Managing the HECM Challenge

1. Managing the HECM Challenge MBA’s Reverse Mortgage Lending Conference September 10, 2009 Joe Kelly, New View Advisors Chris Mullins, American Advisors Group Chris Witeck, BuckleySandler LLP

2. Current State of HECM Program Record volumes 130,000 originations expected this year Absence of proprietary, “jumbo” products so HECMs = the reverse mortgage market Administration has requested that Congress appropriate approximately $800 million to the HECM Program After negative subsidies (“profits”) of $462 million in FY 2008 and $697 million in FY 2007. Budget prepared annually, not cumulative Declining property values

3. Current State of HECM Program (cont.) Fannie Mae still has approximately 90% of the market despite raising margins Fannie also needs a cash injection $10.7 billion according to recent filing What is its role going forward? Ginnie Mae HMBS setting new records each month Fixed-rate product

4. Concerns Raised Potential for public and political support of HECM Program to erode should ongoing positive subsidies be necessary Fees increased Borrowing amounts reduced What can be done to ensure sustainability of the HECM Program? Fannie Mae’s role

5. Common Perceptions HECMs make money for the government (MIP) Excess values have given the program cushion against “crossover loss” ARMs protect more than fixed-rate products because borrowers don’t always draw the full amount with ARMs HECMs have high fees Things will get worse before they get better

6. Cumulative HPA vs. HECM Issuance NAR/Existing S&P/CS # HECMs Homes Index Originated 2000 (1Q) 21% 42% 6,640 2001 14% 26% 8,127 2002 6% 18% 14,181 2003 -2% 5% 21,636 2004 -11% - 6% 47,266 2005 -21% -20% 48,493 2006 -21% -30% 85,639 2007 -20% -30% 108,293 2008 -12% -21% 115,176 2009 (2Q) 0% 0%

7. Loss Mitigation or Lost Mitigation?