With minimal U.S. Treasury assistance and terms that both lessen the monthly payment for the borrower and provide a 100% return for investors, this agreement can be utilized to rapidly resolve millions of pending and imminent foreclosures.

NOTE: This agreement directly addresses both the delinquency balance (if any) and household income capability for the borrower. Furthermore, it removes limits posed by a mortgage-backed security status that the servicer typically faces, because it gives the lender a full, unmodified payment amount as provided by the original loan terms.

Our attached sample D.E.E.A. is based on a typical "sub-prime mortgage" in the amount of $140,000.00 that had a first payment due on October 1, 2005, amortized for 360 months with a "teaser" or initial interest rate of 5%, and is scheduled to reset to a higher interest rate of $8.75% after the initial 24 monthly payments have been made. Our sample is also based on a monthly payments delinquency period of 6 months, from July 1, 2008 through December 31, 2008, during which time interest arrearage has accrued to an amount of $5,987.27. Additionally, our sample includes late fees and foreclosure costs that when added to the interest arrearage, have rendered a mortgage reinstatement total in the amount as noted of $11,547.27.

With the utilization of our sample D.E.E.A., the borrower has been able to address this mortgage reinstatement total of $11,547.27 by sending a payment of just a $500.00 to the lender. The remainder of this balance, $11,047.27, has been paid by the U.S. Department of the Treasury and is held by the U.S. Treasury in the form of a secured deferment loan to the borrower in an account designated the "Deferred Payments Balance". The total amount accrued by this account is payable in full by the borrower within 30 days of the last regularly scheduled monthly mortgage payment of the loan. Should the borrower decide to sell the property in the mean time, the "Deferred Payments Balance" would be paid in full at the property sale closing transaction.

Additionally, the loan monthly payment by the borrower has been split into two separate categories specifically for the purpose of lowering the amount to be sent by the borrower to the lender each month. The first of these payment categories is the "Monthly Remittance Amount" which is the portion of the monthly payment that the borrower actually sends to the lender. The second category of the monthly payment is the "Deferred Credit Amount" which is the portion of the payment that is extended as additional credit to the borrower as it is added to the "Deferred Payments Balance" account each month. The following is an explanation of how the payment amount of each of these two categories is calculated.

The first monthly payment category, the "Monthly Remittance Amount", is calculated by dividing 60% of the total interest amount of the loan to be paid at full amortization by the number of monthly payments remaining on the loan amortization schedule, and then adding 100% of the remaining principal balance of the loan divided by the same number of remaining payments. For example, in our sample agreement, the original loan amount is $140,000.00 and the borrowers have a typical "sub-prime" mortgage with an interest reset to a higher rate, scheduled to occur after 2 years of payments, commonly referred to as a 2/28 mortgage. After 24 payments, the loan interest rate is scheduled to jump from 5% to 8.75%. At that time, the remaining principal balance, based on a typical 360 month payment schedule and having credited the borrower for the amount assigned to the "Deferred Payments Balance", the loan principal balance will be $133,481.02 and the remaining number of monthly payments is 336. As this remaining principal balance of $133,481.02 is amortized for this 336 month term at an interest rate of 8.75%, there is a corresponding increase of the monthly payment from $751.55 to $1,066.12. The total interest that remains to be paid at full amortization is $224,735.24. By taking 60% of this total interest amount , we have the total interest portion to be sent to the lender by the borrower on a monthly basis over the course of the loan term, of $134,841.14. As we add the total outstanding principal balance of $133,481.02 to this amount, we have the payments total amount for the life of the 336 payments term that is to be sent by the borrower on a monthly basis. This total amount is $133,481.02 + $134,841.14, being $268,322.16. As this combined total is divided by the remaining number of months in the loan term of 336, the "Monthly Remittance Amount" of $798.58 is determined. By utilizing DEEA, the loan payment amount to be sent by the borrowers each month is merely $47.03 more than the loan pre-reset payment amount of $751.55, and it is $267.54 less than the reset monthly payment amount of $1,066.12.

The other category of the monthly payment, the "Deferred Credit Amount", is calculated by taking the unpaid interest amount that was subtracted from the remaining total of the loan interest to be paid at full amortization when the "Monthly Remittance Amount" was calculated, and dividing this unpaid amount by the number of payments remaining for the term of the loan. For example, the remaining total of the loan interest to be paid as noted in our example above, is $224,735.24. The borrower is paying 60% of this amount with the "Monthly Remittance Amount" payments. The other 40% of this amount, being $89,894.10, is divided by the number of payments remaining for the loan term of 336 months, which in turn gives us a monthly "Deferred Credit Amount" of $267.54. This amount corresponds with the difference in amounts between the "Monthly Remittance Amount" and the monthly payment amount that would otherwise have been sent by the borrower after the interest reset under the original loan terms. This "Deferred Credit Amount" of $267.54 is paid each month as an extension of secured credit to the borrower by the U.S. Treasury and is added each month to the "Deferred Payments Balance" account.

As you will recall, the "Deferred Payments Balance" account was formed for the purpose of preventing foreclosure as this provided viable means for establishing a current status of the loan payments schedule, without a modification of the loan. After the borrower made a $500.00 payment, the remaining $11,047.27 of arrearage and charges was credited to the borrower in the form of a loan by the U.S. Treasury with a deferred payment schedule, thereby satisfying all of the payments delinquency. This in turn, gave the borrowers a current status of the payments schedule and the need for foreclosure was eliminated. In our sample, the "Deferred Payments Balance" is formed with this deposit of $11,047.27 and each month, $267.54 in the form of the "Deferred Credit Amount" is added to this account. This "Deferred Credit Amount" accrues on a monthly basis to this account for the duration of the 336 month remaining payment term, or until the borrower sells and the accrued balance is paid in full at the property sale closing. D.E.E.A. provides for payment in full of this accrued "Deferred Payments Balance" amount within 30 days of the last payment of the loan term. At that time, this "Deferred Payments Balance" total will be in the amount of $267.54 X 336 months, being $89,893.44, plus the original deposit of $11,047.27, for a total amount of $100,940.71. By utilizing D.E.E.A., the deferred balance of the loan does not have to be paid until the borrower is in a strong equity position as all other loan payments will have been satisfied at that time, and the borrower's monthly payments to be sent to the lender have been significantly lowered. Even as this has been accomplished, the U.S. Treasury has contributed only secured funding to be repaid by the borrower, the lender still receives 100% of the amount provided by the original loan terms, and all of the costs associated with foreclosure and carrying an REO property have been eliminated.

Note: Most importantly, there has been no modification of the original loan due to the fact that the full monthly payment amount is still collected. Servicers can rapidly implement in large numbers nationwide without fear of investor reprisal.

D.E.E.A. is structured to specifically address limitations posed by pooling and servicing agreements, and investment underwriting restrictions that frequently tie the hands of loan servicers in conventional mortgage loan modification attempts. In a conventional modification, a significant portion of the interest amount provided by the original loan terms is typically forfeited by the lender as the monthly payment is lowered via the lowering of the loan interest rate. Practically all pooling and servicing agreements and securities underwriting requirements prohibit the modification of mortgages that would alter the investor pool to which each respective loan has been allocated in the secondary loan purchasing market. However, with D.E.E.A., the full monthly payment amount is paid to the lender even though the actual amount sent by the borrower has been substantially reduced. The lender is not required to forfeit any amount of the loan investment to be paid and the borrower has the benefit of deferment of a substantial portion of this amount to the end of the loan term, or at the property sale closing if the borrower sells before the expiration of the loan amortization term. Lender recovery is at a 100% rate and the deferred interest amount is paid only when the borrower is in a fully capable homeowner equity position as this payment is made only after the last payment of the loan amortization term has been made.

NOTE: Lender recovery is at a 100% rate and the deferred interest amount is paid only when the borrower is in a fully capable homeowner equity position. Additionally, the borrower maintains affordable monthly payments and foreclosure has been eliminated. It's a WIN/WIN for all concerned parties.

A major concern for many lenders and borrowers alike is the recent reduction of home values on virtually a national scale. Home values have suffered from the glut of vacant properties introduced to the market in the wake of the "sub-prime crisis". There has been much debate over who should shoulder these losses. As satisfaction of mortgage loan terms is in the mutual interests of both borrower and lender, D.E.E.A. utilizes a mutually absorbed "net gain/loss schedule" with partial underwriting by the U.S. Treasury, depending on net proceeds from the sale price of the property at a future date.

For obvious reasons, lenders decry the notion of taking over a devalued property in foreclosure without recourse against the borrower. Likewise, borrowers have little interest in owning a property that represents nothing but loss that may never be recovered during the borrower's entire lifetime. With a highly efficient, cost effective and largely secured strategy for the large-scale mitigation of pending and future foreclosures at hand, the U.S. Treasury stands to save hundreds of billions of taxpayer dollars in lieu of massive T.A.R.P. bailouts. As all parties stand to mutually gain or lose in the sale of the property pending market conditions and the property sale price, D.E.E.A. provides for specific terms by which the gain/loss is shared and hence, risk is mitigated for all. Furthermore, utilization of this agreement eliminates the incentive of borrowers who are not in foreclosure to stop making monthly payments as an equitable option for all parties, with or without a payments delinquency, is now a viable alternative.

Structured to specifically address limitations posed by pooling and servicing agreements that restrict a loan servicer's modification options, equitably applicable to all mortgages, delinquent or current, as "100% on the dollar" is still collected by the lender even though terms are adjusted in a way that makes the payment schedule much more viable for most borrowers, and representing a cost effective alternative to foreclosure, the DEFERRED EQUITY EXCHANGE AGREEMENT represents an efficient, responsible and highly beneficial solution for the "sub-prime" mortgage crisis.