Keeping Current in a Changing Market

1. Keeping Current in a Changing Market Claims Trends Presented by: Scott McBee Sr. Vice President Chief Claims Counsel November 11, 2010

2. New Inquiries 2003-2006 Historical Avg.

3. New Claims 2003-2006 Historical Avg.

4. New Claims by Group

5. State Analysis on Open Claims 6

6. Total Reserve Amount – New Claims 2003-2006 Historical Avg.

7. Claim Trend Report • First 32 weeks of 2010 STG averaged 598 inquiries per week • For 12 consecutive weeks we have received less than that number with an average of 511 per week • First 32 weeks of 2010 STG opened on average 126 reserved claims per week • 7 of the last 10 weeks we have opened less than that number

8. Total Open Claims 2003-2006 Historical Avg.

9. Total Reserves for Open Claims by Group

10. Total Reserve Balances for Open Claims by Group

11. Open Claims by ALTA Code

12. Defalcations Campbell & Brown no loss, no file number Crown Title - $120k Quantum Title - $1.4 M Global $1.5 M

13. New Claims Associated by Policy Year

14. Claims Opened YTD by Policy Type (Loan vs. Owners)

15. Steps to Mitigate Claims • Matched authority of Field Underwriters with the new market reality; • Restructured Underwriter Reporting to make decision making uniform while respecting local autonomy; • Reduced Creditor’s Rights Exposure; • Reviewed and modified Mechanic’s Lien coverage underwriting on a state by state basis; • Establish claims website for all manager to view (ASMs, Group VPs, Senior Management, Underwriters, Claim Handlers) so that real time data on claims can be shrared and educated on;

16. Steps to Mitigate Claims cont… • Scheduled and commenced claims webinars (32 COMPLETED AND 21 REMAINING THIS YEAR) targeted to the types of claims affecting each geographic location and business type (agency vs. affiliate vs. RPC). These webinars are case studies from existing claims focusing on what went wrong and what processes need to be changed to make sure it does not happen again;

17. Steps to Mitigate Claims cont… • Reinstitution of claims colleges and regional underwriting meetings that include agency, claims, underwriter, and affiliate associates to focus on claims and underwriting policies and procedures that deter future claims and increase sound underwriting across all business segments;

18. Steps to Mitigate Claims cont… • Development of a compliance working group among audit, agency, affiliate and legal to drill down on regulatory and market conduct issues that have cost us losses; • Breaking down claims on a case by case and state by state basis to involved the field in claims reduction

19. Fraud

20. 2010 FBI Fraud Report Related to Fraud in 2009

21. Key Findings • Fraud increased 71% from 2008 to 2009 • 14 Billion in fraudulent loans originated in 2009

22. Top States for Mortgage Fraud 2009 California Florida Illinois Michigan Arizona Georgia New York Ohio Texas DC

23. Mortgage Fraud: A Primer • Loan Origination • Foreclosure Rescue • Builder Bailout • Equity Skimming • Short Sale • Home Equity Line of Credit • Property Flipping • Reverse Mortgage Fraud

27. Reverse Mortgage Fraud Schemes Major Victims: Senior Citizens

28. Reverse Mortgage Fraud Schemes Technique • Identify distressed property • Straw buyer purchases • Recruit Seniors to purchase from Straw Buyer • Seniors obtain reverse mortgage with inflated appraisal and request lump sum equity disbursement • Fraudsters abscond with equity at closing

29. Indicia of Fraud • Signatures and IDs • The title holder never appears • Irregular Notary • Intrafamily transaction • Document alteration

30. Fraud on the Fringe

31. If a remedy does not exist, or if the existing remedy has been subverted, then one may create a remedy for themselves and endow it with credibility by expressing it in their affidavit • It is tax fraud to use courts to settle a dispute/controversy which could be settled peacefully outside of or without the court

32. The lender “monetized” the note which created a cash item • The lender therefore did not loan its own assets but thereby loaned the borrower his own money • The transaction is a fraud • Failure to respond will be deemed an admission

33. 7. These commercial liens are usually the precursor to the filing of a self-reconveyance • Flag these properties for intense scrutiny

39. 7

40. 7a October 6, 2000

41. 9 9

42. 10

43. 15

44. 19