Disposition of Distressed, Vacant and Abandoned Property in Local CommunitiesPhil Bracken, EVPWells Fargo Home Mortgage

U.S. Conference of Mayors Annual MeetingJune 11, 2010

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The Impact of the Crisis on U.S. Wealth

$68,178

$65,599

$78,795$77,869

$71,737

$16,575$17,039

$20,978$22,944

$22,085

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

2005 2006 2007 2008 2009

billions

Household and Nonprofit Organization Total Assets Household Owner-Occupied Real Estate

• Total household assets declined by $13 billion and real estate assets by $7 billion from their respective peaks (2007 and 2006) to troughs (both in Q109).

• Some rebound occurred in 2009.

Source: Federal Reserve Board

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The Three Housing Challenges

1. Stopping the Flow of Foreclosures and Short Sales (Keeping people in their homes)

2. Cleaning up (disposing) of the existing inventory

3. Preventing the Crisis from re-occurring

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1. Stop the Flow (Keep people in their homes)

Make good loans

Work early and often with customers on options to help make their mortgage payment sustainable.

Use case-by-case and streamlined methods that take into account customers’ circumstances.

Align our loss mitigation efforts with investor guidelines and servicing policies.

Before a house is moved to foreclosure sale, conduct a final loan review to ensure all workout options have been exhausted.

Wells Fargo’s foreclosure rate of 1.95 percent continues to be considerably less than the industry’s average of 3.18 percent.*

*Source: Inside Mortgage Finance, May 21, 2010

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In 2009 and through April 2010, Wells Fargo has helped two million households with mortgage payment relief.

1. Stop the Flow (keep people in their homes)

Continue to make every effort to keep people in their homes through the federal Home Affordable Modification Program (HAMP) and other modification programs focused on mortgage payment relief.

In 2009 and through April 2010: 111,416 active trial and completed HAMP modifications,

including 36,094 permanent modifications

390,000 non-HAMP active trial and completed modifications

Refinanced more than 1.5 million loans

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1. Stop the Flow (keep people in their homes)The Wells Fargo Home Preservation Workshops

Nine Cities thus far—Atlanta; Baltimore; Chicago; Phoenix; St. Paul, Minn.; Los Angeles; Oakland, Calif.; Miami; and Minneapolis

More than 12,000 customers face-to-face

Many customers who attended have received some kind of workout option on site or shortly after the events.

Credit counseling on site

Fannie Mae/Freddie Mac/FHA solution “decision makers” on site

Additional cities planned—Cleveland, Las Vegas and Memphis

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2. Cleaning Up (Dispose of the Inventory)

Fully underwritten - FHA fixed-rate 30-year mortgage loans

Available anywhere in America

Improvement (repair costs) built into the 30 year mortgage

3.5% downpayment requirement for owner occupants

Streamlined 203(k) ($35,000 of repair and under)

Regular 203(k) (more than $35,000 of repair)

Loan amount based on “as repaired” condition

Repair amounts put in escrow and disbursed as work completed

HUD approved contractor required

The LOANS ARE ASSUMABLE!!! See next two pages

The FHA 203(k) mortgage – (America’s Jobs Program?)

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2. Clean Up (Using the FHA 203(k) program)

Step 1A homebuyer finds a

home to purchase andrenovate or an existing

homebuyer wants torenovate their residence.

Step 2Homebuyer applies for an

FHA 203(k) loan withan FHA-approved lender.

Step 3Borrower, contractor

and independentFHA-approved

consultant meet at theproperty to determinerequired (health and

safety issues)vs. desired (cosmetic)

improvements.

Step 4Independent FHA-approvedconsultant prepares a work

write-up. A bid isprepared by the Contractorand given to the Borrower

and Lender.

Step 5Lender provides the

FHA-approved appraiserthe Scope of Workand bid (as signed

off on by the Borrower)so the appraisercan determine

as-improved value.

Step 6Loan application is

underwritten by theLender according to FHA

guidelines.

Step 7Lender closes the loan.Lender sets aside funds

for renovation in anescrow account. Theloan is FHA-insured

after closing.

Step 8Contractor begins work.Borrower/Contractor are

paid in draws as theFHA consultant approves

draw requests forcompleted work.

Step 9After work is completed

Lender releases the10% holdback on all

contracted work.

Standard FHA 203(k) Loan Process

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2. Clean Up – A Wells Fargo Exclusive -Remodel Express

SM [203(k) In A Box]

Remodel Express provides the security of working with some of the most successful professional companies in America a renovation solution to purchase or refinance and remodel a home. [203(k) In A Box] Home Depot

Lowes

Sears

Program features: The maximum repair cost is $35,000

Faster processing and underwriting times, and lower fees

One-year workmanship warranty on all work performed by national home improvement company

Loan amount may be up to 110% of ‘after improved’ value

Wide range of allowable repairs/improvements, such as: Energy efficiency—Appliances, insulation, windows, HVAC

Major/minor remodeling—Kitchens, baths, room additions

Basics—Roof, plumbing, electrical, foundation repairs septic and well systems, painting, floors

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2. Clean Up – (Needed Enhancements to the FHA 203(k) Program) Ideas for expanding availability to non-owner occupied

properties Expanded to investors to purchase and rehabilitate properties

Fixed-rate mortgage at affordable rates

Fully assumable

Investors would have to sell to owner occupants or lose affordable features

City outreach to raise awareness among residents

Owner occupant auction process

Leverage diverse segments networks

Cities actually obtaining a 203(k) mortgage themselves

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3. Preventing the Crisis from Re-Occurring (Wells Fargo’s responsible mortgage lending and servicing principles)Highlights of our long-standing principles:

Facilitate informed customer choices.

Approve applications for loans only if we believe the borrower has the ability to repay the loan according to its terms.

Offer prime-pricing options to first mortgage loan consumers whose loans qualify for such pricing. (Prime Loan Filter)

Approach every interaction from the customer’s point of view.

Provide clear and timely information to consumers, understanding how complex homeownership and financing can be. (Transparency)

Provide tools, products, services and information that can help our customers manage their credit.

Do all we can to help keep people in their homes whenever possible.

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The 203 (k) Solution -- (America’s Jobs Program?)

Get rid of inventory

Stabilize House Prices?

Create Jobs?

Create Rental Housing?

Create Lease Purchase Options?

Create Assumable Fixed Rate Loans

Improve Tax Revenue for Cities?

No Budget Impact to Taxpayers

Questions?