Attach_5_SFMSS_Default_Operation_Procedures_Manual.pdf

This document is for the internal use of Ginnie Mae and its MSSs only.

ii

Government National Mortgage Association

DEFAULT MANAGEMENT

OPERATING PROCEDURES MANUAL

FOR MASTER SUBSERVICERS

Revisions and Approvals Tracking iii

Government National Mortgage Association

DEFAULT MANAGEMENT

OPERATING PROCEDURES MANUAL

FOR MASTER SUBSERVICERS

This manual is comprehensive in its discussion of activities that support an issuer default;

however, it does not cover every possible contingency that could arise in a default. Given the varying urgency of defaults, not all procedures may be followed in the order specified in the manual during each individual default case. Accordingly, the Default Management

Operating Procedures Manual (Default Manual) for Master Subservicers (MSS) is an internal

Ginnie Mae procedures guide only, and does not bind Ginnie Mae or its contracted Master

Subservicers to carry out any of the procedures described within it. Failure to follow the procedures described in this manual does not compromise Ginnie Mae's authority to default an Issuer, to complete the extinguishment of any right, title, or interest of the issuer in the pooled mortgages and to recover its assets. Ginnie Mae's authority to default an issuer is set forth in the statutes, regulations, guides, and guaranty or contractual agreements.

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Table of Contents

INTRODUCTION

..........................................................................................................................................vii v

1.0 Executive Summary

1.1 Purpose of MSS Default Manual

1.2 Acronyms, Abbreviations, and Terms

1.3 Overview of MSS Default Manual

1.4 Using the MSS Default Manual Effectively

1.5 Process to Update MSS Default Manual

PHASE 1

DEFAULT PREPARATION

2.0 Phase 1, Process Summary and Overview

2.1 Phase 1, Process Diagram

2.2 Detailed Notification of Default

2.3 Detailed Activity Description

2.3.1 MSS Activities

2.4 Contact Outside Parties Involved in Acquisition/Transfer

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2.5 Review Defaulted Issuer Information

2.6 Perform Situation Assessment

2.7 Analyze Issuer Data Processing Specifications

2.8 Task Order Process

2.9 Prepare for Acquisition

2.10Coordination of Travel Arrangements

2.11 Gather Necessary Supplies

PHASE 2

ISSUER DEFAULT EXECUTION

3.0 Phase 2, Process Summary and Overview

3.1 Phase 2, Process Diagram

3.2 Participate in Default Execution Team Meeting(s)

3.3 Assemble at the Designated Meeting Point

3.4 Perform Preliminary Onsite Situation Assessment

3.4.6 Coordination with Law Enforcement Personnel

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3.5 Execute Default

3.6 Secure Custodian Records

3.7 Participate in End-of-Day Assessment

3.7.1 Termination of Site Visit

PHASE 3

PORTFOLIO TRANSFER AND INTEGRATION

4.0 Phase 3, Process Summary and Overview

4.1 Phase 3, Process Diagram

4.2 Establish Custodial Accounts

4.3 Process P&I Payments

4.4 Process T&I Payments Due Immediately

4.5 Assign New Ginnie Mae Portfolio Numbers and Transfer Portfolio to MSS

Servicing System

4.6 Complete Conversion Activities

4.7 Assess the Portfolio and Begin Servicing

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4.8 Conduct Individual File Reviews and Certify All Pools

4.9 Participate in an GTR/GTM Assessment of Default

Execution…………….7172

4.10 Continue Ongoing Servicing

APPENDIX A (PHASE 1)

MSS Default Team Matrix……………………………………………............ A-1

MBS/GTM Issuer Information Worksheet …………………………..……… A-2

FRC Issuers Information Worksheet ………………………………………… A-3

Situation Assessment Guide………………………………………………..... A-4

Standard MSS Confirmation Letter…………………………………………... A-5

APPENDIX B (PHASE 2)

Site Visit Conduct Guidelines………………………………………………... B-1

MSS Default Information Collection Checklist ………….…….……………..B-2

FRC Agreed Upon Procedures for Default Operations………….…………….B-3

Phase 2, End of Day Assessment Guide………………………………...….… B-4

APPENDIX C (PHASE 3)

Sample ―Goodbye/Hello‖ Letter..…………………………………………..... C-1

Allotment Notification Letter……………………….….……………………..C-2

MSS Assessment of Default Execution ………………………………...…….C-3

Summary of MSS Reporting Requirements…………………………………...C-4

1.0 Executive Summary

The Default Management Operating Procedures (Default Manual) for Master Subservicers

(MSS) is an internal procedural guide for the Government National Mortgage Association's

(Ginnie Mae’s) Master Subservicers. The Manual outlines the standard operating practices a

MSS should use when acquiring a defaulted mortgage-backed securities portfolio. This includes

HMBS, which is a class of Ginnie Mae HECM (home equity conversion mortages aka ―reverse mortages‖) mortgage backed securities. Ginnie Mae’s HMBS is a standardized MBS which will be collateralized by FHA insured HECM loans. The MSS Default Manual includes instructions and information on the Master Subservicer's involvement in the entire default process, beginning with Ginnie Mae’s notification of the impending default, and ending with subservicing the newly acquired mortgage portfolio.

Role of MSS:

Ginnie Mae Master Subservicer

(MSS)

The Ginnie Mae MSS is responsible for transferring the Ginnie Mae portfolio from the Defaulted Issuer’s control into the MSS’s control for the purposes of servicing the portfolio on behalf of Ginnie Mae.

Ginnie Mae is ultimately responsible for all aspects of the default process; however, the MSS assists in the process related to servicing and transferring the Defaulted Issuers’ portfolio.

The Ginnie Mae mortgage-backed securities (MBS) program is supported by efficient and flexible operations, strong risk management, and a commitment to leadership in human capital management. The program’s simple model and conservative approach enables it to accomplish its mission while remaining a self-sustaining entity.

Ginnie Mae expects the MSS to manage the mortgage portfolio and to reduce overall exposure to risks pertaining to MSS defaulted portfolios.

The following pages provide an overview of the Ginnie Mae organization and of the three major phases of subservicing a defaulted issuer.

To use this manual effectively, it is important to consider the following:

The MSS Default Manual is written from the perspective of a single family portfolio default because the volume of single family portfolios is far greater than either multifamily

HMBS,or manufactured homes portfolios. Where necessary, procedures are inserted, which take into consideration the differences among the various portfolio types.

The MSS Default Manual is intended to be used as an internal reference guide. All parties involved should read this manual upon first receipt and refer to the information summaries included at the front of each section.

Monitoring Backed Securities (MBS) and Office of Multifamily (GTR/GRM) analysts will provide more detailed instructions and information to MSSs about their roles and responsibilities regarding each particular default.

1.A EXHIBIT: GINNIE MAE TO UPDATE WITH CURRENT ORG CHART> GNMA

TO INSERT PHASES CHART

1.1 Purpose of MSS Default Manual

The purpose of the MSS Default Manual is to provide instructions and information to Master

Subservicer personnel who are involved in the issuer default process. This MSS Default Manual is recommended both as a training guide for new MSS personnel, and as a reference document for Ginnie Mae current personnel.

The MSS Default Manual is only intended for Ginnie Mae, the FRC and the MSS; it is not to be relied upon by any other person or entity. Due to the unique nature of defaults, the MSS Default

Manual is intended to be of general applicability, and Ginnie Mae and the MSS have the flexibility to make ad hoc deviations.

The purpose of this manual is to provide guidance and information to all levels of Ginnie Mae

MSS personnel who are involved in the issuer default process.

Information Sources

Ginnie Mae’s stakeholders, and their respective roles in the default portfolio process, are outlined below. Ginnie Mae is responsible for coordinating all activities for all internal stakeholders. Non-internal stakeholders (listed below) may exist based on the unique circumstance of each default issuer, including multiple default portfolio instances.

Stakeholder (* = Internal) Role

Ginnie Mae (GNMA)* Ginnie Mae is responsible for initiating the default, executing the seizure of the defaulted participant’s portfolio, and managing the FRC and MSS. Within

Ginnie Mae, stakeholder groups include the Office of

Mortgage-Backed Securities, the Monitoring Division, the Account Executives, the Office of Program

Operations, the Office Enterprise Risk, and the Office of Finance, all of whom may participate in the default activity.

Ginnie Mae Field Review Contractor

(FRC)*

The FRC is responsible for collecting data to generate a default report, providing assistance to the primary

Ginnie Mae point of contact (POC), and providing recommendations or responses to additional analysis as directed by the Monitoring Division.

Ginnie Mae Master Subservicer

(MSS)*

The Ginnie Mae MSS is responsible for transferring the Ginnie Mae portfolio from the Defaulted Issuer’s control into the MSS’s control, so that the MSS may service the portfolio on behalf of Ginnie Mae.

Ginnie Mae Mortgage Backed

Securities Administrative Agent

(MBSAA)*

The MBSAA provides data support and analytics used to assist the transfer and evaluation of the Defaulted

Issuer’s portfolio.

Stakeholder (* = Internal) Role

Department of Housing and Urban

Development Office of General

Counsel (OGC)*

The OGC provides a final answer to any legal dispute and/or legal issues encountered in the execution of the onsite default. The OGC also drafts the default letter to Defaulted Issuer.

Defaulted Issuer (Issuer) The Defaulted Issuer is responsible for assisting in the transfer of the Ginnie Mae portfolio from the

Defaulted Issuer’s control into Ginnie Mae’s control, in accordance with the Guaranty Agreement.

Funds Custodian(s) The Funds Custodian(s) is the Issuer’s financial institution , in accordance with the terms and conditions of Forms HUD-11709 and HUD-11720 or successor Forms. The Funds Custodian re-titles and transfers control of the accounts used in the servicing of the Ginnie Mae portfolio from the Defaulted Issuer to Ginnie Mae. Also holds P&I and T&I.

Document Custodian(s) The Document Custodian(s) gives Ginnie Mae and any designees access to the loan collateral files, in accordance with the terms and conditions of Form

HUD-11715 or successor Forms.

Insuring Agencies

(FHA/VA/RD/PIH)

Insurance Agencies are the Federal Housing

Administration (FHA), U.S. Department of Veterans

Affairs (VA), U.S. Department of Agriculture Rural

Development (RD), or U.S. Department of Housing and Urban Development Office of Public and Indian

Housing (PIH). These agencies provide mortgage insurance or guaranty for loans backing Ginnie Mae securities, and process and provide mortgage insurance claim-related funds.

Other Key External Stakeholder Role

Issuer Subservicer (ISS) An ISS is used by some Ginnie Mae Issuers to handle some of the servicing operations of their portfolio. In a default situation, those aspects of the servicing operation which were previously performed by the ISS will be transferred to the MSS, and the ISS will assist in the transfer of control of these operations as well as providing records, reconciliations, and files that were previously maintained on behalf of the now

Defaulted Issuer.

Other Key External Stakeholder

(cont.)

Role

Federal Deposit Insurance

Corporation (FDIC)

FDIC is the agency which may be in possession of a Ginnie Mae Defaulted Issuer in the event that the Defaulted Issuer was a bank under the FDIC insurance program and

FDIC executed its rights to obtain control of the bank.

MERS Mortgage Electronic Registration System (MERS).

MERS functions as a clearinghouse and computer registry that was established to track ownership changes in mortgages. MERS can be the assignee of record with counties, and any future transfers are only tracked in the MERS database.

Service Bureau A service bureau is a company which provides business services for a fee. The term has been extensively used to describe technology based services to financial services companies, HMBS >Participating Agent The Participating Agent ( a Issuer) shall perform the monitoring and accounting of pooled Participations designated in a Schedule of Pooled Participations and

Mortgages, (form HUD-11706H) for each issue of

Ginnie Mae-guaranteed mortgage-backed securities

(HMBS).

Tax, Insurance and Escrow Vendors

Third Party vendors who provide property tax, flood data servicing, escrow processing and insurance management/services for residential mortgage originators, servicers and commercial lenders.

Credit Bureaus Credit Bureaus or Consumer Reporting Agencies are companies that collect information from various sources and provide consumer credit information on individual consumers for a variety of uses. They are an organization which providing information on individuals' borrowing and bill-paying habits. Data furnishers are typically creditors, lenders, utilities, debt collection agencies and the courts (i.e. public records) that a consumer has had a relationship or experience with.

HUD U.S. Department of Housing and Urban

Development

1.2 Acronyms, Abbreviations, and Terms

Common acronyms, abbreviations, and terms used in the MSS Default Manual are listed below.

These terms are also commonly used during Ginnie Mae’s Default Portfolio seizure process.

ACH: Automated Clearing House

Bank Cutoff Date: The date of the monthly bank statement

Bank Letter: Document sent to the issuer's financial institution informing the institution of the issuer's default, and requesting that the name on accounts reflect Ginnie Mae as the sole owner.

Basis Point: One one-hundredth of one percent

Borrower: One who receives funds in the form of a loan with the obligation of repaying the loan in full with interest

Certificate of Eligibility: A document issued by the Department of Veterans Affairs, which verifies a veteran's eligibility for a VA mortgage guarantee

Clearing Account: A bank account used by a mortgage service for temporary, short-term deposit of mortgage payments collected for transmittal to investors or for deposit in escrow accounts

CLIN: Contract Line Item Number

CO: Ginnie Mae’s Contracting Officer, who is assigned to the Master

Subservicer

Coinsurance: A type of insurance in which the insured agrees to carry a specified proportion of the policy amount to the actual value of the property insured at the time of loss. Thus, a portion of the property value is self-insured. In federal multifamily housing programs, this refers to a program where the mortgagee and HUD share in the losses resulting from default.

Collection: The servicing procedure one follows to bring a delinquent mortgage current and to begin foreclosure when necessary

Convey: The act of transferring title of real property from one party to another

CPTA: The Central Paying and Transfer Agent

Comment [b1]: GNMA to follow up with

Multifamily Program contact.

1.2 Acronyms, Abbreviations, and Terms continued

Document Custodian: A financial institution that holds the required documents relating to pooled mortgages for the life of a Ginnie Mae pool or until it is replaced by another such institution

Document Custodian Letter: Letter sent to the defaulted issuer's document custodian informing the custodian of the issuer's default, and requesting that only

Ginnie Mae or its representatives be allowed access to the issuer's files

Escrow Custodial Account or T&I Custodial Account: An account that an issuer maintains with a financial institution for the deposit of escrowed funds to be used to pay taxes, insurance premiums, and other amounts due under the mortgage other than principal and interest.

Factor: The number calculated monthly by Ginnie Mae, which represents the outstanding original principal amount of the securities issuance

FHA: Federal Housing Administration, an agency of the United States

Department of Housing and Urban Development

Field Review Contractor

(FRC): The independent contractor responsible for conducting annual field reviews, special field reviews, and onsite default procedures, including reconciling portfolios and gaining control of cash and other monetary accounts

Foreclosure: A legal procedure in which a mortgaged property is sold to pay the outstanding debt in the case of default

Force Placed Insurance: Property insurance that is placed by the lender on the borrower's property when the borrower has failed to provide the required insurance. The property insurance premium is billed to the borrower.

Form HUD 11709: Master Letter Agreement for Servicer's Principal and Interest

Custodial Account. Completed via Ginnie Mae’s RFS (Reporting and Feedback System)

Form HUD 11710A: Issuer's Monthly Accounting Report. Completed via Ginnie Mae’s

RFS (Reporting and Feedback System)

Form HUD 11710D: Issuer's Monthly Summary Report. Completed via Ginnie Mae’s

RFS (Reporting and Feedback System)

Form HUD 11710E: Master Liquidation Schedule. Completed via Ginnie Mae’s RFS

(Reporting and Feedback System)

Form HUD 11715: Master Custodial Agreement. Completed via Ginnie Mae’s RFS

(Reporting and Feedback System)

Form HUD 11716: Summary of Guaranty Agreement - Single Family (Level Payment)

Completed via Ginnie Mae’s RFS (Reporting and Feedback

System)

Form HUD 11720: Master Letter Agreement for Servicer's Escrow Custodial Account

Completed via Ginnie Mae’s RFS, (Reporting and Feedback

System)

Ginnie Mae I Program: The mortgage-backed securities program in which the timely payment of principal and interest on the securities is guaranteed by

Ginnie Mae, and issuers are required to pay security holders directly. The payment date is the 15th of the month. This program is governed by the provisions in Ginnie Mae Handbook 5500.3.

Ginnie Mae II Program: The mortgage-backed securities program in which the timely payment of principal and interest on the securities is guaranteed by

Ginnie Mae, and Ginnie Mae relies on a central paying agent to pay security holders. The payment date is the 20th of the month. This program is governed by the provisions contained in Ginnie Mae

Handbook 5500.3.

Guaranty Agreement: The contractual agreement between Ginnie Mae and an issuer that establishes the rights and obligations of each party under the terms of the Ginnie Mae I & II MBS Program

GTM: Ginnie Mae, Government Technical Monitor

GTR: Ginnie Mae, Government Technical Representative

HUD: U.S Department of Housing and Urban Development

GPADS: Ginnie Mae Portfolio Analysis Database System, which allows

Ginnie Mae online access to summary information and performance statistics on all Ginnie Mae issuers

Master Subservicer (MSS): Ginnie Mae contractor capable of expeditiously assuming the role of subservicer when Ginnie Mae either places an issuer in default or transfers existing portfolios to Ginnie Mae. The MSS's role is to perform the complete range of services expected of a company servicing its own portfolio.

MBS Ginnie Mae Office of Mortgage-Backed Securities

MERS: Mortgage Electronic Registration System

MIP: Mortgage Insurance Premium

MIN: MERS Identification Number

NIST: The National Institute of Standards and Technology. NIST is a process and certification ATO. To be NIST certified is to have security standards (Federal Information Processing Standards) and guidelines (Special Publications in the 800-series) for non-national security federal information systems and assigned controls and tracking to ensure the security of federal information.

OF: Office of Finance

OGC: U.S. Department of Housing and Urban Development Office of

General Counsel

OIG: U.S. Department of Housing and Urban Development Office of the

Inspector General.

OLA: Ginnie Mae Office of Lender Activities

OPO Ginnie Mae Office of Program Operations

OPPRM Office of Policy, Planning, and Risk Management

Principal and Interest

Custodial Account or

P&I Custodial Account: The non-interest bearing account that the issuer maintains with a financial institution for the deposit of principal (including scheduled and unscheduled principal payments) and interest collected from mortgagors, or in connection with the related property, to be paid to security holders.

Pass-Through: Refers to the event of executing a security holder remittance or events related to such remittance. ―Pass-Through,‖ as two unhyphenated words, refers to any event where funds move from one location to another.

Pipeline: Loan applications in process that have not yet closed

POC: Point of Contact

Pool: An assemblage of loans brought together to back an issuance of securities

Portfolio: The collection of loans held for servicing by an issuer or a master subservicer

Power of Attorney: A legal document that authorizes one institution to act on behalf of another

Real Estate Owned (REO): Property a lender or a subservicer acquires as the result of foreclosure

Reconciliation: A review performed by the Master Subservicer and the Field

Review Contractor during a default to determine the condition of the defaulted issuer's portfolio. Reports due after default seizure completion can sometimes be referred to as ―reconciliation‖

Risk Committee: Analyzes the data collected on high-risk, troubled issuers and defines Ginnie Mae's plan relative to the issuer. Examples of decisions made by the Board include outlining specific terms under which the issuer is allowed to continue as a Ginnie Mae issuer, and voting issuers to be defaulted.

Security Holder: Any registered holder of securities issued under a Guaranty

Agreement

Security Holders Register: A list, maintained by the issuer, of the history of registered security holders for which the issuer has responsibility for payments

Servicing: A function that includes receiving payments, customer service, escrow administration, investor accounting, collections, and foreclosures (default administration).

SF: The designation for a pool type consisting of single-family, level payment loans

Task Order, Request for

Quote: When requested, a detailed list of costs to service the defaulted portfolio based on a statement of work, including government rates

(per diems). Details must be listed by each CLIN (Contract Line

Item Number).

Title 1 HUD: The designation for a pool type consisting of manufactured home loans

T&I: Tax and insurance, normally including escrows used to pay real estate taxes and hazard insurance premiums on mortgages included in pools

TIR: Transfer of Issuer Responsibility

UBP: Unpaid Principal Balance

USDA: U.S. Department of Agriculture

VA: Department of Veterans Affairs and its predecessor, the Veterans

Administration

1.3 Overview of MSS Default Manual

This MSS Default Manual is organized into four sections: an introduction and the three phases of a default. Phases 1 through 3 outline, in chronological order, the procedures the MSS uses when assisting in the default of an issuer.

Introduction

The introduction provides an executive summary, a process flow diagram of the default process, an overview of the MSS Default Manual, and a description for the reader of how to become familiar with the scope of activities and timing associated with defaulting an issuer.

Phase 1 - Default Preparation

Phase 1 begins with the MSS receiving notification from Ginnie Mae of an impending default, and concludes with the MSS traveling to the Defaulted Issuer's sites. Emphasis is placed on planning for the acquisition, completing the Task Order for Request for Quote (when requested), and preparing for the transfer process of the defaulting issuer's portfolio, thereby expediting the conversion of the portfolio into the MSS's servicing operation. This phase typically lasts no more than 2 days. The key objectives of this phase are:

Assessing the Defaulted Issuer's situation through the collection of readily available issuer portfolio information provided by the GTR

Preparing cost estimates for Task Order, request for quote (when requested); including travel arrangements

Preparing a strategy for acquiring and transferring the issuer's portfolio

Phase 2 - Issuer Default Execution

Issuer default execution specifically addresses the Defaulting Issuer’s site visit. Default execution primarily occurs at the Defaulted Issuer's place of business, and usually takes 2 to 4 days of the default process. The business site visit may be in two different locations, depending on Default

Issuer’s servicing location and data storage location. This section discusses the roles of each of the default team members, and focuses on these objectives of default execution:

FRC gaining control of default funds in coordination with MSS

Ginnie Mae and MSS to coordinating possession of custodial documents

MSS taking possession of servicing data

Collecting financial information

Taking possession of any hard copy loan files/documents

Phase 3 - Portfolio Transfer and Integration

Phase 3 of the portfolio acquisition process covers the first several weeks after the site visit, during which the MSS converts the portfolio onto its own servicing system, and develops a final reconciliation and a plan for resolving any outstanding problems with the portfolio. Phase 3 also covers Ginnie Mae’s follow-up systemic access for MSS; such as GinnieNET, MERS etc. Phase

3 concludes by addressing the ongoing servicing of the portfolio, including reporting requirements and periodic review by Ginnie Mae. Phase 3 gives a general description on tasks to be completed for on-going servicing of the defaulted portfolio.

Appendices

The MSS Default Manual concludes with three appendices, each of which directly corresponds to the phases of the default process. Sample worksheets, reports, letters, and files prepared in each phase are included in the appendices.

1.B EXHIBIT: Phase 1, 2, and 3 Workflows

The Three Major Phases

OVERVIEW

P h a s e

P o rt fo li o

T ra n s fe r a n d

In te g ra ti o n

P h a s e

Is s u e r

D e fa u lt

E x e c u ti o n

P h a s e

I D e fa

P re p a ra ti o n

Notification of Default from Ginnie Mae to

MSS and FRC

Prepare Cost Estimates for Servicing Default

Portfolio and submit to

Ginnie Mae

Prepare Strategy for Acquiring and

Transfering Default Portfiolo to MSS

Servicing

Review Default Issuer’s

Portfolio Information, provided by Ginnie Mae

Gather at On-Site

Location of Default

Issuer with FRC, MSS and Ginnie Mae

Personnel

MSS to Gain Control of

Funds and Collect

Financial Information

MSS to Take Possession of Custodial Documents and Servicing Data

MSS to Collect

Critical Servicing

Information

MSS, Ginnie Mae and FRC to complete Default

Site Visit

Completion of Default

Issuer's Servicing Data into MSS Servicing

System

MSS Reviews Loan

Level Information

Completion of HUD, FHA and other Letter/Form

Processing for Servicing

Portfolio

Reconciliation of Data and

Submission of Contractual

Portfolio Reports to Ginnie

Mae

1.4 Using the MSS Default Manual Effectively

I. The Structure of Each Phase of This Manual

The user will be able to follow the following detailed default procedures more efficiently if he or she has some familiarity with the structure of the procedures. The following list identifies the common elements of each phase, in the order in which they are presented.

(1) One page summary of the phase, including:

- Objective

- Overview of activities

- Key participants

- Information inputs and outputs

- Timeframe

- Appendices referenced

(2) Process diagram, identifying the activities in that phase

(3) Detailed operational procedures and their supporting steps, which follow the numbering used in the diagram

(4) Alternative procedures for multifamily, HMBS or manufactured homes portfolios when procedures differ from those used with single family issuers.

II. Using This Manual During a Default

New MSS personnel may wish to read the detailed operational procedures in Phases 1 through 3 of this Manual, which provide in-depth coverage of the portfolio acquisition procedures, from the initial notification of the default through integration of the portfolio into the subservicer's servicing operation and ongoing servicing. MSS personnel experienced in the default process may consult the phase diagram at the beginning of each section, and then cross-reference the appropriate process section or subsection in the manual.

1.5 Process to Update MSS Default Manual

This MSS Default Manual may need to be updated from time to time to keep up with changes in policies, regulations, forms, or other guidance. Ginnie Mae will identify any need to update this

MSS Default Manual and will request the MSS to submit a plan to do so. Upon approval of the plan by Ginnie Mae, the MSS will make proposed changes to this MSS Default Manual and submit the revisions to Ginnie Mae for Ginnie Mae’s approval. Upon Ginnie Mae’s approval, the

MSS will update this MSS Default Manual and will record the update on the Revisions and

Approvals page in the front of this MSS Default Manual.

To facilitate updating the MSS Default Manual, the Government Technical Representative

(GTR) Director of the Mortgage-backed Securities and the Multifamily programs/projects are responsible for making all changes and for distributing copies of updated pages to all MSSs.

All modifications to the procedures described within the MSS Default Manual should have the full consent of GTR/GTM management.

DRAFT

March 16, 2012

PHASE 1

DEFAULT PREPARATION

DEFAULT PREPARATION - PHASE 1

2.0 PROCESS SUMMARY AND OVERVIEW

2.0 Phase 1, Process Summary and Overview

OBJECTIVE OF DEFAULT PREPARATION PHASE

The default preparation phase (Phase 1 of the default management process) covers the period from the notification of the Master Subservicer (MSS) of the impending issuer default through the final preparations performed prior to the site visit.

There are two objectives in Phase 1:

1. Quickly assess the defaulted issuer's situation through the collection of readily available issuer portfolio information.

2. Prepare a strategy for acquiring and transferring the issuer's portfolio.

OVERVIEW OF PHASE 1 ACTIVITIES

The key activities in the default preparation planning phase are as follows:

1. Receive notification of default.

2. Contact outside parties involved in acquisition/transfer.

3. Review defaulted issuer information.

4. Perform situation assessment.

5. Analyze issuer data processing specifications.

6. Prepare for acquisition (onsite visit).

7. Gather necessary supplies.

8. Complete task order(s), request for quote (when requested) with detailed cost estimated for servicing default portfolio.

KEY PARTICIPANTS

Ginnie Mae Participants Non-Ginnie Mae Participants

(GTR/GTM) MSS

Office of General Counsel—Ginnie Mae/Finance Field Review Contractor (FRC)

Ginnie Mae, Risk Committee

Ginnie Mae, MBS

INFORMATION INPUTS AND OUTPUTS

Ginnie Mae : Inputs Non-Ginnie Mae: Outputs

FRC Worksheets MSS Default Team Matrix

TIME FRAME:

Days 1 and 2, including completing the Task Order, Request for Quote (when requested).

2.0 PROCESS SUMMARY AND OVERVIEW

APPENDICES REFERENCED

Appendix A - Default Preparation Documents (Phase 1)

2.1 PROCESS DIAGRAM

2.1 Phase 1, Process Diagram

DEFAULT PREPARATION-PHASE 1

2.2 DETAILED NOTIFICATION OF DEFAULT

2.2 Detailed Notification of Default

2.2.1 Receive Notification of Default

The MSS's Servicing Manager receives verbal notification from the

GTR/GTM informing him or her of an issuer default and selection of his or her organization as the MSS of the defaulted portfolio.

The GTR/GTM supplies the MBS Director with general information concerning the default, including:

Name of analyst assigned to the default

Issuer’s location(s)

Approximate number of loans in the portfolio

Approximate default date

Name of Subservicer (if applicable)

Ginnie Mae’s POC contact information for default

A situation assessment conference call involving all members of the default team occurs within 24 hours of initial notification of the default. Before the conference call occurs, the analyst sends a copy of the Office of Mortgage-backed Securities (MBS) and FRC Worksheets (discussed in Section 2.0) to the MSS via email. Due to the confidential nature of the information, every effort should be made to limit the distribution of the default information, including designating a senior individual to directly receive it as it is sent from

Ginnie Mae.

Ginnie Mae’s Contracting Officer (CO) issues a Task Order to the MSS for

Request for Quote for default servicing costs by CLIN, when required. Ginnie

Mae may also provide a copy of the signed default letter to the FRC and the

MSS.

2.2.2 Assign Default Team Members and Send MSS Default Team Matrix to

Ginnie Mae

Once notified of the default, the MSS Servicing Manager selects the appropriate staff members to perform the defaulted portfolio conversion.

MSS Team Size — The size of the team is determined by the MSS based on the size of the defaulted portfolio, default location(s), and other considerations.

Team Composition and Experience — Team members are selected according to their area of expertise, ensuring that all facets of the operation are

2.2 DETAILED NOTIFICATION OF DEFAULT

adequately supported. The MSS team is comprised of senior personnel (i.e., vice president or manager-level employees), with junior staff members providing additional support as the size of the defaulted portfolio dictates.

After determining the team composition, the MSS completes the MSS

Default Team Matrix (see Appendix A) and send this information by email to GTR/GTM.

2.3 DETAILED ACTIVITY DESCRIPTION

2.3 Detailed Activity Description

2.3.1 MSS Activities

During Phase 1, the MSS develops or updates its contingency plan for responding to a Defaulted Issuer. The contingency plan identifies the MSS departments and managers involved in the default response. Each MSS has its own organization, but typical MSS departments involved in the default process could include:

Acquisitions

Foreclosure/Bankruptcy/REO

Investor Accounting

Investor Certification

Collections/Loss Mitigation

Mortgage Insurance

Special Loans

The contingency plan identifies the tasks to be performed by each department before, during, and after the site visit to the Defaulted Issuer. The contingency plan also identifies the schedules and resources required to accomplish these tasks in accordance with the terms of its contract with Ginnie Mae.

Prior to the site visit, Ginnie Mae personnel prepares and submit letters to parties involved in the default process. Some examples are listed below:

1. Bank (Account Freeze) Letter

2. Multifamily Bank Letter for FHA-Required Escrow Accounts (if needed)

3. Document Custodian Letter

2.4 CONTACT OUTSIDE PARTIES INVOLVED IN ACQUISITION/TRANSFER

2.4 Contact Outside Parties Involved in Acquisition/Transfer

In order to effectively and efficiently complete the acquisition and transfer of the defaulted portfolio, the MSS may require the support of various outside parties. The MSS arranges, with the assistance of the GTR/GTM analyst, for any outside support it might need during the default and transfer process. Common examples of outside support required include:

Trucking firm to pick up mortgage loan files and servicing data

Local vendor to supply boxes to store files/documents if trucking firm is not able to locate a sufficient supply

Temporary agency to provide onsite packing and shipping support

Office supply companies that furnish rental copy equipment

Confidentiality is stressed in all interactions with outside parties. Temporary services and outside support firms SHOULD NOT be provided with the Defaulted Issuer's name prior to the default day.

2.5 REVIEW DEFAULTED ISSUER INFORMATION

2.5 Review Defaulted Issuer Information

Shortly after GTR/GTM’s initial notification, the MSS receives a copy of the completed

FRC and MBS/GTM Issuer Information Worksheets, (see Appendix A), concerning the

Defaulted Issuer from the GTR/GTM analyst. These worksheets supply the MSS with relevant information concerning the Default Issuer, including the following:

Default Issuer location(s)

General portfolio characteristics (number of loans and pools, type of loans, age of the portfolio)

Bank and branch location(s)

Lockbox location(s)

P&I, T&I, and clearing account numbers

Document custodian name and location

Issuer hardware and software systems

Other operational characteristics of the issuer

Subservicer location (if applicable)

New issuer numbers (if available) and GinnieNET check digit

MERS (if applicable

Pool’s overdue for pool certification

It is important at this time that Ginnie Mae (or its contractor) provides a complete loan level data file in soft copy of all active loans expected to transfer in the default. The file should include all relevant mortgagor information including FHA/VA case number, originator loan number, servicer loan number, Social Security number, and property address. This file should be used for the purpose of retrieving loan files and confirming the transferring population of loans onsite at the defaulted issuer.

In addition, the MSS should receive a key participant contact sheet providing names, addresses, cell telephone numbers, and facsimile numbers of the key contacts on the default team from the GTR/GTM analyst. Default team members may include the following:

Ginnie Mae GTR/GTM analyst

Ginnie Mae OGC attorney

FRC

MSS

2.6 PERFORM SITUATION ASSESSMENT

2.6 Perform Situation Assessment

2.6.1 Situation Assessment Conference Call

The MSS's team leader participates in a situation assessment conference call led by the (GTR/GTM) analyst. Other participants in the conference call include:

GTR and/or GTM

FRC Team Leader

Office of General Counsel-Ginnie Mae/Finance

The purpose of the conference call is to identify issues and discuss solutions specific to the upcoming default. Refer to the GTR/GTM analyst's Situation Assessment Guide in Appendix A for detailed information on the agenda that will be followed during this important conference call.

2.6.2 Special Situation: Mega-Default

While unlikely, Ginnie Mae and its MSS must be prepared for the possibility of a large issuer default. While the general approach to a servicing transfer remains consistent regardless of the size of the portfolio, due to the nature of a mega-default, there are several key elements to consider:

Size and scope

Multiple locations (servicing, files, lockbox, etc.)

Condition of the portfolio

Availability of defaulted issuer’s facilities and staff

Long term, the MSS hires and trains additional staff as needed, including the possibility of hiring trained and experienced personnel from the defaulted issuer, if feasible. This would provide several advantages, such as immediate manpower, staff who are familiar with the portfolio and understand its servicing, and who possess general mortgage banking experience. If a Defaulted Issuer has multiple servicing locations and the condition of the portfolio is poor, the MSS’s approach to the default will be affected. In the case of a standard default, work is performed by the

Acquisitions unit and small functional groups from key departments.

However, for a Mega-Default, this is simply not feasible.

Therefore, in the event of a Mega-Default, the MSS deploys key managerial and technical staff from each of the following departments:

2.6 PERFORM SITUATION ASSESSMENT

Acquisitions

Bankruptcy

Cash Management

Collections

Customer Service/Training

Foreclosure

Legal

Lockbox

MIP

Originations/ Secondary

Special Loans

Tax

2.6.3 Collection of Data: Mega-Default

These functional groups obtain all information available from the

Defaulted Issuer and perform the appropriate tasks relative to their department. They are managed by senior management individuals. These tasks include, but are not limited to, the following:

Staffing

Attainment of files and reports

Verifying data and file content received

Understanding in detail the defaulted issuer’s procedures, methods, and systems

Risk assessment

Incorporating the above items into the MSS’ normal servicing activities

In order to meet the challenges of multiple locations and a poor portfolio condition, large functional groups from each department need to be deployed to the appropriate locations.

The MSS should also consider if the facilities, systems, and staff of the defaulted issuer are available for purchase, hire, or lease. If they are available, this may maximize the effectiveness of transfer, by allowing continuous servicing of the loans while the loan data and files are transferred to the MSS. Key managerial staff are utilized to oversee the servicing of the loans at the leased/or owned facilities, while portions of the portfolio are transferred to the MSS at a controlled pace. While the ability to be compensated for ―lease‖ payments will impact the MSS’s decision, certain circumstances may dictate that a facility be leased without reimbursement. However, while leasing facilities, systems, and staff may be ideal, the MSS should be prepared for the unavailability of these resources.

2.7 ANALYZE ISSUER DATA PROCESSING SPECIFICATIONS

2.7 Analyze Issuer Data Processing Specifications

Based on the hardware and software information, size of the data and the service bureau information, provided on the FRC worksheet (Form A), the MSS will determine whether a system-to-system conversion/transfer will be possible or if an electronic encrypted desk or hard drive is needed, based on the volume size of data.

If system-to-system conversion/transfer is possible, the Defaulted Issuers data processing department works with the appropriate data management teams to ensure the data is transferred or converted timely and accurately.

If an electronic encrypted desk or hard drive is needed, the data is provided to the

MSS onsite. The desk or hard drive is carried by one MSS personnel and the key and/or encryption information is carried by another MSS personnel. This is to ensure NIST requirements are followed for the security of Ginnie Mae’s information.

2.8 TASK ORDER PROCESS

2.8 Task Order Process (When Requested)

Ginnie Mae selects an MSS at the time it makes the default decision, and sends a letter to the MSS confirming they have been selected. Shortly after the default decision, Ginnie

Mae issues a Work Authorization to the FRC and a Task Order to the MSS. Ginnie Mae may also provide a copy of the signed default letter to the FRC and the MSS. This process may be requested from the OC or GTR.

The Task Order titled Request for Quote is sent to MSS from the OC or GTR. The MSS must provide, identify, and estimate costs to service the defaulted portfolio. The cost estimates are to be identified by each CLIN. Detail examples are listed below:

Labor rates — temporary help needed to review initial loan files

System conversion/transfer costs

Default travel costs and expenses

All CLINs, as needed

The MSS then sends the Task Order response to the Request for Quote to the GTR/GTM and the CO for review and approval.

The MSS may not perform work that causes it to exceed the number of hours or cost estimated provided in the response for Task Order, Request for Quote. If there is need for additional funds due to an unforeseen work effort, a new response to the Task Order, Request for Quote must be submitted, and notification to the GTR/GTM must be completed admittedly for review and approval.

2.9 PREPARE FOR ACQUISTION

2.9 Prepare for Acquisition

2.9.1 Review Team Member Activities

Based on the information obtained to this point, the MSS reviews the critical operational issues surrounding the acquisition process. A critical path and contingency plan for completing these activities is defined.

2.9.2 Establish Toll Free Customer Service Line

The MSS may, at its discretion, establish a separate toll-free customer service line for anticipated inquiries from borrowers in a defaulted portfolio containing 10,000 loans or more. This decision is based on the MSS's ability to handle calls from borrowers in the defaulted portfolio on the current customer service line(s).

2.9.3 Receive Confirmation Letter

The MSS will receive a copy of the engagement confirmation letter (see

Appendix A) from the GTR/GTM analyst, formally documenting its selection as Ginnie Mae's MSS. The original confirmation letter is hand-delivered by the GTR/GTM analyst to the MSS at the default execution meeting in Phase 2.

2.9.4 Review POC Information

The MSS and Ginnie Mae confirm default team members’ names and contact phone numbers. All parties, MSS, FRC, and GTR/GTM revalidate the onsite default timeframe for all parties, as well as the location of the Defaulted Issuer

2.10 COORDINATION OF TRAVEL ARRANGEMENTS .

2.10 Coordination of Travel Arrangements

The MSS appoints one staff member to coordinate its travel arrangements with Ginnie

Mae’s GTR/GTM travel contact or their own travel agent. Travel arrangements for the

MSS team, including air travel, hotel accommodations, and automobile rental, are coordinated between the MSS and the GTR/GTM analyst.

Additionally, plans are made for part of the MSS's team to travel to the Default Issuer's document custodian (if located in another city and onsite representation is deemed necessary) in order to deliver letters to the document custodian and to ship all of the issuer's files.

CO may prepare a hotel letter for the MSS to secure government rates for hotel stay. This letter is coordinated with GTR/GTM and CO. The letter must be provided to the MSS, and the MSS must present the letter to the hotel. However, the hotel may not award government rates to the MSS.

2.11 GATHER NECESSARY SUPPLIES

2.11 Gather Necessary Supplies

The MSS's team leader ensures that members of the default team have made arrangements to ship all necessary supplies to the staff's hotel or that supplies are being provided onsite by outside parties, as arranged in Section 2.4. Essential supplies include the following:

Hard drive and laptop

Conversion programs to secure and encrypt data

System manuals

Shipping supplies (e.g., boxes, tape, labels)

Telephone numbers of outside suppliers

FRC worksheets

March 16, 2012

PHASE 2

ISSUER DEFAULT EXECUTION

ISSUER DEFAULT EXECUTION-PHASE 2

3.0 PROCESS SUMMARY AND OVERVIEW

3.0 Phase 2, Process Summary and Overview

OBJECTIVE OF ISSUER DEFAULT EXECUTION PHASE

The issuer default execution phase (Phase 2 of the default management process) covers the period from the default team's travel to the Default Issuer's city through the completion of the site visit and the GTR/GTM analyst's return to headquarters. The goal of Phase 2 is to ensure that the site visit and actual default are carried out effectively and efficiently, while securing all records and minimizing potential conflict where possible.

Specifically, the objectives of Phase 2 are:

The FRC gaining control of default funds in coordination with the MSS

Ginnie Mae and the MSS coordinating possession of custodial accounts

Ginnie Mae and the MSS coordinating possession of custodian documents

MSS taking possession of servicing data

Collecting financial information

Taking possession of any hard copy loan files/documents

OVERVIEW OF PHASE 2 ACTIVITIES

Key activities that occur in the issuer default execution phase are as follows:

1. Participate in default execution team meetings

2. Assemble at the designated meeting point

3. Perform preliminary onsite situation assessment

4. Execute default

5. Secure custodian records

6. Secure monetary data

7. Participate in end-of-day assessment

GTR/GTM/GTM Analyst FRC

OGC Attorney MSS

Bank Depository for P&I & T&I Accounts

Document Custodian

Ginnie Mae Inputs Non-Ginnie Mae Outputs

Issuer Default Letter Preliminary Site Visit Assessment

Issuer Portfolio Records Issuer Portfolio Records

3.0 PROCESS SUMMARY AND OVERVIEW

TIME FRAME: Days 2 – 4

Appendix B - Issuer Default Execution Documents (Phase 2)

3.1 PROCESS DIAGRAM

3.1 Phase 2, Process Diagram

Issuer Default, Phase 2

D e fa

Is s u e r

M S

S F

R C

G in n ie

M a e Gather at On-Site

Location of Default

Issuer with FRC, MSS and Ginnie Mae

Personnel

MSS to Collect

Critical Servicing

Information

MSS, Ginnie Mae and FRC to complete Default Site

Visit (End of Day

Assessement)

MSS to coordinate with Ginnie

Mae to take Possession of

Custodial Documents and MSS gather Loan/Servicing Data

FRC S to Gain Control of Funds and Collect

Financial Information

FRC Delivers Default

Data Requirements to

Defaulted Issuer

FRC & MSS Receives and Analyses Data from

Defaulted Issuer

FRC to Provide Ginnie Mae and MSS with Progress

Report and Update of

Defaulted Issuer’s Data

MSS provides Update and Progress to FRC

Gather at On-Site

Location of Default

Issuer with FRC, MSS and Ginnie Mae

Personnel

Issuer Receives Default

Letter and Data

Request from Ginnie

Mae

Default Issuer Provides

Data to MSS and FRC

Execute Default

3.2 PARTICIPATE IN DEFAULT EXECUTION TEAM MEETING

3.2 Participate in Default Execution Team Meeting(s)

Phase 2 involves a team approach to a default, in which Ginnie Mae representatives, including the

GTR/GTM analyst and OGC attorney are present.

On the evening before (or the morning of) the default execution, the GTR/GTM analyst may hold a default execution team meeting in the issuer's city with the principal default team members:

OGC attorney

All MSS personnel

All FRC personnel

The purpose of the default execution team meeting is threefold:

1. To introduce the parties to each other

2. To notify all participants of the operational aspects of delivering the default letter

3. To clarify the roles and responsibilities of the various parties

The following information is discussed at the default execution meeting.

1. Default logistics

Time and location to meet at or near Default Issuer’s location(s)

Time and location for team members to meet if personally delivering bank and document custodian letters

Time and location for default team members to meet at issuer's subservicer site (if applicable)

Location of warehouse lender (if applicable)

2. Roles and responsibilities

3. Any foreseeable problems

Based on the information learned in this meeting, the MSS may need to contact its office to alert other key personnel to stand by in the event they are needed at the Defaulted

Issuer's site.

3.3 ASSEMBLE AT THE DESIGNATED MEETING POINT

3.3 Assemble at the Designated Meeting Point

If the Default Issuer is using a subservicer, a second GTR/GTM analyst and OCG attorney may be needed to hand-deliver a copy of the Default Issuer default letter to the subservicer, while the GTR/GTM/ analyst and OGC attorney deliver the default letter to the Default Issuer. All other default team members assemble at the subservicer's site, rather than the Default Issuer's site, to await delivery of the default letter and initiation of the default execution.

At the time of the…