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<br />Mortgage Financing Situation for our CLT Homes in Orange County <br />Since we began using the CLT model here in Orange County, we have been fortunate <br />to have the support of a few banks that have been willing to originate and shelve loans for our <br />land trust homes. Over time, Suntrust, RBC, Harrington Bank, and BB&T have all made <br />portfolio loans to our buyers. However, Suntrust, once our main lender, stopped making loans <br />for our program two years ago, after we declined to begin the use of the Fannie Mae Rider so <br />that the loans could be sold. The other banks we work with have indicated that our financing <br />options are limited because we do not yet use the Rider. For instance, none of these banks <br />will re-finance our owners at a preferable interest rate unless we use the Rider. This has put <br />our Land Trust homeowners at a significant disadvantage to private market owners who have <br />benefitted from recent low interest rates. Also, Harrington Bank has now requested that our <br />buyers make a substantial cash down payment in order to get portfolio loans. Most of our <br />buyers can't meet this requirement. <br />As banks nationwide continue to increase restrictions on financing, we are concerned that <br />mortgage options for our buyers could become very limited. Therefore, we foresee that the <br />fufure success of the land trusf model in Orange County will require that we start using the <br />Fannie Mae Rider with our ground lease. Since the Rider will allow banks to sell our loans <br />and divest themselves of risk, we foresee that it will substantially increase the number of <br />lenders willing to work with our buyers. <br />Benefits and Risks of Using the Fannie Mae Rider <br />While there are several benefits to be had from using the Rider, there are also increased risks <br />of losing Land Trust homes in foreclosure situations. We recognize that local governments <br />will want to weigh the benefits against the risks in making a decision about whether we can <br />use the Rider with government subsidized homes. We foresee that using the Rider will bring <br />us the following benefits: <br />1. The Rider will Ensure our Clients Long Term Access to Mortgage Financing: <br />Using the Rider will ensure that Land Trust homebuyers will be able to obtain mortgage <br />financing over the long run-not just while local banks are willing to originate and hold <br />land trust loans. <br />2. The Rider will Give Our Clients Access to a Wider Range of Lenders: Currently <br />three banks provide mortgage loans for our buyers. This limited pool of lenders restricts <br />the ability of land trust buyers to obtain the most competitive rates. Several other banks <br />have indicated that they would be interested in working with us if we use the Rider, <br />including Suntrust, Bank of America, and Wachovia. Using the Rider will create new <br />options for our buyers. <br />3. The Rider will give our Clients Access to a Wider Range of Loan Products from <br />Each Lender: Currently our buyers may only use the in-house loan program that is <br />offered to each lender. Loan officers told us that they could offer a broader range of first <br />