Goldman Sachs – Loan Servicing Policy and Report

WHEREAS

Our corporation is one of the largest servicers of subprime and other alternative housing loans with servicing rights of about $54 billion of subprime loans as of the end of June and with other purchases from Fremont General in June and about $1.2 billion of loans and servicing rights from Popular Inc in September.

The Mortgage Metrics Report of the Office of Thrift Supervision and the Office of the Comptroller of the Currency for major servicers under their supervision shows over 11 % of subprime loans were seriously delinquent. Of these seriously delinquent loans of lenders supervised by them, 5.9% received loan modifications, 5.7% payment plans, and 7.2% foreclosures. Problems with Alt-A loans were at about half this subprime level but still significant.

Such foreclosures have hurt the economy through the large increase in vacant housing and the further decline of housing values, causing financial problems to local communities. For example, Vallejo City (CA) is filing bankruptcy as the result of the large numbers of vacant houses.

Lenders, especially those like Countrywide that extensively use brokers, have faced complaints of deceptive methods and predatory lending practices in the process of making their loans. As a result State Attorneys General and banking authorities of 11 states brought suit against Countrywide, now a part of Bank of America, on the basis of these complaints. As a result, Bank of America has agreed to a nationwide homeownership retention program focusing particularly on subprime, Option ARM, and hybrid loans and calling for loan modification wherever possible and relocation assistance for borrowers whose loans cannot be modified and face foreclosure.

Loan modification under this agreement seeks whenever possible to make loans affordable by reducing the loans costs plus insurance and taxes to 34% of borrower income through various mechanisms including interest rate reductions and interest caps in the near term

The State Attorneys General have sent letters to 16 major servicers, including Goldman Sachs’ Litton Home Servicing, stating:

 ”Given the significant losses associated with foreclosures, and your fiduciary duty to maximize the return for your investors, we believe that every major servicer of subprime loans should adopt these types of programs as soon as possible. We believe that doing so is in the best interest of homeowners, servicers, investors and the economy at large.”

Since Litton Servicing of Goldman Sachs services large numbers of subprime loans, many of which were brokered loans and may be of predatory nature, we believe Goldman Sachs should implement as far as possible the suggestions on loan modifications given by the State Attorneys General

RESOLVED

The board of directors should develop a loan servicing policy providing for the development of programs such as those put forth by the State Attorneys General in order to remedy borrowers for past predatory loan practices, help prevent future ones, reduce losses associated with foreclosures, and increase return to investors; and then report periodically to shareholders on its progress.

Countrywide Financial – Report on the Subprime Mortgage Resets

WHEREAS

Whereas the problems resulting from poor subprime lending safeguards are having negative impacts on our company, millions of homeowners, our national economy, and global financial markets.

Subprime borrowers in adjustable rate mortgages may face unaffordable loan payments following rate resets, resulting in payment delinquency, foreclosure proceedings, and the loss of homes, negatively affecting communities, borrowers’ credit ratings, and their ability to purchase a home in the future.

Subprime adjustable rate mortgages worth almost $600 billion are expected to experience rate resets by the end of 2008.

Credit Suisse predicts that between August 2007 and July 2009, one million subprime mortgages worth $190 billion will start or continue going through foreclosure. Seventy-five percent of those, or 775,000 homes, will eventually default and be liquidated.

Loan modification strategies may be employed by lenders to adjust the terms of existing mortgages, which can forestall delinquency and foreclosure and result in increased home retention and community stability and mitigate the harmful impacts on the economy.

Treasury Secretary Paulson has said, “…foreclosures take place that aren’t in the investors’ interest, aren’t in the homeowners’ interest, aren’t in the community’s interest and aren’t in the economy’s interest.”

Sheila Bair, Chairman of the Federal Deposit Insurance Corporation, has stated that “…to foreclose on all of these properties is not a good option for anybody.” Ms. Bair encourages converting the loans into fixed rate mortgages at the starter rates.

Fitch Ratings believes that loan modifications “could be the only viable loss mitigation strategy for as much as 40%-50% of the loans in default or determined to be a reasonably foreseeable default scenario.”

Our company is one of the nation’s largest lenders and servicers of subprime mortgages. At the end of September 2007, Countrywide’s servicing portfolio included over $118 billion of subprime loans.

RESOLVED

The shareholders urge the Board of Directors to submit, at reasonable cost and omitting any proprietary information, a report to the shareholders by Sept. 30, 2008 on the implications of subprime adjustable rate mortgage resets on the ability of customers to pay their notes.

SUPPORTING STATEMENT

Shareholders recommend that the report include the number of at-risk borrowers in our company’s subprime servicing portfolio, our company’s definition of “at-risk”, and a discussion of how many borrowers take advantage of our company’s refinance and modification programs.