MBA Quality Assurance

1
MBA Quality Assurance Residential Underwriting

• Clayton Ann Gibbons, Managing Director
• Presentation

2
Pre-Funding Protocols

• Market is dictating the need for more information
  regarding
• Capital What is the source of down-payment,
  funds to close, etc.?
• Collateral What is the value of the real estate
  property or asset?
• Major exceptions and issues that need to be
  addressed include (but are not limited to) the
  following
• AUS not properly loading
• Income and AUS validation
• Condo warranty issues, don't meet requirements
• Credit requirements issues
• Additional Data
• Origination
• Updated data (Credit, valuation, etc.)
• Servicing
• Custodial

3
Post-Close Quality Control
As the market leader in third-party due
diligence, Clayton has the expertise needed on
the salability of loans in the secondary market
and offers a complete outsource solution. When
you outsource your QC reviews to Clayton, youll
get an independent and objective assessment on
the quality of your loans, conformance to
internal guidelines, policies and procedures and
gain a cross-company view of problem areas.
4
The Next Generation Best Practices
The View of 2009 Beyond

• Data Quality
• We can expect
• Critical for 0 error tolerance on key data
  fields
• Enhanced reporting technology requirements to
  ensure clients have the ability to
• Stratify the entire loan pool
• Drill-down for loan-level details
• Defined standards for underwriter practices
  including minimum requirements for years depth
  of experience
• Additional data for purchasers of new
  originations, which will include 3rd-party,
  audit and origination data

• Credit Quality
• We can expect
• Statistically valid methodology to select due
  diligence sample
• Automated or pre-programmed guideline
  verification
• Greater focus by underwriter to deliver better
  credit quality opinions
• Seasoned loans which will require
• Pay history and collection comment reviews
• Updated FICO scores drift calculation
• Updated BPOs AVMs
• Review of legal documents and compliance for
  enforceability

5
Due Diligence Changes to Meet Proposed Industry
Standards

• Due diligence firms to comply with data and
  reporting standardization driven by ASF,
  Rating Agencies, Issuers and
  Originators
• Independent post-close QC in proposed industry
  pre-securitization
  process
• Complete loan file documentation of credit
  underwriting including
• Approvals
• Completed/final loan application
• All external verifications (including Income,
  Employment Occupancy)
• Ability to deliver clear, up-to-date underwriting
  guidelines and policies and procedures for both
  credit and regulatory compliance
• Increased use of third-party services to identify
  fraud
• Universal loan identifier Proposing an
  industry-wide accessible database

6
Regulatory Changes
Imminent Changes on the Horizon

• New TILA disclosure timing requirements
  Effective October 1, 2009 the TILA disclosure
  requirements are changing. The early TILA
  requirement is being expanded to apply to
  non-purchase loans changes the timing
  requirements for re-disclosure and mandates the
  earliest possible closing date (closing cannot
  occur until latter of 7 business days after
  initial disclosure, or 3 business days after
  re-disclosure). This will require training and
  system changes.
• New category of federal higher-priced mortgage
  loans Effective October 1, 2009 systems will
  need to identify such loans and block prohibited
  provisions. Originators will need to assess the
  disposition for these loans in the secondary
  market.
• Higher-priced mortgage loan thresholds Effective
  October 1, 2009 Originators will use these
  thresholds to identify rate spread loans
  subject to reporting under HMDA beginning.
• RESPA reform Issued by January 1, 2010 Will
  require new GFE and HUDs to be issued.
  Comparison between application closing fees.
  That will requiring controls and system changes.
• The SAFE Act Issued by 2010 This act is
  designed to enhance consumer protection and
  reduce fraud by encouraging states to establish
  minimum standards for the licensing and
  registration of state-licensed mortgage loan
  originators. May affect the way that originators
  outsource for back office processing and
  underwriting when it becomes fully effective.