MBA 2006 NonPrime Lending Conference

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• MBA 2006 Non-Prime Lending Conference
• Issues and Trends in the Non-Prime Market
• May 22, 2006
• Marina Walsh
• MBA Research Department

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About the MBA/STRATMOR Peer Group Program

• PROGRAM OBJECTIVES
• To create a means for participating mortgage
  banking companies to review their financial
  results in relation to their peers at semi-annual
  intervals.
• To offer timely data that will allow quick
  responses to changing business environments.
• To analyze the factors that drive mortgage
  business performance.
• To provide participants with a forum to discuss
  financial results through roundtable meetings at
  an off-site location.
• To offer maximum comparative analysis through the
  following peer groups
• Non-prime lenders and servicers (sample size
  18).
• Four prime peer groups Megalenders Large
  lenders Small/medium sized lenders and thrift
  institutions.

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2005 Non-Prime Highlights

• Production volumes increased by 42 overall in
  2005 (33 for repeater companies).
• Overall non-prime production net income declined
  to 52 bps in 2005 from 119 bps in 2004.
• Margin decline was primarily due to a sharp
  decline in gain on sale, partially offset by
  decreased production costs.
• Prime margins in 2005 averaged about 16 basis
  points.
• Average loan servicing portfolios increased by
  33 in 2005.
• Loan servicing profits improved to 236 per loan
  in 2005 from 173 per loan in 2004.
• Higher service fee income due to higher average
  loan balances.
• Continuing reduction in cost to service.

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Non-Prime Average Production Volume (M)
Source MBA/STRATMOR Peer Group Survey
Non-prime volumes increased by 33 for repeater
companies from 2004 to 2005, while overall MBA
industry volumes were flat.
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2005 Non-Prime Production Mix
Source MBA/STRATMOR Peer Group Survey
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Non-Prime Production Income Detail
Source MBA/STRATMOR Peer Group Survey, Spring
2006 Cycle, Broker Production Channel
Net Gain on Sale includes Capitalized MSRs,
SRPs, Fees paid to Brokers, and Secondary
Marketing Gain.
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Non-Prime Broker Channel Production Expenses
Source MBA/STRATMOR Peer Group Survey, Spring
2006 Cycle, Broker Production Channel
Decreases in per-loan expense only partially
offset revenue declines from 2004-2005.
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Non-Prime Average Servicing Volume per Company
Source MBA/STRATMOR Peer Group Survey, Spring
2006 Cycle
Avg. servicing portfolios up an average of 33 in
2005.
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2005 Non-Prime Servicing Results
Source MBA/STRATMOR Peer Group Survey
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Non-Prime Servicing Direct Expense
Source MBA/STRATMOR Peer Group Survey,
Preliminary Data
Source MBA/STRATMOR Peer Group Survey
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For More Information

• Studies for Subprime Lenders/Servicers
• Peer Group Survey and Roundtables
• Servicing Operations Study and Operations Forum
• Annual Technology Focus Group Study
• National Delinquency Survey
• Single Family Mortgage Originations Survey
• Annual Compensation Survey
• Contact MBA Research at [phone] for more
  information