TheMReport

February, 2013

TheMReport — News and strategies for the evolving mortgage marketplace.

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feature ORIGINATION Mcmahon // Our focus will continue to be on the top 20 lenders in the U.S. We now have a full suite of products and can help lenders make better decisions with our data and analytics products and help lenders close loans efficiently with our credit, appraisal, flood, title, and closing services. We see significant opportunities to grow our appraisal business. We continue to invest in the business by adding staff appraisers and enhancing our technology. M // Conversely, what facets of the industry will be the most challenged during the next 12 months? Mcmahon // Despite the challenges of the business, we believe the need in the market for an independent, compliant, —Frank McMahon, DataQuick M // How have your projections for 2013 changed following the presidential election? How is DataQuick adjusting its approach in preparation for the resulting policy changes? Mcmahon // Our views around 2013 are probably more driven by Federal Reserve actions than the presidential election, but it is clear that policy changes will have an impact on the mortgage business longer term. The Obama administration has done an admirable job providing additional support to the housing market over the last three-anda-half years. In particular, the programs that have helped successfully avoid over 5.5 million foreclosures have stabilized the market. Going forward, however, I believe the administration (primarily through the CFPB) will be more focused on "market reform." There are still in refinance activity (fueled by the Fed's commitment to keep long-term rates low until 2015), and we do not expect the regulatory changes to have a material impact on our expectations for 2013. We believe the regulatory changes will have a more material impact in 2014 and beyond. M // What risk-management solutions have been the most successful for DataQuick, and what new tools and compliance strategies can clients anticipate in the near-term? Mcmahon // Our lender clients have been very focused on underwriting and compliance, and our investor clients have been very focused on due diligence. Simply put, both groups have become very risk averse and still have painful memories of 2008–2009. We are helping M // How has your early experience as an investment banker impacted your leadership methods? What strategies are you utilizing to help your team remain future-focused while operating in an unpredictable marketplace? Mcmahon // I worked as an investment banker for two firms from 1986 to 2006. In my 20 years in the industry, the primary difference between firms was the experience and performance of the people. Therefore, culture was everything. The keys to success were simple: first, learn what problems your clients were trying to solve; next, create a sense of urgency at your firm to come up with the best solution; and finally, work with the client to implement or execute the solution. Obviously, to be successful you need your clients to trust and confide in you; you need motivated, creative, and knowledgeable people; and you need operational expertise to help with implementation or execution. I believe the same focus and capabilities will lead to success at DataQuick. John Walsh and I are committed to continuing our evolution into a more dynamic, entrepreneurial, and solutions-based organization. The M Report | 43 se c on da r y m a r k e t M // As lenders make strategic changes in response to the shifting economic environment, what opportunities for growth do you anticipate during the next 12 months? "Despite the challenges of the business, we believe the need in the market for an independent, compliant, high-quality assessment of collateral value is strong and will continue to grow." lenders with analytics that enhance the appraisal review process. This is a time-consuming and costly exercise for lenders, and our solution allows them to prioritize and potentially reduce the manual review of appraisals. For investors in non-agency MBS and whole loans, we offer solutions that provide credit, lien position, current value, and title history on a loan level basis. Investors have a much better ability to assess the credit and default risk in the securities and loans today. We expect these markets to recover, and we are planning to introduce new products and solutions in 2013 to serve the needs of investors. a na ly t ic s Mcmahon // We have been monitoring the CFPB proposals and industry responses and are developing new initiatives to help lenders comply with the new regulations. One of the new requirements will be a more comprehensive certification process for settlement agents. We are working with several partners to develop a solution that meets the needs of the industry. many significant policy issues looming, GSE reform, FHA financial stability, mortgage interest deductions, etc. that will eventually need to be addressed. There seems to be little urgency to address any of these issues in the short term (although the mortgage interest deduction may resurface in the debt ceiling negotiations). So for 2013, our outlook is for continual recovery in new home and existing home sale activity (fueled in part by federal aid and subsidies) and a modest decline s e r v ic i ng M // What new initiatives are emerging within the company to address these issues? high-quality assessment of collateral value is strong and will continue to grow. We also see opportunities to expand our title and closing business. We acquired Rels Title from CoreLogic and Wells Fargo last year. This business has a long history of serving Wells Fargo, and we hope to expand the business and begin serving other large national lenders as well. Finally, we are developing a number of new data and analytic products for lenders that will be introduced in 2013. Or ig i nat ion regarding broker compensation, appraisal disclosure, settlement agent certification, etc. that will require changes to operational workflow and technology platforms. Our clients are hopeful they will have adequate time to implement these operational changes and that the new rules are consistent with other regulatory guidance.

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