With Quarterly Executive Letter. Volume 1, Issue 12. December 2012

With Quarterly Executive Letter Volume 1, Issue 12 December

From the CEO December 12, Gathering Steam We launched The MarketPulse last January on an upbeat note. At that time, our Chief Economist Mark Fleming wrote that both the broad economy and the housing market are moving toward positive growth in. Now, almost a year later, we see continued signs of economic improvement. And while not yet fully recovered, the housing market gathered steam through the summer and into the fourth quarter. But will it heat up enough to help power the general economic engine in the year ahead? Improved fundamentals CoreLogic data demonstrate that home prices are stabilizing in response to improved market fundamentals like reduced inventories and improved buyer demand. Notably, was the first year of significant price appreciation since 2006. Year-to-date, the CoreLogic Home Price Index is up 8 percent nationally welcome news for borrowers, especially those saddled with negative equity. Government efforts, too, seem to be making some difference. The Federal Reserve held the federal funds rate target at zero this year. Continued low interest rates boosted refinancing opportunities for many homeowners, thus benefiting the balance sheets of those who could qualify. For other borrowers, struggling to pay their mortgages, the Home Affordable Modification Program helped reduce their monthly payment to a sustainable level. The Federal Reserve also continued to use non-traditional monetary tools, such as quantitative easing. As part of implementing a third round of this easing last summer, the government renewed its commitment to purchase mortgage securities. In turn, these purchases helped keep interest rates low. With credit remaining tight, one of the more vexing problems facing policymakers has been finding ways to help borrowers who lack sufficient equity to qualify for a traditional refinance gain access at lower interest rates. The expanded Home Affordable Refinance Program HARP 2.0 gave more borrowers this access in. Since 2009, HARP programs have helped more than 1.5 million borrowers refinance under more favorable terms. Lenders and investors have also allowed more homeowners to pursue short sales as an alternative to foreclosure. The continuing downward trend in both delinquency rates and foreclosures as well as a gradual clearing of the shadow inventory are signs of stabilization in the housing market. While we re still far from pre-crisis levels, the trend is firmly in the right direction. Beyond these factors, we are encouraged by strengthening consumer confidence, the mending of consumer credit, increasing household formation and greater home affordability. Taken together, we see a brightening outlook for mortgage production in the coming year. ii

Building confidence Despite this promise, the emerging recovery, in our view, is still a fragile one. Ongoing uncertainty in the overall business climate brings into question whether the economy can fire on all cylinders. The lack of a workable plan to resolve the fiscal cliff so close to deadline has impacted the confidence of business leaders. The ongoing, unresolved problems related to the European debt crisis also weigh down confidence. In the lead article in this month s issue of The MarketPulse, our economists share their observations on the difference between economic uncertainty and risk. We strongly believe, in the face of such an uncertain environment, the best way to increase your confidence level when making decisions and taking action is access to the right information at the right time. It is at the center of smart business planning and can help your teams not only manage business uncertainty but also mitigate risk. At CoreLogic, we are prepared to work with you to deliver expert analysis and innovative, tailored solutions that can help you capitalize on growth opportunities, even in challenging markets. On behalf of the entire CoreLogic team, best wishes for a happy holiday season. We look forward to the year ahead and collaborating with you toward your ongoing business success. Sincerely, Anand Nallathambi President and CEO iii

Table of Contents The Authors Anand K. Nallathambi President and Chief Executive Officer Anand K. Nallathambi is the president and chief executive officer of CoreLogic, a leading provider of consumer, financial and property information, analytics and services to business and government. Nallathambi is responsible for all aspects of the CoreLogic business. Dr. Mark Fleming Chief Economist Dr. Mark Fleming is the chief economist for CoreLogic. He leads the economics team responsible for analysis, commentary, and forecasting trends in the real estate and mortgage markets. Sam Khater Deputy Chief Economist Sam Khater is deputy chief economist for CoreLogic. He is responsible for providing in-depth economic, mortgage market and real estate analysis. Aurora Bristor Senior Research Analyst Aurora Bristor is a senior research analyst for CoreLogic in the Office of the Chief Economist. She develops and delivers mortgage market and real estate analytics in support of CoreLogic and the CoreLogic Academic Research Council. From the CEO... ii The Authors...iv Media Contacts...iv The MarketPulse...1 Economic Risk Versus Uncertainty...1 Impact of Residential Investment on Economic Growth...1 Recessions and the Residential Investment Cycle...1 Moving Toward Regulatory Certainty...2 Follow the Money: Investing in Single-Family Rentals...3 Rental Income Isn t Just for Investors...3 Trends in Rental Income for Owners, Tenants and Free Riders...3 It s Good to Be an Investor In Single-Family Rental Properties...4 Follow the Money...5 Multifamily Rentals Rise Above the Flood...6 In the News...6 National Summary October...7 Largest 25 CBSA Summary October...7 Media Contacts For real estate industry and trade media: Bill Campbell bill@campbelllewis.com (212) 995.8057 (office) (917) 328.6539 (mobile) For general news media: Lori Guyton lguyton@crosbyvolmer.com (901) 277.6066 State Summary October...8 Home Prices...9 Mortgage Performance...10 Home Sales... 11 Variable Descriptions... 12 iv

The MarketPulse Volume 1, Issue 12 December 12th, Data as of October Housing Statistics (October ) HPI YOY Chg...6.3% HPI YOY Chg XD...5.8% NegEq Share (Q2 )...22.3% Shadow Inventory (07/)...2.3m Distressed Discount...34.7% New Sales (ths, ann.)...270 Existing Sales (ths, ann.)... 2,715 Average Sales Price...$234,990 HPI SFC Peak-to-Current...-26.9% Foreclosure Inventory Peak-to-Current...-15.8% Economic Risk Versus Uncertainty By Sam Khater and Mark Fleming In Risk, Uncertainty and Profit, the economist Frank Knight distinguishes between economic risk and uncertainty. Economic risk occurs when potential outcomes are unknown, but have well defined probability distributions. Uncertainty occurs when the outcomes are completely unknown and unquantifiable. Over the past year, the current economic and regulatory landscape facing real estate and the mortgage markets has been characterized as uncertain. The conclusion of the recent election cycle provided some clarification, since we now know regulators are likely to pursue similar policies to the ones they ve pursued over the last two years. The road to economic certainty is also aided by a strong comeback in residential investment. This is important because, while historically residential investment has averaged only 5 percent of GDP, its contribution to GDP growth during expansions is much higher. Impact of Residential Investment on Economic Growth Over the last four quarters, residential investment has added 0.3 percentage Figure 1. Borrower Willingness Commands a Premium points to GDP. While the level is low, it is contributing 12 percent of the overall low GDP growth rate. This is on par with how residential investment contributed in prior recoveries immediately after recession. It took a full two years, but residential investment is now providing the post-recession boost it normally does. During the third quarter, the economy grew 2.7 percent, up from 1.3 percent in the second quarter. Growth in the third quarter, if not revised downward, is in line with an expected long-run trend level of about 2.5 percent. While there were some anomalies in the third-quarter report which reveal that growth is not as strong as it appears on the surface, one thing is certain: The real estate cycle is now contributing to economic growth. This is good news because residential investment is the most important cyclical component of the economy. Recessions and the Residential Investment Cycle Since 1970, there have been six recessions. In each of the four quarters prior to those recessions, growth averaged 3 percent. However, while economic growth was Cont... 780 760 740 720 700 680 660 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jan-04 Jul-04 Jan-05 Jul-05 Jul-06 Jul-07 Source: CoreLogic July Weighted Average Credit Score at Origination 1

positive prior to the recession, residential investment was already flashing a warning sign and subtracting 0.2 percentage points from growth. Then, during the recession, residential investment was responsible for nearly two-thirds (0.9 percentage points) of the average overall decline of 1.4 percent per quarter. In the four quarters after the recession, residential investment contributed 13 percent (0.6 percentage points) of the overall economic growth of 4.2 percent. The pattern was different during the most recent recession (Q4 2007 to Q2 2009). The collapse in residential investment preceded the start of the recession earlier than in prior recessions. Residential investment began to subtract from GDP growth in Q1 2006, a full seven quarters before the recession began. Moreover, during the four quarters prior to the beginning of the recession, residential investment was subtracting a full percentage point of growth from GDP. This is similar to the magnitude of movement during prior recessions but in this case it was prior to the recession s start. Residential investment remained weak after the recession ended during Q2 2009, contributing only 0.1 percentage points to GDP. Figure 2. Capacity Returns to Sustainable Levels 42 40 38 36 34 32 30 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jan-04 Jul-04 Jan-05 Jul-05 Moving Toward Regulatory Certainty On the horizon are regulatory policies that require further clarification. Qualified mortgage and qualified residential mortgage will become the standards for the credit box within which mortgage originations The real estate cycle is now contributing to economic growth. This is good news because residential investment is the most important cyclical component of the economy. will be defined and provide regulatory preference. Two of the most important and frequently discussed dimensions of the credit box are credit scores and debt-to-income (DTI) ratios. The two together provide insight into a borrower s willingness and capacity to pay. Weighted average credit scores (Figure 1), using CoreLogic loan servicing data 1, show modestly improving scores as home prices were rising in the middle of the decade. This trend may have been driven by the increased pace of refinancing, particularly prevalent Jul-06 Jul-07 Weighted Average Debt-to-Income Ratio at Origination in sub-prime loans, causing successful loan repayment to inflate credit scores. The sudden shift to a higher credit score requirement can be seen in late 2008. Since that time, average origination credit scores have trended between 740 and 760, significantly higher than the pre-crisis average of approximately 700. Lenders today are requiring borrowers to show a greater willingness to pay their mortgage. Weighted average DTI ratios (Figure 2) showed a rising trend in the first half of the decade as home prices rose. Capacity to pay, and arguably the sustainability of that capacity, was increasingly at risk. Weighted average DTIs peaked in late 2007 at more than 40, but declined quickly in late 2008 back to 2002 levels. Since that time, weighted average origination DTIs have exhibited some volatility caused by the recent refinance boomlets. They are currently in the low 30s, consistent with DTIs coming out of the refinance boom at the beginning of the 2000s. Lenders today are requiring a level of capacity and sustainability roughly in line with traditional underwriting practices prior to the housing boom. The economy is continuing to recover, and residential investment is once again pulling its weight as it has coming out of prior recessions. Lenders have returned to more sustainable loan products, but remain cautious in extending credit to only the most qualified borrowers. Overall market uncertainty can be reduced further through reduced mortgage risk, investment driven economic recovery and clarity on housing policies, leading to more sustainable profits and outcomes for real estate and housing finance. Source: CoreLogic July End. Footnote 1 The loan servicing data covers more than 80 percent of all first lien mortgages in the U.S. representing all types of mortgages. 2

Follow the Money: Investing in Single-Family Rentals By Sam Khater More than three years into the economic recovery, incomes continue to stagnate. As of September, per capita disposable income increased only 1 percent from a year earlier. While there are many factors behind both the short-term and long-term stagnation in incomes, there are some segments of personal income that are rapidly rising. Rental income of residential properties, defined as gross rents for homeowners and renters minus the associated costs of financing and other expenses, increased 12 percent from September 2011. This growth shows no signs of slowing down. Since reaching a trough of $120 billion in February 2007, rental income has nearly quadrupled to $470 billion as of September (Figure 1). The rapid growth in rental income is a byproduct of fundamental shifts in the housing market, driven by a large increase in affordability and rising rents, which created a large increase in rental incomes. This article explores the rapid growth of rental income in more detail to gain a finer understanding of the profitability of the single-family residential investor rental market. Rental Income Isn t Just for Investors or rental income data. The closest metric is produced by the Bureau of Economic Analysis (BEA) as part of the personal income data released every month. Personal income entails many categories of income well beyond the layman s definition. It includes wages, salaries, employer contributions, rents, dividends, interest, proprietor income and transfers 2. By far the largest category is wages and salaries, which account for nearly two-thirds of all income. The fastest growing primary income category over the last 12 months has been rental income. Rental income only accounts for 4 percent of overall income, but over the last year it has accounted for 10 percent of the income growth through September, and in early it accounted for nearly one-fifth of all income growth. While some of the rise in rental income has been driven by higher Figure 1. Land vs. Labor Land is the Better Deal Percent Change in Income Segment from a Year Ago 8 6 4 2 rents and the rise in the number of renters, much of the rise has nothing to do with the rental market, but the owner-occupied market. This is due to the definition of rental income, which is not just the rental income investors receive from renting single family or multifamily properties, but also the imputed rental income from the flow of services to homeowners. Put differently, homeowners are treated as if they were in the rental business and they leased the property back to themselves. Homeowner rental income accounts for about 70 percent of total rental income, while investor singlefamily and multifamily rental income account for the remaining 30 percent. Trends in Rental Income for Owners, Tenants and Free Riders Rental income growth averaged an annualized rate of 23 percent during the five years ending in 2011, but Cont... While there are a variety of home price indicators for residential real estate transactions that span several decades, there are few monthly sources of rent -2-4 Jan-00 Aug-00 Mar-01 Oct-01 May-02 Dec-02 Feb-04 Source: CoreLogic September Sep-04 Apr-05 Nov-05 Rental Income Jun-06 Aug-07 Mar-08 Oct-08 Overall Income May-09 Dec-09 Feb-11 Sep-11 Apr-12 Footnote 2 It excludes rental income by corporations or entities. 3

Figure 2. Owners, Investors and Free Riders Rental Income by Segment, $Billions 450 400 350 300 250 200 150 100 50 0 1990 1991 1992 1993 Source: CoreLogic 2011 1994 there are wide disparities by tenure. Homeowner rental income rose at an annualized rate of 28 percent, compared to 15 percent a year for investor rental income. In the first half of the 2000s, homeowner rental income fell from a high of $162 billion to a low of $66 billion. Over that same time period, investor rental income typically ranged from $60 to $70 billion. Homeowner rental income in 2011 was $257 billion, and investor rental income was $126 billion. Both segments are exhibiting rapid growth, but the overall rise in rental income is driven more by the increase in homeowner rental income (Figure 2). The reason for the rapid rise in homeowner rental income is that homeowner costs have declined since 2008. Consequently, homeowner rental income, which is defined as gross equivalent rents minus the acquisition and financing costs, soared. 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Investor Homeowner Homeowner Free Riding 2005 2006 in default and not paying for it (i.e., homeowner free riding ), provided a boost to rental income. Free-rider rental income was estimated to be $27 billion dollars in 2011. The combination of these two factors has driven up overall rental incomes dramatically over the last two years. It s Good to Be an Investor In Single-Family Rental Properties To the best of our knowledge, the BEA publicly released data does not distinguish between single-family and multifamily rental income. In order to estimate investor single-family rental income trends, CoreLogic combines Figure 3. It's Good to be a Landlord 2007 2008 Aggregate Single-Family Investor Rents, $Billions 80 70 60 50 40 30 2009 2010 2011 Census, BEA, and CoreLogic singlefamily rental data (as a proxy for national rents) 3. Investor single-family rental income remained flat between 2005 and 2007 (Figure 3). At first, this may seem odd because both single-family rents and the number of single-family rentals were rapidly rising, leading to higher aggregate gross rents for investors. However, rental income is measured on a net basis. Therefore, the rapid rise in home prices in 2005 (and early 2006) led to higher financing costs and offset the higher investor gross rents, resulting in a flat trend in investor single-family rental incomes. Affordability conditions reversed during the housing bust between 2008 and 2011, and investor rental incomes soared because home prices and mortgage rates fell, resulting in a drop in financing costs. Meanwhile, investors aggregate gross rents continued to rise due to an increased demand for single-family rental units. In, the rise in single-family rental income began to moderate, primarily due to the slowdown in the growth rate Cont... Moreover, the rise in delinquencies and foreclosures, in which millions of homeowners received the monetary benefit of living in a home but were 20 10 0 2005 2006 2007 2008 2009 2010 2011 Q2 Source: CoreLogic Q2 Footnote 3 Census data was used to estimate stocks of single-family rentals and CoreLogic and BEA data were used to calculate gross rents and investor single-family rental income estimates to be consistent with BEA s approach for rental income calculations. 4

Figure 4. Owners and Investors Benefit From Falling Acquisition Costs Rents $1,800 $1,700 $1,600 dividend yields, like dividend yields in finance, can be used to calculate the earnings on a real estate investment treating the rental payments like a dividend payment. $1,500 $1,400 $1,300 $1,200 $900 $950 $1,000 $1,050 $1,100 $1,150 $1,200 $1,250 $1,300 $1,350 Source: CoreLogic July of renter occupied units and the flat average rents environment. Much of the dynamics in investor single-family rental incomes are dependent on the owneroccupied market. In 2005 and 2006, the average monthly principal and interest payment on a 30-year fixed-rate mortgage for new purchase loans was rapidly rising as home price growth accelerated, exceeding 10 percent in 2006. The trend continued in 2007 and 2008 because leverage increased in the purchase market. During the same time frame, single-family rents increased linearly with the growth rate of the average mortgage payment on new purchase loans (Figure 4). Mortgage Payment 2005 & 2006 2007 & 2008 2009 & Forward Heading into 2013, the trend in overall rental income will no longer be distorted by changes in affordability and homeowner free riding. It will more likely reflect tightness in the single-family rental market and a continued rise in rental demand given weak wage income and job growth. reached $700 as of mid- double the level in 2005. Moreover, although recent higher home prices have led to a drop in single-family rental dividend yields 4, they remain high relative to history (Figure 5). Single-family rental Follow the Money From a pure cash flow perspective, single-family rents remain high relative to mortgage payments and the rental dividend yield reflects this fact. Going forward, with mortgage rates hovering near record lows and home prices firming, affordability is unlikely to change meaningfully, or it could potentially fall modestly. At the same time, delinquencies and foreclosures have gradually declined from their peaks. Heading into 2013, the trend in overall rental income will no longer be distorted by changes in affordability and homeowner free riding. It will more likely reflect tightness in the single-family rental market and a continued rise in rental demand, given weak wage income and job growth. Investors are following the money: Where else can an investment yield 12 percent? End. Figure 5. Single-Family Rental Dividend Yield Declining, but Remains High 15% However, in late 2008 and 2009, home prices collapsed and rates declined, leading to much higher affordability and lower average mortgage payments (i.e., lower costs). But rents remained static and did not decline. The divergence between affordability and rents led to a rising spread between rents and mortgage payments, which 14% 13% 12% 11% 1 9% 8% Jan-05 May-05 Sep-05 May-06 Sep-06 Source: CoreLogic July May-07 Sep-07 May-08 Sep-08 May-09 Dividend Yield Sep-09 May-10 Sep-10 May-11 Sep-11 May-12 Footnote 4 The annual rent for a single- family residential property divided by the average single-family residential value. 5

Multifamily Rentals Rise Above the Flood By Aurora Bristor In a housing market of underwater mortgages just beginning to dry out, multifamily rents are still floating high. Multifamily rents dropped yearover-year in 2008 and 2009 with the rest of the economy, but recovered faster and stronger than single-family rents. While neither rental class dropped as significantly as the bursting housing bubble, the single-family rental market is more of a draw to foreclosed homeowners who brought their volatile circumstances to market. January 2010 was the first year-overyear decline in pre-foreclosure filings, keeping more homeowners out of the single-family rental market. At the same time, as shown in the chart on page six of the November issue of The MarketPulse ( Flooding the Residential Rental Market ), the flow of properties Rent Increases Year-Over-Year Change 6% 4% 2% -2% -4% -6% Apr-08 Oct-08 Multifamily Rents Source: CoreLogic September into the single-family rental market was negative year-over-year. This tightening helped spur the single-family rental turnaround seen in the chart, though contracted rents did not turn positive until early 2011. The CoreLogic Home Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Single-Family Rents Price Index (HPI ) has been listing yearover-year housing price gains since early. However, the multifamily rental market has been rising steadily since early 2010, leading the housing recovery in duration and strength. Oct-11 Apr-12 End. In the News National Mortgage Professional Magazine, December 6 Foreclosures Still Part of Market Landscape The number of homes lost to foreclosure continued to decline in October, but the overall levels of foreclosure remain uncomfortably high. Fox Business, December 4 Home prices dip in September after string of gains: CoreLogic Home prices posted their biggest annual jump in more than six years in October in a sign the housing sector continues to recover, data analysis firm CoreLogic said on Tuesday. Business Insider, December 4 CoreLogic: Home Prices Are Growing At Their Fastest Rate In 6 Years National home prices including that of distressed homes, climbed 6.3 percent year-over-year in October, rising for the eighth straight month, according to the latest data from CoreLogic. This is the biggest increase since June 2006. USA Today, December 3 Cheaper homes see accelerating price gains Lower-priced homes, which fell the most in price during the housing bust, are showing more zip as the housing market strengthens. HousingWire, December 3 Foreclosures drop 17% in October: CoreLogic When America was in more normal times pre-housing crisis, foreclosures averaged about 21,000 completed actions per month between the years 2000 and 2006. Orange County Register, December 2 CEO: Housing recovery becoming a rally In the 2½ years since CoreLogic broke away from parent company First American Financial Corp., the real estate data giant has refocused on its core business. 6

National Summary October Nov 2011 Dec 2011 Jan Feb Mar Apr May Jun Jul Aug Sep Oct 2010 2011 Total Sales* 3,653 3,782 3,057 3,428 4,222 4,208 4,746 5,121 4,734 4,908 3,623 3,809 4,139 3,948 4,185 New Sales* 277 301 206 243 307 286 323 353 314 336 261 270 342 283 290 Existing Sales* 2,375 2,467 1,940 2,191 2,788 2,866 3,306 3,633 3,384 3,524 2,577 2,715 2,672 2,569 2,892 REO Sales* 661 649 601 659 730 669 691 669 596 583 398 406 800 755 600 Short Sales* 304 330 278 299 360 354 392 427 412 433 365 394 274 302 372 Distressed Sales Share 26.4% 25.9% 28.7% 27.9% 25.8% 24.3% 22.8% 21.4% 21.3% 20.7% 21. 21. 25.9% 26.8% 23.2% HPI MoM -1.1% -0.9% -0.8% -0.4% 1.3% 2.2% 2.4% 2. 1.2% 0.5% -0.2% -0.2% -0.3% -0.3% 0.8% HPI YoY -3.3% -3.2% -2. -0.8% 0.9% 1.8% 2.9% 3.5% 4. 4.7% 5.2% 6.3% -0.3% -4.2% 2.6% HPI MoM Excluding Distressed -1. -0.8% -0.4% -0.3% 0.9% 1.5% 1.8% 1.7% 1. 0.5% 0.2% 0.5% -0.3% -0.3% 0.8% HPI YoY Excluding Distressed -4.2% -4.1% -3.5% -2.8% -1.4% -0.5% 0.6% 1.6% 2.3% 3.2% 4.1% 5.8% -1.7% -4. 0.9% 90 Days + DQ Pct 7.3% 7.3% 7.4% 7.2% 7. 7. 6.9% 6.9% 6.9% 6.8% 6.7% 6.6% 8.1% 7.4% 6.9% Foreclosure Pct 3.5% 3.4% 3.5% 3.5% 3.5% 3.5% 3.5% 3.4% 3.4% 3.4% 3.3% 3.2% 3.2% 3.5% 3.4% REO Pct 0.5% 0.6% 0.6% 0.5% 0.5% 0.5% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.6% 0.6% 0.5% Pre-foreclosure Filings** 127 113 125 121 134 122 133 130 123 119 127 128 2,108 1,529 1,262 Completed Foreclosures** 71 71 74 65 63 59 67 62 56 56 77 58 1,127 914 638 Negative Equity Share N/A 25.2% N/A N/A 23.7% N/A N/A 22.3% N/A N/A N/A N/A 25.3% 24.9% 23.3% Negative Equity** N/A 12,108 N/A N/A 11,374 N/A N/A 10,779 N/A N/A N/A N/A 11,904 11,820 11,209 Months Supply SDQ Homes 10.21 9.80 12.14 10.51 8.33 8.27 7.25 6.68 7.21 6.84 9.16 8.63 10.33 9.88 8.50 * Thousands of Units, Annualized **Thousands of Units NOTE: Data may be light in some jurisdictions. Largest 25 CBSA Summary October Total Sales 12-month sum Total Sales YOY 12-month sum Distressed Sales Share (sales 12-month sum) Distressed Sales Share (sales 12-month sum) A Year Ago SFC HPI YoY SFCXD HPI YoY HPI Percent Change from Peak 90 Days Stock of 90+ + DQ Delinquencies Pct YoY Chg Percent Change Stock of Foreclosures from Peak Negative Equity Share** Months' Supply Distressed Homes (total sales 12-month sum) Chicago-Joliet-Naperville, IL 76,404 12.8% 34.6% 35.5% -2.3% 1.5% -33% 10.3% -7.4% -13.8% 30.1% 20.0 Los Angeles-Long Beach-Glendale, CA 86,680 8.2% 37.1% 42.1% 6.4% 6.9% -35% 5.8% -24.7% -44.7% 22.5% 9.5 Atlanta-Sandy Springs-Marietta, GA 71,860 24.9% 36. 37.3% 2.7% 5.2% -26% 7.5% -19. -27. 40.9% 12.0 New York-White Plains-Wayne, NY-NJ 64,917 2.2% 9.2% 10.5% 4.2% 4.1% -13% 8.9% 2.2% 0. 11.9% 15.4 Washington-Arlington-Alexandria, DC- VA-MD-WV 59,794-0.8% 22.1% 28.8% 4.5% 4.5% -24% 5.6% -7.7% -6.8% 23.9% 9.2 Houston-Sugar Land-Baytown, TX 95,646 6.6% 18.5% 21.7% 6.6% 5.2% -4% 4.4% -17.6% -27.3% 10.4% 4.4 Phoenix-Mesa-Glendale, AZ 106,098-1. 33.6% 51.7% 24.5% 20.1% -41% 4.9% -42.2% -68.7% 41.9% 3.9 Riverside-San Bernardino-Ontario, CA 71,613-1.8% 48.2% 56.5% 7.2% 8.2% -49% 7.7% -28.9% -56.6% 41.5% 8.7 Dallas-Plano-Irving, TX 71,052 6.3% 19.1% 23.2% 4.5% 7.2% -8% 4.4% -13.8% -21. 10.9% 4.7 Minneapolis-St. Paul-Bloomington, MN-WI 38,668-6.8% 21.3% 28.6% 6.3% 7.3% -24% 4.1% -21. -39.9% 18.1% 7.7 Philadelphia, PA N/A N/A N/A N/A -0.4% 0.8% -15% 6. 2.2% -3.3% 9.3% N/A Seattle-Bellevue-Everett, WA 35,090 9.4% 23.9% 28.7% 9. 9.2% -25% 6.4% -0.3% -2.7% 18.7% 10.9 Denver-Aurora-Broomfield, CO 50,342 17.8% 23.6% 33.8% 9.1% 8. -4% 3.4% -23.9% -43. 19.3% 4.0 San Diego-Carlsbad-San Marcos, CA 41,267 12.6% 36.6% 43.6% 3.9% 5.9% -34% 4.7% -27.1% -50.6% 28.1% 6.4 Santa Ana-Anaheim-Irvine, CA 33,130 13.8% 32.1% 35.4% 6.4% 6.5% -32% 4.1% -29.5% -42.6% 18.2% 6.7 Baltimore-Towson, MD 30,766 2.7% 17. 24.1% 2.1% 2.1% -23% 8.1% 4.8% -3.9% 18.3% 14.0 Tampa-St. Petersburg-Clearwater, FL 56,307 1.2% 29. 35.3% 4.8% 6.3% -44% 16.2% -8.2% -12.6% 45.9% 15.3 Oakland-Fremont-Hayward, CA 37,006 8.6% 39.5% 47. 10.8% 11.2% -37% 4.9% -30. -50.4% 30.3% 6.9 Nassau-Suffolk, NY 20,685-6.9% 5.9% 7.6% 2.3% 2.6% -22% 10.7% 3.7% -0.5% 9. 27.1 St. Louis, MO-IL 43,566 7. 25.8% 27.4% 0. 1.4% -19% 4.5% -12.4% -24.5% 16.2% 5.3 Warren-Troy-Farmington Hills, MI 35,723-10.3% 34.2% 39.4% 9.9% 7. -34% 4.7% -28.8% -56.1% 36.4% 6.7 Portland-Vancouver-Hillsboro, OR-WA 31,413 13.3% 26.3% 30.1% 4.5% 5.2% -25% 5.4% -6.8% -3.1% 18.4% 8.0 Sacramento--Arden-Arcade--Roseville, CA 39,378 6.5% 47.4% 57. 9.8% 10.8% -46% 5.7% -30.6% -49.7% 37.5% 6.6 Edison-New Brunswick, NJ 24,523 1.5% 12.2% 12.1% -1.7% -1.3% -26% 9.4% 9.2% 0. 15. 16.6 Orlando-Kissimmee-Sanford, FL 43,586-2.5% 38. 45.9% 9.6% 11.3% -47% 16.5% -14.3% -18.6% 49.1% 16.2 NOTE: * Data may be light in some jurisdictions. ** Negative Equity Data through Q2. 7

State Summary October State Total Sales 12-month sum Total Sales YOY 12-month sum Distressed Sales Share (sales 12-month sum) Distressed Sales Share (sales 12-month sum) A Year Ago SFC HPI YoY SFCXD HPI YoY HPI Percent Change from Peak 90 Days + DQ Pct Stock of 90+ Delinquencies YoY Chg Percent Change Stock of Foreclosures from Peak Negative Equity Share** Months' Supply Distressed Homes (total sales 12-month sum) AK 9,835-5.2% 11.1% 13.4% 3.7% 3.8% -3.4% 2.2% -1.4% -19.9% 5. 2.2 AL 27,971-25. 16.3% 17.2% -0.3% -1.5% -17.8% 5.5% -4. -24.1% 13.7% 12.9 AR 36,055-11.6% 9. 9.3% 1.2% 1.2% -4. 5.6% 9.1% -14.2% 11.6% 5.4 AZ 143,781 0.5% 33.3% 48.7% 21.2% 16.6% -40.2% 4.8% -37.8% -64.4% 39.7% 4.2 CA 473,290 6.8% 40.2% 47.5% 9. 9.7% -36.6% 5.4% -27.9% -48.6% 29. 7.4 CO 97,458 12.6% 24.2% 31.1% 7.3% 6.1% -6.3% 3.4% -21.5% -40. 18.2% 3.8 CT 36,301 10.1% 19.1% 18.8% 0.6% 0.2% -23.6% 7.4% 2. -4.5% 13.7% 11.8 DC 6,748-0.7% 7.9% 13.7% 6. 5.7% -0.4% 5.8% 1.8% -19.2% 10.5% 9.7 DE 8,673 2.2% 23. 17.6% -2.7% -2.1% -23.2% 6.8% 2.8% -18. 16.2% 14.7 FL 412,117 1. 29.7% 36.1% 7.3% 6. -44.5% 16. -12.7% -17.2% 42.7% 13.7 GA 119,728 17.5% 30.6% 30.8% 2.2% 4.8% -24.7% 6.9% -16.9% -26. 35.8% 10.0 HI 15,206-6.1% 16.7% 20.2% 13.2% 12.5% -18.7% 6.5% -2.9% -2.6% 10.2% 8.8 IA 33,276-31.3% 9.9% 9.7% 1. 0.6% -1.4% 3.8% -10.3% -14.4% 9.4% 4.8 ID 33,515 5.3% 22. 32.4% 12.4% 9.7% -29.2% 4.6% -16.7% -20.2% 22.5% 3.8 IL 131,116 9.3% 28.3% 27.4% -2.7% 0.8% -29.7% 8.9% -7.2% -13.7% 25.8% 14.9 IN 108,971 7.9% 18.3% 18.8% 4.1% 3.3% -10.3% 6.2% -10.5% -18. 9.5% 5.8 KS 30,136 7.8% 15.7% 18.3% 3.9% 5.6% -6.5% 4.2% -8.6% -23.2% 8.3% 5.1 KY 35,180-21.1% 15.1% 14.4% 0.6% 3.3% -7.5% 5.4% -6.9% -16.4% 9.5% 8.0 LA 45,146-14.5% 15.5% 12.5% 6.5% 7.9% -2.1% 5.9% -4.6% -22.5% 14.8% 7.1 MA 93,749 26.7% 11.2% 13.8% 3.6% 4.6% -19.6% 5.5% -4.8% -13.7% 15.6% 6.1 MD 66,645 0. 20.9% 28.9% 3.8% 3.7% -26.7% 8.2% 0.9% -4.5% 23.2% 14.8 ME 11,974 8.8% 9.6% 10. 2.3% 2.9% -17.7% 7.2% 1.8% -3.3% 8. 10.6 MI 144,889 2.3% 36.1% 39.1% 7.8% 5.9% -35.3% 5.2% -25.4% -51.8% 32.8% 5.8 MN 59,649-9.5% 18.2% 23.7% 5.2% 5.9% -21.9% 3.8% -20.3% -40. 17.1% 6.7 MO 83,722 8.5% 24.2% 26.9% 1.3% 2.2% -19.1% 4.1% -14.4% -31.4% 15.6% 4.6 MS 6,527-33.4% 16.3% 11.3% 5.7% 5.7% -11.3% 7.2% -5.8% -26.4% 26.5% 30.5 MT 13,909 6.3% 15. 15.8% 4.6% 2.6% -15.4% 2.7% -15.6% -32.8% 7.4% 2.9 NC 117,343 10.8% 15.6% 16.2% 1.8% 1.8% -10.5% 5.5% -6.8% -15. 13.8% 7.3 ND 13,608 12.1% 3.6% 4.4% 10.4% 9.5% 0. 1.5% -9.3% -18.1% 5.5% 0.7 NE 27,602-3.4% 9.9% 10.3% 3.8% 3.2% -2. 2.8% -4.1% -28.1% 11.6% 2.7 NH 17,957 14.1% 25. 24.7% 4.4% 5.8% -16. 4.2% -10.9% -24.6% 20.8% 5.3 NJ 81,016 2.9% 14.2% 15.5% -0.6% -0.2% -25.9% 11.3% 8.2% 0. 18.2% 20.6 NM 21,897-1.4% 18. 19.3% 3.1% 4.1% -21. 5.6% -2.7% -7.2% 13.1% 7.8 NV 70,131-3.5% 49. 57.2% 12.4% 10.8% -53.5% 11.6% -19.3% -49. 58.6% 9.0 NY 157,388 3.6% 6. 7.2% 5.4% 5.3% -10.4% 8.4% 5.7% 0. 8.1% 12.1 OH 137,778-2.5% 24.7% 27.6% 1.4% 1. -17.4% 6.6% -9.8% -18. 24.1% 8.3 OK 65,025 3.3% 10.5% 10.7% 0.6% 0.2% -2.6% 5.2% -3.3% -2.1% 8.1% 3.7 OR 54,662 12.6% 26.8% 30.3% 5.6% 5.7% -25. 5.4% -7.4% -2.9% 18.7% 7.3 PA 130,415 1.4% 12.5% 12.9% 0.7% 1.4% -11.8% 6. 1.2% -2.7% 9.4% 8.0 RI 11,939 10.8% 23.8% 24.3% -0.5% 0.7% -34.4% 7.5% -3.1% -16.7% 22.6% 9.7 SC 65,476 12.3% 22. 24.4% 7.1% 6.1% -13.9% 6.2% -10.1% -15.4% 16.5% 7.0 SD N/A N/A N/A N/A 5.5% 6.1% -1. 2.5% -8.3% -28.5% N/A N/A TN 107,085 11.6% 21. 21.2% 1.6% 3.1% -11.2% 5.6% -12.5% -32.1% 16.8% 4.7 TX 404,800 4.6% 16. 18.6% 5.5% 5.5% -5.7% 4.1% -14.2% -21.9% 8.8% 3.6 UT 47,866 6.4% 21.7% 29.9% 9.2% 7.7% -23.6% 4.3% -15.6% -47.3% 18.1% 4.6 VA 93,531-3.6% 22.3% 25.1% 4.4% 4.3% -21.2% 3.9% -7.7% -21.8% 20.1% 6.3 VT 11,065 32.1% N/A N/A 2.2% 2.5% -10.3% 4.2% 3.9% 0. N/A 3.6 WA 83,086 3.6% 23.1% 26.3% 6.2% 6.3% -24.3% 6.6% 4. 0. 19.1% 10.9 WI 67,500 2.6% 16. 15.9% 1.8% 2. -14.4% 4.2% -12.3% -26.8% 15.5% 5.6 WV 6,291 11.9% 6.8% N/A 4.8% 2.1% -20.3% 3.8% -11.3% -29. 7.1% 9.0 WY 6,061 10.3% 12.4% 14.8% 6.9% 4.7% -8.4% 2.1% -17.6% -54.9% 9.4% 2.9 NOTE: * Data may be light in some jurisdictions. ** Negative Equity Data through Q2. 8

Home Prices Home prices nationwide, including distressed sales, increased on a year-over-year basis by 6.3 percent in October compared to October 2011. This change represents the biggest increase in the HPI since June 2006 and the eighth consecutive increase in the HPI nationally on a year-over-year basis. Excluding distressed sales, home prices nationwide also increased on a year-over-year basis by 5.8 percent in October compared to October 2011. On a month-over-month basis excluding distressed sales, home prices increased 0.5 percent in October compared to September, the eighth consecutive month-over-month increase. Home Price Index Pct Change from Year Ago 2 15% 1 5% -5% -1 Pct Change from Month Ago 3% 2% 1% -1% -2% -3% Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to October ) was -26.9 percent. Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -20.6 percent. The five states with the largest peak-to-current declines, including distressed transactions, are Nevada (-53.5 percent), Florida (-44.5 percent), Arizona (-40.2 percent), California (-36.6 percent) and Michigan (-35.3 percent). Yoy HPI Growth For 25 Highest Rate States Min, Max, Current since Jan 1976 5 4-15% -4% -2-5% HPI by Price Segment Indexed to Jan 2011 113 111 Jan-02 Jul-02 Jan-03 Jan-04 Jul-04 Jan-05 Jul-05 Jul-06 Jul-07 All Transactions Excluding Distressed All Transactions - Right Axis 3 109 2 107 1 105 103-1 101-2 99-3 97-4 95 AZ HI NV ID ND UT CA MI FL CO SC WY LA WA DC MS OR SD TX NY MN WV MT NH VA Feb-11 Mar-11 Apr-11 May-11 Jun-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Aug-12 Sep-12 Oct-12 Current Price 0-75% of Median Price 100-125% of Median Price 75-10 of Median Price > 125% of Median Price to Income Ratio Distressed Sales Discount Indexed to Jan 1976 150 6 4 35% 140 5 3 130 4 25% 2 120 110 3 15% 1 100 2 5% 90 1-5% -1 80-15% Jan-76 Apr-77 Jul-78 Oct-79 Jan-81 Apr-82 Jul-83 Oct-84 Jan-86 Apr-87 Jul-88 Oct-89 Jan-91 Apr-92 Jul-93 Oct-94 Jan-96 Apr-97 Jul-98 Oct-99 Jan-01 Apr-02 Oct-04 Apr-07 Oct-09 Apr-12 Jan-02 Jul-02 Jan-03 Jan-04 Jul-04 Jan-05 Jul-05 Jul-06 Jul-07 Price/Income Ratio REO Price Discount Short Sale Price Discount - Right Axis Source: CoreLogic, BEA October 9

Mortgage Performance At the end of October, there were 2.7 million mortgages in serious delinquency (defined as 90 days past due or more, including those in foreclosure or REO), 12 percent lower than a year ago, and 25 percent below the peak seen in January 2010. The peak-to-current drop represents 912,000 fewer mortgages in serious delinquency. The inventory of foreclosed homes continues to decline and has fallen 16 percent since the peak in January 2011. This decline is due in part to fewer mortgages entering delinquency and in part to mortgages making it through the foreclosure process (completed foreclosure or foreclosure alternative, such as a short sale). Arizona, California and Michigan, all nonjudicial states, have seen the largest year-over-year percentage decreases in foreclosure inventory. These three states, which were previously among the states with the highest percent of foreclosed homes, now have a share lower than the U.S. average. Jumbo Prime Serious Delinquency Rate By Origination Year 25% Conforming Prime Serious Delinquency Rate By Origination Year 18% 16% 14% 12% 1 8% 6% 4% 2% 3 months 6 months 9 months 12 months 15 months 18 months 21 months 24 months 27 months 30 months 33 months 36 months 39 months 42 months 45 months 48 months 51 months 54 months 57 months 60 months Total 2011 Total 2010 Total 2009 Total 2008 Total 2007 Total Source: CoreLogic September Serious Delinquencies for 25 Highest Rate States Min, Max, Current since Jan 2000 2 18% 2 16% 14% 15% 12% 1 1 8% 6% 5% 4% 2% 3 months 6 months 9 months 12 months 15 months 18 months 21 months 24 months 27 months 30 months 33 months 36 months 39 months 42 months 45 months 48 months 51 months 54 months 57 months 60 months FL NV NJ IL NY MD RI CT ME MS GA DE OH WA Current HI IN SC PA LA DC NM TN CA AR MA Total 2011 Total 2010 Total 2009 Total 2008 Total 2007 Total Source: CoreLogic September Overall Mortgage Performance Pre-Foreclosure Filings And Completed Foreclosures In Thousands (3mma) In Thousands 9% 0.9% 120 250 8% 7% 0.8% 0.7% 100 200 6% 0.6% 80 5% 4% 0.5% 0.4% 60 150 100 3% 0.3% 40 2% 1% 0.2% 0.1% 20 50 0. 0 0 Jan-02 Jul-02 Jan-03 Jan-04 Jul-04 Jan-05 Jul-05 Jul-06 Jul-07 Jan-02 Jul-02 Jan-03 Jan-04 Jul-04 Jan-05 Jul-05 Jul-06 Jul-07 90+ Days DQ Pct Foreclosure Pct REO Pct - Right Axis Completed Foreclosures Pre-Foreclosure Filings - Right Axis 10

Home Sales Total year-over-year home sales for October increased by a modest 1.3 percent. The distressed price discount for October stood at 34.7 percent, marking the fifth consecutive month that the distressed price discount has decreased. Nationally, the months' supply of distressed homes is at 8.6 months, down from 9.9 months a year ago. Nevada continues to have the highest share of distressed sales in the country at 41.9 percent, followed by Michigan (35.2 percent) and California (33.8 percent). Of those three states, California has shown the highest year-over-year home sales at 6.9 percent. Nationally, the share of distressed sales account for 21 percent of all sales for the month of October. REO sales (a component of distressed sales) account for 10.7 percent of all sales and are virtually even with the number of short sales (10.3 percent). Short sale transactions have steadily increased for six consecutive months while REO sales show a 38 percent drop on a year-over-year basis. Home Sales Share by Price Tier As a Percentage of Total Sales 6 5 4 3 2 1 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jan-04 Jul-04 Jan-05 Jul-05 Jul-06 Jul-07 0-100K 100K-200K 200K + New Home Sales Trends In Thousands 270 260 250 240 230 220 210 200 190 180 In Thousands 140 120 100 80 60 40 20 Distressed Sale Share for 25 Highest Rate States Min, Max, Current 8 7 6 5 4 3 2 1 170 Jan-02 Jun-02 Nov-02 Apr-03 Sep-03 Feb-04 Jul-04 Dec-04 May-05 Oct-05 Mar-06 Aug-06 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jun-12 0 NV MI CA FL DE AZ GA NH IL OH OR RI MO VA SC TN CT CO WA MD NM MS UT KY NC Median Price Volume - Right Axis Current Distressed Sales as Percentage of Total sales 35% 3 25% 2 15% Sales by Sale Type Annualized In Millions 9 8 7 6 5 4 1 5% 3 2 1 May-06 Sep-06 May-07 Sep-07 May-08 Sep-08 May-09 Sep-09 May-10 Sep-10 May-11 Sep-11 May-12 Sep-12 0 May-06 Sep-06 May-07 Sep-07 May-08 Sep-08 May-09 Sep-09 May-10 Sep-10 May-11 Sep-11 May-12 Sep-12 Short Sales Share REO Sales Share Existing Home New Home REO Short 11

Variable Descriptions Variable Total Sales New Sales Existing Sales REO Sales Short Sales Distressed Sales Share HPI MoM HPI YoY HPI MoM Excluding Distressed HPI YoY Excluding Distressed 90 Days + DQ Pct Foreclosure Pct REO Pct Pre-foreclosure Filings Completed Foreclosures Negative Equity Share Negative Equity Months' Supply Distressed Homes Total Sales YoY Change 12-month sum Price/Income Ratio Definition The total number of all home-sale transactions during the month. The total number of newly constructed residential housing units sold during the month. The number of previously constructed homes that were sold to an unaffiliated third party. DOES NOT INCLUDE REO AND SHORT SALES. Number of bank-owned properties that were sold to an unaffiliated third party. The number of short sales. A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. The percentage of the total sales that were a distressed sale (REO or short sale). Percent increase or decrease in HPI single family combined series over a month ago. Percent increase or decrease in HPI single family combined series over a year ago. Percent increase or decrease in HPI single family combined excluding distressed series over a month ago. Percent increase or decrease in HPI single family combined excluding distressed series over a year ago. The percentage of the overall loan count that are 90 or more days delinquent as of the reporting period. This percentage includes loans that are in foreclosure or REO. The percentage of the overall loan count that is currently in foreclosure as of the reporting period. The count of loans in REO as a percentage of the overall count of loans for the reporting period. The number of mortgages where the lender has initiated foreclosure proceedings and it has been made known through public notice (NOD). A completed foreclosure occurs when a property is auctioned and results in either the purchase of the home at auction or the property is taken by the lender as part of their Real Estate Owned (REO) inventory. The percentage of mortgages in negative equity. The denominator for the negative equity percent is based on the number of mortgages from the public record. The number of mortgages in negative equity. Negative equity is calculated as the difference between the current value of the property and the estimated unpaid principal balance. If the mortgage debt is greater than the current value, the property is considered to be in a negative equity position. The number of months it would take to sell all homes currently in distress of 90 days past due or more based on the current sales pace. Percent increase or decrease in current 12 months of total sales over prior 12 months of total sales. CoreLogic HPI divided by Nominal Personal Income provided by the Bureau of Economic Analysis. 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