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• <br />• <br />• <br />Mr. Charles Riesenberg <br />May 25, 2010 <br />Page 2 <br />As the purchasing lender has purchased the loan at a discount, the purchasing lender has the <br />ability to renegotiate and modify the loan terms to amounts which are payable by the borrower <br />and the project. These modifications have included reductions in outstanding indebtedness and <br />interest rates payable, re- amortization of the loan amount and extensions of the loan period. If <br />the project is operating at some level of profit, many purchasing lenders have been willing to <br />forego foreclosure in lieu of receiving monthly payments under the loan. This does not happen <br />in every loan, and as the underlying loan is in default, the purchasing lender may foreclose on the <br />project. Based on our discussions with HUD and other multifamily lenders, foreclosures of <br />projects have occurred but only in a few instances. Per HUD, in Minnesota less than ten (10) <br />projects have been foreclosed in the last five (5) years. It is our understanding that none of these <br />foreclosed projects have been housing for seniors or elderly persons. � <br />We hope this summary assists you in your conversations with the City. If you require any <br />additional information from us, please do not hesitate to contact me. <br />Sincerely, <br />DOUGHERTY MORTGAGE LLC <br />Tom <br />Tresa Engel <br />Vice President <br />5251830v1 <br />