Metropolitan Washington Council of Government Predatory Lending Conference

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Metropolitan Washington Council of
GovernmentPredatory Lending Conference

• April 27, 2006
• Anne Tyree
• Option One Mortgage Corporation

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Option One Mortgage Corporation

• Founded 1992, Subsidiary HR Block, Inc.
• Lending Channels Indirect and Direct
• Indirect, wholesale through brokers and through
  banks and financial institutions. Non-prime
  products , full service origination and
  servicing.
• Direct, retail through HR Block Mortgage, prime
  and non-prime products (retail will now report
  directly to HRB in 2006-7)
• Origination through December 2005, 44.6 Billion
• Servicing through December 2005, 79.4 billion

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Best Practices and transparency

• Best Practices
• Option One was one of the first lenders to
  publish and discuss best practices. Freddie Mac
  included Option One in its original Dont Borrow
  Trouble symposiums in year 2000.
• Our Best Practices for origination and servicing
  were reviewed by consumer advocates such as NFHA
  and NCRC. There is continuous review of best
  practices that responds to external feedback,
  technology gains, and market dynamics.
• Our Best Practices will be updated in May with
  new and improved features.
• Having Best Practices is a strong company model
  for customers, investors and employees and
  external partners.it sends a clear message,
  offers transparency, and builds trust.

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Highlights of Best Practices

• Prepay-duration matches ARM and borrower benefit
  is required
• Updated change, moving to 3-2-1 versus California
  pre-pay (May,2006)
• ARM start rate floats up and down
• Re-disclose upon receipt of application, with
  changes and at closing.
• Updated change, many plain language disclosures
  around stated income, prepayment penalty, YSP,
  and interest only products. (May,2006)
• Do not offer mandatory arbitration, Neg Am and
  Option arms. Interest only holds for 5 years.
• Servicing We contact all borrowers from the
  start. We offer extended phone hours in English
  or Spanish, day or night. We do not charge fees
  for many services. We promptly provide payoff
  statements, typically within 48 hours.
• Visit www.OOMC.com for best practices

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Katrena Disaster Assistance Initiatives

• Dedicated team of Disaster Specialists to work
  with borrowers in impacted areas
• 15,143 loans are in the affected zip codes
• 3,851 damaged properties
• 2,870 loans were not successfully contacted
  (estimate the contacts do take time to calculate
  since they happen in many forms)
• Outbound solicitation efforts to contact as many
  borrowers  
• No credit reporting or late charges on loans in
  affected zip codes
• All pre-payment penalties waived for victims of
  federally declared disasters, with borrowers
  written or verbal request
• All foreclosures in affected areas on
  hold through May 31, 2006.

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Financial education for borrowers

• Financial Education
• Option One University-Train brokers on industry
  business practices, including fair lending. New
  emerging markets and anti-fraud courses added in
  2006.
• Diversity Scholarship-OOMC offers a diversity
  scholarship to our brokers and also to our
  employees to attend the School of mortgage
  banking through the MBA.
• MBA-OOMC-Option One Co-branded a three year
  offering to provide mortgage brokers with new
  skills in creating new customers by educating
  first- time homebuyers (50 sessions per year).
• Borrow Smart is a nonprofit train the trainer
  team that offers non-profits credit counseling
  for borrower readiness.
• JumpStart is a nonprofit foundation that focuses
  on ways to increase the financial knowledge of
  young people.
• Option One distributes a financial education
  brochures to borrowers and offers key websites
  for borrowers who may have mortgage questions..

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Partnership with industry

• OOMC partners with recognized realtor trade
  groups to work with a diverse segment of the
  market the affordable housing and emerging
  markets.
• National Association of Hispanic Real Estate
  professionals (NAHREP) is a partner to create new
  opportunities for homeownership and homeownership
  preservation.
• Partnership with PRADO. (Gary Acosta, former
  NAHREP chairman.)
• National Association of Real Estate Brokers
  (NAREB)
• Recruit/train members to become REO broker with
  OOMC
• Asian Real Estate Association of America (AREAA)
  is a new partner.
• OOMC leadership is on the board of directors.
• Trade Associations Mortgage Bankers
  Association, American Financial Services
  Association, Financial Services Roundtable, and
  National Home Equity Association.

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Partnership with Community

• Option One works with community and advocacy
  groups on multiple issues, such as the Katrina
  working group in Washington, DC.
• Highlights
• National Fair Housing Alliance (NFHA), Shanna
  Smith They assist us in our review of many
  functions, including fair lending practices.
  They provide feedback on best practices and we
  engage on numerous housing issues.
• National Community Reinvestment Coalition (NCRC),
  John Taylor They assist us on a number of
  housing issues, training, borrower resolutions.
  We participate on the Mortgage Finance Council
  for NCRC.
• Neighborworks and NHS offices, CCRC and The HOPE
  foundation
• OOMC is represented on the Federal Reserve
  Consumer Advisory Council. (2006-2008)

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Preserving Homeownership

• Home Ownership Preservation
• Option One has a long standing commitment of
  customer advocacy for borrowers who in need
  assistance to stay in their homes. We have
  partnered with a national organization,
  Neighborworks, to reach out to borrowers in the
  most vulnerable markets where they are at risk of
  foreclosure. New focus areas are Detroit, Dallas,
  Ohio, Atlanta, and Houston
• Neighborworks is an umbrella organization for
  Neighborhood Housing Services (NHS).
• NHS Chicago example
• On the ground. OOMC is actively engaged with
  Neighborhood Housing Services (NHS) in Chicago,
  Home Ownership Preservation, CCRC and other local
  counselors, to educated borrowers and reduce the
  risk of foreclosure.
• Public private partnering is a success
• City/County, NHS (counseling, loss mitigation,
  and REO)
• Federal Reserve
• Homeownership Preservation Foundation
  (spearheaded creation and support of CCRC)
• Lender/Servicer partners

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Support of our communities

• Option One is very active in giving back to the
  community through its Lending Hands giving and
  volunteering program. Our focus areas are
  Housing, Education and Health and Human Services.
• Partners include Habitat for Humanity and Junior
  Achievement through national partnerships to
  engage our efforts across the country.
• Junior Achievement-We have reached more than
  40,000 students through Junior Achievement
  programs.
• Habitat for Humanity-We have built homes for 34
  families, mobilized more than 3,000 volunteers,
  and given more than 7,200 hours of time
• Corporate Awards
• Option One received the Ethics in America Award
  from the Passkeys Foundation in the national
  public company category, 2005
• Option One was named 2003 Business of the Year by
  the Irvine Chamber of Commerce, 2004
• Best company to work for by OC Metro magazine,
  2004