Consumer Finance Group

Consumer Finance GroupStatement of qualifications

PricewaterhouseCoopers

Table of contents

Summary of qualifications and experience.....................................................................................................................1

Our clients .....................................................................................................................................................................3

Thought leadership ........................................................................................................................................................4

Conferences and events ................................................................................................................................................9

Consumer Finance Group Partners .............................................................................................................................11

PricewaterhouseCoopers Statement of Qualifications1

Summary of qualificationsand experience

A leader among professional services firms

PricewaterhouseCoopers has 100's of professionalsacross the country dedicated to solving businessproblems for clients in the consumer finance sector. Ourfocus is on mortgage banking and other forms ofconsumer credit which means we are at the forefront ofthe industry working to anticipate, understand andresolve emerging issues.

Our clients consistently turn to us for help resolvingcomplex business issues in areas such as: LoanProduction, Servicing, Capital Markets, ManagementReporting and Risk Management. More specifically, ourdetailed subject matter knowledge and regularcommunication with industry leaders allows us to remainat the forefront of industry issues and opportunities. Oflate we have been working with our clients in thefollowing areas.

Default RiskManagement

Servicing AdvanceManagement

Collections and LossMitigation StrategyImplementation

Loan ServicingProfitability

CustomerProfitability andSegmentation

Shared Services andCost Management

RegulatoryCompliance

Asset QualityManagement &Origination Controls

ManagementReporting

Customer Retention ChangeManagement

Credit RiskManagement

Accountingand Auditing

Mergers andAcquisitions

Pricing Strategies

To serve leading organizations, we have developed deepand meaningful knowledge in each of these areas. Ourdedication to investing in our people, our industryrelationships and our commitment to thought leadershipprovides us with the practice depth to sustain ourposition as the market leader. We serve clients in themortgage banking, credit card, home equity, studentloan, auto loan and manufactured housing industries. Inaddition to our core services, we also leveragespecialized skills from broader PwC resources in keyareas such as information technology, securitizations,

regulatory matters and other areas that are critical toour clients.

Addressing contemporary problems withinnovative solutions

In the current environment, requesting assistance fromindustry experts allows for risks to be mitigated throughthe use of focused professionals who are adept atisolating issues, benchmarking practices and developinginnovative solutions to complex business problems.

Our team's collective knowledge is invaluable at a timewhen compliance with constantly changing marketdynamics is imperative, profits are under pressure,monitoring of risks is more difficult and gaining an edgeover the competition is more challenging than ever. Inresponse to these and other challenges, we arediscussing practical yet innovative approaches to severalcurrent areas of focus among our clients including:

• Strategies and approaches to manage and monitorcompliance with recently announced governmentprograms (e.g. HASP, MHAP, TALF)

• Developing and implementing collections, lossmitigation and REO strategies

• Analyzing and providing recommendations on riskmanagement practices in an ever-changing industry

• Servicing profitability analysis

• Loan origination processes and controls to supportagency and FHA production including moreaggressive quality assurance monitoring

• Servicing advance management

• Enhanced production and servicingmanagement reporting

• Strategy, process and technologypeer benchmarking

• Forecasting repurchase demand and minimizing theoperational and accounting impact

• Due diligence and post-mergerintegration assistance

• Loan pricing strategies and accounting solutions

• Customer profitability and segmentation analysis

• Project management oversight and execution

• Providing TDR Accounting and Loan Modificationprocess analysis and support


• Increasing customer retention through improvingcross-sell opportunities and understanding customerlifetime value

• Analyzing models to forecast credit risk andenhancing effective credit risk management

• Creating demand-based pricing models to maximizeprofit per loan

• Providing change management strategies foreffective downsizing

• Defining new products while maximizing economiesof scale

A sampling of recent engagements highlights the breadthof the services we provide to our clients:

• Defining a strategic vision and road map for a top 10mortgage originator

• Analysis and benchmarking of default managementfor a top 10 servicer

• Assisting a large mortgage investor with theimplementation of a loss mitigation programincluding; process design, management reportingand performance analysis

• Transformation of the Default processes for a largeglobal bank

• Multiple servicer reviews on behalf of investors with afocus on default management, cost reductionopportunities, and risk management

• Repurchase process review and exposure analysison a target financial institution

• Developing a household segmentation strategy for aleading mortgage company

• Multiple due diligence and post acquisitionintegration projects

• Pricing optimization work for a top 10mortgage originator

• Creating a change management strategy for acompany in the midst of an M&A process

• Operational risk diagnostics in areas including loanrepurchases and default management

• Design and testing of an advanced loanaccounting solution

• FAS 157/159 implementation and impacts

Breadth of services

Our focus is on the business and compliance issues thatimpact our clients, as well as anticipating industry trends,sharing best and emerging practices, benchmarkingresults, and solving complex business problems. Weleverage our industry knowledge and broad experienceto provide a wide variety of services to clients:

Controls Mergers and Acquisitions

• Sarbanes-Oxley

- Assessments

- Project management

- Efficiency & effectivenessreviews

- Enterprise RiskManagement

• Risk Assessment

- Diagnostics

- Basel II

- FDICIA

- G/L reconciliations

• Due diligence• Acquisition• Integration• File Review• Post-merger integration• Change management

Strategy

• Process optimization

- Originations

- Underwriting

- Closing

- Post closing

- Repurchases

- Default

- Foreclosure

- Pricing

- Fraud

- Servicing

- QC review• Best practice reviews• Customer retention and

cross-sell• Credit risk management

Accounting and systems

• Loan accounting systems• FAS 157• FAS133 program review• FAS 91• Foreclosure database• Key performance metrics• Loan origination systems• Automated underwriting

systems• Business requirements• System selection

Reporting and management Profit maximization

• Audit and attest services• Internal audit outsourcing

co-sourcing• Model validation• Regulatory compliance• Tax

• Process integration• Net economic value• Secondary attribution• Activity based costing• Product configurator• Best execution assessments• Price elasticity• Price optimization


Our clients

In addition to our US clients we also serve clients on aglobal basis in countries such as: Canada, UnitedKingdom and Australia. Our US clients include mostmajor banks and financial services institutions, which weservice in either an audit or advisory capacity. Asummary of our US relationships includes:

Mortgage banking and home equity lending

• 9 of the top 10 residential mortgage originators

• 17 of the top 20 residential mortgage originators

• 10 of the top 10 residential mortgage servicers

• 19 of the top 20 residential mortgage servicers

Automotive finance

• 7 of the top 10 Automotive Finance Companies

• 11 of the top 20 Automotive Finance Companies

Largest Visa & MasterCard credit card issuers

• 8 of the top 10 credit card issuers

• 12 of the top 20 credit card issuers

Student lending

• 8 of the top 10 largest educational lenders

• 11 out of 20 largest educational lenders

Timeshare

• Relationships with 2 of the largest operators ofvacation ownership resorts

GSE

• Relationships with the primary governmentsponsored agencies, guarantors and lenders


Thought leadership

We play an important role in shaping the ideas that affectthe consumer finance industry. In today’s environmentstaying abreast of industry standards and trends iscrucial, and staying aware of changes in the marketplaceenables us to provide the most current and applicableadvice to our clients. Our professionals consistentlyshare insight through publications, technical whitepapers,and conference presentations.

Point of View

Change within the Consumer Finance industry is swiftand with this change comes a need to understand itsimpacts. Our “Point of View”documents were launched in2008 to summarize emergingissues and identify the expectedimpact of the specified topic.

Our Cost Eliminationdocument describes the currentcost challenges in the FinancialServices industry.

On February 18, 2009,President Obama unveiled theHomeowner Affordability and Stability Plan (HASP).The plan is a $275 billion initiative designed to preventhome foreclosures and help people stay in their homes

by stemming therising tide ofdefaults anddelinquencies,and providingopportunities forconsumers whohave been unableto benefit fromdecliningmortgage ratesbecause of highloan-to-value(LTV) ratios. Theplan applies onlyto mortgages onowner-occupiedprimaryresidences. Ourteam has

published three publications addressing the impact ofHASP on the industry. The publications are tools we useto communicate with our clients as update to HASP areannounced.

The Housing and Economic Recovery Act of 2008(HERA) was signed into law and new regulations wereissued under the HomeOwnership and Equity ProtectionAct (HOEPA). HERA is acomprehensive legislativepackage that brings changes tothe regulation of governmentsponsored entities (GSEs),modernizes the Federal HousingAdministration (FHA), andauthorizes a new refinanceprogram for troubled mortgageloans (Hope for Homeowners). Itcreates a series of new requirements for mortgagelenders related to licensing, counseling and disclosures.

XBRL: Steps toward an implementation plan

This document summarizeshundreds of pages of legislationand regulation and presents apoint of view on what stepsmortgage executives need toconsider as they start drafting aplan to comply with the new rulesand potentially take advantage ofthe new FHA Hope forHomeowners program.

Advancing financial reportingbeyond today’s paper-basedforms is a key project for the Securities and ExchangeCommission (SEC). In working toward that goal, the SECis proposing to mandate the use of extensible BusinessReporting Language (XBRL). The language for electroniccommunication is a significant milestone that willenhance and improve the accessibility of informationavailable to investors.

In May 2008, the SEC formally submitted its proposalthat would require all companies applying U.S. GenerallyAccepted Accounting Principles (U.S. GAAP) orInternational Financial Reporting Standards (IFRS) tobegin using XBRL within the next three years. As thedeadline for implementation nears, it is apparent there isa need for a greater awareness and deeperunderstanding about the costs and benefits XBRL offers.


This whitepaper expresses a point of view on whatcompanies can do now to ensure they are preparedwhen the proposal takes effect.

Successful integrations: Howto integrate processes,systems, employees, andcustomers in consumerfinance companies

Reports of mergers andintegrations dominate theheadlines as the consumerfinance industry experiencesextraordinary turbulence. Thecurrent market conditions poseunprecedented challenges but also present opportunitiesfor companies that identify attractive acquisitioncandidates for integration.

Successful integration provides numerous benefits toshareholders, customers, and employees. But manycompanies fail to achieve the synergies necessary tobring about these benefits. A well-executed integrationrequires effective planning and ruthless prioritization.Management often faces difficult decisions, includingwhether to pursue an accelerated transition at the cost ofachieving longer-term efficiencies. The staggeringcomplexity of integrating two lending businessespresents a unique set of challenges especially whenintegrating employees and combining differentorganizational cultures.

Transforming Collections and Loss MitigationThis whitepaper expresses apoint of view on what companiescan do to ensure a successfulintegration. Today's economicclimate forces mortgageservicers to rethink theircollections and loss mitigationstrategies. The traditionalapproach to collections usesinconsistent practices andoutdated policies. It is no longereffective in allowing servicers torecover debt.

It’s time for a new strategy — one that meets thechallenges of today's economic climate with proactive,innovative solutions for collections and loss mitigation. Inthis whitepaper we discuss steps servicers can taketo transform their approach to collections andloss mitigation.

Customer SegmentationFinancial institutions' customeracquisition strategies are takinga one-two punch as theeconomic turmoil shrinks boththeir customer base andmarketing budgets. Thischanging economic outlook istesting the mettle of manybanking industry professionals asthey seek to attract and retainprofitable customers and disengage with those that donot offer value under their operating model.

By building long-term relationships with the mostvaluable customer segments, companies can win over aloyal - and profitable - customer base. While eachcompany's approach will be unique to their particularbusiness needs, we have identified five steps that willhelp companies achieve the characteristics of asuccessful segmentation strategy.

How Mortgage Lender, Servicer, Insurer, andGuarantor Action Affects Mortgage Reserve,Valuation, and Cash Flow Considerations

Past lending practices andmarket volatility are affectingmortgage industry serviceproviders, including lenders,investors, servicers, insurers,guarantors, in dramatic andinterrelated ways.

The summary outlines whatthese service providers arecurrently or should beconsidering.


Publications

Consumer Finance Update

Our semi annual journal offersreaders insightful articles onissues affecting the mortgage,student lending, credit card, Oursemi annual journal offersreaders insightful articles onissues affecting the mortgage,student lending, credit card, autofinance and retail bankingindustries. The most recent issueincludes:

• Tomorrow’s capital market environment: Private-labelsecuritization when the dust settles

• Process considerations of successful integrations forconsumer finance companies

• Servicing loans and managing default in the newbusiness environment

• Managing servicing advances in thecurrent environment

• Effective servicer oversight: A strategy for loweringcredit costs

• The future of consumer finance loan accounting andeconomic analysis

• Rebuilding toward the future: A consumer financeview on managing risk

• Impairment and fair value model risk management

• Credit card reward programs: Understanding yourmodel risk

• Warehouse lending: Moving forward

• Looking forward to a covered bond market

Update: Corporate Sustainability Edition

Does your company practiceresponsible leadership?Shareholders expect yourcompany to generate profits. But,they also want your company tomake a positive contribution tosociety while minimizing anynegative effect it might have onthe environment. This approachto business—balancing economic

interests against social and environmental concerns—iscommonly referred toas sustainability.

• Global perspectives on the greening offinancial services

• Positioning mortgages for the green market

• Counting carbon: The consumer’s carbon footprint

• Improving customer acceptance of offset programs

• Greening the nation’s bank branches

• Commercial building: Is the industry doing enough?

• Do your vendor partners complement your brand?

• PwC and sustainability services

Trends and Perspectives

This semi-regular report takes acloser look at the businessissues facing the consumerfinance industry and sharesobservations on how to meetthose challenges. The latestissue focuses on customerretention in the consumer financeindustry and highlights some ofthe traditional trends in customerretention and providesperspectives on alternativeapproaches.

Customer Retention and theMortgage Industry: 2008Executive RoundtableHighlights

PricewaterhouseCoopers’ 2008Executive Roundtable onCustomer Retention wasattended by over 15 executivesrepresenting nine of the topmortgage lenders in the country.Some of the topics covered

included the retention paradigm, customer lifetime value,and customer segmentation as a way to improve thesuccess of a retention strategy. This documentsummarizes the highlights of the event.

• Becoming strategic: moving from loan retention tocustomer retention


• Executing a retention strategy: charting the stars inthe customer constellation

• Supporting processes: leveraging technology,leveraging loan officer involvement and the changingrole of the retention group

• Measuring retention efforts

• Loan modifications and customer retention

• Legislation and retention

Technical whitepapers

Our whitepapers are produced to help our clientsprepare for the requirements of new and proposedregulatory guidance, emerging GAAP andimplementation strategies.

Surveys

Our experience and relationshipswith our clients means that weare able to provide currentcomparative information from theleading consumer financecompanies. Many of our surveysare developed to providecompanies insight into peerpractices and performancemetrics and understand howoperations and risk practices

might develop over the next few years. They aredesigned to highlight what some of the top tiercompanies are doing, providing best practices that theirpeers might consider in managing their own risk. Asampling of recent surveys includes:

Quarterly Customer Retention Survey

• Launched in 2001 andpublished quarterly

• Widely acknowledged asindustry leading

• Nine to ten top mortgagecompanies participate

• Considers retention metrics,ways of measurement, peerresults, channel analysis

Credit Card Survey

• Launched in 2006

• Six of the top 20 card issuersparticipated in the survey.Survey covers accounting andoperational practices at bothbanks and retailers

Loan pricing practices for mortgage lenders

Gaining a competitive edge intoday’s market is challenging. Asa result, in many casescompanies have focusedadditional resources on becomingmore “surgical” with theirpricing strategies.

Our inaugural loan pricing surveyfocuses on pricing governance,emerging analytics, staffing,channel considerations andgeographic impacts.


Survey of Loan Repurchase Practices

Launched in ‘04 due to high number of client inquiries onunexpected increasesin loan repurchasesfrom agencies andprivate investors.

• Our most recentsurvey, completed inMarch 2009 coversmany of thetop originators.

• Survey coversfinancial and operational aspects of repurchaseprocess including organizational and accountingissues

Survey of industry loan loss and foreclosurereserves and practices in default operations

Launched in 2001 and published annually toparticipating peers.

• Ten participants whorepresent over $3.3trillion of servicing and25 million loans

• Survey coversfinancial andoperational aspects ofloan servicing anddefault management issues

Other Surveys include:

Post Closing, Repurchase, Underwriting, Non AgencyLoan Valuation, Broker and Correspondent


Conferences and events

As knowledgeable professionals, our advice is oftensolicited by consumer finance executives. One of ourobjectives in serving the consumer finance industry hasalways been to share our detailed knowledge of theissues. We frequently go on the road to discuss currentindustry hot topics and participate in numerousconferences and industry events as sponsorsand/or speakers.

Recent examples of conference presentations givenby PwC team members include:

"Loan Repurchases" and "XBRL"MBA's Accounting, Tax and Financial AnalysisConferenceNovember 11-13, 2009, Dallas, TX o

“Loan Modification & Government Program in theMortgage Industry"and"The Mortgage Industry Transformation Post Crisis –A Discussion on the Future State of Industry"FICG ForumOctober 20, 2009, New York, NY9

PwC Consumer Finance Group Chaired Event2009 PICPA Financial Institutions ConferenceSeptember 14-15, Hershey, PA

“Accounting Standards Development in theSecondary Market”MBA's National Secondary Marketing Conference& ExpoApril 19-22, 2009, Chicago, IL

"Fighting Fraud in Today's Highly Volatile Environment:What Lenders Should Know"MBA's National Fraud Issues Conference 2009March 16, 2009, Las Vegas, NV

"Top Lessons Learned for Mortgage Servicers from theCredit Crisis ”MBA's Servicing Conference 2009February 18, 2009, Tampa, FL

"Recent Market Activity, Mortgage Market Trends &Lessons Learned in 2008”Mortgage Risk USA 2008October 2-3, 2008, New York, NY

"Mortgage Servicing Basics"”Executive Enterprises conference – Accounting Issuesfor the Mortgage IndustrySeptember 15-16, 2008, Chicago, IL

“Current Status of the Mortgage Industry”ABA Capital Markets Forum for CorporateTrust ProfessionalsApril 13, 2008, Palm Beach Gardens, FL

“Product Development Trends – From Private LabelReverse Mortgages to ‘Personalizing’ HECMs”Reverse Mortgage Lending ConferenceApril 10–11, 2008, San Diego, CA

“The Mortgage Industry and Emerging Markets”National Mortgage Servicing Conference & ExpoFebruary 26–29, 2008, New Orleans, LA

Recent examples of round tables and otherevents include:

• PwC Executive Forum on Multicultural and EmergingMarkets Lending

• PwC Executive Round Table on Customer Retention

• PwC Consumer Finance Executive Round Tableon Fraud

• PwC Mortgage Banking Internal Audit Roundtable

Recent examples of published articles:

• Touhey, Martin. "Feeling the Pinch? Get Ahead ofAdvances." Servicing Management May 2009: 15-18

• Hernandez, Roberto. "Boosting Profitability RequiresLong-Term Strategizing." Servicing ManagementJune 2009: 9-12

• Kowalak, John. "When It Comes To Costs, Don'tForget the Here and Now." Servicing ManagementOctober 2009: 8-11


Visit pwc.com/consumer finance for further details regarding thedocuments discussed in this publication.


Consumer Finance Group Partners

Co-Chair – Partners

Sam May [email protected]

Martin Hurden [email protected]

Group Partners

Mike English [email protected]

Tom Kelly [email protected]

Alan Lee [email protected]

Jonathan Odom [email protected]

Keith Olson [email protected]

Peter Pollini [email protected]

Mike Seelig [email protected]

Michael Stork [email protected]

Brian Williamson [email protected]


pwc.com/consumerfinance

This document is provided by PricewaterhouseCoopers LLP for general guidance only, and does not constitute the provision of legal advice, accounting services, investment advice, written tax adviceunder Circular 230 or professional advice of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competentadvisers. Before making any decision or taking any action, you should consult with a professional adviser who has been provided with all pertinent facts relevant to your particular situation.

© 2009 PricewaterhouseCoopers LLP. All rights reserved. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, or, as the context requires, thePricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

Consumer Finance Group

Documents

Transcript of Consumer Finance Group