Appraisers dependent on lender referrals led to escalating property values without basis.

1. Economic Recovery Reforms Senator Christopher Dodd Chairman of the Senate Banking Committee Congressman Barney Frank Chairman of the House Financial Services Committee Proposed Guidance for Legislation Submitted to the offices of : January 24, 2009 Prepared by: Sam Chughtai, Risk Management Microsoft Corporation, [email_address] Chris Dufault, Fraud, Credit & Risk Management Consultant, [email_address] Mark Gabel, Risk Management Microsoft Corporation, [email_address] Senator Tim Johnson Ranking Member Senate Banking Committee

21. Proposed Changes & Impact Analysis Mortgage Finance Transaction Processes Current Lending Practice Proposed Model Impact Third party property valuation crosscheck ( AVM/BPO) No Yes Improve transparency / reduces fraud Independent income verification / enforce debt to income qualification No Yes Improve transparency / reduces fraud Mortgage broker / appraiser collusion potential (it was the trigger for the current crisis) Yes No Improve transparency / eliminates frauds Assign every transaction an independent formula driven CRV (calculated risk value) No Yes Improve objectivity / eliminates frauds Attestation requirement for all transactions risk values ( CRV) audit and validation No Yes Improve objectivity / eliminates frauds Mandate civil/criminal penalties for misrepresentation and fraud for all levels from appraiser to board of director No Yes Improve transparency / reduce frauds Mandate third party transaction validation and risk mitigation assessment with quarterly reporting for all transactions No Yes Improve objectivity / eliminates frauds Establish national registry for appraisers, mortgage brokers , and other financial services key players / authenticate all parties to a transaction No Yes Improve objectivity / reduce frauds Mandate commercial trade lines reporting No Yes Improve transparency Mandate banks to submit all transaction details to credit bureau with assigned risk value (CRV) No Yes Improve transparency / eliminates frauds All parties to a mortgage transaction remain responsible for loan performance (i.e. brokers who sell loans are not ‘off the hook’ for poorly qualified loans..) No Yes Improve accountability for loan qualification Mandate insurance companies to report claims histories and frauds to insurance claims reporting companies No Yes Improve transparency / eliminates frauds