Solving the Nation\'s Single Family REO Crisis through public/private partnerships. Fannie Mae, Freddie Mac and the FHA have an historic opportunity to reduce their losses on foreclosed homes while improving neighborhood stability by creating a series of joint ventures with private investors to own, manage, lease and eventually sell the current backlog of millions of foreclosed homes.

1. DUNS Number: 019190960
(a woman-owned small business)
DUNS Number: 828859756
(a woman-owned small business)
2690 Clarendon Boulevard, Suite 200
Arlington, VA 22201
703-894-6011
Mindi H. McClure
mmcclure@thebearco.com
Response to Enterprise/FHA REO Asset Disposition RFI 8 10 2011
September 15, 2011
REO.RFI@FHFA.gov

2. Table of Contents
A) RESPONDENT ORGANIZATION OR TEAM SUMMARY ...................................................................................................... 2
Type of Strategy and Respondent ............................................................................................................................................... 2
TBC Qualifications ....................................................................................................................................................................... 2
Pool Selection, modeling and analytics ................................................................................................................................... 2
JV Structuring, Note Structuring and Analytics ....................................................................................................................... 2
Co-Investor as Value-added MWOB Partner .......................................................................................................................... 3
Asset Marketing through TBC Live! Auction Platform (or through traditional sealed-bid auction process) ............................. 3
Experienced Prime Government Contractor ................................................................................................................................ 3
B) APPROACH ............................................................................................................................................................................ 4
1. Recommendations for REO purchases, ranging from clear sale to joint venture or other partnership structure: .............. 6
2. Planned Use of Properties, with a focus on maximizing returns under strategies tailored to local economic and real
estate conditions .......................................................................................................................................................................... 8
3. Conditions and usage restrictions that can best achieve the stated objectives ................................................................. 9
4. Scale of proposed transactions and the ability to scale up over time ................................................................................. 9
5. Implementation steps and timeline, specifying the earliest feasible date for the first transaction settlement................... 11
6. Extent that approaches should vary by local market or property characteristics ............................................................. 12
7. Steps taken to ensure that the properties are well maintained and managed during the period they are rented or otherwise
held off the market ..................................................................................................................................................................... 13
C) ECONOMICS, RISK AND FINANCIAL ARRANGEMENTS .................................................................................................. 14
1. Pricing recommendations for REO purchased properties ................................................................................................ 14
2. Financing requirements and structures ............................................................................................................................ 14
3. Required Enterprise and/or FHA infrastructure and capital .............................................................................................. 14
4. Counterparty, credit, and other risks to an Enterprise and/or FHA, and approaches to minimize such risks and control
residual risks .............................................................................................................................................................................. 15
5. Tradeoffs between various structures and approaches, as well as mitigation strategies ................................................. 15
6. Use of proceeds from cash flows, operating profits and losses, gain or loss on property disposition and preferred
returns/fees ................................................................................................................................................................................ 16
7. To the extent any joint venture partnerships are proposed, how financial interests are structured between the
Enterprises/FHA and private partners ........................................................................................................................................ 16
D) QUALIFICATIONS Describe the qualifications and experience that the Enterprises/FHA should consider in any potential
partners for recommended approaches .......................................................................................................................................... 17
1. Single Family property valuation, operations and asset management capabilities, including any experience in operating
in any geographically target market(s) ....................................................................................................................................... 17
2. Analytic modeling and software capability to support and structure transactions, select appropriate geographic areas
and properties and assess rent vs. sell decisions ...................................................................................................................... 18
3. Property management experience and capabilities to maintain and support the sustainability of any acquired properties
19
E) TBC QUALIFICATIONS ........................................................................................................................................................ 19
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3. A) RESPONDENT ORGANIZATION OR TEAM SUMMARY
1 Names(s) or organization(s) and address The Bear Companies and MHM Capital
(Together, "TBC" throughout document)
2690 Clarendon Blvd
Suite 200
Arlington, VA 22201
www.thebearco.com
2 Contact Information Mindi McClure
703-894-6011 (o)
703-307-5245 (m)
mmcclure@thebearco.com
Type of Strategy and Respondent
Type of Strategy Type of Respondent
X Outright Purchase X Private Capital
X Joint-venture Real Estate Company
X Rent-and-hold Rental Property Company
X Lease-to-own X Asset Management
Other Nonprofit
X Other
TBC Qualifications
Pool Selection, modeling and analytics
• TBC regularly completes large-scale due diligence projects on residential collateral
supporting multi-billion dollar sub-performing loan pools utilizing TBC Loan Solutions, its
proprietary data capture software
• TBC (through MHM Capital) has conducted loan file review, including a collateral level
review on 38 financial institutions with aggregate assets of $35 billion
JV Structuring, Note Structuring and Analytics
• TBC (through MHM Capital) recently structured Notes for $1.7 billion of structured loan
sales completed by a government agency
• TBC's principals have created multiple multi-billion dollar loan, securities and asset conduit
and joint venture entities for global investment banks and investors
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4. Co-Investor as Value-added MWOB Partner
• TBC is a registered bidder on the FDIC structured sales and is qualified to assist its bidding
partners with real estate analytics, cash flow analysis and bid preparation and analysis. In
addition it seeks to deploy its own capital through structured sales
• TBC's principals were responsible for portfolios including over 500 individual loans and
assets acquired through the failure of regulated financial institutions (FSLIC/FDIC) and a
portfolio of income producing multi–family assets assigned to an asset manager due to
under/non performance (Freddie Mac)
Asset Marketing through TBC Live! Auction Platform (or through traditional sealed-bid
auction process)
• TBC developed its proprietary TBC Live! Auction Platform to address the needs of
government agencies and private sector clients desiring to sell large, disparate portfolios of
assets, securities and loans
• TBC Securities is a fully registered broker-dealer with all the appropriate licenses to conduct
sales of security interests in JV-REO structures described herein
Experienced Prime Government Contractor
• TBC (through MHM Capital) is a PRIME contractor for the FDIC
Page 3

5. B) APPROACH
Strategic Overview
The Enterprises and the FHA ("Enterprises/FHA") have the opportunity to optimize short-term
proceeds and long-term returns on their REO properties while reducing the risk of
neighborhood instability by creating a series of joint ventures with private investors to own,
manage and lease and eventually dispose of the subject properties. The REO joint venture
("REO-JV") program should be structured to attract the broadest possible spectrum of investors
including local institutions and global fund complexes and enabling them to bid against each
other in a live combinatorial auction designed to maximize proceeds. The Enterprises and FHA
should offer appropriate, modest levels of low-cost debt to the REO-JVs in order to enhance
short term initial proceeds and retain equity interests improve loss recoveries over the longer
term. In addition, the Enterprises and the FHA should encourage potential investors to partner
with local property management resources and minority and woman-owned firms, addressing
the needs of the local communities and enhancing the
profile of the REO-JV program.
TBC Live! Auction Platform. The Enterprises/FHA
TBC LIVE! Auction Platform
should optimize initial proceeds by offering equity
 Enables sellers to approach
investments in multiple REO-JVs simultaneously small and large buyers
through a live combinatorial auction conducted simultaneously through a live
auction
through the TBC Live! Auction Platform. TBC Live!  Optimizes individual,
combination and portfolio bids
enables hundreds of pre-qualified bidders to
in real time
simultaneously and continuously bid on unlimited self-  Enables buyers to create
customized pools
determined sets of REO-JV interests while receiving
 Increases seller proceeds by
real-time information on the status of their bids in a enabling multiple escalating
bids
secure, internet enabled environment. This data-rich  TBC Live! Features proprietary
auction platform enables small bidders on a single REO- security technology ensuring
fair auctions and data integrity
JV interest to bid against large global investors, with
significant financial resources, but limited in-market
knowledge.
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6. Government agencies and private sector liquidators consistently leave proceeds on the table by
selling assets through a sealed-bid auction process with pre-determined pools. The "single-bid"
nature of the sealed-bid auction process does not enable investors to increase their bids to
reflect the bidding action of other investors. The TBC Live! Auction Platform utilizes linear
mathematics to instantly determine the combination of bids that produces the highest
proceeds and automatically calculates the price non-winning bidders need to pay to get their
bids into a winning position, enabling them to increase their bids and driving up proceeds.
The Enterprises/FHA have indicated a desire to sell REO assets in transaction sizes totaling $50
million to $1 billion in real estate value. Assuming the capital structure in Figure 2 below, this
size would indicate that REO-JV investors would require $12.5 - $250 million in investment
commitment.
Figure 1 - Types of Investors Vary Greatly by Investment Opportunity Size
Likely Investor "Niche" regionally focused "Global Fund" investor
investor
Pool Size (guidance from RFI) $50 million $1 billion
Required Investor Equity $12.5 million $250 million
(25%)
Number of Properties 400 units 8,000 units
($125,000 average property
value)
Investor Characteristics Likely to be local real estate Likely to be global fund
professionals backed by local complex with property
or small institutional capital management partners
Investor Investment Likely to have limited capital Significant "minimum" capital
Limitations investment thresholds ($50 -
100mm+)
Investment Style Knowledge of specific Making a "sector bet" on the
markets, specific plans for the asset class
assets
The $50 million pool and the $1 billion pools attract investors with significantly different capital
levels and investment styles. The Enterprises/FHA can simultaneously engage both types of
Page 5

7. investors (and the broad spectrum in-between) by utilizing the TBC Live! Auction Platform to
conduct auctions that attract all levels of investors and a bidding environment that enables
them to bid against each other creating the highest level of auction proceeds for the
Enterprises and the FHA. Contractors running "sealed-bid" auctions offering multiple
combinations of bids regularly spend days determining the combination of bids that produce
the highest level of seller proceeds. TBC Live! instantaneously calculates the combination of
bids that results in the highest proceeds and calculates the dollar increases required for
individual bidders to increase their losing bids to move them back to a winning position. This
capability creates an environment which enables bidders to submit ever-increasing bids
resulting in the highest possible seller (Enterprise/FHA) proceeds.
Figure 2 - Comparison of Traditional And TBC Live! Auctions
Traditional Sealed-Bid Auction Process TBC Live! Auction Platform
Single Bidding Round Multiple Bidding Rounds – Live Auction
Bids Communicated via Phone, Fax or E- Online Platform Provides Instantaneous and
Mail Current Communication Among Participants
Pools Pre-Determined by Seller Bidder Customizes Sub Pools to Exact Needs
Broker-Dealer Must Manually Determine Rules-Based System Automatically Determines
Optimal Combination of Bids to Accept Optimal Bid Combination
Bidders Cannot Redeploy Losing Bid Bidder Can Rebid Same or Different Assets
Bidders “In The Dark” About Overall Seller Can Choose to Provide Bidders With
Auction Progress Robust, Real-Time Auction Information
Bidders Have Single Chance to Clear Bidders May Re-Bid Until Single and/or Pool
Reserves Reserve Levels are Met
1. Recommendations for REO purchases, ranging from clear sale to joint venture or other
partnership structure:
Asset fire sales generally have negative impacts on asset prices. Large-scale residential fire-
sales can have a devastating impact on neighborhoods, communities and families.
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8. Stabilize Neighborhoods: By offering responsible, well capitalized investors with scalable
property management and leasing capabilities the opportunity to invest in residential REO at
commercially attractive prices (implying a commercially appropriate investment yield) the
Enterprises/FHA can meet its objectives of stabilizing home prices and neighborhoods.
Enhance Initial Proceeds: The Enterprises/FHA should offer low-cost leverage to its REO-JV
through a guaranteed note program or by investing directly in the notes issued by REO-JVs.
These "Notes" should be very low cost and should be structured to enhance REO-JV returns
without subjecting investors to the risk of excessive leverage. By offering low-cost debt for 30-
70% of the capital structure, the Enterprises/FHA can enhance initial proceed by providing
leverage which is well secured but not commercially available.
Participate in Long Term Returns: The Enterprises/FHA should retain equity interests in the
REO-JV structures, reducing the private capital requirement and enabling the Enterprises/FHA
to improve recovery rates on REO portfolios over the long term. Additionally, through their
participation in the long-term profits in their retained JV-REO interests alongside private
investors, the Enterprises and the FHA can articulate a sound strategy of managing capital and
limiting the cost of resolving government guaranteed assets and limiting the financial burden
on taxpayers.
Page 7

9. Figure 3 - Potential JV-REO Structure
Potential REO JV Structure
25%
Low Cost Notes
"Structured Notes"
Enterprise/FHA Retained
50% Interest "Initial Member"
Private Sector Investor
Equity "Private Owner
Interest"
25%
2. Planned Use of Properties, with a focus on maximizing returns under strategies
tailored to local economic and real estate conditions
There are numerous potential uses for residential REO properties. Key to a successful private
sector joint venture program is enabling investors to make economic market driven decisions,
while adhering to all relevant guidelines, laws and regulations. Structuring the REO-JVs to have
geographic concentrations in individual markets will give investors an economic incentive to
respond to market demands and stabilize neighborhoods while reducing taxpayer costs.
Market-driven decision making will drive optimal results. Investors in multiple properties in a
single neighborhood or community will bid a portfolio of residential REO to reflect market
rents, market capacity and other economic issues. The interest of the Enterprises/FHA are best
served by structuring pools with regional concentrations and letting responsible, pre-qualified
investors with a vested interest in a given community determine best outcomes for individual
properties.
Markets with high concentrations of foreclosed properties and increasing rental demand are
good candidates for converting pools of REO properties into rental properties or rent-to-own
structures for qualified tenants. Markets with low rental demand may need to consider
Page 8

10. additional strategies for foreclosed and abandoned properties including destroying certain
properties and selling the lots, converting them to neighborhood green space, playgrounds or
other commercial uses (subject to local zoning and usage restrictions). Destroying properties
should be considered only as a last resort to remove potentially dangerous abandoned
properties from neighborhoods and to stabilize property values and rents by removing excess
capacity from the market. Investors should also consider entering into partnerships with not-
for profit entities to create innovative solutions to difficult to resolve REO assets.
3. Conditions and usage restrictions that can best achieve the stated objectives
Conditions and usage restrictions should largely be driven by the laws and economic
environment in individual communities as well as the existing framework of regulations
governing housing issues. Additional restrictions should generally be avoided in order to
control costs and to attract the broadest spectrum of investors. Appropriate property
management is better achieved through a rigorous pre-qualification process, intended to
determine that the bidders have the skills and resources appropriate to successfully managing
residential properties.
4. Scale of proposed transactions and the ability to scale up over time
The proposed JV-REO structures should have sufficient scale to attract a broad spectrum of
investors and include properties in concentrated markets in order to provide property
management and leasing efficiencies and asset management consistent with concentrations in
the subject neighborhoods.
For the first sale, the Enterprises/FHA should consider offering five to 10 pools simultaneously;
each pool with 250 - 500 units apiece. Each pool will be structured as a JV-REO structure and
investors will have the opportunity to bid a single pool or any combination of pools (for which
the investors have been pre-qualified - having demonstrated financial capability and property
management and leasing resources in each of the relevant markets.
Offering multiple modest sized pools through the TBC Live! Auction Platform will attract
"Global" investors as well as "Niche" local investors. "Global" investors can submit all-or
nothing bids on multiple pools, meeting their minimum investment thresholds. "Niche" local
Page 9

11. investors have the opportunity to participate in single pools. All of these investors will bid
against each other on self selected pool combinations in real time, creating the highest level of
initial proceeds.
Figure 4 - Initial JV-REO Structures Offered and Target Investors
Pool MSA / Region Number Aggregate Value Required Number Number
Number of Units ($125,000 per Investment of Local of
unit) (25%) "Niche" "Global"
Investors Investors
1 Los Angeles- 400 $50 million $12.5 million 6 4
Long Beach-
Santa Ana
2 San Francisco- 400 $50 million $12.5 million 8 4
Oakland-
Fremont
3 Phoenix- 400 $50 million $12.5 million 13 4
Mesa-
Glendale
4 Miami-Fort 400 $50 million $12.5 million 15 4
Lauderdale-
Pompano
Beach
5 Cape Coral- 400 $50 million $12.5 million 8 4
Fort Myers, FL
6 Chicago-Joliet- 400 $50 million $12.5 million 5 4
Naperville
Total 2400 $300 million $75 million 40 4
Benefit: Attract "Global" investors with deep pockets. Each of the individual pools will
not have the size and scale to attract the "Global" funds with minimum investment
requirements. Offering the pools simultaneously through a combinatorial auction will give
"Global" investors a chance to meet their minimum investment thresholds as they can submit
all or nothing bids on all (or any combination of) the pools they desire. In Figure 4 above four
"Global" Investors are pre-approved to bid. Each of the four is approved on all six pools.
Page 10

12. Benefit: Attract "Niche" investors with interest in a single (or a smaller combination of)
JV-REO structures by allowing them to bid on individual pools with their limited capital and
geographically concentrated property management resources. In Figure 4 above, each pool
attracts a different number of "Niche" investors, some of whom are pre-approved for more
than one market, resulting in 40 distinct "Niche" Investors.
Benefit: The TBC Live! Auction Platform enables ALL 44 (4 "Global" and 4 "Niche") of the
investors in Figure 4 above to continuously bid against each other in real time on unlimited
self-selected combinations of pools with perfect information about their bid positions,
significantly increasing proceeds to the Enterprises/FHA.
The limiting factors for scaling the auctions will be investor demand and due diligence capacity.
In addition, the Enterprises/FHA may consider monitoring the performance of the completed
JV-REO structures for several months to determine potential weaknesses and or problems with
the property management and leasing efforts. This information should be factored in to the
investor pre-qualification process for future pools.
5. Implementation steps and timeline, specifying the earliest feasible date for the first
transaction settlement
Figure 5 - Potential Transaction Timeline (4 - 6 Months)
Months Activity
2 Determine and fulfill contracting needs
• Determine outside contracting needs and create RFPs for each newly
created function
• Receive and review RFP responses, hire appropriate contractors
1-2 Prepare for Marketing
• Determine asset pools, appropriate JV structures including leverage, equity
investment levels and pre-qualification standards
• Develop due diligence materials and create online data-rooms for subject
properties
• Market the investment opportunity to potential bidders through webinars
and other media
Page 11

13. Months Activity
1-2 Market JV-REO Interests
• Pre-qualify bidders and grant access to the investor data room
• Distribute REO-JV Structure terms to bidders
• Conduct live Combinatorial Auction through the TBC Live! Auction Platform
• Close REO-JV Transactions
Successful completion of the structuring, marketing, due diligence and closing of an REO-JV
transaction should be possible within four to six months including hiring qualified third party
contractors to assist with certain functions.
6. Extent that approaches should vary by local market or property characteristics
Each local market has residential characteristics which are unique, some requiring radically
different approaches. JV-REO pools should be structured with concentrations of assets in a
single locality. This will create management efficiencies for the pool and create a vested
interest for the private investors in JV-REO assets to manage all assets with the best interest of
a community in mind (as discussed earlier). In addition, grouping regional assets into single JV-
REO pools will attract investors (and their property management partners) with different
investment, asset management and property management styles.
Pools of REO properties in tracts with high Neighborhood Stabilization Program (NSP) Need
scores may likely require more repairs and maintenance and a more aggressive leasing strategy
due to the overabundance of foreclosed homes in that community. Rigorous asset
management strategies in high NSP score markets may include removing homes and selling the
vacant lots, working with not-for profit groups and community agencies to convert excess
homes into better uses utilizing available tax benefits and local incentives to offset losses on
individual properties.
Pools of REO properties in tracts with lower NSP need scores may be relatively less
management intensive and more likely to attract stable tenants due to the supply/demand
conditions in the subject community. In some cases these markets may benefit less from a JV-
Page 12

14. REO strategy and the Enterprises and HUD may consider continuing to sell these properties to
end users through their established channels (like Fannie Mae Homepath and other programs).
Figure 6 - TRACT NSP3 Need Scores Comparison (source: HUD)
Tract Number 12086005302 51013101800
Tract NSP3 Need Score 20 1
State Minimum Qualifying NSP3 Score 17 13
HMDA Mortgages 2004 to 2007 262 1747
Estimated Delinquent Mortgages (%) 18.7 1.8
Total USPS Residential Addresses 3295 7233
USPS Residential Addresses Vacant 90+ days 54 13
USPS Residential Addresses NoStat 77 3
MSA Miami-Fort Washington–Arlington–
Lauderdale-West Alexandria, DC–VA–
Palm MD–WV
Figure 6 above illustrates the difference between selected census tracts in various markets.
This data (from HUD) can be supplemented with additional regional economic data including
job growth, household income and population growth historical statistics and expected future
change.
7. Steps taken to ensure that the properties are well maintained and managed during the
period they are rented or otherwise held off the market
Trust But Verify: Each private sector JV-REO investor should act as an asset manager and
provide thorough budgets and comprehensive financial reporting and complete periodic asset
reports detailing the condition of the underlying homes. These reports should include details of
the condition of the home infrastructure and maintenance along with the financial details of
the lease or other third party financial arrangements. Schedules of property maintenance,
taxes and insurance and reciepts and invoices should be made available for review by the
Enterprise or FHA oversight manager. These detailed reports should be updated on an ongoing
bases and should be formally presented to the Enterprise/FHA on a periodic basis. In addition,
the Enterprise/FHA may consider hiring a third party contractor to periodically visit random
samples of the subject properties, comparing actual condition to the reported condition.
Additionally, the private investor (in its role as the manager) should provide audited financial
statements.
Page 13

15. C) ECONOMICS, RISK AND FINANCIAL ARRANGEMENTS
1. Pricing recommendations for REO purchased properties
While the Enterprises and HUD can impact the pricing of REO purchased properties by running
a well executed marketing and sale process and offering investors attractive JV-REO structures
that address the investment needs of a broad spectrum of investors (see Figure 4), the price
investors ultimately pay will be driven by exogenous factors over which the Enterprises and
HUD have limited control. In order to mitigate potential loss in a failed or weak auction, the
Enterprises and HUD can consider utilizing reserve prices below which the JV-REO structure(s)
will not be sold. Reserve pricing should be used carefully as investors may limit their
participation future JV-REO sales if they perceive the reserve prices are set too high for the
pools to clear the market.
2. Financing requirements and structures
The Enterprises/FHA should create JV structures which enable private sector investors to
purchase equity interests in pools of residential REO assets. In order to enhance the investor
return (thereby increasing initial proceeds received by the Selling Agency) the Selling Agency
should offer low-cost senior debt as further described in C(7) below.
3. Required Enterprise and/or FHA infrastructure and capital
Creating, marketing and monitoring each JV-REO structure will require a knowledgeable capital
markets, legal, public relations and government affairs professionals. The Enterprises/FHA
should utilize their internal resources of professionals and decision makers and hire contracting
firms with broad, deep and recent transaction experience in similar transactions with
knowledge of investor preferences and legal constraints.
Transaction Structure Due Diligence Financial Modeling
Asset Marketing Bidder Qualification Transaction Monitoring
Public Relations Government Relations
Ideally the hired contractors will be overseen by Enterprise/FHA staff with appropriate levels of
transaction knowledge and full understanding of the objectives of the Enterprises/FHA.
Page 14

16. 4. Counterparty, credit, and other risks to an Enterprise and/or FHA, and approaches to
minimize such risks and control residual risks
Counterparty credit risks: The Enterprises/FHA should structure the JV-REO Entities with all
the customary, relevant requirements and covenants to protect the Enterprises/FHA's interests
and objectives. As the Manager, the Private Owner should enter into a management contract
specifying the Manager's roles and responsibilities including appropriately maintaining the
subject properties, complying with all the relevant national and local laws and regulations,
appropirately distributing cash-flow in a timely manner, developing and executing on business
plans and meeting pre-determined benchmarks. The Enterprises/FHA should have remedies
including selling the Private Owner's interest and replacing the Manager in certain events
including the failure of the Private Owner and Manager to perform its contractual duties. In
addition, the Enterprises/FHA should reserve the right to sell their Initial Interests.
5. Tradeoffs between various structures and approaches, as well as mitigation strategies
Risk Mitigation Strategy
The JV-REO Structure The Structured Notes should be structured to proved modest
defaults on its obligation to leverage. Each Structured Note should endure "stress testing"
repay the Structured Notes to determine the amount of economic stress the level of losses
the Notes can endure without default.
The Enterprises/FHA In the proposed JV-REO structure, the Enterprises/FHA will
experience a negative continue to have exposure economic risk and performance risk
return on their equity (on the part of the Managing Member). The economic risks are
interests in the JV-REO difficult to control and are somewhat mitigated by having initial
structures valuation validation from knowledgeable, deep pocketed
investors. The Performance risk can be mitigated through an
appropriate covenant package, which gives the Enterprises/FHA
the ability to remedy lack of performance through measures
including replacing the "Managing Member" and selling the
"Private Owners'" interest
Page 15

17. 6. Use of proceeds from cash flows, operating profits and losses, gain or loss on property
disposition and preferred returns/fees
Cash Flows equal all rental income net of property management fees plus all proceeds from the
sales of properties, net of sales fees.
Figure 7 - Use of Proceeds
Payment Description
Priority (definitions of capitalized terms are in C7 below)
1 Replenish the Property Management Reserve (see definition in C7 below)
2 Pay interest on the Structured Notes
3 Pay Asset Management Fee to Managing Member
4 90% of the proceeds available after deducting all items above will be used
to pay principal on the Structured Notes
5 All remaining funds will be distributed to the Initial Member and the Private
Owner on a pro-rata basis (or according to Incentive Threshold schedule if
applicable)
7. To the extent any joint venture partnerships are proposed, how financial interests are
structured between the Enterprises/FHA and private partners
JV-REO Structural Overview: The Enterprises/FHA will deposit the subject assets into a newly -
formed single purpose Delaware limited liability company (the "JV-REO Entity"). The
Enterprises/FHA will be the "Initial Member". The Enterprises/FHA will market a private
ownership interest in the JV-REO Entity based on a pre-determined percentage interest (the
"Private Owner Interest") to multiple bidders. The winning bidder will become the "Private
Owner" and the "Managing Member" and will control the management of the subject
properties and the LLC. In consideration of its responsibilities as an asset manager the
Managing Member will be entitled to receive an "Asset Management Fee" similar to other
commercially available asset management fees.
"Structured Notes": The JV-REO Entity will issue "Structured Notes" to the
Enterprise/FHA to fund a pre-determined percentage of the initial valuation of the assets in the
JV-REO Entity. The Structured Notes will pay a modest interest rate and will be entitled to
receive priority payments and accelerated amortization. The term of the Structured Notes will
be 10 years, but they will likely have an average duration of 2-3 years due to their accelerated
amortization.
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18. "Property Management Reserve" the Initial Member and the Private Owner will fund a
Property Management Reserve on a pro rata basis at closing. The Property Management
Reserve will be used to fund necessary property improvements if their cost exceeds the current
cash flow from the subject properties. The amount of the Property Management Reserve will
be determined based on the risk inherent in the subject properties in each JV-REO Entity. To
the extent the Property Management Reserve is utilized, it will be replenished in the priority of
payments.
Incentive Thresholds: The Enterprises/FHA may consider including "Incentive
Thresholds" which reward the Private Owner for exceeding expected performance benchmarks.
Incentive Thresholds are common features used to incentivize asset managers and can be
structured in a variety of ways.
D) QUALIFICATIONS Describe the qualifications and experience that the Enterprises/FHA
should consider in any potential partners for recommended approaches
1. Single Family property valuation, operations and asset management capabilities,
including any experience in operating in any geographically target market(s)
Figure 8 - Key Qualifications and Experience for Potential Partners
Key Qualifications and Experience for Potential Partners
Single Family Access to national trends and local intelligence
Property Valuation  Knowledgeable, experienced staff with access to multiple
sources of home price data
 Access to local market / sub-market and street-level intelligence
on staff or through partnerships with property manager and local real-
estate community
Single Family See Figure 10 - Key Elements for Successful Property management
Property Operations below
Asset Management  Ability to create and execute financial budgets
Capabilities  Knowledge of all relevant laws and regulations
Page 17

19. 2. Analytic modeling and software capability to support and structure transactions,
select appropriate geographic areas and properties and assess rent vs. sell decisions
Figure 9 - Key Analytic Modeling and Software Capability to Support and Structure
Transactions
Key Analytic Modeling and Software Capability to Support and Structure Transactions
Select Appropriate Properties Ability to understand Enterprise/FHA
objectives and structure pools that reflect
those objectives and are relevant to investors.
Analytics and modeling should incorporate
(NOTE: MHM Capital and TBC regularly multiple factors drawn from multiple data
complete large-scale due diligence projects sources including:
on residential collateral supporting multi-  Property level data including initial
billion dollar sub-performing loan pools purchase price, original loan amount, purchase
utilizing TBC Loan Solutions, its proprietary date, default date, foreclosure date, property
data capture software) listing date
 Local data including tract NSP3 Need
(NOTE: MHM Capital has conducted loan file score, mortgage delinquency statistics,
review, including a collateral level review) on housing inventory, rental rates for comparable
38 financial institutions with aggregate assets properties, comparable home sale data,
of $35 billion) regional joblessness, historical and projected
growth rates
 National data including interest rate
and mortgage cost outlook, relevant tax law
changes or incentives and national joblessness
Structure Transactions Ability to synthesize the factors above into
useful analytics
(NOTE: MHM Capital recently structured  Model the projected cashflow of the
Notes for $1.7 billion of structured loan sales subject properties, creating baseline scenarios
completed by the FDIC) and stressed case scenarios
 Model the cashflow waterfall to
determine the returns (and return sensitivities
(NOTE: TBC's principals have created in the stressed cases) to each class of investors
multiple multi-billion dollar loan, securities  Model the worst case scenario to
and asset conduit and joint venture entities determine the safety and security of the
for global investment banks and investors) Structured Notes
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20. Key Analytic Modeling and Software Capability to Support and Structure Transactions
Sell JV-REO Interests Utilizing Secure-Internet • Provide Secure, internet enabled
Enabled Live Combinatorial Auction combinatorial auction platform
• Enable pre-approved bidders to bid on
unlimited pool combinations
(NOTE: TBC developed its proprietary TBC • Monitor bidding action in real time and
Live! Auction Platform to address the needs encourage bidders to increase their bids (TBC
of government agencies and private sector is a registered broker dealer)
clients desiring to sell large, disparate • Provide audit trail through secure
portfolios of assets, securities and loans) automated bid log
3. Property management experience and capabilities to maintain and support the
sustainability of any acquired properties
Maintaining properties, marketing properties appropriately and qualifying and retaining
tennants are all essential elements.
Figure 10 - Key Elements for Successful Property Management
Key Elements for Successful Property Management
Building Maintenance and  Establish and Maintain Building Service Contracts
Renovation  24 hour Emergency Maintenance Service
 Inspections
 Contractor Management
Tennant management  Property Marketing and Leasing
 Lease Administration
 Tennant Qualifications
 Collections
Financial Reporting  Budgeting
 Rent Rolls
 Monthly Reporting and Financial Statements
Management
Real Estate Portfolio Management  Property disposition / Sale recommendations
E) TBC QUALIFICATIONS: To the extent applicable, discuss your organization's ability to
execute any recommended approaches
TBC is Qualified to in the Following Areas
Pool Selection, modeling and analytics
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21. • TBC regularly completes large-scale due diligence projects on residential collateral
supporting multi-billion dollar sub-performing loan pools utilizing TBC Loan Solutions, its
proprietary data capture software
• TBC (through MHM Capital) has conducted loan file review, including a collateral level
review on 38 financial institutions with aggregate assets of $35 billion
JV Structuring, Note Structuring and Analytics
• TBC (through MHM Capital) recently structured Notes for $1.7 billion of structure loan sales
completed by a government agency
• TBC's principals have created multiple multi-billion dollar loan, securities and asset conduit
and joint venture entities for global investment banks and institutional investors
Co-Investor as Value-added MWOB Partner
• TBC is a registered bidder on the FDIC structured sales and is qualified to assist its bidding
partners with real estate analytics, cash flow analysis and bid preparation and analysis. In
addition it seeks to deploy its own capital through structured sales
• TBC's principals were responsible for portfolios including over 500 individual loans and
assets acquired through the failure of regulated financial institutions (FSLIC/FDIC) and a
portfolio of income producing multi–family assets assigned to an asset manager due to
under/non performance (Freddie Mac)
Asset Marketing through TBC Live! Auction Platform (or through traditional sealed-bid
auction process)
• TBC developed its proprietary TBC Live! Auction Platform to address the needs of
government agencies and private sector clients desiring to sell large, disparate portfolios of
assets, securities and loans
• TBC Securities is a fully registered broker-dealer with all the appropriate licenses to conduct
sales of security interests in JV-REO structures described herein
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