Licensing and the Market
Notes and Insight to Make you a Better Buyer
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Objectives for this Session
• Introduction to Licensing: GA and CA examples
• Licensing examples: CA and GA
• Licensing – some basic points
• The market – a current overview
• Macro picture
• Loan sales
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Licensing
All the answers aren’t in one place …
• Problems with “advice” across states
• 1/3 of states
• Attorney input/advice vs. actual licensing support
• Exceptions
• Regulatory environment changing, emergence of a
“clearinghouse” for licensing registration: NMLS
www.stateregulatoryregistry.org (follow links for NMLS)
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Licensing takeaways
Learn what’s required in your state
• Loans are bought ALL the time by people and companies
without licenses …
• But doing so is illegal in states that regulate note buying
• “Will I get caught?” vs. “How much does it cost and what
does it take?”
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States with Readily Available Licensing Info (NMLS)
• Arizona • Mississippi
• Arkansas • Nebraska
• Connecticut • New Hampshire
• Delaware • New York
• Georgia • North Carolina
• Idaho • North Dakota
• Indiana DFI • Pennsylvania
• Indiana SOS • Puerto Rico
• Iowa • South Dakota
• Kentucky • Rhode Island
• Louisiana • Tennessee
• Maryland • Vermont
• Massachusetts • Washington
• Michigan • Wyoming 5

The Market - Rally & Hope
At 1998 levels now
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Have we hit Bottom Yet?
Now [Sacramento] seems to be in the earliest stages of a
recovery…
Sales in Las Vegas in March, for example, rose 35 percent
from last year.
New York Times, May 4, 2009
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US New Home Sales
March 2009 – lowest since 1963
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Unemployment – Still Growing
No Slowdown in
Job Losses
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John Mauldin @ Investor Insight 5/11/09
Part of the reason we are so challenged in our
outlook is that we are experiencing a deleveraging
on a scale in the world that is absolutely breath-
taking in its scope.
And to balance that, governments are going to have
to issue massive amounts of sovereign debt to
deal with their deficits.
But who will buy it, and at what price?
And in which currency?
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US Deficit Shortfall Assuming $0 in Jan. 2008
Cumulative Deficit Since Jan. 2008
200,000
0
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09
-200,000
-400,000
-600,000
-800,000
-1,000,000
-1,200,000
-1,400,000
7 straight months deficit growth
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US “Income” (last 28 Aprils – traditionally + months)
US Deficit/Surplus (-)
250,000
200,000
150,000
100,000
50,000
0
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2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
8
8
8
8
8
8
8
8
8
9
9
9
9
9
9
9
9
9
9
0
0
0
0
0
0
0
0
0
0
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-50,000
First shortfall since 1983
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Home Prices Still Dropping
I expect another 15-30% Drop 13

FASB 160 and Accounting
The IMF reckons that both European and US banks - but
in particular the European ones - are well behind the curve
in terms of recognizing their credit crunch related losses.
According to the IMF, there is at least another $1,500
billion to come.
So when the US banks reported surprisingly good
numbers for Q1 it was certainly not because the economy
had suddenly and miraculously revived itself, but because
some of the oldest tricks in the book were used to
gloss over much bigger problems.
Absolute Return Letter, May 2009 (www.arpllp.com)
14

Foreclosures – Climbing Still (CA example)
Many lenders re-initiated foreclosure
proceedings after March 31, 2009 (the
“holiday homeowner break”)
Source: MDA Dataquick, April 22, 2009
15

Default Rates by Bank as an FYI
Institutions with highest default rates for loans originated in
August to November 2006:
• ResMAE Mortgage 69.9% of loans w/NOD’s)
• Master Financial 64.6%
• Ownit 63.6%
• IndyMac default rate of 18.9%
• World Savings 8.0%
• Countrywide 7.7%
• Washington Mutual 6.3%
• Wells Fargo 3.4%
• Citibank <1% in default
• B of A <1% in default
Source: MDA Dataquick, April 22, 2009
16

The Market: Loan Sales
Sales and Pricing Trends:
• PPIP – market slowdown since 12/08
• Uncertainty on pricing: WL Ross (10%); Morgan
Stanley – DB – CSFB (3-7%)
• Hold mentality amongst larger institutions
• Smaller institutions still hitting quarterly and monthly
recovery targets
• Consolidation: larger trading platforms (Milestone,
First Financial, DebtX)
• Rise of the small aggregators: BigBidder / Loanmarket
17

Tips on Sourcing
Regional banks
Loan-level is good
Bankruptcy trustees and liquidators (Resmae /
Ownit / AHM)
Build relationships now – buying opportunities
will increase through the year
Don’t assume 1 trade = forever deal flow
Follow-up, follow-up, follow-up
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Next Session: May 27 5pm PT / 8pm ET
Due diligence basics – a step-by-step analysis
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