Shared-Loss Agreement - Single-Family Residential Mortgage Loans - UnionBanCal Corp. and the FDIC


SINGLE FAMILY SHARED-LOSS AGREEMENT

This agreement for the reimbursement of loss sharing on certain single family residential mortgage loans (the "Single Family Shared-Loss Agreement") shall apply when the Assuming Institution purchases Single Family Shared-Loss Loans as that term is defined herein. The terms hereof shall modify and supplement, as necessary, the terms of the Purchase and Assumption Agreement to which this Single Family Shared-Loss Agreement is attached as Exhibit 4.15A and incorporated therein. To the extent any inconsistencies may arise between the terms of the Purchase and Assumption Agreement and this Single Family Shared-Loss Agreement with respect to the subject matter of this Single Family Shared-Loss Agreement, the terms of this Single Family Shared-Loss Agreement shall control. References in this Single Family Shared-Loss Agreement to a particular Section shall be deemed to refer to a Section in this Single Family Shared-Loss Agreement, unless the context indicates that it is intended to be a reference to a Section of the Purchase and Assumption Agreement.

ARTICLE I : DEFINITIONS

The capitalized terms used in this Single Family Shared-Loss Agreement that are not defined in this Single Family Shared-Loss Agreement are defined in the Purchase and Assumption Agreement. In addition to the terms defined above, defined below are certain additional terms relating to loss-sharing, as used in this Single Family Shared-Loss Agreement.

"Accounting Records" means the subsidiary system of record on which the loan history and balance of each Single Family Shared-Loss Loan is maintained; individual loan files containing either an original or copies of documents that are customary and reasonable with respect to loan servicing, including management and disposition of Other Real Estate; the records documenting alternatives considered with respect to loans in default or for which a default is reasonably foreseeable; records of loss calculations and supporting documentation with respect to line items on the loss calculations; and, monthly delinquency reports and other performance reports customarily utilized by the Assuming Institution in management of loan portfolios.

"Accrued Interest" means, with respect to Single Family Shared-Loss Loans, the amount of earned and unpaid interest at the note rate specified in the applicable loan documents, limited to 90 days.

"Affiliate" shall have the meaning set forth in the Purchase and Assumption Agreement; provided, that, for purposes of this Single Family Shared-Loss Agreement, no Third Party Servicer shall be deemed to be an Affiliate of the Assuming Institution.

"Commencement Date" means the first calendar day following the Bank Closing.

"Commercial Shared-Loss Agreement" means the Commercial Shared-Loss Agreement attached to the Purchase and Assumption Agreement as Exhibit 4.15B.

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"Cumulative Loss Amount" means the sum of the Monthly Loss Amounts less the sum of all Recovery Amounts.

"Cumulative Servicing Amount" means the sum of the Period Servicing Amounts for every consecutive twelve-month period prior to and ending on the True-Up Measurement Date in respect of each of the Shared-Loss Agreements during which the loss-sharing provisions of the applicable Shared-Loss Agreement is in effect.

"Cumulative Shared-Loss Amount" means the excess, if any, of the Cumulative Loss Amount over the First Loss Tranche.

"Cumulative Shared-Loss Payments" means (i) the aggregate of all of the payments made or payable to the Assuming Institution under the Shared-Loss Agreements minus (ii) the aggregate of all of the payments made or payable to the Receiver under the Shared-Loss Agreements.

"Customary Servicing Procedures" means procedures (including collection procedures) that the Assuming Institution (or, to the extent a Third Party Servicer is engaged, the Third Party Servicer) customarily employs and exercises in servicing and administering mortgage loans for its own accounts and the servicing procedures established by FNMA or FHLMC (as in effect from time to time), which are in accordance with accepted mortgage servicing practices of prudent lending institutions.

"Deficient Loss" means the determination by a court in a bankruptcy proceeding that the value of the collateral is less than the amount of the loan in which case the loss will be the difference between the then unpaid principal balance (or the NPV of a modified loan that defaults) and the value of the collateral so established.

"Examination Criteria" means the loan classification criteria employed by, or any applicable regulations of, the Assuming Institution153s Chartering Authority at the time such action is taken, as such criteria may be amended from time to time.

"Home Equity Loan" means a loan or funded or unfunded portions of a line of credit secured by a mortgage on a one-to four-family residences or stock of cooperative housing association, where the Failed Bank did not have a first lien on the same property as collateral.

"Final Shared-Loss Month" means the calendar month in which the tenth anniversary of the Commencement Date occurs.

"Foreclosure Loss" means the loss realized when the Assuming Institution has completed the foreclosure on a Single Family Shared-Loss Loan and realized final recovery on the collateral through liquidation and recovery of all insurance proceeds. Each Foreclosure Loss shall be calculated in accordance with the form and methodology specified in Exhibits 2c(1)-(3).

"Intrinsic Loss Estimate" means total losses under the shared loss agreements in the amount of One Billion, Five Hundred Thousand Dollars and No Cents ($1,500,000,000.00).

"Investor-Owned Residential Loan" means a Loan, excluding advances made

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pursuant to a Home Equity Loan, that is secured by a mortgage on a one- to four family residences or stock of cooperative housing associations that is not owner-occupied or the borrower153s primary residence.

"Loss" means a Foreclosure Loss, Restructuring Loss, Short Sale Loss, Portfolio Loss, Modification Default Loss or Deficient Loss.

"Loss Amount" means the dollar amount of loss incurred and reported on the Monthly Certificate for a Shared-Loss Loan.

"Modification Default Loss" means the loss calculated in Exhibits 2a(1)-(3) for single family loans previously modified pursuant to this Single Family Shared-Loss Agreement that subsequently default and result in a foreclosure, short sale or Deficient Loss.

"Modification Guidelines" has the meaning provided in Section 2.1(a) of this Single Family Shared-Loss Agreement.

"Monthly Certificate" has the meaning provided in Section 2.1(b) of this Single Family Shared-Loss Agreement.

"Monthly Loss Amount" means the sum of all Foreclosure Losses, Restructuring Losses, Short Sale Losses, Portfolio Losses, Modification Default Losses and Deficient Losses realized by the Assuming Institution for any Shared Loss Month.

"Monthly Shared-Loss Amount" means the change in the Cumulative Shared-Loss Amount from the beginning of each month to the end of each month.

"Neutral Member" has the meaning provided in Section 2. 1(f)(ii) of this Single Family Shared-Loss Agreement.

"Period Servicing Amount" means, for any twelve month period with respect to each of the Shared-Loss Agreements during which the loss-sharing provisions of the applicable Shared-Loss Agreement are in effect, the product of (i) the simple average of the principal amount of Shared-Loss Loans and Shared-Loss Assets (other than the Shared-Loss Securities) (in each case as defined in the Shared-Loss Agreements), as the case may be, at the beginning of such period and at the end of such period times (ii) one percent (1%).

"Portfolio Loss" means the loss realized on either (i) a portfolio sale of Single Family Shared-Loss Loans in accordance with the terms of Article IV or (ii) the sale of a loan with the consent of the Receiver as provided in Section 2.7.

"Recovery Amount" means, with respect to any period prior to the Termination Date, the amount of collected funds received by the Assuming Institution that (i) are applicable against a Foreclosure Loss calculated in accordance with Exhibits 2c(1)-(3), or (iii) gains realized from a Section 4.1 sale of Single Family Shared-Loss Loans for which the Assuming Institution has previously received a Restructuring Loss payment from the Receiver (iv) or any incentive payments from national programs paid to an investor or borrower on loans that have been modified or otherwise treated (short sale or foreclosure) in accordance with Exhibit 5.

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"Related Loans" has the meaning set forth in Section 3.1.

"Restructuring Loss" means the loss on a modified or restructured loan measured by the difference between (a) the principal, Accrued Interest, tax and insurance advances, third party or other fees due on a loan prior to the modification or restructuring, and (b) the net present value of estimated cash flows on the modified or restructured loan, discounted at the Then-Current Interest Rate. Each Restructuring Loss shall be calculated in accordance with the form and methodology attached as Exhibits 2a(1)-(3), as applicable.

"Restructured Loan" means a Single Family Shared-Loss Loan for which the Assuming Institution has received a Restructuring Loss payment from the Receiver. This applies to owner occupied and investor owned residences.

"Servicing Officer" has the meaning provided in Section 2.1(b) of this Single Family Shared-Loss Agreement.

"Shared Loss Loan" means a Single Family Shared-Loss Loan, Investor-Owned Residential Loan, Restructured Loan or Home Equity Loan.

"Shared-Loss Month" means each calendar month between the Commencement Date and the last day of the month in which the tenth anniversary of the Commencement Date occurs, provided that, the first Shared-Loss Month shall begin on the Commencement Date and end on the last day of that month.

"Shared-Loss Payment Trigger" means when the sum of the Cumulative Loss Amount under this Single Family Shared-Loss Agreement and the cumulative Shared-Loss Amounts under the Commercial Shared-Loss Agreement, exceeds the First Loss Tranche. If the First Loss Tranche is zero or a negative number, the Shared Loss Payment Trigger shall be deemed to have been reached upon Bank Closing.

"Shares" means common stock and any instrument which by its terms is currently convertible into common stock, or which may become convertible into common stock.

"Short-Sale Loss" means the loss resulting from the Assuming Institution153s agreement with the mortgagor to accept a payoff in an amount less than the balance due on the loan (including the costs of any cash incentives to borrower to agree to such sale or to maintain the property pending such sale), further provided, that each Short-Sale Loss shall be calculated in accordance with the form and methodology specified in Exhibits 2b(1)-(3).

"Single Family Shared-Loss Loan" means a single family one-to-four owner-occupied residential mortgage loans, excluding advances made pursuant to Home Equity Loans, that is secured by a mortgage on a one-to four family residences or stock of cooperative housing associations (whether owned by the Assuming Institution or any Subsidiary).

"Termination Date" means the last day of the Final Shared-Loss Month.

"Then-Current Interest Rate" means the most recently published Freddie Mac survey rate for 30-year fixed-rate loans for Investor-Owned Loans or such other interest rate

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approved by the Receiver.

"Third Party Servicer" means any servicer appointed from time to time by the Assuming Institution or any Affiliate of the Assuming Institution to service the Shared-Loss Loans on behalf of the Assuming Institution, the identity of which shall be given to the Receiver prior to or concurrent with the appointment thereof.

ARTICLE II : SHARED-LOSS ARRANGEMENT

2.1 Shared-Loss Arrangement.

(a) Loss Mitigation and Consideration of Alternatives.

(i) For each Single Family Shared-Loss Loan in default or for which a default is reasonably foreseeable, the Assuming Institution shall undertake reasonable and customary loss mitigation efforts, in accordance with any of the following programs selected by Assuming Institution in its sole discretion, Exhibit 5 (FDIC Mortgage Loan Modification Program), the United States Treasury153s Home Affordable Modification Program Guidelines or any other modification program approved by the United States Treasury Department, the Corporation, the Board of Governors of the Federal Reserve System or any other governmental agency (it being understood that the Assuming Institution can select different programs for the various Single Family Shared-Loss Loans) (such program chosen, the "Modification Guidelines"). After selecting the applicable Modification Guideline for each such Single Family Shared-Loss Loan, the Assuming Institution shall document its consideration of foreclosure, loan restructuring under the applicable Modification Guideline chosen, and short-sale (if short-sale is a viable option) alternatives and shall select the alternative the Assuming Institution believes, based on its estimated calculations, will result in the least Loss. If unemployment or underemployment is the primary cause for default or for which a default is reasonably foreseeable, the Assuming Institution may consider the borrower for a temporary forbearance plan which reduces the loan payment to an affordable level for at least six (6) months.

(ii) Losses on Home Equity Loans shall be shared under the charge-off policies of the Assuming Institution153s Examination Criteria as if they were Single Family Shared-Loss Loans.

(iii) Losses on Investor-Owned Residential Loans shall be treated as Restructured Loans, and with the consent of the Receiver can be restructured under terms separate from the Exhibit 5 standards. Please refer to Exhibits 2(a)(1)-(2) for guidance in Calculation of Loss for Restructured Loans. Losses on Investor-Owned Residential Loans will be treated as if they were Single Family Shared-Loss Loans.

(iv) The Assuming Institution shall retain its loss calculations for the Shared Loss Loans and such calculations shall be provided to the Receiver upon request. For the avoidance of doubt and notwithstanding anything herein to the contrary, (x) the Assuming Institution is not required to modify or restructure any Shared-Loss Loan on more than one occasion and (y) the Assuming Institution is not required to consider any alternatives with respect to any Shared-Loss Loan in the process of foreclosure as of the Bank Closing if the Assuming Institution can

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document that a loan modification is not cost effective and shall be entitled to continue such foreclosure measures and recover the Foreclosure Loss as provided herein, and (z) the Assuming Institution shall have a transition period of up to 90 days after Bank Closing to implement the Modification Guidelines, during which time, the Assuming Institution may submit claims under such guidelines as may be in place at the Failed Bank.

(b) Monthly Certificates.

Not later than fifteen (15) days after the end of each Shared-Loss Month, beginning with the month in which the Commencement Date occurs and ending in the Final Shared-Loss Month, the Assuming Institution shall deliver to the Receiver a certificate, signed by an officer of the Assuming Institution involved in, or responsible for, the administration and servicing of the Shared-Loss Loans whose name appears on a list of servicing officers furnished by the Assuming Institution to the Receiver, (a "Servicing Officer") setting forth in such form and detail as the Receiver may reasonably specify (a "Monthly Certificate"):

(i) (A) a schedule substantially in the form of Exhibit 1 listing:

(i) each Shared-Loss Loan for which a Loss Amount (calculated in accordance with the applicable Exhibit) is being claimed, the related Loss Amount for each Shared-Loss Loan, and the total Monthly Loss Amount for all Shared-Loss Loans;

(ii) each Shared-Loss Loan for which a Recovery Amount was received, the Recovery Amount for each Shared-Loss Loan, and the total Recovery Amount for all Shared-Loss Loans;

(iii) the total Monthly Loss Amount for all Shared-Loss Loans minus the total monthly Recovery Amount for all Shared-Loss Loans;

(iv) the Cumulative Shared-Loss Amount as of the beginning and end of the month;

(v) the Monthly Shared Loss Amount;

(vi) the result obtained in (v) times 80%, which is the amount to be paid under Section 2.1(d) of this Single Family Shared-Loss Agreement by the Receiver to the Assuming Institution if the amount is a positive number, or by the Assuming Institution to the Receiver if the amount is a negative number;

(ii) for each of the Shared-Loss Loans for which a Loss is claimed for that Shared-Loss Month, a schedule showing the calculation of the Loss Amount using the form and methodology shown in Exhibits 2a(1)-(3), Exhibit 2b, or Exhibits 2c(1)-(2), as applicable.

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(iii) For each of the Restructured Loans where a gain or loss is realized in a sale under Section 4.1 or 4.2, a schedule showing the calculation using the form and methodology shown in Exhibits 2d(1)-(2).

(iv) a portfolio performance and summary schedule substantially in the form shown in Exhibit 3.

(c) Monthly Data Download. Not later than fifteen (15) days after the end of each month, beginning with the month in which the Commencement Date occurs and ending with the Final Shared-Loss Month, Assuming Institution shall provide Receiver:

(i) the servicing file in machine-readable format including but not limited to the fields shown on Exhibit 2.1(c) for each outstanding Single Family Shared-Loss Loan, as applicable; and

(ii) an Excel file for ORE held as a result of foreclosure on a Single Family Shared-Loss Loan listing:

(A) Foreclosure date

(B) Unpaid loan principal balance

(C) Appraised value or BPO value, as applicable

(D) Projected liquidation date

Notwithstanding the foregoing, the Assuming Institution shall not be required to provide any of the foregoing information to the extent it is unable to do so as a result of the Failed Bank153s or Receiver153s failure to provide information required to produce the information set forth in this Section 2.1(c); provided, that the Assuming Institution shall, consistent with Customary Servicing Procedures seek to produce any such missing information or improve any inaccurate information previously provided to it.

(d) Payments With Respect to Shared-Loss Assets. After the Shared Loss Payment Trigger is reached, not later than fifteen (15) days after the date on which the Receiver receives the Monthly Certificate, the Receiver shall pay to the Assuming Institution, in immediately available funds, an amount equal to eighty percent (80%) of the Monthly Shared-Loss Amount reported on the Monthly Certificate. If the total Monthly Shared-Loss Amount reported on the Monthly Certificate is a negative number, the Assuming Institution shall pay to the Receiver in immediately available funds eighty percent (80%) of that amount.

(e) Limitations on Shared-Loss Payment. The Receiver shall not be required to make any payments pursuant to Section 2.1(d) with respect to any Foreclosure Loss, Restructuring Loss, Short Sale Loss, Deficient Loss, or Portfolio Loss that the Receiver determines, based upon the criteria set forth in this Single Family Shared-Loss Agreement (including the analysis and documentation requirements of Section 2.1(a)) or Customary Servicing Procedures, should not have been effected by the Assuming Institution; provided, however, (x) the Receiver must provide notice to the Assuming Institution detailing the grounds for not making such payment, (y) the Receiver must provide the Assuming Institution with a reasonable opportunity to cure any such deficiency and (z) (1) to the extent curable, if cured, the

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Receiver shall make payment with respect to the properly effected Loss, and (2) to the extent not curable, shall not constitute grounds for the Receiver to withhold payment as to all other Losses (or portion of Losses) that are properly payable pursuant to the terms of this Single Family Shared-Loss Agreement. In the event that the Receiver does not make any payment with respect to Losses claimed pursuant to Section 2.1(d), the Receiver and Assuming Institution shall, upon final resolution, make the necessary adjustments to the Monthly Shared-Loss Amount for that Monthly Certificate and the payment pursuant to Section 2.1(d) above shall be adjusted accordingly.

(f) Payments by Wire-Transfer. All payments under this Single Family Shared-Loss Agreement shall be made by wire-transfer in accordance with the wire-transfer instructions on Exhibit 4.

(g) Payment in the Event Losses Fail to Reach Expected Level. On the date that is 45 days following the last day (such day, the "True-Up Measurement Date") of the Final Shared Loss Month, or upon the final disposition of all Shared Loss Assets under this Single Family Shared-Loss Agreement at any time after the termination of the Commercial Shared-Loss Agreement, the Assuming Institution shall pay to the Receiver fifty percent (50%) of the excess, if any, of (i) twenty percent (20%) of the Intrinsic Loss Estimate less (ii) the sum of (A) twenty-five percent (25%) of the asset premium (discount) plus (B) twenty-five percent (25%) of the Cumulative Shared-Loss Payments plus (C) the Cumulative Servicing Amount. The Assuming Institution shall deliver to the Receiver not later than 30 days following the True-Up Measurement Date, a schedule, signed by an officer of the Assuming Institution, setting forth in reasonable detail the calculation of the Cumulative Shared-Loss Payments and the Cumulative Servicing Amount.

(h) Payments as Administrative Expenses. Payments from the Receiver with respect to this Single Family Shared-Loss Agreement are administrative expenses of the Receiver. To the extent the Receiver needs funds for shared-loss payments respect to this Single Family Shared-Loss Agreement, the Receiver shall request funds under the Master Loan and Security Agreement, as amended ("MLSA"), from FDIC in its corporate capacity. The Receiver will not agree to any amendment of the MLSA that would prevent the Receiver from drawing on the MLSA to fund shared-loss payments.

2.2 Auditor Report; Right to Audit.

(a) Within the time period permitted for the examination audit pursuant to 12 CFR Section 363 after the end of each fiscal year during which the Receiver makes any payment to the Assuming Institution under this Single Family Shared-Loss Agreement, the Assuming Institution shall deliver to the Receiver a report signed by its independent public accountants stating that they have reviewed the terms of this Single Family Shared-Loss Agreement and that, in the course of their annual audit of the Assuming Institution153s books and records, nothing has come to their attention suggesting that any computations required to be made by the Assuming Institution during such fiscal year pursuant to this Article II were not made by the Assuming Institution in accordance herewith. In the event that the Assuming Institution cannot comply with the preceding sentence, it shall promptly submit to the Receiver corrected computations together with a report signed by its independent public accountants stating that, after giving effect to such

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corrected computations, nothing has come to their attention suggesting that any computations required to be made by the Assuming Institution during such year pursuant to this Article II were not made by the Assuming Institution in accordance herewith. In such event, the Assuming Institution and the Receiver shall make all such accounting adjustments and payments as may be necessary to give effect to each correction reflected in such corrected computations, retroactive to the date on which the corresponding incorrect computation was made.

(b) The Assuming Institution shall perform on an annual basis an internal audit of its compliance with the provisions of this Article II and shall provide the Receiver and the Corporation with copies of the internal audit reports and access to internal audit workpapers related to such internal audit.

(c) The Receiver or the FDIC in its corporate capacity ("Corporation"), its contractors and their employees, and its agents may perform an audit or audits to determine the Assuming Institution153s compliance with the provisions of this Single Family Shared-Loss Agreement, including this Article II, by providing not less than ten (10) Business Days153 prior written notice. Assuming Institution shall provide access to pertinent records and proximate working space in Assuming Institution153s facilities. The scope and duration of any such audit shall be within the reasonable discretion of the Receiver or the Corporation, but shall in no event be administered in a manner that unreasonably interferes with the operation of the Assuming Institution153s business. The Receiver or the Corporation, as the case may be, shall bear the expense of any such audit. In the event that any corrections are necessary as a result of such an audit or audits, the Assuming Institution and the Receiver shall make such accounting adjustments and payments as may be necessary to give retroactive effect to such corrections.

2.3 Withholdings. Notwithstanding any other provision in this Article II, the Receiver, upon the direction of the Director (or designee) of the Federal Deposit Insurance Corporation153s Division of Resolutions and Receiverships, may withhold payment for any amounts included in a Monthly Certificate delivered pursuant to Section 2.1, if in its good faith and reasonable judgment there is a reasonable basis under the requirements of this Single Family Shared-Loss Agreement for denying the eligibility of an item for which reimbursement or payment is sought under such Section. In such event, the Receiver shall provide a written notice to the Assuming Institution detailing the grounds for withholding such payment. At such time as the Assuming Institution demonstrates to the satisfaction of the Receiver, in its reasonable judgment, that the grounds for such withholding of payment, or portion of payment, no longer exist or have been cured, then the Receiver shall pay the Assuming Institution the amount withheld which the Receiver determines is eligible for payment, within fifteen (15) Business Days.

2.4 Books and Records. The Assuming Institution shall at all times during the term of this Single Family Shared-Loss Agreement keep books and records sufficient to ensure and document compliance with the terms of this Single Family Shared-Loss Agreement, including but not limited to (a) documentation of alternatives considered with respect to defaulted loans or loans for which default is reasonably foreseeable, (b) documentation showing the calculation of loss for claims submitted to the Receiver, (c) retention of documents that support each line item on the loss claim forms, and (d) documentation with respect to the Recovery Amount on loans for which the Receiver has made a loss-share payment

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2.5 Information. The Assuming Institution shall promptly provide to the Receiver such other information, including but not limited to, financial statements, computations, and bank policies and procedures, relating to the performance of the provisions of this Single Family Shared-Loss Agreement, as the Receiver may reasonably request from time to time.

2.6 Tax Ruling. The Assuming Institution shall not at any time, without the Receiver153s prior written consent, seek a private letter ruling or other determination from the Internal Revenue Service or otherwise seek to qualify for any special tax treatment or benefits associated with any payments made by the Receiver pursuant to this Single Family Shared-Loss Agreement.

2.7 Loss of Shared-Loss Coverage on Shared-Loss Loans. The Receiver shall be relieved of its obligations with respect to a Shared-Loss Loan upon payment of a Foreclosure Loss amount, or a Short Sale Loss amount with respect to such Single Family Shared-Loss Loan, or upon the sale without FDIC consent of a Single Family Shared-Loss Loan by Assuming Institution to a person or entity that is not an Affiliate. The Assuming Institution shall provide the Receiver with timely notice of any such sale. Failure to administer any Shared-Loss Loan or Loans in accordance with Article III shall at the discretion of the Receiver constitute grounds for the loss of shared loss coverage with respect to such Shared-Loss Loan or Loans. Notwithstanding the foregoing, a sale of the Single Family Shared-Loss Loan, for purposes of this Section 2.7, shall not be deemed to have occurred as the result of (i) any change in the ownership or control of Assuming Institution or the transfer of any or all of the Single Family Shared-Loss Loan(s) to any Affiliate of Assuming Institution, (ii) a merger by Assuming Institution with or into any other entity, or (iii) a sale by Assuming Institution of all or substantially all of its assets.

ARTICLE III - RULES REGARDING THE ADMINISTRATION OF SHARED-LOSS LOANS

3.1 Agreement with Respect to Administration. The Assuming Institution shall (and shall cause any of its Affiliates to which the Assuming Institution transfers any Shared-Loss Loans to) manage, administer, and collect the Shared-Loss Loans while owned by the Assuming Institution or any Affiliate thereof during the term of this Single Family Shared-Loss Agreement in accordance with the rules set forth in this Article III. The Assuming Institution shall be responsible to the Receiver in the performance of its duties hereunder and shall provide to the Receiver such reports as the Receiver reasonably deems advisable, including but not limited to the reports required by Sections 2.1, 2.2 and 3.3 hereof, and shall permit the Receiver to monitor the Assuming Institution153s performance of its duties hereunder.

3.2 Duties of the Assuming Institution.

(a) In the performance of its duties under this Article III, the Assuming Institution shall:

(i) manage and administer each Shared-Loss Loan in accordance with Assuming Institution153s usual and prudent business and banking practices and Customary Servicing Procedures;

(ii) exercise its best business judgment in managing, administering and collecting amounts

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owed on the Shared-Loss Loans;

(iii) use commercially reasonable efforts to maximize Recoveries with respect to Losses on Shared-Loss Loans without regard to the effect of maximizing collections on assets held by the Assuming Institution or any of its Affiliates that are not Shared-Loss Loans;

(iv) retain sufficient staff (in Assuming Institution153s discretion) to perform its duties hereunder; and

(v) other than as provided in Section 2.1(a), comply with the terms of the Modification Guidelines for any Single Family Shared-Loss Loans meeting the requirements set forth therein. For the avoidance of doubt, the Assuming Institution may propose exceptions to Exhibit 5 (the FDIC Loan Modification Program) for a group of Loans with similar characteristics, with the objectives of (1) minimizing the loss to the Assuming Institution and the FDIC and (2) maximizing the opportunity for qualified homeowners to remain in their homes with affordable mortgage payments.

(b) Any transaction with or between any Affiliate of the Assuming Institution with respect to any Shared-Loss Loan including, without limitation, the execution of any contract pursuant to which any Affiliate of the Assuming Institution will manage, administer or collect any of the Shared-Loss Loans will be provided to FDIC for informational purposes and if such transaction is not entered into on an arm153s length basis on commercially reasonable terms such transaction shall be subject to the prior written approval of the Receiver.

3.3 Shared-Loss Asset Records and Reports. The Assuming Institution shall establish and maintain such records as may be appropriate to account for the Single Family Shared-Loss Loans in such form and detail as the Receiver may reasonably require, and to enable the Assuming Institution to prepare and deliver to the Receiver such reports as the Receiver may from time to time request regarding the Single Family Shared-Loss Loans and the Monthly Certificates required by Section 2.1 of this Single Family Shared-Loss Agreement.

3.4 Related Loans.

(a) Assuming Institution shall use its best efforts to determine which loans are "Related Loans," as hereinafter defined. The Assuming Institution shall not manage, administer or collect any "Related Loan" in any manner that would have the effect of increasing the amount of any collections with respect to the Related Loan to the detriment of the Shared-Loss Loan to which such loan is related. A "Related Loan" means any loan or extension of credit to an Obligor of a Shared-Loss Loan held by the Assuming Institution at any time on or prior to the end of the Final Shared-Loss Month.

(b) The Assuming Institution shall prepare and deliver to the Receiver with the Monthly Certificates for the calendar months ending June 30 and December 31, a schedule of all Related Loans on the Accounting Records of the Assuming Institution as of the end of each such semi-annual period.

3.5 Legal Action; Utilization of Special Receivership Powers. The Assuming Institution shall notify the Receiver in writing (such notice to be given in accordance with Article V below and to include all relevant details) prior to utilizing in any legal action any special legal

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power or right which the Assuming Institution derives as a result of having acquired an asset from the Receiver, and the Assuming Institution shall not utilize any such power unless the Receiver shall have consented in writing to the proposed usage. The Receiver shall have the right to direct such proposed usage by the Assuming Institution and the Assuming Institution shall comply in all respects with such direction. Upon request of the Receiver, the Assuming Institution will advise the Receiver as to the status of any such legal action. The Assuming Institution shall immediately notify the Receiver of any judgment in litigation involving any of the aforesaid special powers or rights.

3.6 Third Party Servicer. The Assuming Institution may perform any of its obligations and/or exercise any of its rights under this Single Family Shared-Loss Agreement through or by one or more Third Party Servicers, who may take actions and make expenditures as if any such Third Party Servicer was the Assuming Institution hereunder (and, for the avoidance of doubt, such expenses incurred by any such Third Party Servicer on behalf of the Assuming Institution shall be included in calculating Losses to the extent such expenses would be included in such calculation if the expenses were incurred by Assuming Institution); provided, however, that the use thereof by the Assuming Institution shall not release the Assuming Institution of any obligation or liability hereunder.

ARTICLE IV : PORTFOLIO SALE

4.1 Assuming Institution Portfolio Sales of Remaining Shared-Loss Loans. The Assuming Institution shall have the right, with the consent of the Receiver, to liquidate for cash consideration, from time to time in one or more transactions, all or a portion of Shared-Loss Loans held by the Assuming Institution at any time prior to the Termination Date ("Portfolio Sales"). If the Assuming Institution exercises its option under this Section 4.1, it must give sixty (60) days notice in writing to the Receiver setting forth the details and schedule for the Portfolio Sale, which shall be conducted by means of sealed bid sales to third parties, not including any of the Assuming Institution153s affiliates, contractors, or any affiliates of the Assuming Institution153s contractors. Sales of Restructured Loans shall be sold in a separate pool from Shared-Loss Loans that have not been restructured. Other proposals for the sale of a Shared-Loss Loan or Shared-Loss Loans submitted by the Assuming Institution will be considered by the Receiver on a case-by-case basis.

4.2 Assuming Institution153s Liquidation of Remaining Shared-Loss Loans. In the event that the Assuming Institution does not conduct a Portfolio Sale pursuant to Section 4.1, the Receiver shall have the right, exercisable in its sole and absolute discretion, to require the Assuming Institution to liquidate for cash consideration, any Shared-Loss Loans held by the Assuming Institution at any time after the date that is six months prior to the Termination Date. If the Receiver exercises its option under this Section 4.2, it must give notice in writing to the Assuming Institution, setting forth the time period within which the Assuming Institution shall be required to liquidate the Shared-Loss Loans. The Assuming Institution will comply with the Receiver153s notice and must liquidate the Shared-Loss Loans as soon as reasonably practicable by means of sealed bid sales to third parties, not including any of the Assuming Institution153s affiliates, contractors, or any affiliates of the Assuming Institution153s contractors. The selection of any financial advisor or other third party broker or sales agent retained for the liquidation of the remaining Shared-Loss Loans pursuant to this Section shall be subject to the prior approval of

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the Receiver, such approval not to be unreasonably withheld, delayed or conditioned.

4.3 Calculation of Sale Gain or Loss. For Shared-Loss Loans that are not Restructured Loans, gain or loss on the sales under Section 4.1 or Section 4.2 will be calculated as the sale price received by the Assuming Institution less the unpaid principal balance of the remaining Shared-Loss Loans. For any Restructured Loan included in the sale gain or loss on sale will be calculated as (a) the sale price received by the Assuming Institution less (b) the net present value of estimated cash flows on the Restructured Loan that was used in the calculation of the related Restructuring Loss plus (c) Loan principal payments collected by the Assuming Institution from the date the Loan was restructured to the date of sale. (See Exhibits 2d(1)-(2) for example calculations).

ARTICLE V : LOSS-SHARING NOTICES GIVEN TO RECEIVER AND PURCHASER

All notices, demands and other communications hereunder shall be in writing and shall be delivered by hand, or overnight courier, receipt requested, addressed to the parties as follows:

If to Receiver, to: Federal Deposit Insurance Corporation as Receiver for Frontier Bank
Division of Resolutions and Receiverships
550 17th Street, N.W.
Washington, D.C. 20429
Attention: Ralph Malami, Manager, Capital Markets

with a copy to: Federal Deposit Insurance Corporation as Receiver for Frontier Bank
Room E7056
3501 Fairfax Drive, Arlington, VA 2226
Attn: Special Issues Unit

With respect to a notice under Section 3.5 of this Single Family Shared-Loss Agreement, copies of such notice shall be sent to:

Federal Deposit Insurance Corporation
Legal Division 40 Pacifica, Irvine, CA 92618
Attention: Managing Counsel

If to Assuming Institution, to:

UNION BANK, N.A.

400 California Street

San Francisco, California 94104

Attention: John F. Woods, Vice Chairman & Chief Financial Officer

Copy to: Jon Nakamura, VP & Compliance Counsel

74



Such Persons and addresses may be changed from time to time by notice given pursuant to the provisions of this Article V. Any notice, demand or other communication delivered pursuant to the provisions of this Article V shall be deemed to have been given on the date actually received.

ARTICLE VI : MISCELLANEOUS

6.1. Expenses. Except as otherwise expressly provided herein, all costs and expenses incurred by or on behalf of a party hereto in connection with this Single Family Shared-Loss Agreement shall be borne by such party whether or not the transactions contemplated herein shall be consummated.

6.2 Successors and Assigns; Specific Performance. This Single Family Shared-Loss Agreement, and all of the terms and provisions hereof shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted successors and assigns only. The Receiver may assign or otherwise transfer this Single Family Shared-Loss Agreement and the rights and obligations of the Receiver hereunder (in whole or in part) to the Federal Deposit Insurance Corporation in its corporate capacity without the consent of Assuming Institution. Notwithstanding anything to the contrary contained in this Single Family Shared-Loss Agreement, except as is expressly permitted in this Section 6.2, the Assuming Institution may not assign or otherwise transfer this Single Family Shared-Loss Agreement or any of the Assuming Institution153s rights or obligations hereunder (in whole or in part), or sell or transfer of any subsidiary of the Assuming Institution holding title to Shared-Loss Assets or Shared-Loss Securities, without the prior written consent of the Receiver, which consent may be granted or withheld by the Receiver in its sole and absolute discretion. An assignment or transfer of this Single Family Shared-Loss Agreement includes:

(i) a merger or consolidation of the Assuming Institution with or into another company, if the shareholders of the Assuming Institution will own less than sixty-six and two/thirds percent (66.66 %) of the equity of the consolidated entity;

(ii) a merger or consolidation of the Assuming Institution153s Holding Company with or into another company, if the shareholders of the Holding Company will own less than sixty-six and two/thirds percent (66.66 %) of the equity of the consolidated entity;

(iii) the sale of all or substantially all of the assets of the Assuming Institution to another company or person; or

(iv) a sale of shares by any one or more shareholders that will effect a change in control of the Assuming Institution, as determined by the Receiver with reference to the standards set forth in the Change in Bank Control Act, 12 U.S.C. 1817(j).

For the avoidance of doubt, any transaction under this Section 6.2 that requires the Receiver153s consent that is made without consent of the Receiver hereunder will relieve the Receiver of any of its obligations under this Single Family Shared-Loss Agreement.

75



No Loss shall be recognized under this Single Family Shared-Loss Agreement as a result of any accounting adjustments that are made due to or as a result of any assignment or transfer of this Single Family Shared-Loss Agreement or any merger, consolidation, sale or other transaction to which the Assuming Institution, its Holding Company or any Affiliate is a party, regardless of whether the Receiver consents to such assignment or transfer in connection with such transaction pursuant to this Section 6.2.

6.3 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR RELATING TO OR IN CONNECTION WITH THIS SINGLE FAMILY SHARED-LOSS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

6.4 No Third Party Beneficiary. This Single Family Shared-Loss Agreement and the Exhibits hereto are for the sole and exclusive benefit of the parties hereto and their respective permitted successors and permitted assigns and there shall be no other third party beneficiaries, and nothing in this Single Family Shared-Loss Agreement or the Exhibits shall be construed to grant to any other Person any right, remedy or Claim under or in respect of this Single Family Shared-Loss Agreement or any provision hereof.

6.5 Consent. Except as otherwise provided herein, when the consent of a party is required herein, such consent shall not be unreasonably withheld or delayed.

6.6 Rights Cumulative. Except as otherwise expressly provided herein, the rights of each of the parties under this Single Family Shared-Loss Agreement are cumulative, may be exercised as often as any party considers appropriate and are in addition to each such party153s rights under the Purchase and Sale Agreement and any of the related agreements or under law. Except as otherwise expressly provided herein, any failure to exercise or any delay in exercising any of such rights, or any partial or defective exercise of such rights, shall not operate as a waiver or variation of that or any other such right.

ARTICLE VII
DISPUTE RESOLUTION

7.1 Dispute Resolution Procedures.

(a) In the event a dispute arises about the interpretation, application, calculation of Loss, or calculation of payments or otherwise with respect to this Single Family Shared-Loss Agreement ("SF Shared-Loss Dispute Item"), then the Receiver and the Assuming Institution shall make every attempt in good faith to resolve such items within sixty (60) days following the receipt of a written description of the SF Shared-Loss Dispute Item, with notification of the possibility of taking the matter to arbitration (the date on which such 60-day period expires, or any extension of such period as the parties hereto may mutually agree to in writing, herein called the "Resolution Deadline Date"). If the Receiver and the Assuming Institution resolve all such

76



items to their mutual satisfaction by the Resolution Deadline Date, then within thirty (30) days following such resolution, any payment due as a result of such resolution shall be made arising from the settlement of the SF Shared-Loss Dispute.

(b) If the Receiver and the Assuming Institution fail to resolve any outstanding SF Shared-Loss Dispute Items by the Resolution Deadline Date, then either party may notify the other of its intent to submit the SF Shared-Loss Dispute Item to arbitration pursuant to the provisions of this Article VII. Failure of either party to submit pursuant to paragraph (c) hereof any unresolved SF Shared-Loss Dispute Item to arbitration within thirty (30) days following the Resolution Deadline Date (the date on which such thirty (30) day period expires is herein called the "Arbitration Deadline Date") shall extinguish that party153s right to submit the non-submitted SF Shared-Loss Dispute Item to arbitration, and constitute a waiver of the submitting party153s right to dispute such non-submitted SF Shared-Loss Dispute Item (but not a waiver of any similar claim which may arise in the future).

(c) If a SF Shared-Loss Dispute Item is submitted to arbitration, it shall be governed by the rules of the American Arbitration Association (the "AAA"), except as otherwise provided herein. Either party may submit a matter for arbitration by delivering a notice, prior to the Arbitration Deadline Date, to the other party in writing setting forth:

(i) A brief description of each SF Shared-Loss Dispute Item submitted for arbitration;

(ii) A statement of the moving party153s position with respect to each SF Shared-Loss Dispute Item submitted for arbitration;

(iii) The value sought by the moving party, or other relief requested regarding each SF Shared-Loss Dispute Item submitted for arbitration, to the extent reasonably calculable; and

(iv) The name and address of the arbiter selected by the moving party (the "Moving Arbiter"), who shall be a neutral, as determined by the AAA.

Failure to adequately include any information above shall not be deemed to be a waiver of the parties right to arbitrate so long as after notification of such failure the moving party cures such failure as promptly as reasonably practicable.

(d) The non-moving party shall, within thirty (30) days following receipt of a notice of arbitration pursuant to this Section 7.1, deliver a notice to the moving party setting forth:

(i) The name and address of the arbiter selected by the non-moving party (the "Respondent Arbiter"), who shall be a neutral, as determined by the AAA;

(ii) A statement of the position of the respondent with respect to each Dispute Item; and

(iii) The ultimate resolution sought by the respondent or other relief, if any, the respondent deems is due the moving party with respect to each SF Shared-Loss Dispute Item.

Failure to adequately include any information above shall not be deemed to be a waiver of the non-moving party153s right to defend such arbitration so long as after notification of

77



such failure the non-moving party cures such failure as promptly as reasonably practicable

(e) The Moving Arbiter and Respondent Arbiter shall select a third arbiter from a list furnished by the AAA. In accordance with the rules of the AAA, the three (3) arbiters shall constitute the arbitration panel for resolution of each SF Loss-Share Dispute Item. The concurrence of any two (2) arbiters shall be deemed to be the decision of the arbiters for all purposes hereunder. The arbitration shall proceed on such time schedule and in accordance with the Rules of Commercial Arbitration of the AAA then in effect, as modified by this Section 7.1. The arbitration proceedings shall take place at such location as the parties thereto may mutually agree, but if they cannot agree, then they will take place at the offices of the Corporation in Washington, DC, or Arlington, Virginia.

(f) The Receiver and Assuming Institution shall facilitate the resolution of each outstanding SF Shared-Loss Dispute Item by making available in a prompt and timely manner to one another and to the arbiters for examination and copying, as appropriate, all documents, books, and records under their respective control and that would be discoverable under the Federal Rules of Civil Procedure.

(g) The arbiters designated pursuant to subsections (c), (d) and (e) hereof shall select, with respect to each Dispute Item submitted to arbitration pursuant to this Section 7.1, either (i) the position and relief submitted by the Assuming Institution with respect to each SF Shared-Loss Dispute Item, or (ii) the position and relief submitted by the Receiver with respect to each SF Shared-Loss Dispute Item, in either case as set forth in its respective notice of arbitration. The arbiters shall have no authority to select a value for each Dispute Item other than the determination set forth in Section 7.1(c) and Section 7.1(d). The arbitration shall be final, binding and conclusive on the parties.

(h) Any amounts ultimately determined to be payable pursuant to such award shall bear interest at the Settlement Interest Rate from and including the date specified for the arbiters decisions specified in this Section 7.1, without regard to any extension of the finality of such award, to but not including the date paid. All payments required to be made under this Section 7.1 shall be made by wire transfer.

(i) For the avoidance of doubt, to the extent any notice of a SF Shared-Loss Dispute Item(s) is provided prior to the Termination Date, the terms of this Single Family Shared-Loss Agreement shall remain in effect with respect to the Single Family Shared-Loss Loans that are the subject of such SF Shared-Loss Dispute Item(s) until such time as any such dispute is finally resolved.

7.2 Fees and Expenses of Arbiters. The aggregate fees and expenses of the arbiters shall be borne equally by the parties. The parties shall pay the aggregate fees and expenses within thirty (30) days after receipt of the written decision of the arbiters (unless the arbiters agree in writing on some other payment schedule).

Exhibit 1

Monthly Certificate

78



SEE FOLLOWING PAGE

79



CERTIFICATE

MONTHLY SUMMARY

FOR SINGLE FAMILY ASSETS

FDIC - RECEIVER FOR XXXXXXX BANK

PURCHASE AND ASSUMPTION AGREEMENT DATED: Jan 1, 2009

Shared-Loss Period Ended:

(Dollars)

Calculation of Amount Due from (to) FDIC

FDIC % Share

0%

80%

Total

Carry forward from other types of assets:

1. Cumulative losses from single family pool

0

0

0

2. Cumulative losses from securities

0

0

0

3. Cumulative loss from commercial and other pool

0

0

:

0

4. Total cumulative losses at beg of period

0

0

0

5. Covered single family losses (gains) during period

0

0

:

0

6. Cumulative loss at end of period

0

0

0

FDIC % Share

x 0

%

x 80

%

7. Amount Due from (to) FDIC

0

+

0

+

=

-

Memo: threshold for recovery percentage

0

0

Preparer name:

Preparer signature

Preparer title:

Officer name:

Officer signature

Officer title:

Date:

1



XXXXXXXXX Bank

FIN No.

Schedule 4.15B

Date:

Non-Single Family Shared-Loss Agreement

Proforma Net Balance*

Unfunded

Schedule 4.15B as provided

$

:

$

:

Loan

Explanation

Number

Name

Net Balance

Unfunded

(Loan Description)

Add the following loans currently included in Schedule 4.15A Non-Single Family Shared-Loss Agreement:

:

:

:

:

:

:

:

:

:

:

Subtotal

:

:

Subtract the following loans currently included in Schedule 4.15B Single Family Shared-Loss Agreement:

:

:

:

:

:

:

:

:

:

:

Subtotal

:

:

Add the following loan not included in either Schedule 4.15A or 4.15B Asset Detail (Must provide documentation)

:

:

:

:

:

:

:

:

:

:

Subtotal

:

:

Add the following Unfunded Commitments (Must provide documentation)

:

:

:

:

:

:

:

:

:

:

Subtotal

:

:

Total Adjustments

:

:

Schedule 4.15B Revised Totals

$

:

$

:


Note: Total adjustments should also be reflected in the Certificate filing for the quarter this form is submitted.

* Net Balance agrees with amount noted on Schedule 4.15A Single Family Shared-Loss Agreement, or Revised Totals if this form has already been submitted previously.

81



XXXXXXXXX Bank

FIN No.

Schedule 4.15A

Date:

Single Family Shared-Loss Agreement

Proforma Net Balance*

Unfunded

Schedule 4.15A as provided

$

:

$

:

Loan

Explanation

Number

Name

Net Balance

Unfunded

(Loan Description)

Add the following loans currently included in Schedule 4.15B Non-Single Family Shared-Loss Agreement:

:

:

:

:

:

:

:

:

:

:

Subtotal

:

:

Subtract the following loans currently included in Schedule 4.15A Single Family Shared-Loss Agreement:

:

:

:

:

:

:

:

:

:

:

Subtotal

:

:

Add the following loan not included in either Schedule 4.15A or 4.15B Asset Detail (Must provide documentation)

:

:

:

:

:

:

:

:

:

:

Subtotal

:

:

Add the following Unfunded Commitments (Must provide documentation)

:

:

:

:

:

:

:

:

:

:

Subtotal

:

:

Total Adjustments

:

:

Schedule 4.15A Revised Totals

$

:

$

:

82



Exhibit 2.1(c)

1

Shared-Loss Month

2

Loan ID

3

First payment date

4

Property type

5

Lien

6

Original loan amount

7

Documentation

8

Original FICO

9

Original LTV

10

Original combined LTV

11

Original front-end DTI

12

Original back-end DTI

13

Negative Amortization cap

14

Property city

15

Property state

16

Property street address

17

Property zip

18

Maturity date

19

MI Coverage

20

Occupancy

21

Interest rate type

22

Product Type

23

Loan amortization type

24

Lookback

25

Margin

26

Interest rate index

27

Interest rate cap

28

Interest rate floor

29

First interest cap

30

Periodic interest cap

31

Periodic interest floor

32

Pay Cap

33

UPB

34

Interest rate

35

Paid-to date

36

Next payment due date

37

Scheduled payment

38

Escrow payment

83



39

Escrow balance

40

Next interest rate reset date

41

Next payment reset date

42

Rate reset period

43

Payment reset period

44

Payment History

45

Exceptional Loan Status

46

Valuation date

47

Valuation amount

48

Valuation type

49

Household income

50

Current FICO

51

Maximum Draw Amount

52

Draw period

53

Superior Lien Balance

84



Exhibit 2a (1)

CALCULATION OF RESTRUCTURING LOSS - HAMP or FDIC LOAN

MODIFICATION

1

Shared-Loss Month

20090531

2

Loan no:

123456

3

Modification Program:

HAMP

Loan before Restructuring

4

Unpaid principal balance

450000

5

Remaining term

298

6

Interest rate

0.06500

7

Next ARM reset rate (if within next 4 months)

0.00000

8

Interest Paid-To-Date

20081230

9

Delinquency Status

FC

10

Monthly payment - P&I

3047

11

Monthly payment - T&I

1000

Total monthly payment

4047

12

Household current annual income

95000

13

Valuation Date

20090121

14

Valuation Amount

425000

15

Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)

AVM

Terms of Modified/Restructured Loan

16

1st Trial Payment Due Date

20090119

17

Modification Effective Date

20090419

18

Net Unpaid Principal Balance (net of forbearance & principal reduction)

467188

19

Principal forbearance

0

20

Principal reduction

0

21

Product (fixed or step)

step

22

Remaining amortization term

480

23

Maturity date

20490119

24

Interest rate

0.02159

25

Next Payment due date

20090601

26

Monthly payment - P&I

1454

27

Monthly payment - T&I

1000

Total monthly payment

2454

28

Next reset date

20140501

29

Interest rate change per adjustment

0.01000

30

Lifetime interest rate cap

0.05530

31

Back end DTI

0.45000

Restructuring Loss Calculation

same as Unpaid Principal Balance before

4 above restructuring/modification

450000

34

Accrued interest, limited to 90 days

7313

35

Attorney153s fees

0

36

Foreclosure costs, including title search, filing fees, advertising, etc.

500

37

Property protection costs, maint. and repairs

0

38

Tax and insurance advances

2500

Other Advances

39

Appraisal/Broker153s Price Opinion fees

100

40

Inspections

0

41

Other

0

Total loan balance due before restructuring

460413

Cash Recoveries:

42

MI contribution

0

43

Other credits

0

44

T & I escrow account balances, if positive

Total Cash Recovery

0

Assumptions for Calculating Loss Share Amount, Restructured Loan:

45

Discount rate for projected cash flows

0.05530

46

Loan prepayment in full

120

47

NPV of projected cash flows (see amort schd1)

386927

48

Gain/Loss Amount

73485

Line item definitions can be found in SFR Data Submission Handbook.

85



Exhibit 2a(2)

CALCULATION OF RESTRUCTURING LOSS - 2nd FDIC MODIFICATION

1

Shared-Loss Month

20090531

2

Loan no:

123456

3

Modification Program:

FDIC

Loan before Restructuring

4

Unpaid principal balance

450000

5

Remaining term

298

6

Interest rate

0.06500

7

Next ARM reset rate (if within next 4 months)

0.00000

8

Interest Paid-To-Date

20081230

9

Delinquency Status

FC

10

Monthly payment - P&I

3047

11

Monthly payment - T&I

1000

Total monthly payment

4047

12

Household current annual income

95000

13

Valuation Date

20090121

14

Valuation Amount

425000

15

Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)

AVM

Terms of Modified/Restructured Loan

16

1st Trial Payment Due Date

20090201

17

Modification Effective Date

20090501

18

Net Principal balance (net of forbearance & principal reduction)

467188

19

Principal forbearance

0

20

Principal reduction

0

21

Product (fixed or step)

step

22

Remaining amortization term

480

23

Maturity date

20490501

24

Interest rate

0.02159

25

Next Payment due date

20090601

26

Monthly payment - P&I

1454

27

Monthly payment - T&I

1000

Total monthly payment

2454

28

Next reset date

20140501

29

Interest rate change per adjustment

0.01000

30

Lifetime interest rate cap

0.05530

31

Back end DTI

0.45000

Restructuring Loss Calculation

32

Previous NPV of loan modification

458740

33

Less: Post modification principal payments

2500

Plus:

35

Attorney153s fees

0

36

Foreclosure costs, including title search, filing fees, advertising, etc.

500

37

Property protection costs, maint. and repairs

0

38

Tax and insurance advances

2500

Other Advances

39

Appraisal/Broker153s Price Opinion fees

100

40

Inspections

0

41

Other

0

Total loan balance due before restructuring

459340

Cash Recoveries:

42

MI contribution

0

43

Other credits

0

44

T & I escrow account balances, if positive

Total Cash Recovery

0

Assumptions for Calculating Loss Share Amount, Restructured Loan:

45

Discount rate for projected cash flows

0.05530

46

Loan prepayment in full

120

47

NPV of projected cash flows (see amort schd1)

386927

48

Gain/Loss Amount

72413

Line item definitions can be found in SFR Data Submission Handbook.

86



Notes to Exhibits 2a (restructuring)

1. The data shown are for illustrative purpose. The figures will vary for actual restructurings.

2. For purposes of loss sharing, losses on restructured loans are calculated as the difference between:

a. The principal, accrued interest, advances due on the loan, and allowable 3rd party fees prior to restructuring (2a(1) lines 34-41, 2a(2) lines 33-41), and

b. The Net Present Value (NPV) of the estimated cash flows (line 47). The cash flows should assume no default or prepayment for 10 years, followed by prepayment in full at the end of 10 years (120 months).

3. For owner-occupied residential loans, the NPV is calculated using the most recently published Freddie Mac survey rate on 30-year fixed rate loans as of the restructure date.

4. For investor owned or non-owner occupied residential loans, the NPV is calculated using commercially reasonable rate on 30-year fixed rate loans as of the restructure date.

5. If the new loan is an adjustable-rate loan, interest rate resets and related cash flows should be projected based on the index rate in effect at the date of the loan restructuring. If the restructured loan otherwise provides for specific charges in monthly P&I payments over the term of the loan, those changes should be reflected in the projected cash flows. Assuming Institution must retain supporting schedule of projected cash flows as required by Section 2.1 of the Single Family Shared-Loss Agreement and provide it to the FDIC if requested for a sample audit.

6. Do not include late fees, prepayment penalties, or any similar lender fees or charges by the Failed Bank or Assuming Institution to the loan account, any allocation of Assuming Institution153s servicing costs, or any allocations of Assuming Institution153s general and administrative (G&A) or other operating costs.

7. The amount of accrued interest that may be added to the balance of the loan is limited to the minimum of:

a. 90 days

b. The number of days that the loan is delinquent at the time of restructuring

c. The number of days between the resolution date and the restructuring

To calculate accrued interest, apply the note interest rate that would have been in effect if the loan were performing to the principal balance after application of the last payment made by the borrower.

87



Exhibit 2b(1)

CALCULATION OF LOSS FOR SHORT SALE LOANS

Loan written down to book value prior to Loss Share

1

Shared-Loss Month:

20090531

2

Loan #

62201

3

Interest Paid-to-Date

20071130

4

Short Payoff Date

20090522

5

Note Interest rate

0.08500

6

Occupancy

Owner

If owner occupied:

7

Household current annual income

45000

8

Estimated NPV of loan mod

220000

9

Valuation Date

20090121

10

Valuation Amount

300000

11

Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)

Ext Appraisal

Short-Sale Loss calculation

13

Book Value

300000

14

Less: Post closing principal payments

0

17

Accrued interest, limited to 90 days

6375

18

Attorney153s fees

75

19

Foreclosure costs, including title search, filing fees, advertising, etc.

0

20

Property protection costs, maint., repairs and any costs or expenses relating to environmental conditions

0

21

Tax and insurance advances

0

Other Advances

22

Appraisal/Broker153s Price Opinion fees

250

23

Inspections

600

24

Other

0

25

Incentive to borrower

5000

Gross balance recoverable by Purchaser

312300

26

Amount accepted in Short-Sale (net proceeds)

275000

27

Hazard Insurance

0

28

Mortgage Insurance

0

29

T & I escrow account balance, if positive

0

30

Other credits, if any (itemize)

0

Total Cash Recovery

275000

31

Gain/Loss Amount

37300


(1) Costs with respect to environmental remediation activities are limited to $200,000 unless prior consent of the FDIC

Line item definitions located in SF Data Submission Handbook

88



Exhibit 2b(2)

CALCULATION OF LOSS FOR SHORT SALE LOANS

No Preceeding Loan Mod under Loss Share

1

Shared-Loss Month:

20090531

2

Loan #

58776

3

Interest Paid-to-Date

20080731

4

Short Payoff Date

20090417

5

Note Interest rate

0.07750

6

Occupancy

Owner

If owner occupied:

7

Household current annual income

38500

8

Estimated NPV of loan mod

200000

9

Valuation Date

20090121

10

Valuation Amount

300000

11

Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)

Ext Appraisal

Short-Sale Loss calculation

12

Loan UPB

375000

17

Accrued interest, limited to 90 days

7266

18

Attorney153s fees

0

19

Foreclosure costs, including title search, filing fees, advertising, etc.

400

20

Property protection costs, maint., repairs and any costs or expenses relating to environmental conditions

1450

21

Tax and insurance advances

0

Other Advances

22

Appraisal/Broker153s Price Opinion fees

350

23

Inspections

600

24

Other

0

25

Incentive to borrower

2000

Gross balance recoverable by Purchaser

387066

26

Amount accepted in Short-Sale (net proceeds)

255000

27

Hazard Insurance

0

28

Mortgage Insurance

0

29

T & I escrow account balance, if positive

0

30

Other credits, if any (itemize)

0

Total Cash Recovery

255000

31

Gain/Loss Amount

132066


(1) Costs with respect to environmental remediation activities are limited to $200,000 unless prior consent of the FDIC

Line item definitions located in SF Data Submission Handbook

89



Notes to Exhibits 2b (short sale)

1. The data shown are for illustrative purpose. The figures will vary for actual short sales.

2. The covered loss is the difference between the gross balance recoverable by Purchaser and the total cash recovery. There are two methods of calculation for covered losses from short sales, depending upon the circumstances. They are shown below:

a. If the loan was restructured when the Loss Share agreement was in place, and then the short sale occurred, use Exhibit 2b(3). This version uses the Net Present Value (NPV) of the modified loan as the starting point for the covered loss.

b. Otherwise, use Exhibit 2b(2). This version uses the unpaid balance of the loan as of the last payment as the starting point for the covered loss.

c. Use Exhibit 2b(1) for loans written down to book value prior to the shared-loss agreement.

3. For Exhibit 2b(2), the gross balance recoverable by the purchaser is calculated as the sum of lines 12 : 25; it is shown after line 25. For Exhibit 2b(3), the gross balance recoverable by the purchaser is calculated as line 15 minus line 16 plus lines 18 : 25; it is shown after line 25.

4. For Exhibit 2b(2), the total cash recovery is calculated as the sum of lines 26 : 30; it is shown in line 31. For Exhibit 2b(3), the total cash recovery is calculated as the sum of lines 26 : 30; it is shown after line 30.

5. Reasonable and customary third party attorney153s fees and expenses incurred by or on behalf of Assuming Institution in connection with any enforcement procedures, or otherwise with respect to such loan, are reported under Attorney153s fees.

6. Do not include late fees, prepayment penalties, or any similar lender fees or charges by the Failed Bank or Assuming Institution to the loan account, any allocation of Assuming Institution153s servicing costs, or any allocations of Assuming Institution153s general and administrative (G&A) or other operating costs.

7. If Exhibit 2b(3) is used, then no accrued interest may be included as a covered loss. Otherwise, the amount of accrued interest that may be included as a covered loss is limited to the minimum of:

a. 90 days

b. The number of days that the loan is delinquent when the property was sold

c. The number of days between the resolution date and the date when the property was sold

To calculate accrued interest, apply the note interest rate that would have been in effect if the loan were performing to the principal balance after application of the last payment made by the borrower.

90



Exhibit 2c(1)

CALCULATION OF FORECLOSURE LOSS

ORE or Foreclosure Occurred Prior to Loss Share Agreement

1

Shared-Loss Month

20090630

2

Loan no:

364574

3

Interest Paid-To-Date

20071001

4

Foreclosure sale date

20080202

5

Liquidation date

20090412

6

Note Interest rate

0.08100

10

Valuation Date

20090121

11

Valuation Amount

228000

12

Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)

Int Appr

Foreclosure Loss calculation

13

Book value at date of Loss Share agreement

244900

14

Less: Post closing principal payments

0

3306

Costs incurred after Loss Share agreement in place:

19

Attorney153s fees

0

20

Foreclosure costs, including title search, filing fees, advertising, etc.

0

21

Property protection costs, maint. and repairs

6500

22

Tax and insurance advances

0

Other Advances

23

Appraisal/Broker153s Price Opinion fees

0

24

Inspections

0

25

Other

0

Gross balance recoverable by Purchaser

254706

Cash Recoveries:

26

Net liquidation proceeds (from HUD-1 settl stmt)

219400

27

Hazard Insurance proceeds

0

28

Mortgage Insurance proceeds

0

29

T & I escrow account balances, if positive

0

30

Other credits, if any (itemize)

0

Total Cash Recovery

219400

31

Gain/Loss Amount

35306

Line item definitions located in SF Data Submission Handbook

91



Exhibit 2c(2)

CALCULATION OF FORECLOSURE LOSS

During Term of the Agreement

No Preceeding Loan Mod under Loss

Share

1

Shared-Loss Month

20090531

2

Loan no:

292334

3

Interest Paid-to-Date

20080430

4

Foreclosure sale date

20090115

5

Liquidation date

20090412

6

Note Interest rate

0.08000

7

Occupancy

Owner

If owner occupied:

8

Household current annual income

42000

9

Estimated NPV of loan mod

195000

10

Valuation Date

20090121

11

Valuation Amount

235000

12

Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)

Ext BPO

Foreclosure Loss calculation

14

Loan Principal balance at property reversion

300000

Plus:

18

Accrued interest, limited to 90 days

6000

19

Attorney153s fees

0

20

Foreclosure costs, including title search, filing fees, advertising, etc.

4000

21

Property protection costs, maint. and repairs

5500

22

Tax and insurance advances

1500

Other Advances

23

Appraisal/Broker153s Price Opinion fees

0

24

Inspections

50

25

Other

0

Gross balance recoverable by Purchaser

317050

Cash Recoveries:

26

Net liquidation proceeds (from HUD-1 settl stmt)

205000

27

Hazard Insurance proceeds

0

28

Mortgage Insurance proceeds

0

29

T & I escrow account balances, if positive

0

30

Other credits, if any (itemize)

0

Total Cash Recovery

205000

31

Gain/Loss Amount

112050

Line item definitions located in SF Data Submission Handbook

92



Exhibit 2c(3)

CALCULATION OF FORECLOSURE LOSS

Foreclosure after a Covered Loan Mod

1

Shared-Loss Month

20090531

2

Loan no:

138554

3

Interest Paid-to-Date

20080430

4

Foreclosure sale date

20090115

5

Liquidation date

20090412

6

Note Interest rate

0.04000

10

Valuation Date

20081215

11

Valuation Amount

210000

12

Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)

Ext Appr

Foreclosure Loss calculation

16

NPV of projected cash flows at loan mod

285000

17

Less: Post modification principal payments

2500

Plus:

19

Attorney153s fees

0

20

Foreclosure costs, including title search, filing fees, advertising, etc.

4000

21

Property protection costs, maint. and repairs

7000

22

Tax and insurance advances

2000

Other Advances

23

Appraisal/Broker153s Price Opinion fees

0

24

Inspections

0

25

Other

0

Gross balance recoverable by Purchaser

295500

Cash Recoveries:

26

Net liquidation proceeds (from HUD-1 settl stmt)

201000

27

Hazard Insurance proceeds

0

28

Mortgage Insurance proceeds

0

29

T & I escrow account balances, if positive

0

30

Other credits, if any (itemize)

0

Total Cash Recovery

201000

31

Gain/Loss Amount

94500

Line item definitions located in SF Data Submission Handbook

93



Notes to Exhibits 2c (foreclosure)

2. The data shown are for illustrative purpose. The figures will vary for actual restructurings.

3. The covered loss is the difference between the gross balance recoverable by Purchaser and the total cash recovery. There are three methods of calculation for covered losses from foreclosures, depending upon the circumstances. They are shown below:

a. If foreclosure occurred prior to the beginning of the Loss Share agreement, use Exhibit 2c(1). This version uses the book value of the REO as the starting point for the covered loss.

b. If foreclosure occurred after the Loss Share agreement was in place, and if the loan was not restructured when the Loss Share agreement was in place, use Exhibit 2c(2). This version uses the unpaid balance of the loan as of the last payment as the starting point for the covered loss.

c. If the loan was restructured when the Loss Share agreement was in place, and then foreclosure occurred, use Exhibit 2c(3). This version uses the Net Present Value (NPV) of the modified loan as the starting point for the covered loss.

4. For Exhibit 2c(1), the gross balance recoverable by the purchaser is calculated as the sum of lines 13 : 25; it is shown after line 25. For Exhibit 2c(2), the gross balance recoverable by the purchaser is calculated as the sum of lines 14 : 25; it is shown after line 25. For Exhibit 2c(3), the gross balance recoverable by the purchaser is calculated as line 16 minus line 17 plus lines 17 : 25; it is shown after line 25.

5. For Exhibit 2c(1), the total cash recovery is calculated as the sum of lines 26 : 30; it is shown in line 31. For Exhibit 2c(2), the total cash recovery is calculated as the sum of lines 26 : 30; it is shown in line 31. For Exhibit 2c(3), the total cash recovery is calculated as the sum of lines 26 : 30; it is shown in line 31.

6. Reasonable and customary third party attorney153s fees and expenses incurred by or on behalf of Assuming Institution in connection with any enforcement procedures, or otherwise with respect to such loan, are reported under Attorney153s fees.

7. Assuming Institution153s (or Third Party Servicer153s) reasonable and customary out-of-pocket costs paid to either a third party or an affiliate (if affiliate is pre-approved by the FDIC) for foreclosure, property protection and maintenance costs, repairs, assessments, taxes, insurance and similar items are treated as part of the gross recoverable balance, to the extent they are not paid from funds in the borrower153s escrow account. Allowable costs are limited to amounts per Freddie Mac and Fannie Mae guidelines (as in effect from time to time), where applicable, provided that this limitation shall not apply to costs or expenses relating to environmental conditions.

8. Do not include late fees, prepayment penalties, or any similar lender fees or charges by the Failed Bank or Assuming Institution to the loan account, any allocation of Assuming Institution153s servicing costs, or any allocations of Assuming Institution153s general and administrative (G&A) or other operating costs.

9. If Exhibit 2c(3) is used, then no accrued interest may be included as a covered loss. The amount of accrued interest that may be included as a covered loss on Exhibit 2c(2)is limited to the minimum of:

a. 90 days

b. The number of days that the loan is delinquent when the property was sold

94



c. The number of days between the resolution date and the date when the property was sold

To calculate accrued interest, apply the note interest rate that would have been in effect if the loan were performing to the principal balance after application of the last payment made by the borrower.

95



Exhibit 2d(1)

CALCULATION OF LOSS FOR UNRELATED 2ND LIEN

CHARGE-OFF

1

Shared-Loss Month:

20090531

2

Loan #

58776

3

Interest paid-to-date

20081201

4

Charge-Off Date

20090531

5

Note Interest rate

0.03500

6

Occupancy

Owner

If owner occupied:

7

Household current annual income

0

8

Valuation Date

20090402

9

Valuation Amount

230000

10

Valuation Type (Interior/exterior appraisal, BPO, AVM, etc)

BPO

11

Balance of superior liens

210000

Charge-Off Loss calculation

12

Loan Principal balance

55000

13

Charge-off amount (principal only)

55000

Plus:

14

Accrued interest, limited to 90 days

481

15

Attorney153s fees

0

16

Foreclosure costs, including title search, filing fees, advertising, etc.

250

17

Property protection costs, maint., repairs and any costs or expenses relating to environmental conditions

0

18

Tax and insurance advances

0

Other Advances

19

Appraisal/Broker153s Price Opinion fees

75

20

Inspections

0

21

Other

0

Gross balance recoverable by Purchaser

55806

22

Foreclosure sale proceeds

0

23

Hazard Insurance proceeds

0

24

Mortgage Insurance proceeds

0

25

Tax overage

0

26

Short sale payoff

1500

27

Other credits, if any (itemize)

0

Total Cash Recovery

1500

28

Loss Amount

54306


(1) Costs with respect to environmental remediation activities are limited to $200,000 unless prior consent of the FDIC

Line item definitions located in SF Data Submission Handbook

96



Exhibit 2d(2)

Shared-Loss Month:

[input month]

Loan no.:

[input loan no.)

NOTE

The calculation of recovery on a loan for which a Restructuring Loss has been paid will only apply if the loan is sold.

EXAMPLE CALCULATION

Restructuring Loss Information

Loan principal balance before restructuring

$

200,000

A

NPV, restructured loan

165,000

B

Loss on restructured loan

$

35,000

A : B

Times FDIC applicable loss share % (80%)

80

%

Loss share payment to purchaser

$

28,000

C

Calculation : Recovery amount due to Receiver

Loan sales price

$

190,000

NPV of restructured loan at mod date

165,000

Gain - step 1

25,000

D

PLUS

Loan UPB after restructuring (1)

200,000

Loan UPB at liquidation date

192,000

Gain - step 2 (principal collections after restructuring)

8,000

E

Recovery amount

33,000

D+ E

Times FDIC loss share %

80

%

Recovery due to FDIC

$

26,400

F

Net loss share paid to purchaser (C : F)

$

1,600

Proof Calculation (2)

Loan principal balance

$

200,000

G

Principal collections on loan

8,000

Sales price for loan

190,000

Total collections on loan

198,000

H

Net loss on loan

$

2,000

G : H

Times FDIC applicable loss share % (80%)

80

%

Loss share payment to purchaser

$

1,600


(1)

This example assumes that the FDIC loan modification program as shown in Exhibit 5 is applied and the loan restructuring does not result in a reduction in the loan principal balance due from the borrower.

(2)

This proof calculation is provided to illustrate the concept and the Assuming Institution is not required to provide this with its Recovery calculations.

97



Exhibit 3

Portfolio Performance and Summary Schedule

SHARED-LOSS LOANS

PORTFOLIO PERFORMANCE AND SUMMARY SCHEDULE

MONTH ENDED: [input report month]

POOL SUMMARY

#

$

Loans at Sale Date

xx

xx

Loans as of this month-end

xx

xx

PORTFOLIO PERFORMANCE STATUS

Percent of Total

#

$

#

Current

30 : 59 days past due

60 : 89 days past due

90 : 119 days past due

120 and over days past due

In foreclosure

ORE

Total

Memo Item:

Loans in process of restructuring : total

Loans in bankruptcy

Loans in process of restructuring by delinquency status

Current

30 - 59 days past due

60 - 89 days past due

90 - 119 days past due

120 and over days past due In foreclosure

Total

98



List of Loans Paid Off During Month

Loan #

Principal
Balance

List of Loans Sold During Month

Loan #

Principal
Balance

99



Exhibit 4
Wire Transfer Instructions

PURCHASER WIRING INSTRUCTIONS

BANK RECEIVING WIRE

9 DIGIT ABA ROUTING NUMBER

ACCOUNT NUMBER

NAME OF ACCOUNT

ATTENTION TO WHOM

PURPOSE OF WIRE

FDIC RECEIVER WIRING INSTRUCTIONS

BANK RECEIVING WIRE

SHORT NAME

ADDRESS OF BANK RECEIVING WIRE

9 DIGIT ABA ROUTING NUMBER

ACCOUNT NUMBER

NAME OF ACCOUNT

ATTENTION TO WHOM

PURPOSE OF WIRE

100



EXHIBIT 5

FDIC MORTGAGE LOAN MODIFICATION PROGRAM

Objective

The objective of this FDIC Mortgage Loan Modification Program ("Program") is to modify the terms of certain residential mortgage loans so as to improve affordability, increase the probability of performance, allow borrowers to remain in their homes and increase the value of the loans to the FDIC and assignees. The Program provides for the modification of Qualifying Loans (as defined below) by reducing the borrower153s monthly housing debt to income ratio ("DTI Ratio") to no more than 31% at the time of the modification and eliminating adjustable interest rate and negative amortization features.

Qualifying Mortgage Loans

In order for a mortgage loan to be a Qualifying Loan it must meet all of the following criteria, which must be confirmed by the lender:

- The collateral securing the mortgage loan is owner-occupied and the owner153s primary residence; and

- The mortgagee has a first priority lien on the collateral; and

- Either the borrower is at least 60 days delinquent or a default is reasonably foreseeable.

Modification Process

The lender shall undertake a review of its mortgage loan portfolio to identify Qualifying Loans. For each Qualifying Loan, the lender shall determine the net present value of the modified loan and, if it will exceed the net present value of the foreclosed collateral upon disposition, then the Qualifying Loan shall be modified so as to reduce the borrower153s monthly DTI Ratio to no more than 31% at the time of the modification. To achieve this, the lender shall use a combination of interest rate reduction, term extension and principal forbearance, as necessary.

The borrower153s monthly DTI Ratio shall be a percentage calculated by dividing the borrower153s monthly income by the borrower153s monthly housing payment (including principal, interest, taxes and insurance). For these purpose of the foregoing calculation:

(1) the borrower153s monthly income shall be defined as the borrower153s (along with any co-borrowers153) income amount before any payroll deductions and includes wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing allowances, other compensation for personal services, Social Security payments, including Social Security received by adults on behalf of minors or by minors intended for their own support, and monthly income from annuities, insurance policies, retirement funds, pensions, disability or death benefits, unemployment benefits, rental income and other income. All income information must be documented and verified. If the borrower receives public assistance or collects unemployment, the Assuming Institution must determine whether the public assistance or unemployment income will continue for at least nine (9) months.

(2) the borrower153s monthly housing payment shall be the amount required to pay monthly principal and interest plus one-twelfth of the then current annual amount required to pay real property taxes and homeowner153s insurance with respect to the collateral.

101



In order to calculate the monthly principal payment, the lender shall capitalize to the outstanding principal balance of the Qualifying Loan the amount of all delinquent interest, delinquent taxes, past due insurance premiums, third party fees and (without duplication) escrow advances (such amount, the "Capitalized Balance").

In order to achieve the goal of reducing the DTI Ratio to 31%, the lender shall take the following steps in the following order of priority with respect to each Qualifying Loan:

1. Reduce the interest rate to the then current Freddie Mac Survey Rate for 30-year fixed rate mortgage loans, and adjust the term to 30 years.

2. If the DTI Ratio is still in excess of 31%, reduce the interest rate further, but no lower than 3%, until the DTI ratio of 31% is achieved.

3. If the DTI Ratio is still in excess of 31% after adjusting the interest rate to 3%, extend the remaining term of the loan by 10 years.

4. If the DTI Ratio is still in excess of 31%, calculate a new monthly payment (the "Adjusted Payment Amount") that will result in the borrower153s monthly DTI Ratio not exceeding 31%. After calculating the Adjusted Payment Amount, the lender shall bifurcate the Capitalized Balance into two portions : the amortizing portion and the non-amortizing portion. The amortizing portion of the Capitalized Balance shall be the mortgage amount that will fully amortize over a 40-year term at an annual interest rate of 3% and monthly payments equal to the Adjusted Payment Amount. The non-amortizing portion of the Capitalized Balance shall be the difference between the Capitalized Balance and the amortizing portion of the Capitalized Balance. If the amortizing portion of the Capitalized Balance is less than 75% of the current estimated value of the collateral, then the lender may choose not to restructure the loan. If the lender chooses to restructure the loan, then the lender shall forbear on collecting the non-amortizing portion of the Capitalized Balance, and such amount shall be due and payable only upon the earlier of (i) maturity of the modified loan, (ii) a sale of the property or (iii) a pay-off or refinancing of the loan. No interest shall be charged on the non-amortizing portion of the Capitalized Balance, but repayment shall be secured by a first lien on the collateral.

Special Note:

The net present value calculation used to determine whether a loan should be modified based on the modification process above is distinct and different from the net present value calculation used to determine the covered loss if the loan is modified. Please refer only to the net present value calculation described in this exhibit for the modification process, with its separate assumptions, when determining whether to provide a modification to a borrower. Separate assumptions may include, without limitation, Assuming Institution153s determination of a probability of default without modification, a probability of default with modification, home price forecasts, prepayment speeds, and event timing. These assumptions are applied to different projected cash flows over the term of the loan, such as the projected cash flow of the loan performing or defaulting without modification and the projected cash flow of the loan performing or defaulting with modification.

By contrast, the net present value for determining the covered loss is based on a 10 year period. While the assumptions in the net present value calculation used in the modification process may change, the net present value calculation for determining the covered loss remains constant.

102



Related Junior Lien Mortgage Loans

In cases where the lender holds a junior lien mortgage loan that is collateralized by the same property that collateralizes a Qualifying Loan that is modified as described above, the junior lien mortgage loan shall also be modified to enhance overall affordability to the borrower. At a minimum, the lender shall reduce the interest rate on the junior lien mortgage loan to no more than 2% per annum. Further modifications may be made at the lender153s discretion as needed to support affordability and performance of the modified first lien Qualifying Loan.

103