Investors play a critical role in both the recovery and future of the housing market by acquiring non-performing loans and single-family homes. Unlike other markets, investing in housing is not a zero-sum game as investors' and borrowers' interests can be aligned through strategies like loan modifications and rental conversions. Carrington offers several residential investment strategies including acquiring non-performing loans and single-family rentals to help stabilize communities and transition borrowers while generating returns.

1. Buying & Selling Distressed Mortgage Portfolios Forum
Confidential & Proprietary
June 2012

2. Disclaimer and Confidentiality
Copyright © 2012 Carrington Holding Company, LLC
No Offer or Solicitation Regarding Securities. This document is for general information purposes only. This document is neither an
offer to sell nor a solicitation of an offer to buy any security mentioned herein. Securities related to Carrington funds (“Carrington
Securities”) are offered only in jurisdictions where permissible by offering documents available through qualified securities dealers or
banks.
No Warranties; Estimates Subject to Change; Not Advice. This document is based upon information and assumptions (including
financial, statistical, or historical data and computations based upon such data) that we consider reliable and reasonable, but we do not
represent that such information and assumptions are accurate or complete, or appropriate or useful in any particular context, including
the context of any investment decision, and it should not be relied upon as such. Estimates expressed herein constitute Carrington
Holding Company’s present judgment and are subject to change without notice. They should not be construed as either projections or
predictions of value, performance, or results, nor as legal, tax, financial, or accounting advice. No representation is made that any
strategy, performance, or result illustrated herein can or will be achieved or duplicated. The effect of factors other than those
assumed, including factors not mentioned, considered, or foreseen, by themselves or in conjunction with other factors, could produce
dramatically different performance or results. Investors considering purchasing a Carrington Security should consult their own financial
and legal advisors for information about such security, the risks and investment considerations arising from an investment in such
security, the appropriate tools to analyze such investment, and the suitability of such investment in such investor’s particular
circumstances.
Confidential; Not for Public Disclosure. This document of Carrington Holding Company, LLC is confidential and not intended for public
review. No recipient of this document shall use it as a basis for any publication or research report that will be published, distributed or
posted in any public domain. This document of Carrington Holding Company, LLC shall not be disclosed to any other party except as
required by law, regulatory requirements, court order or discovery procedures. No matter contained in the attached document may be
reproduced or copied by any means without the prior written consent of Carrington Holding Company, LLC.
PROPRIETARY & CONFIDENTIAL | 1

3. Residential Investment Themes
Investors Play a Critical Role in BOTH
the Recovery and the Future of the Housing Market
Unlike other Financial Markets,
Investing in Residential Housing is NOT a Zero‐Sum Proposition
Can offer an Alignment of Interest between Investors, Borrowers and Policymakers
PROPRIETARY & CONFIDENTIAL | 2

4. Residential Investment Themes
Discussion Summary & Themes
 Investors play a critical role in the cleanup and future of the housing market
Investors and borrowers interests should be
aligned during the cleanup phase… Preserve
value of
property
Keep the
property cash‐
flowing
Keep borrower
in the home
PROPRIETARY & CONFIDENTIAL | 3

5. Carrington: Overview
Investment Management Resources
Active residential mortgage loan investor since 2004
Acquired in excess of $26 billion in mortgage loans since inception
Utilize internal operational infrastructure to manage pools of distressed loans & residential rental properties
Mortgage Loan Servicer Mortgage Lending
Tactical Modifications Refinancing
Customized Dispositions Resolution Path Selection
Scaled servicing platform Organically grown underwriting and loan origination platform
Extensive default management and loss mitigation capabilities Focused on quality loan production versus volume
Property Management Real Estate Brokerage
Rental Management Property Dispositions
Due Diligence ‐ Site Visits Qualitative Market Data
Property Valuation
Fannie Mae on Tenant‐in‐Place Program
42 branch locations throughout U.S.
Currently managing properties in 18 states for Fannie Mae
Control over property disposition process
Property manager proprietary Buy‐to‐Rent program
PROPRIETARY & CONFIDENTIAL | 4

6. Residential Investment Strategies
Non‐  Control‐based investment strategy in single family residential mortgage loans
Performing
Loan  “High touch” special servicing capabilities
Acquisition &
Resolution  Loan mods, short sales, refinancings and rental conversions contribute to returns
 The “New” asset class – bringing a regional asset class to institutional world
Single Family
Rental Strategy  Developing national strategy for single family rentals
 Homeownership is declining – need to reconstitute vacant homes into rental stock
 Private Label – Mortgage Lending 2.0
Non‐Agency
Loan  Fill liquidity gap in private label lending market
Origination
 Thought leadership necessary to structure new market with proper alignments
PROPRIETARY & CONFIDENTIAL | 5

7. Carrington: Residential Investment Strategies
Strategies consistent with US Government policy & housing initiatives:
 Work with struggling homeowners to offer affordable modified mortgage loan payments
 Assist consumers during the transition from homeowners to tenants
 Remove excess vacant homes from property markets
 Re‐vitalize neighborhoods and communities through property rehabilitation
 Help reduce government’s footprint in US mortgage lending market
PROPRIETARY & CONFIDENTIAL | 6

8. Residential Investment Spectrum
Evolution of housing investment opportunities since onset of the global financial crisis
Non‐
Agency
RMBS
NPLs
Single
Family
Rentals
Non‐
Agency
Lending 2.0
2008 2009 2010 2011 2012 2013 2014 2015 2016
PROPRIETARY & CONFIDENTIAL | 7

9. Single Family Housing Statistics
 35.1% peak‐to‐trough home price decline
 2.6% YoY decline (Mar ‘12 vs Mar ‘11)
 Prices have remained range bound since 2009
 Trends vary amongst property markets
• Phoenix: Cash investors propping up values
• Atlanta: Lagging market that continues to decline
• Austin: Positive migration is increasing demand
 Housing Affordability Index is at all time high
 Median Income relative to Qualifying Income
 Consumer credit impacted during crisis
 Tight underwriting limits loan availability
 Affordability not translating into high demand
Source: S&P Case Shiller, National Association of Realtors PROPRIETARY & CONFIDENTIAL | 8

10. Single Family Housing Statistics
 Large pipeline of delinquent borrowers
 Trend is clearly moving in the right direction
 Increased efforts to work with borrowers
 Strategic resolutions include loan modifications
 Visible inventory = Existing Home Sales Inventory
 Pending Inventory = Foreclosures
 Significant inventory is available on market
 Pipeline of distressed properties is increasing
Source: Mortgage Bankers Association, National Association of Realtors PROPRIETARY & CONFIDENTIAL | 9

11. Single Family Housing Statistics
Aging foreclosure inventory: 42% of loans have had no payment in over 24 months
Source: Lender Processing Services PROPRIETARY & CONFIDENTIAL | 10

12. Single Family Housing Statistics
US Monthly Foreclosure Activity
Source: Lender Processing Services, RealtyTrac PROPRIETARY & CONFIDENTIAL | 11

13. Non‐Performing Loans
 Top 10 banks hold well over $150bn in delinquent 1st lien mortgage loans*
Non‐
Performing  Delinquent and defaulted mortgage loans are generally priced to liquidation
Loans
 Liquidation timelines vary significantly among states
Estimated Foreclosure Timeline by State**
* Source: FDIC call reports
** Timelines based upon Carrington experience PROPRIETARY & CONFIDENTIAL | 12

14. NPL Acquisition & Resolution
 Control‐based strategy
NPL Strategy  Optionality exists through “high touch” resolution & disposition strategies
 Evaluate strategies aimed at keeping borrowers in homes and asset cash flowing
Customized Disposition Plan for each Loan
Loan
Prepay at Par
Modification
Deed-in-Lieu / Government Refi
Deed-for-Lease Program
Delinquent Current
Mortgage Mortgage
Refinance after
Short Sale
Debt Forgiveness
Legend
Property Sale Foreclose and
Re-Default
Liquidate or Rent
Refinance
Loan Sale Secondary Whole Secondary Whole
Loan Sale Loan Sale
PROPRIETARY & CONFIDENTIAL | 13

15. Non‐Performing Loans
 Asymmetric risk/return profile for distressed whole loan pools
NPL Risk &  Basic loan pricing models are generally priced to a liquidation scenario
Return
Profile  Liquidation timelines are state specific
 Judicial versus non‐judicial foreclosure has the largest impact on timelines
Generic Pricing by State
Source: Carrington Capital Management, LLC
‐ “Median Price” means the generic pricing analysis assumes median home price in the particular state
‐ “Constant Price” means the generic pricing analysis assumes a constant $200,000 home price for all states PROPRIETARY & CONFIDENTIAL | 14

16. Non‐Performing Loans
Substantial capital cushion with asymmetric risk/return profile
 Low cost basis can provide meaningful downside protection
• Current market prices for non‐performing loans is generically 60% of current property value
• Modeled home values would have to decline 27.25% from current levels to impair invested capital
• Modeled probability of $1 loss of invested capital is less than 1.0%
Strength of Invested Capital Price as % of Property Value Home Price (“HP”) Simulation
(Probability of $1 Loss on Investment) (Stressed Vol over 3‐year Time Horizon)
100.00% 6.75% Mean Stressed HPD: 10.25%*
Assumes 3‐year Time Horizon Carry Costs Standard Deviation: 7.11%
2.25% Annual Carry Costs
6.0% Broker
6.00% Broker Fee at Liquidation 87.25% 0% HPD
At market price of 60.0% 50% probability
‐3% HPD
to property value, home home values decline
prices can decline an LESS THAN 10.25%
77.00% ‐10.25% HPD Base HPD
additional 17.00% from
50% probability
stress case (27.25% in total) ‐17% HPD
home values decline
prior to a loss of $1 of
MORE THAN 10.25%
invested capital. 60.00% ‐27% HPD
Acquisition
Less than 1.0% probability of Price
$1 loss of invested capital at Price = 60% of
60% of current property value Property
37.25% Value
‐50% HPD
* Generic stressed case home price depreciation. Stressed for median income and unemployment variables. PROPRIETARY & CONFIDENTIAL | 15

17. Non‐Performing Loans
 Ability to perform loan level due diligence
Transparency  Ability to perform exterior site visits to reconcile property value
 Ability to review all servicing notes and correspondence with borrowers
 Typical diligence pull through rates range between 70% to 90%*
Due Diligence
 Review loan files for compliance, chain of title, litigation
 Accounting constraints keep bank sellers on the sidelines
Challenges  AG Settlement temporarily put some bank NPL seller programs on hold
 Uncertainty surrounding foreclosure moratoriums and legislated modifications
* Based upon Carrington Capital Management, LLC whole loan acquisition experience PROPRIETARY & CONFIDENTIAL | 16

18. Homeownership Statistics
 Structural shift or reversion to normal level?
 69.25% peak in homeownership
 Since 2004 peak in homeownership rate:
• Owners have increased 1.8% (absolute terms)
• Renters have increased 18.5% (absolute terms)
• Vacant homes increased 14.1% (absolute terms)
Total Housing Units 132,596
Vacant housing units 18,474
 Assume 100% of 90+ DQs/FCs become renters
Owner occupied housing units a 74,601
Renter occupied housing units 39,521 • Between 3 – 4 million increase in rent demand
Occupied housing units b 114,122 • New formations could add 2+ million in demand
Homeownership Rate (Owner occ. units / Occ. units) 65.37
Mortgage Loans c 47,000
90+ days plus FC (%) d 8.91
90+ days plus FC (#) e = [c x d] 4,188
Adjusted Owner occupied housing units f = [a ‐ e] 70,413
Adjusted Homeownership rate (%) g = [f / b] 61.70
Source: U.S. Census Bureau, Mortgage Bankers Association, Carrington Capital Management PROPRIETARY & CONFIDENTIAL | 17

19. REO Rental Strategy
 Increased rental demand, low vacancies and stable rental rates
 Multiple sources to acquire properties
REO Rental
• Auctions, bulk opportunities through banks, MLS, GSEs and NPL loans
 Consistent with policy efforts to reduce inventory and reconstitute housing stock
Potential New Rental Demand/Stock
Source: Mortgage Bankers Association, Carrington Capital Management PROPRIETARY & CONFIDENTIAL | 18

20. Single Family Rental Strategy
“Even the Oracle of Omaha, billionaire Warren Buffett, told CNBC that
distressed single‐family homes were one of the best investment
opportunities around, asserting, ‘…It’s a leveraged way of owning a very
cheap asset now and I think that’s probably as an attractive an investment as
you can make.’” ‐ Warren Buffett, Forbes, April 2012
“…rental markets are strengthening in some areas of the country, reflecting
in part a decline in the homeownership rate. Reducing some of the barriers
to converting foreclosed properties to rental units will help redeploy the
existing stock of houses in a more efficient way. Such conversions might also
increase lenders' eventual recoveries on foreclosed and surrendered
properties.” – Board of Governors of the Federal Reserve System, Housing
White Paper, January 2012
“The best opportunities for single‐family REO‐to‐rental investors are in Florida
and the Midwest, which boast high cap rates and a large stock of potential
REO properties” – CoreLogic, Market Pulse, April 2012
PROPRIETARY & CONFIDENTIAL | 19

21. REO Rental Strategy
 Rent is not linearly correlated with home prices
Rent‐to‐
Property  Net cash flow yield targets drive property price point range
Value Ratio
 Higher running yield targets generally garner the focus of lower value properties
Average Monthly Rent Payment & Rent Yield
Property Value Distribution
Source: Carrington Property Services, LLC PROPRIETARY & CONFIDENTIAL | 20

22. REO Rental Strategy
Typical Property Profile Typical Floor Plan
Average Market Value:  $120,000
Average Monthly Rent:  $1,222
Target Rental Yield:  12%-16%
Total Square Footage:  1,750 square feet
Rent/Square Foot:  $0.70
Bedrooms:  3.3
Bathrooms:  2.3
Total Rooms:  6.8
Typical Tenant Profile
Number of Occupants:  3.4
Number of Minors/Property:  1.5
Rent-To-Income:  20%
Average Household Income:  $6,200/month
Source: Carrington Property Services, LLC PROPRIETARY & CONFIDENTIAL | 21

23. REO Rental Strategy
Rental  Acquire in select markets with significant distressed supply
Strategy
 Acquire, rehabilitate, identify tenants and manage rental portfolio
 Prefer property characteristics conducive to effective rental management
Target
Properties  Target square foot range, bed/bath counts and prefer newer/renovated properties
 Limit properties with additional maintenance requirements (e.g. swimming pools)
 Importance of internal operational capabilities and controls
Investment
Approach  Risks of outsourcing key functions
 Ability to manage and control key aspects of rental process is important
PROPRIETARY & CONFIDENTIAL | 22

24. REO Rental Strategy
 Policy initiatives aimed at GSE REO portfolio is slow to proceed
Challenges  Operational challenges for new entrants
to Strategy
• Technology, pricing, acquisition, management
 Empirical data concerning key pricing variables
Select Variables used
to assess Rental Strategy
Limited historical data exists on single family
rentals for non‐operators to accurately explore
economics…
PROPRIETARY & CONFIDENTIAL | 23

25. Carrington: Single Family Rental Platform
 13 affiliate operating companies
 Approx. 1,800+ full-time and contract employees
 National network of field assessors for asset evaluation
Local Contractors  Manage approx. 5,200 properties, 3,200 in rental CPS National Network
 Disposed of 34,000 assets and managed 10,000 rental units to date
Established relationships Over 2,000 real estate
with hundreds of local professionals in national
contractors Asset preferred network
Management
Portfolio
34,000+
 40 employees Property properties managed Property Over 850 agents and over
 Two regional offices Preservation Sales 40 offices licensed in 22
10,000+ states
 Nationwide coverage rental assets managed
Technological
Infrastructure
 Over 35 employees
 Provide services in 26
states
RNT Logistics
 Vendor management
 Business analytics  Core portfolio systems
 Acquisition and disposition tracking  Financial results and reporting
PROPRIETARY & CONFIDENTIAL | 24

26. Private Label Mortgage Lending
Non‐Agency Mortgage Lending 2.0
US Mortgage  Prior to 2008, US Gov’t provided explicit or implicit support to 50‐60% of loan volume
Market –
Supplier of  Recently, Government sponsorship has reached levels approaching 90%
Loans
 Private label securitization market is extremely limited and economics are challenged
Government versus Private Sector Mortgage Originations
Source: Inside Mortgage Finance PROPRIETARY & CONFIDENTIAL | 25

27. Private Label Mortgage Lending
 Thought and action‐oriented leadership in the private label market is required
The New  Must improve upon the market’s past inadequacies
Private Label
Market  Alignment of interests between the lender and the borrower is critical
 All participants in the process must have “skin in the game”
 Borrowers must be able to provide documentation for fully underwritten loans
Bilateral • Borrowers must consent to ongoing credit/income requests of servicers
Transparency
And • Re‐think Gramm‐Leach‐Bliley
Engagement  Lenders must provide plain‐English disclosure
 Borrowers should have complete understanding of loan terms and obligations
PROPRIETARY & CONFIDENTIAL | 26

28. Residential Investment Themes
Discussion Summary & Themes
 Non‐Performing Loan (“NPL”) and Rental strategies are often consistent with policymaker’s goals
 In early innings of developing the Buy‐to‐Rent strategy for residential housing on a national scale
• Concerns about the number of new players that lack the infrastructure and experience
• Concerns about the potential for “rental” operators to become property “flippers”
 Future of private lending has yet to be determined
• Must rethink the relationship between the borrower, lender and investor
• Successful non‐agency market needs to be built on transparency, alignment of interest
• Rules must be clear and cannot be unilaterally changed
 Post election, the discussion concerning long‐term plans for the GSEs will heat up
 Investors need to be engaged now to help define the future of the private lending market
PROPRIETARY & CONFIDENTIAL | 27