1. STRATMOR | GROUP Peer to Peer Performance Benchmarking Comparing 2015 with 2014 Outlook for 2016 Borrower Satisfaction Metrics – Management Tool Jeff Babcock, Senior Partner February 22, 2016

2. STRATMOR | GROUP 2 Three Directional Questions  How much better was TMC lender performance in 2015 over 2014?  What are your peers forecasting for 2016?  How might a recession impact the mortgage origination business?  What’s the message to management from borrower satisfaction findings?  How might you use this satisfaction data to enhance production sales management? To achieve a better balance between sales and operations?

3. STRATMOR | GROUP 3 Mortgage Collaborative Lenders Mini-Survey Findings and Analysis

4. STRATMOR | GROUP 4 Profile - TMC Lender Mini-Survey  Great majority of the registered Conference lenders responded to our survey request by submitting their data  Survey Composition  77% Independents/23% Bank Lenders  Production scale of responding lenders $1.2 billion was the median production volume  89% Retail/11% other channels

5. STRATMOR | GROUP 5 TMC Lenders’ Mini-Survey Results 2015 vs. 2014: $ Volume up 43% Net Income up 64% Profit margin up 14% Sales force count up 15% Loan Servicing Portfolio OPB up 29% Fulfillment staffing up 21% Production forecast for 2016 up 14% over 2015 Product Mix: Purchase business fell by 7 percentage pts Government lending share was up 2 points Forecasting 2016 to be up 16%

6. STRATMOR | GROUP 6 TMC Lenders’ Mini-Survey Results

7. STRATMOR | GROUP 7 TMC Lenders’ Mini-Survey Results Banks vs. Independents Independents in 2015: 2% larger production volume 16% higher avg. loan amount 78% higher Government share 16% higher purchase share 50% more originators Forecasting 2016 to be up 40% Banks in 2015: 4% more profitable $ volume grew by 57% (vs. 40%) Profitability improved by 78% Loans Servicing was up 35% Forecasting 2016 to be up 4%

8. STRATMOR | GROUP 8 TMC Lenders’ Mini-Survey Results Smaller vs. Larger Lenders Smaller lenders out- performed the larger lenders: Grew faster in 2015 – 49% vs.42% Improved profitability by 73% vs. 61% Improved Net Income margin by 16% vs. 13% Higher Government share – 39% vs. 31% Better purchase share – 74% vs. 65% More ambitious forecast for 2016 - 26% vs. 11% Larger lenders: Increased their Loan Servicing Portfolio by 38% vs. 4% Showed marginally better sales and fulfillment productivity

9. STRATMOR | GROUP 9 TMC Lenders’ Mini-Survey Results Above-Average Profitability vs. Below-Average Profitability More Profitable Lenders: Grew faster in 2015 – 47% vs.41% Had sales and fulfillment productivity two times greater Less Profitable Lenders: Improved Net Income by 81% vs. 58% Improved profit margin by 29% vs. 7% Increased their Loan Servicing Portfolio by 44% vs. 23% Virtually no difference in product mix

10. STRATMOR | GROUP 10 TMC Lenders’ Mini-Survey Results  Single channel Retail lenders out-performed multi-channel lenders:  All-Retail lenders were more profitable Net Income margin of 61 bps vs. 40.1 bps  All-Retail lenders had a more favorable product mix Slightly higher Government share and more purchase business  Originator productivity was materially better

11. STRATMOR | GROUP 11 TMC Lenders’ Mini-Survey Results  Hardly a consensus of TMC lenders with respect to production forecast for 2016  No correlation between production scale and/or Net Income margin and a given lender’s outlook for 2016  Independents were more optimistic --- up an average of 16% vs. Banks at 4%

12. STRATMOR | GROUP 12 Mortgage Banking Industry Outlook for 2016

13. STRATMOR | GROUP 13 Outlook for 2016 – Agency Forecasts  By averaging the national market forecasts from Fannie, Freddie and the MBA, the table below presents the consensus outlook (published in January, 2016)  Note that the three entities cannot yet agree on the final 2015 volume There remains a $264 billion (18%) variance between Fannie Mae and the MBA  Average 2016 projected volume of $1.452 trillion is down 11% from the average 2015 volume of $1.636 trillion  2017 average forecast of $1.389 is down another 4% from 2016  In this flat-market environment, it may be especially challenging for the 34% of TMC lenders who are projecting more than 20% volume increases for 2016  forecast calls for another 4% national market decline

14. STRATMOR | GROUP 14 Outlook for 2016 – Peer Lender Survey  PeerViews is a fast turnaround small-survey program that gives executive management a unique way to obtain specific qualitative mortgage industry information about:  What senior executives at other companies think about issues and significant new industry developments  What actions they are considering, planning or have taken  The PeerViews 2016 Lender Outlook survey was conducted in late 2015  Invitations were sent to 1,650 individuals representing 608 unique lenders  Responses were received from 41 unique lenders (a 6.7% response rate)  Survey composition:  56% were Independents and Realtor/Builder captives  46% were depositories  93% of the respondents’ production was Retail  Median production scale was about $2 billion  35% had volume < $500 million  10% had volume > $10 billion

15. STRATMOR | GROUP 15 Outlook for 2016 – Peer Lender Survey 54% of lenders responding to the survey believe that industry volume in 2016 will be down from 2015:  72% of Banks predict lower industry volume in 2016 compared to only 39% of Independents  Among lenders predicting a volume decline, the most cited reasons for the decline were: the fall-off in refinance will exceed the pickup in purchase originations; continuing tight credit; that homeownership is simply less attractive to younger households; and that affordability will decline  Of the 46% of lenders predicting higher industry volume in 2016, virtually all expect mortgage rates to remain low; most believe that the increase in purchase volume will be more than offset by a fall-off in refinances; many look for younger households to return to the home purchase market; and a few expect the economic recovery to actually gain steam. Some Bank and Independent lenders expect their origination volume in 2016 to buck the industry trend and be up:  While 54% of lenders expect industry volume to be down, only 24% expect that their volume will be down.  72% of Banks think that industry volume will be down; but only 39% think that their volume will be down  39% of Independents think that industry volume will be down; but only 13% think that their volume will be down.  Unless there is a reason to believe that the views of survey respondents differ from non-respondents, the divergence between industry and individual lender volume expectations is inconsistent.

16. STRATMOR | GROUP 16 Outlook for 2016 – Peer Lender Survey 73% of all respondents believe that all-in production margins across all channels will be down in 2016 compared with 2015:  All-in margins are comprised of revenues less direct expenses, production support expenses and both direct overhead and allocated corporate overhead expenses.  89% of Banks expect lower margins compared to 61% of Independents. Of the lenders that believe that 2016 margins will be down, the most cited reasons:  Increased compliance costs, e.g., TRID, as a contributing factor.  Higher unit-fixed costs as a result of lower origination volumes.  Increases in “other back office costs”  Revenues to be less (in bps) due to aggressive pricing in the face of lower volumes. Of the 27% who believe that 2016 margins will be up, the most cited reasons:  Continued consolidation, i.e., mergers and acquisitions, and the resulting revenue and expense scale economies as a factor.  Improved retention of higher-margin existing customers as a factor.  Improved use of front-end technology and consumer data to generate more and better leads and improved lead management.  Lower unit fixed-costs as a result of higher volumes.

17. STRATMOR | GROUP 17 Outlook for 2016 – Peer Lender Survey Similar to origination volume, respondent lenders were more optimistic (or less pessimistic) as regards the production profit margin outlook for their company versus the industry:  While 89% of Banks expect industry margins to be down, 61% thought that their margins would be down  While 61% of independents expect industry margins to be down, only 35% thought that their margins would be down Both Banks and Independents 2016 growth strategies for their retail production platform focus on adding/acquiring new branches and LOs in both existing and new markets; however: Independents reportedly are much further along than Banks in implementing such platform strategies.  Banks tend to be in the “planning” or “under consideration” stages as regards such growth strategies whereas Independents already have such strategies in place or are in the process of implementation. As regards marketing strategies, both Banks and Independents are placing a priority on:  Expanding their product menus --with Banks leveraging their portfolio funding capacity  Intensifying marketing efforts targeting affiliate customers  Using advanced data base/social media techniques to generate quality leads and improve customer retention.

18. STRATMOR | GROUP 18 Outlook for 2016 – Peer Lender Survey Neither Banks nor Independents are giving significant consideration to adjusting either LO or back office personnel compensation as a means of lowering expenses; however:  Both Banks and Independents are considering or planning the introduction of quality components to back office compensation, with Independents somewhat further along than Banks Both Banks and Independents are implementing or planning to reduce expenses by use of a lead management system (to improve service and reduce fall-out), making better use of LOS functionality and redesigning back office processes Independents are also moving to increase centralization of fulfillment functions and adopting tools and methods for improving lead quality so as to improve the lead-to- application conversion rate Across all respondents, the greatest concerns were: where longer-term growth would come from (83%); and the ability to recruit, motivate and retain both superior LOs and back office staff (77%)  These concerns reflect a slow-growth outlook for the mortgage industry  61% of respondents also expressed concern about a weak world economy derailing the U.S. recovery and the prospect of a CFPB audit

19. STRATMOR | GROUP 19 Outlook for 2016 – Recession Possibility “ We are in the last innings of the economic recovery, the last innings of the equity market, and the last innings of the dollar rally.” Goldman Sachs: February, 2016  Some economists put the probability that we are now in a recession at 50%; plenty of indicators to support this viewpoint  Stock market sell-off … mostly for jumbo loans  Rising corporate bond yields  Oil prices at a 14 year low  Absence of inflation  Expansion phase of the economic cycle now over 6.5 years  Global economic slowdown  Battering of bank stocks, especially in Europe  Fed’s inability to raise short term rates

20. STRATMOR | GROUP 20 Outlook for 2016 – Impact of a Recession  STRATMOR is not taking a position on the state of the U.S. economy, but mortgage industry management should be preparing their contingent plans in case a recession does indeed occur  Possible recessionary impacts on the mortgage banking business:  Home values under pressure, especially in certain bubble-prone markets and energy dependent states  Stock market sell-off reduces wealth effect  Fading consumer confidence derails the purchase market Job loss in energy sector expands to manufacturing and eventually to the service sector  Given already low mortgage rates, there might be insufficient refinance business to replace lower purchase volume Rising fixed cost (pushed by regulatory demands) will be even more difficult in manage if volume declines  Falling interest rates trigger MSR impairments  Widespread selling off of Loan Servicing to replenish cash further depresses MSR values and reduces Gain on Sale  Pricing pressure increases as competition becomes more intense in the primary markets, further reducing Gain on Sale  Rising delinquencies increase cost to service  Greater mobility among originators increases production expense while LO productivity is falling

21. STRATMOR | GROUP 21 Outlook for 2016 – Anticipating a Recession  Proactive management initiatives which might somewhat mitigate the impact of a recession  Most powerful strategy to expand production volume is to increase average Loan Officer productivity To increase production by 24.5% via recruiting, this lender would have to hire 47 originators who average 3 closed loans monthly for a full year Which option is the most feasible? Least expensive? Less risky?  Terminate originators who cannot close at least two loans monthly With minimum wage and their drag on fulfillment staff, these low producers are likely unprofitable  Close unprofitable branches

22. STRATMOR | GROUP 22 Outlook for 2016 – Anticipating a Recession  Proactive management initiatives which might somewhat mitigate the impact of a recession (continued)  Become more disciplined in secondary marketing policies and practices to reduce or eliminate Gain on Sale leakage  Identify the best co-issue investors and sell to them rather than retaining loan servicing  Target recruiting on proven Government originators Be prepared to pay signing bonuses for the right candidates  Establish a retention pool for originators that meet an acceptable production standard May be less expensive that incurring turnover costs and recruiting bonuses  Upgrade Management Reporting capabilities to generate key financial and production metrics Hold management accountable for utilizing these metrics in their decision-making

23. STRATMOR | GROUP 23 Message to Management from Borrower Satisfaction Data

24. STRATMOR | GROUP 24 How Does MortgageSAT Work?  MortgageSAT is a proprietary survey product designed to obtain feedback from borrowers on their origination experience  Facilitates benchmarking and provides vital management information  Participating lenders provide loan level data on each borrower, uploaded via FTP  Survey invitations (customized for each lender) are sent via e-mail to all closed loan borrowers who then complete the survey online  Out of 260,000 invitations, 68,000 borrower surveys were completed during 2015 (26% response rate)  All surveys identical  Each employee who touches the file and all steps of the origination process are scored by the borrower  Data, charting, and comments are available the day after a respective survey submission is received  Real benefit of comprehensive borrower satisfaction data is the enhanced ability to manage the production and fulfillment functions  Recognize and reward those earning positive borrower feedback  Remediate individuals or processes that resulted in dissatisfaction  Provides hard data to achieve better balance sales vs. operations  Benchmark findings against peers on a local or regional basis

25. STRATMOR | GROUP 25 80% of Responding Borrowers were Very Pleased while 10% of Borrowers were Not Happy  Over 68,000 surveys, MortgageSAT lenders generated average aggregated borrower satisfaction scores of 87 out of a possible 100  80% gave their lender a 9-10 individual satisfaction score out of a maximum score of 10  10% of borrowers gave their lender an individual satisfaction score of 6 or less (out of 10), with the average aggregated score for these borrowers coming in at a very low 24 (100 point scale)  These dissatisfied borrowers represent potential CFPB complaints for lenders along with negative comments on social media and to friends and relatives

26. STRATMOR | GROUP 26 Millennials Depend on Realtors and Friends for Referrals  Millennials behave traditionally in who they listen to when seeking lender referrals  Like most people, they listen primarily to Realtors and then Friends and Family for lender referrals  They are most satisfied when they work with the lender that their Friends and Family recommend  There can be an economic incentives to work with a builder-captive lender, but but it doesn’t usually result in a highly satisfied borrower  Borrowers that use the referral from an investment advisor or tax professionals are highly satisfied

27. STRATMOR | GROUP 27 Failure to Provide an Upfront List of Required Documents Dramatically Hurts Satisfaction  Failing to provide mortgage applicants with an upfront checklist of required documents has a dramatically adverse impact on Satisfaction  When a document checklist is provided up-front, Satisfaction is 89  But when a lender fails to provide such a checklist --- 3.6% of the time in our sample of more than 68,000 loans --- these scores drop to 51  Providing borrowers with an up-front checklist of required documentation should be standard operating and part of an overall strategy of improving borrower communications and managing borrower expectations

28. STRATMOR | GROUP 28 Single Point of Contact Drives Higher Satisfaction  Customers appear to value a single point of contact during the mortgage process: Borrowers who worked only with a loan officer reported average Satisfaction of 90 vs. 84 for borrowers who also worked with someone else  This result underscored the tradeoff between efficiency and borrower satisfaction  To increase satisfaction with the processor role, communication and coordination between the originator and processor should be emphasized

29. STRATMOR | GROUP 29 Borrowers Strongly Dislike Taking the Initiative to Find Out Loan Status  Average borrower satisfaction ratings, when the lender proactively provides the status (score of 89 or higher for calls, emails, text message or mobile app), are much higher than when the borrower has to call the lender (64) or log into a lender website (82).  Borrower satisfaction is highest when the lender calls the borrower (93). This allows the borrower to ask questions and/or discuss various other concerns that may be on their mind; however  Electronic notification methods (e.g., e-mail, text etc.) achieve almost the same borrower satisfactions scores at lower cost

30. STRATMOR | GROUP 30 Not Contacting Borrowers Prior to Closing Hurts Borrower Satisfaction  Failing to contact mortgage applicants prior to closing has a dramatically adverse impact on Satisfaction  When the lender contacts the borrower, Satisfaction is 91  But when a lender fails to do so these scores drop to 59. This happens a surprisingly high 12% of the time  Such poor scores are relatively likely to result in adverse comments and/or postings to regulators, on social media and to friends and relatives

31. STRATMOR | GROUP 31 Originator’s Attitudes on Surveys Vary  Many originators welcome the feedback of borrowers on the origination process  They understand they can become better with feedback from unvarnished borrowers’ experience  If other players in the origination process are scored on satisfaction, this can create a greater sense of teamwork  However, some originators feel that surveys are management’s way of “looking over their shoulder” which opens them up for criticism … as a result they feel threatened by the process  MortgageSAT shows that:  For many companies, their highest producing originators score the worst on customer satisfaction  Some originators with high satisfaction scores can be low producers  There is no question that high satisfaction builds repeat customers and strong word of mouth advertising. On an individual basis, however, borrower satisfaction may not be predictive of success

32. STRATMOR | GROUP 32 Everyone in the Process Matters  Despite the fact that underwriters don’t interact with consumers, they can impact customer satisfaction  In this example, customer satisfaction varies materially within the same company for underwriters

33. STRATMOR | GROUP 33 Millennials are Less Satisfied than Other Borrowers  Millennials are less satisfied than other borrowers  Millennials are essentially first time home buyers and they are less satisfied than other borrowers; because home buying is new to them, their expectations are not being met  Net promoter score shows the difference in the percent of ‘promoters’ (10 & 9 on the Willing to Recommend question) and the percent of ‘Detractors’ (1 – 6 on the Recommend question)  This 5 point difference shows the impact of not meeting Millennials expectations

34. STRATMOR | GROUP 34 TRID Has Increased Days to Close, But Contact is Up  The chart on the left shows the improvement in people being contacted prior to closing --- one of the objectives of TRID  The chart on the right below shows a 15% increase in time from Application to Closing at the exact time TRID was implemented

35. STRATMOR | GROUP 35 Meet the Borrower on Their Terms for Satisfaction  Satisfaction improves when borrowers complete the survey in their preferred language  The 97.2 satisfaction score shows over a 6 point improvement when Hispanic borrowers complete the survey in their preferred language  Good example of meeting the borrower on their preferred terms engenders which builds loyalty and branding

36. STRATMOR | GROUP 36 Satisfaction Based on Ethnicity or Product Type  We see some slight differences in Satisfaction based on Ethnicity or Product type. The most important aspect of this representation is that the overall scores are very tightly bunched with little variation  It is important to understand that Satisfaction is based on how the lender performs versus the borrowers expectations

37. STRATMOR | GROUP 37 Satisfaction Varies with Origination Channel  Conventional wisdom says that borrower satisfaction is lower in the Wholesale/Broker channel. MortgageSAT results confirm that satisfaction is more closely aligned with origination methodology than the origination channel  From the borrower’s perspective, the origination method is virtually the same for Retail vs. mortgage broker --- so borrower satisfaction is very similar  Borrowers satisfaction declines by over 20 points in the Consumer Direct channel  We have already learned that a decline in satisfaction results from a lack of of personal interaction

38. STRATMOR | GROUP 38 STRATMOR Contact Information jeff.babcock@stratmorgroup.com 415-925-9883 (office) 415-902-3086 (cell ) MortgageSAT: tim.ryan@stratmorgroup.com 630-447-9261