SITUATION SUMMARY:

The deteriorating credit market since mid 2007 not withstanding, there
is another more specific debacle that has been purposely manifested by
the financial services industry: Creditor abuse of Veterans thru
investor gouging with illicit pricing policies.

Let's briefly examine a few facts of the Veteran borrower and the home
loans that are available through the Veterans Administration and the
1944 GI Bill.....

The Veteran borrower is unlike other home buyers. The Veteran holds a
unique entitlement mandated by Congress with the 1944 GI Bill
(considered by academic economists as one of the most successful
economic development plans ever implemented)..

The Veteran borrower has historically low defaults, being one-tenth of
one per cent of all other mortgage programs put together.

Veteran loan proceeds come from Government National Mortgage Association
Pass-thru bonds, a U.S. Government 'full & credit' Treasury securities
identical in quality to U.S. Treasury bonds -- US Treasuries are
considered the safest credit investment in the world.....

A Veteran's home loan is guaranteed by the Federal Government.

Veterans Administration Home Loan program has unique and well structured
mortgage criteria unlike any other mortgage program....making it if not
the best managed certainly significantly better managed than any other
mortgage program.

Enter the credit crisis of 2007 -- investors who aggressively
mis-managed their due diligence seeking fast profits received the usual
reward of such cavalier policies -- a bubble and with the help of failed
IRS tax policies took advantage of several Trillion dollars of tax
write-offs to rape the U.S. Treasury of tax receipts...

VA Home Loans and the Veteran borrower were not part of this fiasco.

However, growing out of the credit crisis if not commencing in the years
prior to the crisis, is the policy of greed that always comes from 'fast
markets'......the investors began to gauge with excessive fees and
increased interest rates. Using manipulative schemes -- investors
charged fees that are by VA Home Loan Guidelines 'non-allowable' and hid
their gouging from proper disclosure with a variety of techniques that
avoided disclosure from RESPA exposure and resulting in benefiting the
mortgage underwriting and investor bottom lines while costing the
Veteran borrowers significantly more.

Originators, who counsel borrowers, craft the mortgage structure to the
borrower's purchase needs and conduct the due diligence to insure the
creditworthiness of the mortgage loan, have also become victims of the
underwriters and investors. Limited in their participation by VA
Guidelines, RESPA rules and State laws -- mortgage originators who are
VA agents and Prior Approval Lender have been back charged non-allowable
fees under the table by underwriters and investors who hid these
excessive costs from RESPA disclosure and in order to fatten the
investor pockets while increasing the short-term costs to Veteran
borrowers.

Additionally, investors having successfully "flown under the radar" of
regulatory oversight with short-term gouging, now have swaggered into
more aggressive gouging borrowers for illicit profits by manipulating
long-term profits by increasing the recurring profits from increased
interest rate yields using high-cost yield spread premiums and again
gouging VA agents and Prior Approval Lenders with policies specifically
designed to circumvent RESPA disclosure..... profiteering policies
created by the investors have had the most serious negative impact on
the Veteran borrower by increasing the Veterans long-term cost of
mortgage by 130 to 150 per cent over the life of the Veterans' loan.

This tactic while in existence for the past several years, the investors
have become increasingly bold and created new yield spread increases
through a variety of techniques that also follow their avoidance of
RESPA disclosure. In one such situation, the investor can increase the
short-term fees to the Veteran borrower by 300 basis points (3 per cent)
causing the Veteran's annual mortgage interest rate to rise by 120% per
annum. Extrapolating this over the 30 year mortgage term, the Veteran
borrower will pay over 3000% more for his home than if VA home loan
guidelines permit.

However, it seems inherent that investors dream up new schemes
continually. The most recent being that of a major investor that has
developed a pricing policy whereby the originator can no longer earn the
origination fee (that now goes to the investor); the originator can only
earn a fee if the originator 'above-par' prices the interest rate and to
earn the premium..this of course, increases the investor's yield.
Consequently, the long-term cost of the mortgage to the Veteran and
decreases the fees that the originator could earn. Interestingly, this
investor may have been feeling the heat on the non-allowable fee gouging
and in turn has used the origination fee to hide the investor's
collection of these non-allowable fees i.e. "hit to the rate" from RESPA
disclosure.

As we progress, if VA and regulators don't take immediate action to
issue a 'cease and desist' on these investor practices, I believe
strongly that the investors will develop even more abusive schemes to
fatten their bottom lines...

Further, other questionable impacts have surfaced....possibly a market
phenomenon resulting from the credit crisis.... but still resulting in a
major change to the cost to the Veteran borrower, overtly noticeable is
the increase in the trading spread relationship between the 10 year
Treasury bond rate and the 30 year mortgage Par rate. Historically the
10 year treasury v. 30 mortgage par rate has fluctuated between 100 and
150 basis points. This spread since mid 2007 has increased to 180 to 200
basis points, an increase of 120% greater annual cost to the Veteran
borrower. Because this a monthly reoccurring expense to the borrower,
when extrapolated over the 30 year term of the typical VA mortgage loan,
this results in again over a 3000% increase of cost to the Veteran for
his home.

Although this latter significant increase may not be directly investor
caused, one can not keep from relating this observation and making it
too come under investigation...The question as to how the GNMA bond,
issued by the U.S. Treasury with all its features of creditworthiness,
even in the midst of the current credit crisis, could manage a major
change in its historical trading relationship causing such a significant
increase in the Veterans home loan costs has to be queried as well....my
belly-brain tells me that it has something to do with the investor
delivery process as the deliver the loans to GNMA pooling....however,
this is speculation albeit still it could be another gouging of the
Veteran has transpired....

In conclusion, two observations are obvious in studying this situation.

First, the Veteran is being charged astronomical increased costs for his
VA home loan.

Second, the Investor/underwriter is making astronomical increased income
from these gouging policies.

A third observation is also obvious, the mortgage originator or VA agent
and the VA Prior Approval Lender [are not]{.underline} parties to the
investor's manipulative price to gouge and profiteer from the Veteran,
quite to the contrary, the investor also gouges the originator as well
to fatten the investors profits just as the investor has done to the
Veteran borrower but in this case by failure to disclose on RESPA forms
by deducting the investor's illicit fees from the broker's gross fees
and paying the broker less or by above par pricing an investor profit of
up to .375% pushing the loan interest rate by .50 to 1.0 % per annum
over the term of the Veteran's mortgage with the investor profiting
without disclosing these charges & practices on RESPA documents.....

If the VA agent and Prior Approval Lender are following their duties
under the VA Home Loan Guidelines, it is no different than the
attorney's duty to 'vigorously defend his client'; likewise, the VA
Agent and Prior Approval Lender are bound by the VA home loan guidelines
and business ethics to obtain the most economic cost of finance for his
client, who is the Veteran Borrower......but in the current investor
orchestrated gouging even the originator, as is the Veteran, is a victim
of investor gouging....

Coincidently, *[the investor schemes are sophisticated enough to dodge
discovery by RESPA disclosure]{.underline}* and even VA Guidelines due
diligence so that the end result is that everyone, Veteran borrower,
originator, VA, HUD, State & National economies looses except the
investor...and the investors come out smiling like the 'cat who ate the
canary'!!!

Let me end by saying that although each investor has used some of these
schemes more than others, there are no innocent investors....whether
this is conspiracy among investors or not is only speculation...but one
fact is clear, investors pricing VA home loans are all complicit in some
way of gouging the borrower Veteran and [it is NOT the
originator]{.underline} that is complicit with the investor's
misfeasance, a claim that investor always make as it's scapegoat, it is
definitively and inequitably the investor that has schemed with the
practices heretofore outlined.

Donald K. Arnold

Corridor Capital/Veterans Loans 4 Homes

VA Prior Approval Lender #95983600005

Tel: 505-298-9800

email: <don@veteransloans4homes.com>

fax: 505-298-8173