FAIR LENDING

Commitment To Fair Mortgage Lending Practices

Mortgage Bank of California’s Fair Mortgage Lending Practices reflect our commitment to ensuring consumers seeking financing are fairly evaluated, fully informed, and pay fair costs for the mortgage lending services they receive.

These Fair Mortgage Lending Practices Support Our Belief In :

• Working with independent mortgage brokers who are professional and reputable
• Applying objective and fair lending standards to all loan applicants
• Making information available to consumers to help them make educated financial decisions
• Providing products and services that benefit the consumer and meet consumers’ financial needs

Independent mortgage brokers originate the majority of home loans nationwide. Consumers choose brokers for various reasons including their expertise in assisting the borrower through an important and complex transaction, their access to a larger selection of loan options, and their ability to compare and present loan products from multiple lenders. At Mortgage Bank of California, we are inspired by the pursuit of the mortgage broker: to find the best financing options to consumers at a fair cost.

Mortgage Bank of California is committed to doing its part to encourage higher standards in fair lending. We hope that other organizations who share our commitment to further the cause of fair lending will take similar steps.

Fair Mortgage Lending Practice

Mortgage Bank of California Commitment to Fair Lending Practices

As a leading national wholesale mortgage lender, Mortgage Bank of California, in conjunction with a network of approved independent mortgage brokers, helps make credit accessible to all qualified consumers. This document details Mortgage Bank of California’s commitment to Fair Mortgage Lending Practices, a higher standard to which we hold ourselves and independent mortgage brokers, for the purpose of ensuring consumers are fairly evaluated, informed, and pay fair costs for receiving mortgage lending services.

At Mortgage Bank of California we believe in :

• Working with brokers who are professional and reputable
• Applying objective and fair lending standards to all loan applicants
• Making information available to consumers to help them make educated financial decisions
• Providing products and services that benefit the consumer and meet their financial needs

Our goal is to promote an environment in which informed consumers work with reputable brokers to obtain lending services at a fair and reasonable cost.

An Overview of Wholesale Lending

In understanding how a set of fair mortgage practices supports fair lending in a wholesale model, the distinction between wholesale and retail (or direct) lending models is important. Retail lenders reach out to consumers, take applications, process and approve them, and then provide funds to approved consumers.

In contrast, wholesale lenders qualify, approve, and fund loans submitted by brokers, whom work with consumers to evaluate their financial needs and to place their loan in a product designed to meet their goals.

Mortgage brokers originate the majority of home loans nationwide. Consumers choose brokers for various reasons, including convenience, expertise, counseling through a complex transaction, accessibility to loan options, and pricing competition created by shopping the loan to multiple lenders.

Fair Mortgage Lending Key Points

• We evaluate and monitor all independent mortgage brokers with whom we conduct business and require them to abide by a Broker Code of Conduct.
• We have a commitment to fair and reasonable lending costs which includes setting limits on borrower- and lender-paid broker compensation and third-party fees.
• We ensure fair and consistent evaluation of each loan applicant based on the borrower’s ability to repay the loan, supported by objective and automated processes.
• We do not and have never offered loans with balloon payments, negative amortization, mandatory arbitration clauses, or an increased interest rate upon default.
• We provide resources to adequately inform and protect consumers, including plain language disclosures, a consumer-focused website, and partnerships with key community organizations.
• We do not sell single-premium credit insurance or permit brokers to finance such products through loan proceeds, and we do not permit brokers to charge fees to set up alternative payment plans.

Broker Approval

Before closing any loan with a broker, Mortgage Bank of California requires a detailed application and supporting documentation, including:

Upon obtaining the required documentation, we perform a thorough evaluation before approving any broker. When processing a broker application, we may:

• Perform a background check through third-party information services
• Identify Office of Foreign Assets Control (OFAC) alerts, pending litigation, bankruptcy, judgments, and liens through a systematic review
• Verify that the broker has legal authority to broker loans and is in good standing
• Brokers agree to abide by a Broker Code of Conduct, which requires them to follow our fair mortgage lending practices.
• Brokers also sign our Mortgage Broker Agreement, which requires them to, among other things:
• Comply with all federal and state consumer protection and disclosure laws
• Disclose broker compensation fees to the consumer
• Maintain all necessary licenses
• Submit accurate loan applications and supporting documentation
• Not solicit consumers for refinancing within 2 years from the date of funding an Mortgage Bank of California loan

Brokers are not approved if they fail to meet our approval standards, or they are removed from our approved list if they do not comply with our requirements after approval or do not remain in good standing with any state

Broker Monitoring

Mortgage Bank of California’s broker monitoring process is designed to ensure approved brokers are meeting our standards, including these Fair Mortgage Lending Practices.

• Monitoring includes reviews of loan submissions and post-funding quality-control audits. These reviews and audits include checks for compliance with:
• Applicable federal, state and local lending laws
• Our underwriting requirements
• Our fair lending policies
• The terms and conditions of our Mortgage Broker Agreement

In addition to loan-level reviews, each broker’s approval is reviewed annually using the same evaluation process as previously described in the Broker Approval section. Our loan origination system tracks broker licensing by state, and prevents brokers from closing Mortgage Bank of California loans in states where they are not licensed or their license has expired.

Voluntary and Clear Disclosures

Mortgage Bank of California strives to ensure that consumers are fully informed about the transactions they are considering. To promote this goal, we provide consumers with an Early Disclosure Package. Our disclosure package is promptly sent to consumers after we receive a loan application from their broker.

Mortgage Bank of California has developed a unique set of voluntary, plain language documents that are given to consumers to help them better understand the loan origination process and the cost and terms of their loan.

These include:

• Understanding the Loan Origination Process (This document explains the role of the broker and wholesale lender and provides tips consumers should consider when taking a loan against their home). Consumers are encouraged to discuss with their broker the costs, options, and fees associated with their loan.
• Resources are also provided so consumers can obtain additional information about the loan origination process. This document is provided in the Early Disclosure Package.
• Borrower’s Certification of Income (This document identifies the income used to qualify borrowers for the loan when any portion of their income is stated) Borrowers sign this document at closing to acknowledge that the income used to qualify them for the loan is accurate).
• Payments, Fees, and Early Prepayment Charge (This document explains any adjustable interest rate feature; the monthly payment amount, including escrow; the loan fees (including discount points and broker compensation) and third-party charges; whether the loan contains a prepayment charge; and the maximum dollar amount of any prepayment charge. We provide this document in the Early Disclosure Package as an estimate and again at closing with the final terms).
• Acknowledgement of Final Loan Terms (This document clearly sets forth the difference, if any, between the Good Faith Estimate provided in the Early Disclosure Package and the final loan terms. Borrowers sign this document at closing to acknowledge the final loan terms).

Educating Consumers and Brokers

For the Consumer:

If you would like further education about the process we encourage you to call and speak with one of our friendly customer service advocates for more information. Or you may write to us at mak@globalit.biz and we will be glad to answer any questions you may have.

Mortgage Bank of California takes an active approach to consumer education by reaching out to consumers through helpful links within the industry, which provide important information to help consumers to :

• Better understand the loan origination process
• Make informed mortgage choices
• Understand how their credit affects the loan program and rate choices available to them

Mortgage Bank of California also provides consumers with a toll-free number on our web site, in our Early Disclosure Package, and with closing documents so they have an opportunity to contact us with any questions or concerns they may have about the loan origination process.

For the Broker:

Mortgage Bank of California also takes an active approach to broker education by reaching out to brokers.

Industry Links are provided with help provide comprehensive online industry education and reference tools that enables Mortgage Bank of California-approved brokers to build and expand their knowledge base, comply with state license renewal requirements for continuing education, enroll in more than 50 on line courses to stay current on fraud issues and regulatory compliance requirements

National tradeshows provide information to brokers about our company and our fair mortgage lending practices.

Sponsorships help promote education through broker trade organizations and industry publications.

Determining Whether the Consumer Has the Ability to Repay Our Loan Mortgage Bank of California has developed underwriting guidelines to ensure consistent evaluation of each consumer’s ability to repay based on factors such as income, credit score, mortgage payment history, and debt-to-income ratio.

Protecting Special Mortgages

Mortgage Bank of California’s policies prohibits paying off special-purpose mortgages such as government-subsidized loans or loans made through a community organization.

Special-purpose loans provide features such as a zero or low interest rate, a reduced payment, or no monthly payment.

Steering Incentives Not Advertised

Some wholesale lenders provide monetary incentives to brokers for submitting an increased number of loans. They may also pay an additional incentive to submit complete packages for which the broker is already being compensated.

These practices are sometimes referred to as volume incentives or full-package incentives. Mortgage Bank of California may offer such compensation to brokers upon receipt of approved, full income documented, underwriting qualified loans.

Lending Costs

Mortgage Bank of California does not originate loans defined as high cost under state and local high-cost loan laws or the Home Ownership and Equity Protection Act of 1994 (HOEPA).

Our loan origination systems are programmed to check for and prohibit the origination of any loan exceeding any high-cost threshold of points, fees and/or APR.

Limit on Lender-Paid Broker Compensation

Brokers may receive all or part of their compensation directly from a lender based on the interest rate agreed to between the borrower and his/her broker. Mortgage Bank of California requires full disclosure of such amounts and caps them to no more then 2% of the loan amount. We disclose amounts paid to the broker on the voluntary Payment, Fees, and Early Prepayment Charge disclosure as well as on disclosures required by law.

Limit on Total Broker Compensation

Mortgage Bank of California has limited total broker compensation to 5% of the loan amount. The limit includes the following fees:

• Broker’s Origination Points/Broker Fee/Closing Fee
• Lender-paid broker compensation (also known as Yield Spread Premium, Premium Yield Adjustment or Rebate)
• Other broker fees, which are limited to $1,500 or by state law, whichever is lower, include:
• Broker’s Application Fee
• Broker’s Underwriting Fee
• Broker’s Processing Fee
• Bona Fide Discount Points

Consumers have the option of buying down their rate using bona fide discount points. Mortgage Bank of California’s Automated Pricing System ensures a prescribed rate reduction and will not permit lender-paid compensation to the broker when the consumer chooses a lower rate by paying discount points.

Plainly stated, Mortgage Bank of California does not pay brokers lender-paid compensation when a consumer has paid discount points.

Fixed Lender Fees

Our combined lender fees are fixed at $1142 except for the following states:

Third-Party Fees

Mortgage Bank of California requires third-party fees, such as appraisal, title and credit report fees, to be passed through with no markup or additional charge to the consumer

Optional Prepayment Charges

Our products allow for loans with and without a prepayment charge, except where a prepayment charge is prohibited by law. No consumer is required to accept a loan with a prepayment charge, and Mortgage Bank of California’s interest rates is lower for loans that contain them.

The maximum term of a prepayment charge on any loan is 3 years; however, consumers can choose a shorter term. For adjustable rate loans, the prepayment term cannot exceed the date when the rate begins to adjust. When a consumer accepts a prepayment charge, the total potential cost is clearly shown on the Payments, Fees, and Early Prepayment Charge disclosure.

Property Valuation

Mortgage Bank of California seeks to ensure accurate property valuations through independent licensed appraisers and industry-recognized tools, including automated valuation models (AVMs). All loan submissions must include a full appraisal completed by a licensed appraiser with an interior inspection performed in accordance to the Uniform Standards of Professional Appraisal Practice.

Every appraisal submitted is subject to an extensive pre-funding review, including a third-party automated valuation opinion at no cost to the borrower. In addition, underwriting advocates examine all appraisals triggered for review by the automated system. In addition, a random sample of appraisals is audited each month.

Appraisers who submit appraisals that do not meet our requirements may be placed on a Suspense or Watch list list.

Separation of Sales, Loan Processing and Control Functions

Mortgage Bank of California has a unique approach to separation of duties that promotes origination of quality loans.

Sales

Sales staff does not set pricing policy, has no loan approval authority, and is not compensated based on the terms of loan transactions.

Loan Processing

All loan processing is managed in our regional processing centers. Loan processing associates who perform underwriting, appraisal review, and funding functions are not compensated based on volume, closings, or revenue.

Corporate Controls

Systems development/maintenance, pricing policy, vendor/broker management, and reporting are managed independent of sales or loan processing. Our quality assurance department performs monthly audits on a sample of funded loans to ensure compliance with federal, state, and local laws as well as company policy and underwriting guidelines. Findings are reported to management for awareness, action, and associate training as applicable.

Protecting Privacy

Mortgage Bank of California supports consumers’ right to privacy; therefore, we have never sold consumer information to third parties for any purpose. As outlined in our Privacy Policy, which can be found on our web site, http://www.mortgagebankca.com, we maintain policies, system controls, and audits to make sure protections are in place.