Ratings

The company recently introduced e-bill presentment and payment applications to certain borrowers, and plans to offer this option to all its customers over the next year. If a check requires further research, personnel forward the item to the respective department for review. Although there is appropriate oversight over the process, including dual review upon receipt of the checks, Standard & Poor's strongly prefers that the department send only copies of the item to reduce the risk of lost or misappropriated funds.  

Bank of America Mortgage's well-organized investor reporting department displays an appropriate segregation of duties and controls that ensure timely reporting, remitting, and reconciliation processes. The policy and procedure attributes in place comprise:  

• The company's ranking as a Tier One performer by FHLMC;
• A FNMA assignment of either a 'good' or 'excellent' peak performance scorecard rating;
• An agency and private investor group, and further assignment according to investor, to foster expertise. The department, however, crosstrains personnel to handle other clients;
• The completion of the vast majority of reports in electronic format. No information is manipulated manually, reducing possible errors resulting from human input of data;
• The maintenance of on-line access to the custodial bank statements, which allows for timelier balancing of accounts;
• Managerial review and approval of all reports, reconciliations, and remittances; and
• No late reporting or remittance penalties in the last 12 months.

Overall, the company exhibits sound oversight over its payment processing and investor accounting area, which properly safeguards investor interests.  

Customer Relations
Bank of America Mortgage provides an adept level of customer service to its borrower base using different technologies to enhance and to monitor the process. Key areas of merit include:  

• A laudable VRU capture rate of almost 47%;
• A VRU with Spanish language capabilities, with a recent enhancement feature that automatically transfers the call to a Spanish-speaking representative if necessary;
• An acceptable abandonment rate averaging 4.5%;
• Broad oversight of customer service employees through telephone monitoring and recording, as well as quarterly testing, designed to identify performance and training issues;
• Differentiated service via a separate telephone number for branch personnel seeking to immediately address inquiries from customers;
• An executive group that handles escalated calls; and
• A customer service support group to assist during times of high call volume;

Several technology projects are scheduled for completion early in 2001, which will further increase the company's service levels, such as introduction of a customer service website for borrower information, borrower surveys, and an automatic call-back feature for the VRU. Standard & Poor's believes the company has a well-controlled customer service department.  

Escrow Administration
The company's well-managed escrow department benefits from its capable oversight over its third-party providers that demonstrate competency in tax and insurance processing. Management successfully consolidated its four insurance vendors, and now uses just two companies, resulting in cost savings and more valuable use of existing resources. The following mechanisms are in place:  

• Complete outsourcing of tax and insurance functions, with quarterly meetings to review expectations and to leverage the existing relationship to improve performance.
• Tax penalties average $0.10 per loan, which is an excellent rate for a company of this size.
• Force placed insurance policy statistics are very low, at only 1% of the portfolio.
• The vendor reviews insurance carrier ratings to ensure claim-paying ability in case of a loss on the property.
• The department initiates a proactive series of calls and letters beginning approximately two weeks before policy expiration to ascertain the status of the current year's invoice.

Default Management
Bank of America Mortgage's practical collection efforts allow the company to maintain very good delinquency levels. Approximately 13% of the portfolio consists of higher delinquency FHA/VA accounts. The department's experienced staff works extended day and evening hours to fully accommodate its geographically diverse borrower base. Management adheres to all applicable investor requirements when initiating mortgagor contact, and makes fine use of its technology to accentuate delinquency administration. Key characteristics of the operation include:  

• Maintenance of an excellent delinquency rate of 2.86%, which is much better than the MBA average of 3.72%;
• An autodialer system to provide flexibility, to customize calling campaigns and to ascertain collector productivity;
• A FHLMC Tier 1 rating for default processing;
• Capabilities for immediate borrower remittance of payments via Western Union Quick Collect®, Easy Pay, and proprietary in-house developed software;
• DAISY software, offered by First American Financial Corp., which allows management to generate numerous default reports for tracking and compliance purposes;
• Management of skip tracing and other ancillary tasks by different personnel, which enables collectors to concentrate solely on resolving past due accounts; and
• FHLMC's EarlyIndicator and FNMA's Risk Profiler scoring programs to identify and to focus on those loans posing a higher risk of default.

Managers perform both telephone monitoring and file reviews of collection staff, although the company's different sites have their own guidelines for these functions. Standard & Poor's recommends that the company adopt a unified approach to this process, which would include frequent monitoring of its employees at least several times a month to ensure compliance with departmental policy and FDCPA guidelines. Collectors may earn additional compensation based on established team and individual goals for the month. Although Standard & Poor's prefers that companies use non-monetary incentives, the plan is not excessive. Overall, Standard & Poor's believes Bank of America Mortgage has solid collection practices.  

Loss mitigation personnel adhere to applicable investor and company specifications when commencing workout initiatives. Depending on the loan type, loss mitigation solicitations generally begin by the 50th day of delinquency. Such efforts continue while the loan is in foreclosure. This is a practical way of minimizing future losses by maintaining communication with the borrower, whose possible change in financial status may warrant reconsideration of a workout option. FNMA maintains on-site representatives at each servicing location, who assist with questions and approvals. Collectors and loss mitigation employees have certain authority to approve limited-term payment plans, although the workout department handles delinquencies of greater than three months duration. Most loss mitigation plans, however, must be presented for management review to ensure that the plan represents the greatest degree of success when curing the default. Workout rates average an efficient 46% across all sites.  

Bank of America Mortgage's judicious foreclosure and bankruptcy procedures allow for timely processing of legal actions, thus minimizing future losses arising from possible REO properties. Controls in effect include:  

• Using FNMA and FHLMC scoring modules, management may delay foreclosure proceedings so collection and loss mitigation personnel can continue to try and resolve accounts before incurring additional legal expenses that can hinder a cure;
• A formal review process before the account can be referred for legal action;
• The use of DAISY, in tandem with servicing system provided data, to generate assorted customized tracking reports to ascertain vendor performance within agreed-upon timeframes;
• The use of the LenStar software program by the Richmond facility for expedient referral and communication with legal counsel. LenStar also allows for electronic filing of proof-of-claim with attorneys;
• The use of the Hogan system for automatic upload of bankruptcy data for updated filings and release information, which assists in filing claims with the court;
• Management selection of counsel through an on-line approved list of attorneys; and
• Management generation of timeline reports on its attorneys, providing both verbal and written feedback, as the company is not yet providing report cards detailing vendor performance.

The company has not yet implemented a common foreclosure referral system because management may purchase Alltel's MaxMilion default system in the near future. MaxMilion will provide the company with several of the same features as LenStar, and enhanced vendor performance mechanisms. Overall, Bank of America has a capable foreclosure and bankruptcy function that helps expedite needed legal actions.  

The Louisville servicing site oversees the disposition and marketing of REO properties. Management exhibits good supervision over the process, which includes:  

• Obtaining two independent valuations on the property upon vacancy;
• Listing agreements of no more than three months through approved brokers;
• The approval and review of list price recommendations by senior management;
• Submission by brokers of monthly status reports on each property, detailing such items as open houses, and total showings;
• On-line availability of the approved broker list available to facilitate Realtor management;
• A company website for REO properties, commenced September 1999, which serves as an additional marketing tool;
• Marketing time averaging 150 days, which is a satisfactory rate; and
• Net sales to market value averaging approximately 91%, which is a good figure for the industry.