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April 8, 2013 Karen L Bowerman 1419 College Ave Visalia, Ca 93277 Gregory Bowerman 933 Carolyn Ave Modesto,

CA 95350 Via Certified Mail Re: Discussion on disposition of 933 Carolyn property

Dear Greg, I recently received notice from Melissa Chiangi, the PMZ real estate agent who listed the 933 Carolyn property, that she had received an offer of $400,000.00 for the Carolyn property. Shortly thereafter my attorney Yasmine Mehmet received a letter indicating the same from Mr. Goss accompanied by the written offer from Michael D. and Cindy B. Brunn. There are a number of factors to consider regarding the current status of the mortgage on the house, qualification status for short sale, possible tax liability ramifications and the current upward trend in Modesto property values. I am in favor of a resolution that represents the greatest risk mitigation to the community in regard to decreasing debt, avoiding unnecessary tax liability and maintaining asset value. In short, we must perform our fiduciary responsibility to the community. Our real estate agent, Melissa Chiangi, informs me in discussions regarding the most recent offer by the Brunns that opting for a short sale at the offered price may not represent the best financial decision for the community. Further, Ms Chiangi informs me that, in fact, a short sale has not been approved by either Ocwen Loan Servicing LLC, the current holders of the primary mortgage at approximately $490,000.00 nor by Bank of America who currently holds an approximately $190,000.00 second mortgage on the property. Apparently the Ocwen Loan Modification Packet that I forwarded to you in October of 2012 has not been completed and submitted to Ocwen Loan Servicing LLC in order to qualify for a short sale in addition to receiving consideration for a number of their other loan modification and assistance programs. In order to evaluate the current offer by the Brunns, I believe you and I need to determine with certainty the facts regarding a number interdependent issues to best determine whether we should short sell the house or work on a loan modification plan. Here are the primary issues I believe require definitive answers prior to making any decisions:

Letter regarding disposition of 933 Carolyn property

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1. Complete and submit Ocwen Loan Modification Application


Ocwen requires the application be completed and submitted to evaluate us for qualification for various programs according to hardship and other factors. In addition to qualifying for short sale, the loan can be restructured so the existing outstanding payments are added to end of the mortgage and a new payment plan with a reduced monthly installment can be structured to better fit the financial realities of the community. There are also opportunities to refinance and decrease the interest rate which can also lower the monthly payment.

2. Qualification for tax free debt forgiveness on principle residence


According to IRS Tax Regulations the debt canceled by the lender must have been used to buy, build or substantially improve your principle residence. This is known as the Qualified Principle Residence Tax Exemption which would be the primary benefit to the community in possibly choosing to short sale the 933 Carolyn property. Unfortunately, there have been approximately $400,000.00 in equity loans taken out against the house that have not been shown to be used to improve the residence or otherwise meet the qualifications for tax free debt forgiveness should the property be short sold. There needs to be clear account -ing of exactly how much of the approximately $490,000.00 primary mortgage that Ocwen acquired from Bank of America represents debt for purchasing the property and what represents equity loan funds that do not qualify for tax free debt forgiveness if we short sell. You need to produce records on these financial issues so we can review them together to determine our qualification status on tax free debt forgiveness and/or potential tax exposure on the amount of debt forgiven in a short sale.

3. Verify availability of DOJ / Bank of America Loan Extinguishment


In October of 2012 I spoke with Jackie at Bank of America regarding the DOJ agreement the bank made for loan extinguishments. Jackie indicated that there would be income tax due on the $190,000.00 debt if I allowed the extinguishment to go through by default. I sought counsel from our Real Estate Agent, Melissa Chiangi and also from a tax adviser. Both parties indicated that if I was not going to live in the 933 Carolyn residence and there was no guarantee it would not foreclose immediately after the extinguishment then there was no benefit for me to allow the extinguishment to go through - and no apparent benefit to the community. Shortly thereafter I again spoke with Jackie at Bank of America and she too indicated that in my present circumstance the extinguishment appeared to create a tax liability for me with no tangible benefit. Jackie indicated to me that if I informed her at that time to NOT allow the extinguishment to proceed by default, the extinguishment would still be available by request at a later date when we had re structured our primary mortgage with Ocwen and secured assurances in writing from Ocwen that there would be no foreclosure. Based on Jackie's input and the input from my other advisers, I opted to wait until there was a clear benefit, to counter balance the

Letter regarding disposition of 933 Carolyn property

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significant tax liability to the community, to pursue the loan extinguishment. Since I have no ability to pay any tax on the loan extinguishment debt forgiveness, we are best served to work on the loan modification with Ocwen and restructure our debt with Ocwen. With the increasing property value trend in Modesto, we may realize a positive equity position on the 933 Carolyn property that would offset the tax liability of opting for the $190,000.00 loan extinguishment. That would leave us with just the $490,000.00 primary mortgage with Ocwen and the likelihood that the property is currently valued over $500,000.00 and trending upwards.

4. Determine accurate current market value of 933 Carolyn property


We need to determine an accurate market value of the property at 933 Carolyn. I strongly opposed listing the property at $440,000.00 in 2012 as that was far below market value attributed to it on www.zillow.com ($540,000.00). Listing the property at below market value has artificially decreased its value. The fact is that Modesto housing prices have increased 15% over the last 12 months according to a report from the Central Valley Association of Realtors in March 2013. The zillow.com website reports an average home in Modesto valued at $120,000.00 in 2012 is now valued at $140,000.00 according to the Zillow Home Value Index through February, 2013. An article dated April 7, 2013 in the Central Valley Business Journal reports that Year Over Year increases in housing prices in Modesto are higher than then the upward trending national rate. And finally, according to MOVOTO.com, the number of price reductions of houses listed for sale in Modesto has drastically slowed 50% from September 2012 through March 2013. Inventory is low and demand is high. Our realtor, Melissa Chiangi, has also informed me of the upward trend in housing values and indicates we would be well served to pursue a loan modification on the primary mortgage with Ocwen and once that agreement has been signed we should pursue the loan extinguishment for the $190,000.00 with Bank of America to create a positive equity position on the property. My current position, based on the existing conditions, is that you complete and submit the Ocwen Loan Modification Application ASAP to begin the process of negotiating with Ocwen to see what options we have. At this point there is no indication that Ocwen will approve a short sale. Further, all the available facts indicate that the Bowerman community is not in a position to qualify for the only benefit that would make a short sale a viable option tax free debt forgiveness. The short sale could create community income tax liability on a portion of $490,000.00 unless you can produce records that either indicate the equity loan funds were spent to improve the property -OR- you can produce records that indicate the $490,000.00 Ocwen mortgage does not include any equity loan amounts and if it does how much is equity loan? We need to understand our tax liability exposure. I am inclined toward the advice of our realtor and my other advisers that restructuring the mortgage loan with Ocwen and then taking advantage of the Bank of America / DOJ loan extinguishment provides the community with a positive equity property asset that will continue to appreciate through payment of mortgage installments and the
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continuing upward trend of Modesto housing values. My advisers point out that we avoid the income tax on loan forgiveness for the primary Ocwen mortgage not covered by an artificially low offer ($400,000.00) and the equity in the house we realize from the loan restructure and loan extinguishment offsets the tax liability exposure on the Bank of America loan extinguishment. Short Sale & IRS Tax Lien on 933 Carolyn Given that there is no evidence that the Bowerman community qualifies for Tax Free Debt Forgiveness we must understand that the IRS Tax Lien should NOT be paid off through a short sale process. If an offer of $400,000.00 were accepted with the intent for the $160,000.00 IRS Tax Lien to paid from the $400,000.00 that would leave only $240,000.00 in purchase funds applied toward the $490,000.00 Ocwen primary mortgage. That would result in a difference of $250,000.00 considered as forgiven debt and that does not qualify for the tax free principle residence exemption. The community would therefore face income tax liability on $250,000.00. That means the Bowerman Community would be liable for approximately 33% income tax rate on paying $160,000.00 in income tax that would be phenomenally poor fiduciary management of the community. Taking advantage of the CEP Partnership 0% Hardship Loan Program or even an operating capital loan between 7% and 8% or even 12% to pay the taxes is much more prudent than paying the 33% income tax rate on paying the community income tax. There is no rational determination that includes paying the IRS Tax Lien off through a short sale when there is no qualification for tax free principle residence debt forgiveness. We would literally being throwing money way in the most ludicrous manner - paying 33% tax on the $160,000.00 that is paying an income tax debt. I suggest we schedule a meeting at the earliest possible time to go over whatever documentation you have that will help us determine the portion of the $490,000.00 Ocwen mortgage that may qualify for tax free debt forgiveness. I also urge you to complete and submit the Ocwen Loan Modification Application at the earliest possible moment so we can move forward rapidly with determining what options Ocwen can make available to us in regard to hardship, loan modification, short sale qualification and tax implications.

Best regards,

Karen L Bowerman

cc: Michael Goss, Yasmine Mehmet

Letter regarding disposition of 933 Carolyn property

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