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MORTGAGE PORTFOLIO PROTECTION PROGRAM

I. BACKGROUND

The Mortgage Portfolio Protection Program(MPPP) was introduced on January 1,1991, as an additional tool to assist themortgage lending and servicing industries inbringing their mortgage portfolios intocompliance with the flood insurancerequirements of the Flood DisasterProtection Act of 1973.

The MPPP is not intended to act as asubstitute for the need for mortgagees toreview all mortgage loan applications at thetime of loan origination and comply withflood insurance requirements asappropriate.

Proper implementation of the variousrequirements of the MPPP usually results inmortgagors, after their notification of theneed for flood insurance, either showingevidence of such a policy, or contactingtheir local insurance agent or appropriateWrite Your Own (WYO) company topurchase the necessary coverage. It isintended that flood insurance policies bewritten under the MPPP only as a lastresort, and only on mortgages whosemortgagors have failed to respond to thevarious notifications required by the MPPP.

MORTGAGE PORTFOLIO PROTECTION PROGRAM RATE ANDINCREASED COST OF COMPLIANCE (ICC) TABLE

ZONEMPPP Rates per $100of Building Coverage

MPPP Rates per $100of Contents Coverage

ICC Premium for$30,000 Coverage

A Zones - All building &occupancy types,

except A99, AR, AR Dual Zones

2.40 / 1.20 2.50 / 1.20 75.00

V Zones - All building &occupancy types

3.70 / 3.70 3.47 / 3.47 75.00

A99 Zone, AR, AR Dual Zones .67 / .35 .89 / .35 6.00

NOTES: (1) ICC coverage does not apply to contents-only policies or to individually owned condominium unitsinsured under the Dwelling Form or General Property Form.

(2) The ICC premium is not eligible for the deductible discount. First calculate the deductible discount,then add in the ICC premium.

(3) Add Federal Policy Fee and Probation Surcharge, if applicable, when computing the premium.(4) MPPP policies are not eligible for Community Rating System premium discounts.

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II. REQUIREMENTS FOR PARTICIPATINGIN THE MPPP

The following paragraphs represent thecriteria and requirements that must befollowed by all parties engaged in the saleof flood insurance under the National FloodInsurance Program's Mortgage PortfolioProtection Program.

A. General

1. All mortgagors notified, inconjunction with this Program, oftheir need to purchase floodinsurance must be encouragedto obtain a Standard FloodInsurance Policy (SFIP) fromtheir local agent.

2. When a mortgagee or amortgage servicing companydiscovers, at any time followingloan origination, that one ormore of the loans in its portfoliois determined to be located in aSpecial Flood Hazard Area(SFHA), and that there is noevidence of flood insurance onsuch property(ies), then theMPPP may be used by suchlender/servicer to obtain (forceplace) the required floodinsurance coverage. The MPPPprocess can be accomplishedwith limited underwritinginformation and with special flatflood insurance rates.

3. In the event of a loss, the policywill have to be reformed if thewrong rate has been applied forthe zone in which the property islocated. Also, the amount ofcoverage may have to bechanged if the buildingoccupancy does not support thatamount.

4. It will be the WYO company'sresponsibility to notify themortgagor of all coveragelimitations at the inception ofcoverage and to impose those

limitations that are applicable atthe time of loss adjustment.

B. WYO ArrangementArticle III—Fees

With the implementation of theMPPP, there is no change in themethod of WYO company allowancefrom that which is provided in theFinancial Assistance/Subsidy Arrange-ment for all flood insurance written.

C. Use of WYO Company Fees forLenders/Servicers or Others

1. No portion of the allowance thata WYO company retains underthe WYO Financial Assistance/Subsidy Arrangement for theMPPP may be used to pay,reimburse or otherwiseremunerate a lending institution,mortgage servicing company, orother similar type of companythat the WYO company maywork with to assist in its floodinsurance compliance efforts.

2. The only exception to this is asituation where the lender/servicer may be actually due acommission on any floodinsurance policies written on anyportion of the institution'sportfolio because it was writtenthrough a licensed propertyinsurance agent on their staff orthrough a licensed insuranceagency owned by the institutionor servicing company.

D. Notification

1. WYO Company/Mortgagee—Any WYO company participatingin the MPPP must notify thelender or servicer, for which it isproviding the MPPP capability,of the requirements of theMPPP. The WYO companymust obtain signed evidencefrom each such lender orservicer indicating their receipt

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of this information, and keep acopy in its files.

2. Mortgagee to Mortgagor—Inorder to participate in the MPPP,the lender (or its authorizedrepresentative, which willtypically be the WYO companyproviding the coverage throughthe MPPP) must notify theborrower of the following, at aminimum:

a. The requirements of theFlood Disaster ProtectionAct of 1973,

b. The flood zone location ofthe borrower's property,

c. The requirement for floodinsurance,

d. The fact that the lender hasno evidence of theborrower's having floodinsurance,

e. The amount of coveragebeing required and its costunder the MPPP, and

f. The options of the borrowerfor obtaining conventionallyunderwritten flood insurancecoverage and the potentialcost benefits of doing so.

A more detailed discussion of thenotification requirements is made apart of this program document inSection O.

E. Eligibility

1. Type of Use—The MPPP will beallowed only in conjunction withmortgage portfolio reviews andthe servicing of those portfoliosby lenders and mortgageservicing companies. The MPPPis not allowed to be used inconjunction with any form ofloan origination.

2. Type of Property—The standardNFIP rules apply, and all typesof property eligible for coverage

under the NFIP will be eligiblefor coverage under the MPPP.

F. Source of Offering

The force placement capability willbe offered by the WYO companiesonly and not by the NFIP ServicingAgent.

G. Dual Interest

The policy will be written coveringthe interest of both the mortgageeand the mortgagor. The name of themortgagor must be included on theApplication Form. It is not, however,necessary to include the mortgageeas a named insured because theMortgage Clause (section VII.Q. ofthe Dwelling Form and the GeneralProperty Form) affords buildingcoverage to any mortgagee namedas mortgagee on the FloodInsurance Application. If contentscoverage for the mortgagee isdesired, the mortgagee should beincluded as a named insured.

H. Term of Policy

NFIP policies written under theMPPP will be for a term of 1 yearonly (subject to the renewalnotification process).

I. Coverage Offered

Both building and contents coveragewill be available under the MPPP.The coverage limits available underthe Regular Program will be$250,000 for building coverage and$100,000 for contents. If the WYOcompany wishes to provide higherlimits that are available to otheroccupancy types such as otherresidential or non-residential, it maydo so only if it can indicate thatoccupancy type as appropriate. Ifthe mortgaged property is in anEmergency Program community,then the coverage limits availablewill be $35,000 for building coverageand $10,000 for contents. Again, ifthe higher limits are desired forother types of property, then thebuilding occupancy type must be

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provided at the inception of thepolicy or when that information maybecome available, but it must beprior to any loss.

J. Policy Form

The current SFIP Dwelling Form andGeneral Property Form will be used,depending upon the type of structureinsured. In the absence of buildingoccupancy information, the DwellingForm should be used.

K. Waiting Period

The NFIP rules for the waiting periodand effective dates apply to theMPPP.

L. Premium Payment

The current rules applicable to theNFIP will apply. The lender orservicer (or payor) has the option tofollow its usual business practicesregarding premium payment, solong as the NFIP rules are followed.

M. Underwriting—Application

1. The MPPP will require lessunderwriting data than isnormally required under thestandard NFIP rules andregulations. The MPPP datarequirements for rating,processing and reporting are, ata minimum:

a. Name and mailing addressof insured (mortgagor; alsosee Dual Interest),

b. Address of insured(mortgaged) property,

c. Community information(complete NFIP map panelnumber and date; programtype, Emergency orRegular) countywide maps,

d. Occupancy type (sostatutory coverage limits arenot exceeded. This datamay be difficult to obtain.

Also see CoverageOffered.),

e. NFIP flood zone whereproperty is located (lendermust determine, in order todetermine if flood insurancerequirements are necessaryand to use the MPPP),

f. Amount of coverage,

g. Name and address ofmortgagee,

h. Mortgage loan number,

i. Policy number.

2. No elevation certificates will berequired as there will be noelevation rating.

N. Rates

(See page MPPP 1.)

O. Policy Declaration PageNotification Requirements

In addition to the routine information,such as amounts of coverage,deductibles and premiums, that aWYO company may place on thepolicy declarations page issued toeach insured under the NFIP, thefollowing messages are required:

1. This policy is being provided foryou as it is required by Federallaw as has been mentioned inthe previous notices sent to youon this issue. Since yourmortgage company has notreceived proof of floodinsurance coverage on yourproperty in response to thosenotices, we provide this policy attheir request.

2. The rates charged for this policymay be considerably higher thanthose that may be available toyou if you contact your localinsurance agent (or the WYOcompany).

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3. The amounts of insurancecoverage provided in this policymay not be sufficient to protectyour full equity in the property inthe event of a loss.

4. You may contact your localinsurance agent (or WYOcompany) to replace this policywith a conventionally under-written Standard FloodInsurance Policy, at any time,and typically at a significantsavings in premium.

The WYO company may addother messages to thedeclarations page and makeminor editorial modifications tothe language of thesemessages if it believes any arenecessary to conform to thestyle or practices of that WYOcompany, but any suchadditional messages ormodifications must not changethe meaning or intent of theabove messages.

Since the amount ofunderwriting data obtained atthe time of policy inception willtypically be limited, the extent ofany coverage limitations (suchas, when replacement coverageis not available or coverage islimited because the building hasa basement or is considered anelevated building with anenclosure) will be difficult todetermine. It is, therefore, theresponsibility of the WYOcompany to notify themortgagor/insured of allcoverage limitations at theinception of coverage andimpose any that are applicableat the time of the lossadjustment.

P. Policy Reformation—PolicyCorrection

Section VII.G. of the Dwelling Formand of the General Property Formwill apply as appropriate.

Examples of circumstances underwhich reformation or correctionmight be needed would be:

Policy Reformation—The wrong flatrate was applied for the zone inwhich the property was actuallylocated. Policy Correction—Theamount of coverage exceeds theamount available under the NFIP forthe type of building occupancy thatrepresents the building insured. Insuch cases, the amount of coveragewould have to be adjusted to theamount available and anyappropriate premium adjustmentsmade.

Q. Coverage Basis—Actual CashValue or Replacement Cost

There are no changes from thestandard practices of the NFIP forthese provisions. The coveragebasis will depend on the type ofoccupancy of the building coveredand the amount of coverage carried.

R. Deductible

A $500 deductible is applicable forpolicies written under the MPPP.

S. Federal Policy Fee

There is no change from thestandard practice. The FederalPolicy Fee in effect at the time theMPPP policy is written must beused.

T. Renewability

The MPPP policy is a 1-year policy.Any renewal of that policy can occuronly following the full notificationprocess that must take placebetween the lender (or its authorizedrepresentative) and the insured/mortgagor, when the insured/mortgagor has failed to provideevidence of obtaining a substituteflood insurance policy.

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U. Cancellations

The NFIP Flood Insurance Manualrules for cancellation/nullification areto be followed, when applicable.

V. Endorsement

An MPPP policy may not beendorsed to convert it directly to aconventionally underwritten SFIP.Rather, a new policy application,with a new policy number, must becompleted according to theunderwriting requirements of theSFIP, as contained in the NFIPFlood Insurance Manual. The MPPPpolicy may be endorsed to assign itunder rules of the NFIP. It may alsobe endorsed for other reasons suchas increasing coverage.

W. Assignment to a Third Party

Current NFIP rules remainunchanged; therefore, an MPPPpolicy may be assigned to another

mortgagor or mortgagee. Any suchassignment must be through anendorsement.

X. Article XIII—Restriction on OtherFlood Insurance

Article XIII of the Arrangement isalso applicable to the MPPP and, assuch, does not allow a company tosell other flood insurance that maybe in competition with NFIPcoverage. This restriction, however,applies solely to policies providingflood insurance. It also does notapply to insurance policies providedby a WYO company in which flood isonly one of several perils provided,or when the flood insurancecoverage amounts are in excess ofthe statutory limits provided underthe NFIP or when the coverage itselfis of such a nature that it isunavailable under the NFIP, such asblanket portfolio coverage.