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MBA 2006 Non-Prime Lending Conference Issues and Trends in the Non-Prime Market May 22, 2006 Marina Walsh MBA Research

MBA 2006 Non-Prime Lending Conference Issues and Trends in the Non-Prime Market May 22, 2006 Marina Walsh MBA Research Department About the MBA/STRATMOR Peer Group Program PROGRAM OBJECTIVES:

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MBA 2006 Non-Prime Lending Conference Issues and Trends in the Non-Prime Market May 22, 2006 Marina Walsh MBA Research

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  1. MBA 2006 Non-Prime Lending Conference Issues and Trends in the Non-Prime Market May 22, 2006 Marina Walsh MBA Research Department

  2. About the MBA/STRATMOR Peer Group Program • PROGRAM OBJECTIVES: • To create a means for participating mortgage banking companies to review their financial results in relation to their peers at semi-annual intervals. • To offer timely data that will allow quick responses to changing business environments. • To analyze the factors that drive mortgage business performance. • To provide participants with a forum to discuss financial results through roundtable meetings at an off-site location. • To offer maximum comparative analysis through the following peer groups: • Non-prime lenders and servicers (sample size – 18). • Four prime peer groups: Megalenders; Large lenders; Small/medium sized lenders and thrift institutions.

  3. 2005 Non-Prime Highlights • Production volumes increased by 42% overall in 2005 (33% for repeater companies). • Overall non-prime production net income declined to 52 bps in 2005 from 119 bps in 2004. • Margin decline was primarily due to a sharp decline in gain on sale, partially offset by decreased production costs. • Prime margins in 2005 averaged about 16 basis points. • Average loan servicing portfolios increased by 33% in 2005. • Loan servicing profits improved to $236 per loan in 2005 from $173 per loan in 2004. • Higher service fee income due to higher average loan balances. • Continuing reduction in cost to service.

  4. Non-Prime Average Production Volume ($M) Source: MBA/STRATMOR Peer Group Survey Non-prime volumes increased by 33% for repeater companies from 2004 to 2005, while overall MBA industry volumes were flat.

  5. 2005 Non-Prime Production Mix Source: MBA/STRATMOR Peer Group Survey

  6. Non-Prime Production Income Detail Source: MBA/STRATMOR Peer Group Survey, Spring 2006 Cycle, Broker Production Channel Net Gain on Sale includes: Capitalized MSRs, SRPs, Fees paid to Brokers, and Secondary Marketing Gain.

  7. Non-Prime Broker Channel: Production Expenses Source: MBA/STRATMOR Peer Group Survey, Spring 2006 Cycle, Broker Production Channel Decreases in per-loan expense only partially offset revenue declines from 2004-2005.

  8. Non-Prime Average Servicing Volume per Company Source: MBA/STRATMOR Peer Group Survey, Spring 2006 Cycle Avg. servicing portfolios up an average of 33% in 2005.

  9. 2005 Non-Prime Servicing Results Source: MBA/STRATMOR Peer Group Survey

  10. Non-Prime Servicing Direct Expense Source: MBA/STRATMOR Peer Group Survey, Preliminary Data Source: MBA/STRATMOR Peer Group Survey

  11. For More Information • Studies for Subprime Lenders/Servicers: • Peer Group Survey and Roundtables • Servicing Operations Study and Operations Forum • Annual Technology Focus Group Study • National Delinquency Survey • Single Family Mortgage Originations Survey • Annual Compensation Survey • Contact MBA Research at (202) 557-2817 for more information

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