1. Defvas Project In Partnership with TEGoVA and the IRRV EUROPEAN VALUATION APPLICATION - 3 PROPERTY VALUATION FOR SECURITISATION PURPOSES

2. Defvas Project In Partnership with TEGoVA and the IRRV INTRODUCTION The securitisation of property has become an important source of financial instruments in capital markets The creator of the securities benefits from the removal of property related assets from its balance sheet These securities offer their purchasers a chance to diversify their funding Where property based securities have been created from mortgages, investors are principally exposed to changes in: -the underlying value of properties securing the mortgages, and -the income from those mortgages As every investment decision is based on the ability of a property to produce revenue.

3. Defvas Project In Partnership with TEGoVA and the IRRV SCOPE This EVA applies to property valuation for the purpose of valuing these securities Valuations relevant to REIT’s, property trusts and property unit trusts are considered in EVA1 The assessment of other risks relating to the assets, are not considered by this EVA.

4. Defvas Project In Partnership with TEGoVA and the IRRV DEFINITIONS Property Securitisation Property-Related Asset-Backed Securities (PRABSs) Residential Mortgage Back Securities (RMBS) Commercial Mortgage Backed Securities (CMBS) A Special Purpose Vehicle (SPV) Net Asset Value A Sustainable Net Asset Value or Sustainable Asset Value Market Value Mortgage Lending Value A Risk Profile

5. Defvas Project In Partnership with TEGoVA and the IRRV STATEMENT OF THE APPLICATION Where the valuation will be used to secure a loan this will normally be on the basis of the Market Value. In some jurisdictions, the Mortgage Lending Value may also be used When undertaking a valuation for securitisation purposes, valuers should focus on the market and property related risks relevant to the property TEGoVA recommends valuers to undertake their tasks in two stages: -The conventional valuation -Assessment of the specific property risk profile

6. Defvas Project In Partnership with TEGoVA and the IRRV COMMENTARY The first step is to consider the individual underlying properties The valuer should prepare a structured risk assessment Valuations and risk assessments are carried out within the context of the market The second step, where a portfolio of properties is being assessed, is to assess the entire portfolio Cluster analysis The validity of the market value of the individual properties should be verified Sustainable net asses value