I will be in the office today around 9:30, but in a meeting from 10-Noon.

Yesterday had a couple of new problems arise; or, I should say, new twists to old problems.

1. Chase stopped accepting credit scores below 580 for manual underwrites. This narrows the playing field down to just 2 known level 1 lenders that now accept that product; GMAC and Wells. As you know we only deliver to GMAC.

Jason first heard about this new change from Dawn Pieper at GMAC. She does not believe GMAC will change their policy of accepting these files but is concerned about being "adverse selected." Meaning: GMAC only gets the low credit score loans.

The problem?: this could cause an influx of these loans to Alethes (Jason got phone calls from new loan officers yesterday asking about minimum scores)-
too many low credit scores vs high scores (we battle that daily)
neighborhood watch ratios 6 months to 2 years from now
many of these loans are poorly processed
the originators are B/C type individuals masquerading as loan officers
our loan flow processes get bogged down with bad files / phone calls / hysteria....please do not think this an exaggeration
the good loans we get everyday get messed up with the badly processed loans
I'll come back to the possible solution below

2. the other problem; continued People problems and though we had a new incident yesterday, this is not isolated. This is a continued problem that is a result of months, even years, of not dealing with the real issues. We are not trained properly, and we want the problem to just go away. While we have to patient with these problems (we are working with each other - people), we have to be deligent.

This is are biggest long-term problem and we will continue to address this on a daily basis. Sharon and I check-in every morning and work through not only an on-going problem, but revisit past problems so we can learn from them. As Bryon has said..."this ain't rocket-science, it's tougher."

Focus today:

1. New Credit Score Floor; these are the possibilities of what came out of conversations between Jason, Bryon, Chas, and I yesterday
loans Below 580 will be either denied or approved - no suspenses
badly processed files will be killed even before getting to an underwriter
this will help us get cleaner files, not today and tomorrow, but next month
we will not take loans Below 580 without loans Above 580 and AUS files
1 to 1 ratio
this will stop the adverse selection
this would not be easy, today, to monitor and will be on the back of Paul to run reports and keep track of with Jason keeping it in check
I'm working under the assumption that the reporting features in ProLender will help us
we do not accept manual underwrites from TPO (maybe just new TPOs) below 580
the lower scores can have more back side problems and we have more problems from TPO follow up documents
Note: we have to be aware of not getting into "tiered-pricing" violations

2. Continued focus on warehouse line amounts ; pray for Don's call to Horizon Bank today. We are still waiting on their decision for another 1- to 20 million line

3. Loan Officers: old and repeated problems came up yesterday with "seasoned" loan officers. Many continue to NOT be engaged in the pure fact that this market has, and continues to, change. We are probably going to terminate a few more of these loan officers that have been with us for years; and processors.

We continue to get bogged down in the mire of their badly processed files.

I will be walking around today and reviewing files in racks today; processing, submissions, underwriting, and closing. I will be pulling some of these files to review with John Glenn and Paul Findley. We want well processed files. If a file is badly processed, it could have fraud in it; it is costing us too much money to work through our system - corporately, we are not making money on these files.

My answer to this problem has been..."show them what they are doing wrong and they'll correct it." That is not working. Many of these loan officers do not believe they have a problem.

I believe the only answer is...let them go somewhere else and after two or three moves they'll get beat down and finally change. During this time, we'll hire new loan officers and require a high level of performance from them and they'll conform. This will possibly work, in part, because many of these loan officers will have left a previous employer for the same reasons ours are leaving. They will evenually conform to the industry because they get tired of fighting.

This is a shame, but we will require higher levels of performance from the field.

3. Exceptions :
Glover was purchased and Garland is being reviewed by GMAC today.
Bell: Sunne is working this file. Bryon has reviewed and given her some suggestions.
4. File Submission to Funding Process : new processes that went into effect yesterday are being monitored. I'll be working with Bryon and team to see how this is performing

5 . Thinking about the direction we take for moving forward
types of business: new business models?
warehouse lines
processing
sales
Loan Officers
Processors
7. ProLender : I assume the training went well...even heard that it was "cool." There is a lot of work to be done to get this ready by month's end. Scott and John have WebEx training set-up for the off-site personnel. Please insure you are encouraging them.
Is everyone paying attention?
Is everyone REALLY preparing to learn this software?
What are we missing?
Off-Site personnel?
Reminder: DataTrac is gone in 12 days.

8. Performance : this is a key. Please insure we are getting 360 pereformance.

9. DU and DO: we are looking at better ways to get this done in the field. Please be considering

10. Underwriting- what has changed recently...

From: Bryon Cunningham Sent: Wednesday, March 19, 2008 9:26 AMTo: Danny SmithSubject: RE: Underwriting
Cradle to grave, 1 uw handle file from uw to closing.
Increase loan declinations
Suspended loan procedure (3 levels) Level 1 resubmit back to UW, Level 2 resubmit file back for full UW, Level 3 refer file to Paul Findley.
Carrie as liaison between operations and sales
Team to communicate UW questions via e-mail
WYCY given to sales, under 550 credit score not accepted.
Exceptions worked by UWs.
Eliminated Jr. UW position.
All loans below 550 credit score require second review by Bryon Cunningham.
New condition distribution procedure.
All declined loans input into FHA connection.
Promoted Kelly/Denise to underwriters.

Ok...this enough for one day.

Keep up the good work......

Thanks,

Danny