nation grants. According to Russell in a phone conversation, he came up with the idea in 2006 when the IRS began cracking down on the non-profit seller-funded grant providers. It occurred to Russell that the Sovereign Nation status of tribes exempted the Tribes from the recent IRS ruling revoking the non-profit status of agencies that participated in sellerfunded down payment grants. Shortly thereafter, according to Russell "he and Hill approached the Penobscot Indian Tribe and launched the Grant America Program" which he states "is ran exclusively by Global Direct Sales, LLC." Russell also stated "the Penobscot Indian Tribe declined the option of processing grants for a $100 transaction fee, and instead only receives 20% of the proceeds." In 2007, after HUD published their Final Rule in the Federal Register eliminating seller funded grants, Global Direct Sales and the Penobscot Indian Tribe filed suit in Federal Court for an injunction against HUD in implementing the rule. The Penobscot suit was in addition to suits filed by Nehemiah and Ameridream costing the Federal Government and taxpayers time and money. Finally in March 2008, HUD s Final Rule was vacated and the matter was remanded back to HUD to address the deficiencies in the rule-making process in accordance with the Administrative Procedures Act. On April 3, 2008, HUD and the Penobscot Indian Tribe executed a Stipulation to Resolve Remaining Claims and Dismiss Action which the Grant America Program website posts as a HUD approval letter. Click here to view the Stipulation of Dismissal. Not only is the Stipulation and Dismissal not an approval letter, it doesn t provide specific approval of seller-funded grants as Sovereign Grant providers claim. The Stipulation and Dismissal is merely a temporary settlement which gave HUD the opportunity to publish a revised proposed rule and re-open the comment period. Click here to view the proposed revised rule that HUD published in the Federal Register on June 16th, What the stipulation provides is confirmation that the Penobscot Indian Tribe's Sovereign Nation "government entity" status qualifies the tribe to participate in the FHA program as an acceptable downpayment assistance provider as per Chapter 2, Section 2-10(C) of the REV 5. As such,

90 9/18/2008 The Mortgage Whistleblower» Blog Archive» What the SFDPA Administrators Don t Want Yo... Page 3 of 7 Case 8:08-cv DKC Document Filed 10/07/2008 Page 4 of 8 loans involving PIN grants are insurable under standing HUD rules at the time. Regardless of the Stipulation and Dismissal, the seller contribution to the Grant America Program is clearly a concession that is confirmed by IRS ruling , which only allows sellers to deduct the SFDPA contribution as a sale expense and not as a charitable deduction. The PIN program Seller Enrollment form itself solidifies the fact that it is a sales concession by stating that the service fee (which includes down payment contribution) may be deductible as a sale expense and is not a charitable contribution. See final paragraph of Seller Enrollment Form: Click here to view the form. Excerpt: "Seller understands that the G.A.P service fee may be tax deductible as a selling expense, depending upon Seller's personal circumstances. Seller should consult a tax advisor. Seller further acknowledges that the G.A.P. service fee is a fee for service, and is not a charitable contribution. No changes may be made to the pre-printed text of this Agreement, without the prior written consent from PIN Fair Housing Administration." The PIN-FHA gift letter also confirms that it is a concession: Click here to view gift letter. Excerpt: The IRS issued Revenue Ruling , on May 22, This ruling implies that for TAX PURPOSES ONLY, similarly structured transactions are not to be treated as a gift for income tax purposes. Similar down payment funds are to be treated as a rebate against the purchase price of the property, lowering the purchaser's basis in the property. Please seek competent legal and tax advice before entering into this agreement. This information is not to be construed as tax advice. Each individual's situation may be different and advice should be provided by a competent tax advisor. By their own admission, the seller contribution is a sales concession and not a charitable donation. Hence, the Penobscot Indian Tribe isn t really providing assistance and is merely laundering the down payment for a fee, no different than the other seller-funded down payment assistance (SFDPA) providers. Nonetheless, the Stipulation and Dismissal predates H.R. 3221, and seller-funded down payment grants will not be allowed for loans approved after October 1, 2008 for FHA loans regardless of provider as per Federal Law. In speaking with Christopher Russell, he confirms that the changes to the National Housing Act which prohibit seller-funded down payments also apply to Sovereign Nation grants. Fortunately, Russell states: "That the impact to the tribe will be minimal and will not result in job losses due to the program being entirely administered by Global Direct Sales. At most, the Tribe stands to lose approximately $250,000 a year in revenues. Also, the Penobscot s manned Fair Housing Department will still be able to provide Portable Housing and Indian Block grant opportunities for their Tribal members and other types of legitimate, non seller funded assistance, for Tribe members." However, not to be dissuaded from the seller-funded down payment assistance business, Russell and Hill are already working on an alternative program through the Down Payment Grant Alliance which is a URL Russell states he founded in Their idea is to create a network of non profit companies and grant providers and have one party provide the grant while another party receives the donation. According to Russell, the seller contribution would not be tax deductible as a charitable contribution and would be considered a sale expense. This grant alliance sounds more like convoluted down payment shell game than a down payment assistance program due to the stated purpose to circumvent public law. When asked about the adverse effects of seller-funded down payment grants and what could be done to mitigate risks to borrowers and the FHA fund, Russell stated that "Some steps that can be taken to mitigate risk include requiring the seller to sign a certification that the sales price was not increased for the grant, implementing strict appraisal controls, and limiting borrower credit scores to a minimum of 580." When asked whether limiting credit scores might displace low income and ethic groups who traditionally have lower scores as well as multiple borrowers, Russell stated "it required some thought." Russell did assert that seller-funded down payment assistance loans had a 92-94% success rate, however, I cannot confirm this information. It is no secret that FHA s delinquency and default rate are rising dramatically. As I have outlined in a prior entry, currently, 1 in 6 borrowers are delinquent or in default on their FHA loan and that number is increasing. Furthermore, there is a clear correlation between the expanding FHA delinquency rate and the rise in seller funded down payment grants. As you can see from this chart, the FHA delinquency rate rose in tandem with the increase use of non profit down payment grants as the source of down payment.

91 9/18/2008 The Mortgage Whistleblower» Blog Archive» What the SFDPA Administrators Don t Want Yo... Page 4 of 7 Case 8:08-cv DKC Document Filed 10/07/2008 Page 5 of 8 While many who argue the merits of seller funded down payment grants cite the negative impact on sales prices and values that eliminating the programs will have on the market, the reality is that the economy needs inflation relief. Lower sales prices actually benefit homebuyers who have been displaced by astronomical home prices and rents. Considering that incomes did not rise in tandem with price increases caused in recent years by irresponsible lending, a little inflation relief is exactly what Americans need to improve their quality of life. The last thing that Americans and the economy need is anything that sustains continued housing inflation. While adding 3-5% to the sales price may not sound like much, the increases gradually add up in areas where these types of grants are prevalent resulting in higher overall prices. Furthermore, the current proposal, H.R. 6694, which is sponsored by the Representatives Al Green, Gary Miller, Christopher Shays, Maxine Waters along with Ameridream and Nehemiah Corporation, proposes increases in mortgage premiums to offset the risk of SFDPAs to the FHA insurance fund. H.R included a provision which placed a moratorium on risk based premiums that are based on borrower credit decision scores. However, credit score based premiums or eligibility create a barrier for racial minorities and socioeconomically disadvantaged borrowers who typically have lower scores. The proposal of risk based credit scores along with higher prices caused by seller funded down payment grants could displace the very borrowers that seller funded down payment grant providers claim to help. The taxpayers and FHA should not be forced to sponsor continued lending abuse via seller funded down payment grant schemes. Posted in Uncategorized Short Sale Foreclosures Step-by-Step Guide Getting Banks To Discount Mortgages up to 40%! Down Payment Assistance Get $50,000 DownPayment Grants Never Repay - Get Your Free Kit Responses to What the SFDPA Administrators Don t Want You To Know: Part 1, The Penobscot Indian Tribe Down Payment Grant Program 2. As an underwriter I had my dealings with this sovereign nation grant. I did not allow them as I believe that this is not a municipality of the US Government which is what they were trying to deal under. Since they are SOVEREIGN and have their own government this was my semi-legal conclusion. By Elizabeth on Sep 16, This came as a surprise to you? You are just now seeing this smoke and mirror scam? Anyone with two weeks in the industry figured that out long ago. By Ron Scribner on Sep 16, Ameridream and these SCAMMERS are a couple of sue-happy criminals. Where the f**k is the FBI when you need them?? By BlowmeChrisRussell on Sep 16, Chris is an embarrassment to the human race. By SteveP on Sep 18, good sleuthing. insiders may say what they like, the idea is this info belongs to the large. don t rest with a smug comment, spread some knowledge to the ignorant. explain it to a layman! By chuck beef, coo on Sep 18, 2008

92 9/18/2008 The Mortgage Whistleblower» Blog Archive» What the SFDPA Administrators Don t Want Yo... Page 5 of 7 Case 8:08-cv DKC Document Filed 10/07/2008 Page 6 of 8 7. Bravo! I thought I was the only one that compiled the facts about this never-ending fraud. Since you are such an astute observer of this debacle, I offer a tidbit entitled Motion to Seal Motion - Denied I wonder why Syphax and Harris wanted to seal this? Maybe this is the offending language: Plaintiff contends that defendant has not complied with a prior court order to produce documents sufficient to identify what happened to the $7 million Don Harris received from Invision from 1998 through Rollin in the dirt fightin over the loot. Enjoy! By Winston Smith on Sep 18, It never ceases to amaze me the lengths to which people will go in order to attempt to siphon off some of the transaction cashflow from home sales to unsuspecting and unsophisticated buyers. Call it what you will - whether it fits the legal definition of fraud isn t really the point. The point is that the unsophisticated thinks he s getting a deal when in fact nothing of the sort of is happening. When you look at the various DPA web sites and information from the seller s point of view (how they pitch them to the sellers) you will hear how they will encourage fullprice offers and in fact may encourage people with fewer resources (that s shorthand for can t afford the house ) to buy anyway. How does this promote SUSTAINABLE housing? It doesn t, but it sure as hell makes the folks in the middle rich! HUD was right to try to ban this crap and I hope on the second go-around they are successful. Every one of these firms needs to take a dirtnap. By Karl on Sep 18, Elizabeth, we need more underwriters like you. Lenders could shut don t this insanity in an instant by simply refusing to accept SFDPAs. By the way, carefully check the non profit status of participating companies if you receive one of these, and when I say check the status, I mean call the IRS and have the organizations verified name and Tax ID in hand (even if it is a religious organization). Ron, everyone knows SFDPAs are a scheme (IRS words), but not everyone knows what is going on behind the SFDPAs and what is going on behind the scenes with the companies. This is the purpose of this series on SFDPA providers. Chuck Beef, need bloggers and You Tuber s to pick up this stuff and feed it to the layman. This is a more of a research report than anything. Most of the bold lettering is links to articles, reports, filings, and websites and is not there for effect. This blog is as much as a resource for other bloggers and journalists as it is for commentary. Spread the word!! Winston Smith, again. Thank you for the link. I still need about 10 cases from Sacramento. I appreciate your comments and I appreciate you taking the time to visit the site and read the information. Karl, its an honor to have you visit the blog. I reposted your comment from the first entry that was deleted. Also signed the new petition you have up: As always, I appreciate the comments. I also appreciate information tips and links. Please feel free to share You Tube videos!!! By Do the math on Sep 18, 2008 Post a Comment Name (required) (will not be published) (required) Website Submit Comment

93 9/18/2008 The Mortgage Whistleblower» Blog Archive» What the SFDPA Administrators Don t Want Yo... Page 6 of 7 Case 8:08-cv DKC Document Filed 10/07/2008 Page 7 of 8 Loans Just for TEACHERS Get Your CalSTR Loan Approved Today CalSTRS Approved Direct Lender 12YR courtesymortgage.com Mortgage Insurance Leads Filter ARMS + Credit & Debt Free! Easy Pre-Made Mortgage Campaigns ResponseMaker.com Pages About Do_the_Math The FHA Seller-Funded Down Payment Grants Information Page The Seller-Funded DPA Organizations The Penobscot Indian Tribe Down Payment Grant Program House Financial Services Committee Approves Markup of H.R Recent Comments Do the math on What the SFDPA Administrators Don t Want You To Know: Part 1, The Penobscot Indian Tribe Down Payment Grant Program Karl on What the SFDPA Administrators Don t Want You To Know: Part 1, The Penobscot Indian Tribe Down Payment Grant Program Winston Smith on What the SFDPA Administrators Don t Want You To Know: Part 1, The Penobscot Indian Tribe Down Payment Grant Program chuck beef, coo on What the SFDPA Administrators Don t Want You To Know: Part 1, The Penobscot Indian Tribe Down Payment Grant Program SteveP on What the SFDPA Administrators Don t Want You To Know: Part 1, The Penobscot Indian Tribe Down Payment Grant Program Recent Posts House Financial Services Committee Approves Markup of H.R What the SFDPA Administrators Don t Want You To Know: Part 1, The Penobscot Indian Tribe Down Payment Grant Program FHA Raises and Lowers Mortgage Insurance Premiums with RBP Moratorium Return of the Living Debt: How Lenders Enable Predatory Zombie Debt Collectors The FHA Non-Approved Broker Debate Part II: End of the HECM Advisor Program Archives September 2008 August 2008 July 2008 June 2008 April 2008 March 2008 Categories Uncategorized Agencies Department of Housing and Urban Development FHA - Federal Housing Administration The Federal Trade Commission VA Loan Guaranty - Department of Veterans Affairs Blogroll Mr. Mortgage The Market Ticker WordPress Planet Forums Implode-O-Meter FHA Forum Mortgage Lender Implode-O-Meter Forum

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95 Case 8:08-cv DKC Document Filed 10/07/2008 Page 1 of 9 Exhibit K

96 Case 8:08-cv DKC Document Filed 10/07/2008 Page 2 of 9 This is Google's cache of It is a snapshot of the page as it appeared on Aug 19, :36:53 GMT. The current page could have changed in the meantime. Learn more These search terms are highlighted: christopher russell ameridream Text-only version Domain Statute UDRP Disputes Home Blog Alleged Cybersquatters Database Someone Took Your domain? Report it! UDRP Rules & Decisions NATIONAL ARBITRATION FORUM DECISION Ameridream, Incorporated v. Christopher Russell Claim Number: FA PARTIES Complainant is Ameridream, Incorporated ( Complainant ), represented by Dennis B. Lisbon, of Ameridream, Incorporated, 200 Professional Drive, Suite 400, Gaithersburg, MD Respondent is Christopher Russell ( Respondent ), Woodfield Rd, Suite E, Gaithersburg, MD REGISTRAR AND DISPUTED DOMAIN NAME The domain name at issue is <ameridreamprogram.com>, registered with Austrian. PANEL The undersigned certifies that he has acted independently and impartially and to the best of his knowledge has no known conflict in serving as Panelist in this proceeding. Jacques A. Léger, Q.C. as Panelist. PROCEDURAL HISTORY Complainant submitted a Complaint to the National Arbitration Forum electronically on April 12, 2006; the National Arbitration Forum received a hard copy of the Complaint on April 14, On April 12, 2006, Austrian confirmed by to the National Arbitration Forum that the <ameridreamprogram.com> domain name is registered with Austrian and that the Respondent is the current registrant of the name. Austrian has verified that Respondent is bound by the Austrian registration agreement and has thereby agreed to resolve domain-name disputes brought by third parties in accordance with ICANN s Uniform Domain Name Dispute Resolution Policy (the Policy ).

97 Policy ). Case 8:08-cv DKC Document Filed 10/07/2008 Page 3 of 9 On April 20, 2006, a Notification of Complaint and Commencement of Administrative Proceeding (the Commencement Notification ), setting a deadline of April 20, 2006 by which Respondent could file a Response to the Complaint, was transmitted to Respondent via , post and fax, to all entities and persons listed on Respondent s registration as technical, administrative and billing contacts, and to postmaster@ameridreamprogram.com by . A timely Response was received and determined to be complete on May 5, An Additional Submission from the Complainant was received on May 9, On May 10, 2006, pursuant to Complainant s request to have the dispute decided by a singlemember Panel, the National Arbitration Forum appointed Jacques A. Léger, Q.C. as Panelist. RELIEF SOUGHT Complainant requests that the domain name be transferred from Respondent to Complainant. PARTIES CONTENTIONS A. Complainant Complainant asserts that it promotes home ownership by providing and administering a downpayment gift assistance program; it maintains a website at the domain name < to provide buyers and lenders with information on the program offered. Its mark AMERIDREAM is registered with the United States Patent and Trademark Office (hereinafter the USPTO); Complainant alleges that home purchasers and lenders rely on the AMERIDREAM mark and the above mentioned website to obtain information on Complainant services. Complainant further contends that Respondent registered the disputed domain name on March 31, 2006, although the WHOIS refers to registration on March 29, 2006, and that said domain name revolves to a website that contains links to other downpayment assistance programs and resources. Furthermore, Complainant alleges that the domain name in dispute is legally equivalent and confusingly similar to its mark, if not nearly identical. The dominant portion of said domain name is AMERIDREAM and the suffix program added does not prevent the trademark from being nearly identical, a common descriptive term being insufficient to avoid a likelihood of confusion between the domain and the mark, nor does the addition of a top level domain (.com) to the mark prevent the domain in dispute to be confusingly similar to the Complainant s mark. Complainant further asserts that Respondent has no rights or legitimate interests in the domain name in dispute, as it is not known by the name AMERIDREAM, nor any current connection or affiliation with Complainant. Complainant further contends that it was originally founded by Respondent Christopher Russell along with Ryan Hill, both having signed Non-Competition Agreements that expired on March 30, 2006, thus one day after the domain names (below mentioned) were registered; in Complainant s view, this is evidence that the Respondent intended to use the disputed domain name to compete or disparage Complainant. Finally, Complainant contends that Respondent was one of the founders of the Complainant, and thus intimately familiar with Complainant services and reputation, represented by the AMERIDREAM mark; the use of this mark in connection with the disputed domain name is intended to harass Complainant, to cause damage to its reputation and to create confusion, and indicates bad faith.

98 indicates Case bad 8:08-cv DKC faith. Document Filed 10/07/2008 Page 4 of 9 Complainant also alleges that the use of its trademark in its entirety with the addition of a descriptive word is an indication to trade on the goodwill of Complainant, and is also an indication of bad faith. B. Respondent Respondent asserts that the addition of a distinctive word is dissimilar enough for the USPTO to believe it does not cause confusion, as the mark AMERIDREAM was filed on October 30, 2001, and the mark AMERIDREAM ENTERPRISES was filed on January 20, 1999, and is still in use by another party. Thus, by the addition of the distinctive word program, the domain name in dispute is neither identical nor confusing with Complainant s mark. Respondent alleges that it has created a protest site by adding the word fuck, in addition to other domains adding the word program, to communicate Complainant s mishandling of public benefit monies. According to Respondent s contentions, the use of a word loaded with criticism would make it clear to visitors that they have not reached the official AMERIDREAM website, and that not even an inexperienced Internet user would consider the disputed domain name and the mark confusingly similar. Respondent contends that ICANN Policy provides as a complete defense for the Registrant s continued use of the domain by stating Respondent is making a legitimate noncommercial or fair use of the domain name, without intent for commercial gain to misleadingly divert consumers or to tarnish the trademark or service mark at issue. Respondent s site was established on April 29, 2006, and has been maintained as a legitimate protest site directed towards the Complainant. Respondent asserts that he is one of the founders and former CEO of Complainant, and is dedicated to providing information to the public with the hope that it will be able to provide public pressure to better regulate rogue exempt organizations. Respondent maintains several domains: <fuckameridream.com>, <fuckameridream.net>, <fuckameridream.org>, <ameridreamprogram.net> and <ameridreamprogram.org>, in addition to the one disputed in this case. All of these sites are directed to the protest site Fuck Ameridream. Respondent also argues that it operates the <ameridreamprogram.com> domain name with a legitimate First Amendment purpose of expressing its views about Complainant. It further notes that the domain is an information site and that Respondent does not gain any commercial advantage from its use, nor does it operate the site with the purpose of competing or disparaging Complainant s service mark. Furthermore, Respondent argues that the Complaint was filed just ten days after the disputed domain name was acquired, and thus that it did not have adequate time to develop and execute a protest site that was the intended use. Respondent states that within thirty days of acquiring the disputed domain name, it has made legitimate use of it, dozens of members of the public having visited the site and several participated in the discussions. Finally, Respondent asserts that Complainant must show both bad faith in registration and use of the domain name in dispute, and that it has not met its burden. Registration was done in good faith on March 31, 2006, with the intention of launching a protest site, to convince AmeriDream to adopt fiscally responsible policies in the use of public benefit funds. The protest site is damaging to AmeriDream as it informs the public of the gross mismanagement and squandering of public monies; Respondent has never wished to compete or economically harm AmeriDream, and Complainant s only evidence of bad faith is the fact that the Respondent was formerly employed by Complainant.

99 Case 8:08-cv DKC Document Filed 10/07/2008 Page 5 of 9 C. Additional Submissions Complainant submits that subsequent to initiating this proceeding, Respondent changed the content of its website in order to feature a discussion on said proceeding; however, Respondent s communications to Complainant don t reflect the intent to maintain a protest site but rather the intent to maintain the ownership of the domain name in dispute. Complainant also asserts that Respondent is trying to demonstrate that because there is a third-party trademark registration also including the word AMERIDREAM, it must follow that the combination with any other name is sufficient to avoid the likelihood of confusion. Complainant argues that the services offered by the third-party company are unrelated to its services, while Respondent is offering a competitive program and disrupting Complainant s business; furthermore, the presence of other potential infringers does not vitiate the confusion caused by Respondent s use of the disputed domain name. The addition of the generic term program does not create a new mark, according to Complainant, nor does adding suck, or as in this particular case fuck, to a mark prevent the domain name from being confusingly similar. Complainant alleges that prior to the proceedings, Respondent demonstrated the intention to compete with or to disrupt Complainant s business; Respondent s direct communications with Complainant demonstrate the launching of a downpayment assistance program from Respondent at the domain name in dispute, and thus the offering of a competing program. Furthermore, another subsequent to the proceedings was sent to Tom Carmody, the former Chairman of the Complainant s Board, in which Respondent indicated that it was willing to sell the domain names, and suggested to Complainant to cut the losses now. Complainant asserts that Respondent s attempt to profit from the sale of the disputed domain name, in excess of its value, is indicative of bad faith. In response to Respondent s statements to the effect that bad faith in both registration and use of the domain name in dispute, Complainant asserts that Respondent sent the information that it had the intent to offer a competing downpayment assistance program, and further sought payment in exchange for the transfer of the domain name. Respondent s admonition to cut the losses is, according to Complainant, a threat to continue to harass Complainant. Finally, Respondent alleged that it had insufficient time to prepare a protest site; in Response to that statement, Complainant contends that Respondent was able to change promptly the content of the website following the initiation of the proceeding. FINDINGS Complainant is the owner of registered trademark Number 2,578,724, issued June 11, 2002 (AMERIDREAM), and the domain name in dispute, <ameridreamprogram.com>, registered on March 29, 2006, is confusingly similar with said trademark. Complainant and Respondent are not currently affiliated in any way; Respondent registered various domain names, in addition to the one in dispute, in order to protest against Complainant s policies on managing the public monies, and this is pointing away from legitimate rights or interest in the domain name in dispute. The use of the domain name by Respondent leads, for reasons stated below, with respect to evidence adduced and all surrounding circumstances, to an indication of bad faith.

100 Case 8:08-cv DKC Document Filed 10/07/2008 Page 6 of 9 DISCUSSION Paragraph 15(a) of the Rules for Uniform Domain Name Dispute Resolution Policy (the Rules ) instructs this Panel to decide a complaint on the basis of the statements and documents submitted in accordance with the Policy, these Rules and any rules and principles of law that it deems applicable. Paragraph 4(a) of the Policy requires that the Complainant must prove each of the following three elements to obtain an order that a domain name should be cancelled or transferred: (1) the domain name registered by the Respondent is identical or confusingly similar to a trademark or service mark in which the Complainant has rights; and (2) the Respondent has no rights or legitimate interests in respect of the domain name; and (3) the domain name has been registered and is being used in bad faith. Identical and/or Confusingly Similar Complainant has argued that the disputed domain name, <ameridreamprogram.com>, registered on March 30, 2006 in the name of Christopher Russell, is confusingly similar to its mark AMERIDREAM, filed with the United States Patent and Trademark Office ( USPTO ) on October 30, 2001 (Reg. No. 2,578,724 issued June 11, 2002). As per this registration, Complainant has established rights in the mark pursuant to Policy 4(a)(i). As the decisions Innomed Techs. Inc. v. DRP Servs., FA (Nat. Arb. Forum Feb. 18, 2004) and U.S. Office of Pers. Mgmt. v. MS Tech. Inc., FA (Nat. Arb. Forum Dec. 9, 2003) have recognized: Once the USPTO has made a determination that a mark is registrable, by so issuing a registration, as indeed was the case here, an ICANN panel is not empowered to nor should it disturb that determination. The Panel agrees with these decisions; the issuance of a Registration certificate by the empowered US federal authority on trademark matters is a scheme to regulate trade and commerce in relation to trademarks, and unless registration is shown invalid, it gives its owner the exclusive right to the use of said trademarks in respect of those wares or services for which it is registered. On that basis, Complainant has satisfied its burden on the first element. Complainant s contentions are to the effect that merely adding a commonly used term, as in the word program to the mark AMERIDREAM, does not vitiate the possibility of confusion. The Panel finds that the suffix added to the disputed domain name does not sufficiently distinguish Complainant s mark from the domain name in dispute, and neither does the addition of the top level name.com. As in Sony Kabushiki Kaisha v. Inja, Kil, D (WIPO Dec. 9, 2000), the Panel agrees that neither the addition of an ordinary descriptive word nor the suffix.com detract from the overall impression of the dominant part of the name. Consequently, the Panel finds in favor of Complainant on the first element. Rights or Legitimate Interests As to the second element, Complainant must first make a prima facie case that Respondent lacks rights and legitimate interests in the disputed domain name under Policy 4(a)(ii), and then the burden shifts to Respondent to show it does have rights or legitimate interests.

101 Complainant Case 8:08-cv DKC alleges that Respondent is Document not known by the name Filed AMERIDREAM, 10/07/2008 Page nor does 7 of it 9have any current connection or affiliation with the Complainant, who was originally founded by Respondent Christopher Russell, along with Ryan Hill. Apart from the WHOIS indicating Christopher Russell as the registrant of the disputed domain name, there is no other evidence that Respondent is commonly known by the <ameridreamprogram.com> domain name. Furthermore, Complainant contends that Respondent is using the disputed domain name to operate a website featuring other downpayment assistance programs links that compete with the Complainant s services. As set forth in Exhibit 6 submitted by Complainant, all the websites registered by Respondent are linked to a webpage titled Owners Alliance, and is defined as The Association for Real Estate Owners, providing negotiation for rebates and discounts. The Panel finds this evidence as indicative of an intent to compete with Complainant s services. Respondent also signed a Non-Competition Agreement which expired on March 30, 2006, and registered the domain name in dispute on March 29, 2006; the Complainant submits that this indicates the intent to disparage the Complainant. The Panel agrees with this view, and adds that the proximity between said registration and termination of the Non-Competition Agreement leads to the inference, at least in Complainant s mind, that such registration could potentially be in competition with Complainant s activities. According to ICANN Policy 4(c)(i), this does not constitute a bona fide offering of goods or services, and neither is a legitimate noncommercial or fair use pursuant to Policy 4(c)(iii). The disputed domain name, <ameridreamprogram.com>, now resolves, as evidenced by Respondent, to a protest site named Fuck AmeriDream, protesting Complainant s business practices. The Panel finds that maintaining this protest site containing criticism does not give Respondent rights or legitimate interests in the disputed domain name, despite the Respondent s argument that the U.S. Constitution s First Amendment provides the liberty of expressing its views. As decided in E. & J. Gallo Winery c. Hanna Law Firm, D (WIPO Aug. 3, 2000), establishing a legitimate free speech/complaint site does not give rights to use a famous mark in its entirety. In conclusion, on balance, the Panel finds that Complainant has satisfactorily met its burden on the second element, and finds Respondent having no rights or legitimate interests in the domain name in dispute. Registration and Use in Bad Faith Complainant maintains that Respondent has registered and is using the <ameridreamprogram.com> domain name in bad faith pursuant to Policy 4(b)(iv), because it is diverting Internet users seeking Complainant s downpayment assistance program to a website providing links to other websites offering competing services; furthermore, it contains that the domain names were registered primarily in order to disrupt Complainant s business. It is most of the time quite difficult, if not impossible, to actually show bad faith, at the time of registration and use, with concrete evidence. While bad faith cannot be presumed, once Complainant has presented some evidence pointing in that direction, it is then incumbent upon Respondent to either respond or explain why its conduct should not be assimilated to bad faith. The Panel s understanding of the Policy is that although the initial burden to prove Respondent s bad faith in the registration and the use of the disputed domain name relies squarely on the shoulders of Complainant, such obligation is only to make out a prima facie case, and once it has done so, it is then incumbent upon Respondent to either justify or explain its business conduct (if not to demonstrate the contrary). As stated in Old Sturbridge Inc. v S.C.I. Management Inc., FA (Mar. 1, 2001), The burden of proof is shifted to a Respondent only when the complaint and supporting evidence demonstrate to the Panel that Complainant is entitled to relief. Failure to do so

102 supporting Case evidence 8:08-cv DKC demonstrate to the Document Panel that Complainant Filed is entitled 10/07/2008 to relief. Page Failure 8 of to 9do so will, in some circumstances, enable the Panel to draw a negative inference. In the present case, the registration by Respondent of several websites containing a word loaded with criticism, such as fuck, is, from Respondent s own admission, intended to launch a protest website, in order to inform the public of the gross mismanagement and squandering of public monies by Complainant. Respondent is the founder and former CEO of Complainant; he has signed a Non-Competition Agreement, which terminated one day after the registration of the domain names. The Response states that the only evidence of Complainant s bad faith is the fact that Respondent was formerly employed by Complainant; the Response also says that the protest site is damaging to AmeriDream as it informs the public of the gross mismanagement ( ). The Panel infers from this admission that Respondent clearly knows that the registration of a various domain names, including the disputed one, adding the prefix fuck or the suffix program, and all leading to the website Fuck AmeriDream is damaging to Complainant. Had there still been a doubt, the fact that Respondent waited until the expiry of its Non-Competition Agreement clause is also an indication that, at least from its perspective, there might be a doubt as to bad faith of so doing. Furthermore, evidence submitted by Respondent, showing the homepage of their Fuck AmeriDream website, is an indication of bad faith, in the Panel s view, as the Respondent writes Just ten days after we bought the domains for this site, AmeriDream spent thousands filing a complaint with the Internet gods, ICANN. We offered to let them save their money and just buy the domains, for what we have in them. ICANN, at Policy 4(b)(i), considers that certain circumstances present are evidence of registration and use of a domain name in bad faith, of which: circumstances indicating that you have registered or you have acquired the domain name primarily for the purpose of selling, renting, or otherwise transferring the domain name registration to the complainant or to a competitor of that complainant ( ) If this wasn t enough, the Additional Submission s evidence submitted by the Complainant point out to the fact that Respondent is trying to benefit from the sale of the disputed domain name in excess of its value. The dated April 10, 2006, from ryanandchris@fuckameridream.org, and addressed to Tom Carmody, currently a consultant with Complainant, reads: Tom, You can do much better than this, I am truly disappointed. You could have bought the names from us for the six fucking grand you had to spend just filing your stupid complaint! ( ) As Ryan and I are reasonable people, we are now willing to sell the names for $5000 each. Especially since you ve already spent $20k plus on this, cut your losses now. The Panel infers from this Exhibit that Respondent was, before the initiation of the proceedings, trying to sell the domain names it registered to Complainant, and also after the Complaint was filed, thus contravening ICANN Policy 4(b)(i).

103 Case 8:08-cv DKC Document Filed 10/07/2008 Page 9 of 9 In light of these conclusions, the Panel s finds that, on balance, Complainant has met its initial burden in regards to the third element, and that Respondent has failed to adequately rebut it, as the nature of its usage points out to bad faith use. The Panel finds that based on the totality of circumstances and evidence submitted, Respondent s registration and use of the disputed domain name is indicative of bad faith under ICANN Policy 4(a)(iii). DECISION Complainant having established all three elements required under the ICANN Policy, the Panel concludes that relief shall be GRANTED. Accordingly, it is Ordered that the <ameridreamprogram.com> domain name be TRANSFERRED from Respondent to Complainant. Jacques A. Léger, Q.C., Panelist Dated: May 24, 2006 NATIONAL ARBITRATION FORUM

104 Case 8:08-cv DKC Document Filed 10/07/2008 Page 1 of 3 Exhibit L

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107 Case 8:08-cv DKC Document Filed 10/07/2008 Page 1 of 6 Exhibit M

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113 Case 8:08-cv DKC Document Filed 10/07/2008 Page 1 of 6 Exhibit N

114 Case 8:08-cv DKC Document Filed 10/07/2008 Page 2 of 6 Residential Dealer Agreement (A) Independent Residential Dealer John Buyer, herein referred to as Dealer, agrees to represent and sell memberships to the client associations, of Global Direct Sales, LLC, in North America. Global Direct Sales will pay commission s equal to 3%, 5% or 10% of the price of the property enrolled in our membership association. Special commission rates may be earned by contacting us directly with special needs and situations. Commissions will be paid seven to ten days prior to the estimated date the property owner will complete enrollment. Dealer agrees to pay all applicable taxes due on commissions earned from Global Direct Sales, LLC. Dealer recognizes and acknowledges that they will receive an IRS form 1099 at the end of the year for any commissions paid during that tax year. Dealer acknowledges and understands that no income taxes, FICA or other withholding will take place. As an independent contractor, the dealer acknowledges and understands that they are not entitled to any company benefits, health insurance or other such benefits offered to regular employees. Dealer agrees to adhere to all laws regarding the marketing and sale of referenced association memberships. The Dealer authorizes Global Direct Sales LLC to charge back commissions in which the property owner does not complete enrollment. In the event of a dispute arising from this agreement, all parties agree to apply the laws of the state of Maryland and seek any remedies, by the Courts of Maryland. It is recognized by all parties that the commissions to be paid are not contingent upon the sale of any property. The income earned is strictly contingent upon a property owner completing enrollment into a client association. Sample Independent Residential Dealer authorizes Global Direct Sales, LLC to exchange and/or release information with any third party for which I or my agent has provided. Furthermore, I hereby authorize Global Direct Sales, LLC to open a savings account in my name at an FDIC insured bank to deposit my commission check. I authorize Global Direct Sales, LLC, as my agent, to be a signor on this account and to distribute the funds in the account for my benefit. In the event that the property owner does not complete enrollment, the Dealer authorizes GDS to close the account the commission was drawn off. The Independent Residential Dealer further agrees to return, repay and rescind, any and all commissions paid to the Independent Dealer, in the event a sale is not completed and a Member does not complete enrollment. Michael J. Tkac VP North American Sales & Marketing Independent Residential Property Dealer Date (B) Name John Buyer Current Mailing Address 555 Main Street City Fairfax State NC Zip Telephone (444) SSN/EIN TRN 1548

115 Case 8:08-cv DKC Document Filed 10/07/2008 Page 3 of 6 Residential Property Enrollment Form (C) (D) Residential Property Owner, Bob Seller, herein referred to as Owner, agrees to enroll his property into the Owners Alliance, Inc. Membership is a bundle of benefits and services that convey with the property ( Owner agrees and acknowledges the desire to enroll the property known as, Address 685 Main Street, Fairfax, VA 22030, herein referred to as the Property, into the Owners Alliance, the Owners Alliance desires to accept the property, with the requirements set forth herein. The Owners Alliance hereby grants membership into the association, to the above-mentioned Property and Owner, for a period as outlined below. Nothing herein shall bind either party to exclusivity and the said property may be enrolled in other associations, as the Owner may will. The Owner acknowledges, by checking one of the following boxes, which program they wish to enroll the property for membership. The enrollment fee is based upon a percentage of the value of the property enrolled, or the actual sales price, whichever is applicable plus $300 payable at closing. Residential Program: (E) Diamond 11% Emerald 6% Ruby 4% Other (Call for Details) % (Enrollment Fee Varies) (F) (Property Value) $76, X ( Program % (E) ) 6% + $300 = $4, (Enrollment Fee) The Owner hereby intends to complete enrollment and submit all monies due within forty-five days of the signing of this agreement. Failure to do so will result in termination of the Owners Alliance membership The Owner, at his sole option, may cancel the membership for a full refund within the Trial Period. The Trial Period ends forty-five days after enrolling, or in the event the enrolled Property is to be sold, up to forty-eight hours prior to the sale of the Property. The Owner waives any right under the law to cancel membership within forty-eight hours prior to closing, during the trial period. In the event that the Property sells and closes escrow, prior to the completion of enrollment, the Property will automatically complete enrollment at closing. At closing, the Owner will be responsible for paying any monies due for his membership, either to the Owners Alliance, or designated funding source, as directed by the Owners Alliance. Sample The Owner hereby instructs any closing agent, that the above listed property, is a member of the Owners Alliance and the enrollment fee is due and payable at time of closing of escrow. In the event that a closing agent fails to collect the enrollment fee at closing, the Owner acknowledges that the monies are due and will promptly pay on demand, without delay. In the event that the Property is sold, the Owner further agrees and acknowledges, that by the very act of his Property closing escrow, that he has received substantial and valuable benefit from his membership into Owners Alliance and that the enrollment fee is due in full at closing. The Owner agrees to indemnify and hold harmless, the Owners Alliance, Inc., Global Direct Sales, LLC and the designated funding source from any loss or claim arising out of the sale of the Property by the Owner, any third parties, or parties to the transaction, with respect to the program and services provided by the Owners Alliance and its agents, pursuant to the terms and agreements of its program. Unless terminated the membership shall be for a period of three years, five years, ten years or as determined by the Owners Alliance, depending on the program, Diamond, Emerald, Ruby or other, into which the Residential Property is enrolled. All parties agree to this binding agreement under the laws of the state of Maryland. In the event of a dispute, all claims will be settled in the Courts of Maryland. This agreement is assignable to Rycho Funding, LLC and may not be modified except in writing and agreed to by all parties. (G) Owner/Company Name Date Co-Owner Date By Title TRN 1548

116 Case 8:08-cv DKC Document Filed 10/07/2008 Page 4 of 6 Assignment of Funds Closing Date: Property Address: 685 Main Street City Fairfax State VA Zip Property Owner s Name: Bob Seller Co-Owner s Name: I/We, the undersigned, hereby assign the amount of $4, from my/our settlement proceeds, payable to Rycho Funding, LLC. Rycho Funding, LLC has purchased the liability listed on the accompanying Residential Property Enrollment Form from Owners Alliance bearing the same transaction number. I/We hereby authorize and direct the agent/agency managing and executing settlement of the sale of the above-referenced property to disburse the assigned funds via wire transfer immediately upon the close of escrow of said property, in accordance with the wire transfer instructions provided by the assignee. I/We understand and acknowledge that should the sale of the above referenced property not close as contracted that this agreement is voidable, in writing, by the owner(s). Owner Signature Printed Name/Company Name Date Co-Owner Signature Printed Name Date TRN 1548 Sample

117 Case 8:08-cv DKC Document Filed 10/07/2008 Page 5 of 6 GLOBAL DIRECT SALES, LLC W-9 Substitute In accordance with Internal Revenue Service regulations, we are required to have on file, the following information on all individuals and businesses to which we pay a commission. Name John Buyer Address 555 Main Street Fairfax, NC I/We are: Individual (Sole Propritorship) Corporation Partnership Other Social Security Number (or EIN if applicable): Under penalties of perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. 2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. Sample Signature Date Print Name Please fax to: TRN

118 Case 8:08-cv DKC Document Filed 10/07/2008 Page 6 of 6 Personal Account Information First Signer (First, Last) John Buyer Social Security # Date of Birth Home Address 555 Main Street Fairfax, NC Driver's License # State Exp Date Issue Date Home Phone (444) Work Phone Name of Employer I hereby authorize Global Direct Sales, LLC to open a savings account at Sandy Spring Bank of Maryland in my name and to deposit my commission check in that account. I hereby authorize a member of the management of Global Direct Sales, LLC to be a signor on the account and to distribute the funds in the account for my benefit. Sample Independent Dealer Date Please Fax this Completed and SIGNED Form as well as a Picture ID to

119 Case 8:08-cv DKC Document Filed 10/07/2008 Page 1 of 5 Exhibit O

120 Case 8:08-cv DKC Document Filed 10/07/2008 Page 2 of 5 9/7/08 11:36 PM About Us Contact Home Get Started Sample Guidelines FAQ's Scenarios Getting Started Congratulations, by reading this you are one step closer to becoming a Global Direct Sales, LLC Residential Dealer. As a Residential Dealer you will be able to earn a commission by selling Owner Alliance memberships. Below are the steps that you should take to understand and perfect your role as a Residential Dealer. 1. Understand the benefits that an Owners Alliance Membership provides. Owners Alliance is one of the largest Property Owners Associations. Key benefits of an Owners Alliance Membership are; The Owners Alliance membership conveys with the property enrolled. If the property owner sells the property within the membership period they will have the opportunity to enroll the other property in the Owners Alliance membership, at no costs, for the duration of the membership term. Savings -- over 350 name brand stores and companies provide thousands of ways to save with free services, discount services, and discounts on products. Property Ownership Rights Advocacy -- Owners Allianceis an advocate for property ownership rights. In time of need our members will have the peace of mind knowing that Owners Alliance will support and guide them through the long and sometimes confusing fight, if their property ownership rights are threatened. Transferable -- Can be transferred or given as a gift anytime during the duration of Page 1 of 4

121 Case 8:08-cv DKC Document Filed 10/07/2008 Page 3 of 5 Transferable -- Can be transferred or given as a gift anytime during the duration of the membership. 9/7/08 11:36 PM For a full list of Owners Alliance benefits, please visit 2. Calculate the Membership Fee and Commission. Membership 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 year Fee 3% PV 4% PV 5% PV 6% PV 7%PV 8%PV 9%PV 10% PV 11% PV Commission 2% PV 3% PV 4% PV 5% PV 6% PV 7% PV 8% PV 9% PV 10% PV Membership 11 year 12 year 13 year 14 year 15 year 16 year 17 year 18 year 19 year 20 year Fee 13% PV 14% PV 15% PV 16% PV 17%PV 18%PV 19%PV 20% PV 21% PV 22% PV Commission 11% PV 12% PV 13% PV 14% PV 15% PV 16% PV 17% PV 18% PV 19% PV 20% PV All membership enrollments are subject to a $300 processing fee. PV Property Value Now that you understand Owners Alliance and the Global Direct Sales Independent Dealer opportunity you are ready to begin selling Owners Alliance memberships. DpFUNDER APPLICATION PROCESS (Entering a New Application as a Loan Originator): 1. Go to 2. Review current DpFunder Guidelines Webpage 3. If you have already created an account enter your address and password and click the Submit button. 4. To register your information online, click on the Sign Up Now button located under the Application Login. Enter your information as the Originator. You will be asked to create a password of your choice. Page 2 of 4

122 Case 8:08-cv DKC Document Filed 10/07/2008 Page 4 of 5 9/7/08 11:36 PM 5. To login and start entering online applications, go back to the home screen ( 6. You will be taken to a screen to begin entering online applications. Click on 'Submit a New Application.' 7. Fill in the requested information and click submit. 8. Print the Application. Once the application is printed, you will notice that all fields have been filled-in and all calculations (Enrollment Fee and Buyer's Commission) have been completed for you. Have the application package signed by the Buyer and Seller. 9. The 5-page application package must be signed as follows: 1. BUYER SIGNS - Residential Dealer Agreement, W9, and Personal Account Information Form (requires a copy of the Buyer's drivers license or State ID) 2. SELLER SIGNS - Assignment of Funds, Enrollment Form 10. Once the pages have been signed, fax the application package along with a clear copy of the buyer's ID to for processing and approval Once we receive the signed application package and driver's license, the $99 Account Setup fee has been paid, and we have received a written request from the Independent Dealer, we send the Account Information Form and a copy of the Buyer's Drivers License to Our Bank in Maryland. Our Bank will then create a savings account in the name of the Buyer and send a Verification of Deposit (VOD) directly to the Loan Officer via the fax number that was provided on the online application. PLEASE NOTE: Any account information received for new applicants after 12:00 pm will be processed the next business day. 12. Once our Bank opens the Buyer's account and sends the VOD, our office will fax the DpFunder Approval Letter and a copy of the Buyer's Paycheck to the Loan Originator via fax. PLEASE NOTE: If the account that has been opened for the Buyer stays open longer than 20 days and the file does not settle in that time frame, the account will be closed. Please review our "Guidelines" page on this website. 13. Once the Loan Originator confirms a closing date with our office, we require a Clear-to-Close statement to be faxed or ed to our office in order to send the funds in time for settlement. 14. Once we receive a Clear-to-close, our office will contact the listed Settlement Agent/Title Company to request a signed Settlement Agent Confirmation form that must be signed and faxed back to Rycho Funding at Rycho's information is listed on the Settlement Agent Confirmation form that is sent to the title company. Page 3 of 4

123 Case 8:08-cv DKC Document Filed 10/07/2008 Page 5 of 5 Agent Confirmation form that is sent to the title company. 9/7/08 11:36 PM 15. A certified check or direct wire will be sent to the listed title company to arrive on the day of settlement. The certified check or wire will be in the amount of the Buyer's commission, made out to the listed title company For Benefit Of the Buyer. 16. PLEASE NOTE: AFTER SUBMITTING YOUR APPLICATION INFORMATION ONLINE, YOUR APPLICATION IS NOT COMPLETE UNTIL WE RECEIVE THE COMPLETE APPLICATION PACKAGE SIGNED AND FAXED TO PLEASE NOTE: If you need to change any information on the application, simply contact our office at , OR log on to and enter your address and password under 'Submit Application Login.' You will be taken to the same page that you entered your application(s). You will see the application you have submitted, and next to the application, you will be able to 'View' or 'Edit' your transaction. Copyright Global Direct Sales, LLC. All rights reserved Terms & Conditions Page 4 of 4

124 Case 8:08-cv DKC Document Filed 10/07/2008 Page 1 of 2 Exhibit P

125 10/6/2008 Grant America Program Down Payment Assistance for Homebuyers Page 1 of 1 Case 8:08-cv DKC Document Filed 10/07/2008 Page 2 of 2 About Us Contact Us G.A.P. Is HUD APPROVED!!! The Grant America Program was given an approval by HUD. Click Here To See Approval The Grant America Program (G.A.P.) is a government grant program that provides low to moderate-income homebuyers with a down payment grant to be used towards the purchase of a home.. The grant of up to $34,000 will be sent directly to the settlement agent for the benefit of the homebuyer. The only qualification is that the homebuyer must qualify for a mortgage loan that allows gift funds (e.g., FHA loans) and the seller must be willing to enroll the home in the program. Submit Grant Application Username: Password: Remember me: gfedc Login Government Down Payment Assistance HUD guidelines ( revised) allow a cash gift of down payment funds from a government entity. G.A.P. is a Government Down Payment Assistance Program, not a "non-profit" program and is not subject to IRS Ruling Click Here For More Info... News Room Click Here To Refer This Website... IRS Starts Formal Revocation of Non-Profit DPA's What Does HUD Say About GAP HUD finds that PIN s Grant America Program ( GAP ) meets HUD s current policies pertaining to the source of gift funds for the borrowers required cash investment for obtaining FHA insured mortgage financing. Accordingly, HUD will insure mortgages that meet FHA requirements in which home buyers obtain downpayment assistance provided by PIN for the borrowers cash investments Grant America Program Provides Safe Alternative to Ill-Fated Non-Profit DPA's Sample Forms Sample Gift Letter Sample Property Enrollment Form Copyright All rights reserved Terms & Conditions Disclosures * The Penobscot Indian Nation Fair Housing Administration (PIN FHA) is not to be confused with the Department of Housing and Urban Development or Federal Housing Administration.