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Supply & Demand

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S&P Case-Shiller Home Price Indices

S&P Case Shiller 1/31/2012

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Prices

Until distressed sales in the market recede, wewill see continued downward pressure on prices.

- Mark Fleming, Chief Economist for CoreLogic

CoreLogic 2/2/2012

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Prices

The enormous supplyoverhang of existinghomes (particularlyfactoring in all those inforeclosure or soon tobe) promises to keeppressure on prices for

some time.Joshua ShapiroChief U.S. Economist at MFR Inc.

NY Times 1/31/2012

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Prices

Fiserv projects thataverage U.S. prices will

decline another 2.7

percent by the thirdquarter of 2012,

compared to the year-ago period, before rising

3.8 percent by the thirdquarter of 2013.

Fiserv 1/30/2012

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Appraisals

Foreclosures and short sales can provide important information forappraisers, who develop valuations based on market data andmarket forces.

An appraisershould not ignore foreclosure sales and short

sales if consideration of such salesis necessary to develop acredible value opinion

A short sale might have involvedatypical seller motivationsand so might not be an ideal comp

A sale of a bank-owned property might haveinvolved typical motivations, so the fact that itwas a foreclosed property would not render itineligible as a comp.

Appraisal Institute 1/30/2012

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Percentage of Contract Failures

Contract failures cancellations caused largely by declined mortgage applications orfailures in loan underwriting from appraised values coming in below the negotiated price.

9%

16%

18%

33% 33% 33%

0%

5%

10%

15%

20%

25%

30%

35%

Aug 2010 Sept 2011July 2011 Oct 2011 Nov 2011 Dec 2011

NAR 1/2012

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40%

37%

31%

30% 29%

31%

30% 28% 29%

32%

0%

10%

20%

30%

40%

50%

March April May June July August September October November December

Percentage of Distressed Property Sales

NAR

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REOs to Rentals

Were working to turn more foreclosed homes into rentalhousing, because as we know and a lot of families know,that empty house or for sale sign down the block can bringdown the price of homes across the neighborhood.

- President Barack Obama

WSJ 2/3/2012

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The FHFA announced an REO-bulk sales initiative that aimstosell off bulk assets to investors who have the ability toturn those properties into rentals.

REOs to Rentals

The FHFA says investors can now

enter the pre-qualification process toestablish whether they have thefinancial ability and property-management capacity to bid on

transactions during the initial pilotphase of the program.

Housing Wire 2/1/2012

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Private equity firms are jumping into distressedhousing as the U.S. government plans to market200,000 foreclosed homes as rentals to speed upthe economic recovery.

REOs to Rentals

GTIS Partners will spend $1 billionGI Partners, expects to invest$1 billion, and Oaktree Capital

Management LP will spend$450 million on similar housing.

Bloomberg 1/31/2012

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Type of Sale % of ValueNon-Distressed Sale 100%

Short Sale 87%

Foreclosure Sale 78%

Value by Sale Category

NAR 01/2012