Occ Foreclosure Review - 3 Banks Go With Promontory Financial - Bank of America, Wells Fargo, PNC

September 6, 2011
Charlotte, NC 28255
Dear_:
This letter, if acceptable to and countersigned by you, and upon approval by the Office of the
Comptroller ofthe Currency ("OCC"), will serve as the agreement (the "Agreement") between the Bank
of America Corporation and Promontory Financial Group, LLC ("Promontory") governing Promontory's
conduct of the Foreclosure Review required by Article VII of the Consent Order entered into by the Bank
of America, National Association (together with Bank of America Corporation, "BAC") and the OCC on
April 13, 2011 (the "Consent Order").
BAC and Promontory agree that the purpose of the Foreclosure Review is to carry out all the
requirements of Article VII of the Consent Order and, in particular, to identify borrowers who suffered
financial injury as a result of any error, misrepresentation, or other deficiency as set forth in the Consent
Order. BAC and Promontory believe that the activities outlined in the Agreement represent a
comprehensive and robust process to achieve this purpose, based on what both parties know prior to
commencement of the Foreclosure Review. However, they recognize that, during the course of the
review, Promontory will gather and analyze information that may lead it to conclude independently that
it must conduct additional review to ensure that the Foreclosure Review accomplishes its purpose.
While the Agreement cannot explicitly incorporate such potential additional review, BAC and
Promontory intend the Agreement to authorize Promontory to provide the services necessary to
complete the Foreclosure Review.
1. BACKGROUND
The Consent Order: On April 13, 2011, BAC and the OCC entered into the Consent Order, which relates
to the conduct of BAC's mortgage servicing business. Article VII ofthe Consent Order requires BAC,
within 45 days of the date of the Consent Order, to retain an independent consultant to review certain
residential mortgage foreclosure sales, actions, or proceedings (including foreclosures that were in
process or completed) for loans serviced by BAC that have occurred or been pending at any time from
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Bank of America
September 6, 2011
January 1, 2009 to December 31, 2010 (the "Foreclosure Review") within 120 days following the OCC's
approval of the Agreement.
2. ORGANIZATION OF THE AGREEMENT
Section 3 of the Agreement sets forth the Agreement's essential terms and conditions. Section 3.a sets
forth an affirmative statement of the parties' intent to comply with the terms of the Consent Order.
Section 3.b identifies the project name. Section 3.c describes the scope and timing of services to be
provided by Promontory pursuant to the Agreement. Section 3.d sets forth the performance period.
Section 3.e identifies work sites. Section 3.f describes the fees that Promontory expects to charge BAC
for services performed under the Agreement, as well as the costs for which BAC will reimburse
Promontory. Section 3.g sets forth acceptance criteria. Sections 3.h and 3.i identify project managers.
Section 3.j identifies subcontractors that Promontory intends to use. Section 3.k sets all other terms and
conditions governing the conduct of the agreement.
Article VII(2) of the Consent Order requires the Agreement to include four items. The table below
summarizes those items and indicates the section and page of the Agreement that responds to each of
them.
AGREEMENT
REQUIREMENT SECTION PAGE
Methodology for conducting the Foreclosure Review Attachment A 1
Expertise and resources to be dedicated to the Foreclosure
Review Attachment B 1
Completion ofthe Foreclosure Review within one hundred Agreement
twenty (120) days from approval of the Agreemene Section 3.d.ii.1 12
Commitment that any workpapers associated with the
Foreclosure Review be made available to the OCC immediately Agreement
upon request Section 3.c.v 11
Three attachments provide important supplemental information and are integral to the Agreement:
Attachment A sets forth the methodology Promontory intends to use in accomplishing the Foreclosure
Review. In accordance with the terms of the Consent Order, Attachment A includes (i) a description of
the information systems and documents that Promontory will review, including the selection of criteria
for cases to be reviewed; (ii) the criteria Promontory intends to apply in evaluating the reasonableness
1 The review will necessarily be concluded in greater than 120 days due to the size of the sample anticipated to be
reviewed, and the final timeframe estimated in this letter.
Foreclosure Review Engagement Letter, page 2
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of fees and penalties; (iii) other procedures necessary to make the required determinations (such as a
process for submission and review of borrower claims and complaints); and (iv) Promontory's proposed
sampling techniques, including both a full description of the statistical basis for the sampling methods
chosen, as well as procedures to increase the size of the sample depending on results of the initial
sampling.
Attachment B describes the resources and expertise Promontory will use to complete the Foreclosure
Review, including personnel and information systems. Attachment B further describes Promontory's
plans for enlisting additional resources necessary to complete the Foreclosure Review in the event that
the initial sampling identifies the need for more extensive file review.
Attachment C details Promontory's policy on conflicts of interest.
3. TERMS AND CONDITIONS
a. COMPLIANCE WITH CONSENT ORDER
BAC and Promontory intend the Agreement to comply fully with the requirements of Article VII of the
Consent Order. In the event that the OCC requires further refinement of the Agreement as a condition
of its approval, BAC and Promontory agree to work together in good faith to make refinements
acceptable to the ace.
b. PROJECT NAME
Foreclosu re Review
c. SCOPE AND TIMING OF PROMONTORY SERVICES
i. Foreclosure Review.
Within 423 days2 depending on the sample size reviewed (see Attachment B for details regarding
resource estimates) and following the OCC's approval of the Agreement, as further described below,
Promontory will conduct an independent review of certain residential foreclosure actions regarding
individual borrowers with respect to BAC's mortgage servicing portfolio. Promontory's review shall
include residential foreclosure actions or proceedings (including foreclosures that were in process or
completed) for loans serviced by BAC, whether brought in the name of BAC, the investor, the mortgage
note holder, or any agent for the mortgage note holder (including the Mortgage Electronic Registration
System ("MERS")), that have been pending at any time from January 1, 2009 to December 31,2010, as
well as residential foreclosure sales that occurred during this time period.
2This assumes an initial ramp-up period of 45 days plus a file review period of 378 days based on a sample size
range of 35,000 files, 200 File Reviewers, and an average file review time of ten hours. Detailed assumptions are
included in Attachment B.
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Bank of America
September 6, 2011
ii. Report of Findings.
Within thirty (30) days of completing the Foreclosure Review, Promontory will prepare a written report
detailing the findings of the Foreclosure Review ("Foreclosure Review Report"). Upon completion,
Promontory will simultaneously deliver the Foreclosure Review Report to the members of the Board of
Directors of BAC (the "Board"), the Compliance Committee established in accordance with Article II of
the Consent Order, the OCC's Deputy Comptroller for Large Bank Supervision, and the OCC's Examiner in
Charge.
iii. Reporting.
1. Periodic Reports to Management.
Promontory will report to BAC at regular intervals and in a form to be mutually agreed upon, no less
than every fourteen (14) days, concerning the status of its performance of services under the
Agreement. At a minimum, Promontory's reporting will identify any respects in which the
accomplishment of milestones is at risk, any need(s) for assistance from BAC, and any findings or
observations believed by Promontory likely to warrant inclusion in the Foreclosure Review Report.
2. Ad Hoc Reports to Management.
Managing Directors assigned by Promontory to this engagement shall be reasonably available to BAC
management by telephone, e-mail, or in-person for ad hoc consultations and status reports throughout
the period of the Agreement.
3. Reporting to the Board(s).
Upon reasonable notice, Promontory will report to the Board, the Compliance Committee of the
Enterprise Risk Committee, or any other committee of the Board charged with oversight of BAC's efforts
to comply with the Consent Order, for the purpose of discussing the status of Promontory's provision of
services pursuant to the Agreement and any findings or observations Promontory may have made in the
course of providing such services.
4. Reporting to the OCe.
If requested by BAC or the OCC, Promontory will meet with representatives of the OCC to discuss the
status of the Foreclosure Review, the findings set forth in the Foreclosure Review Report, or any other
matters germane to this engagement.
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Bank of America
September 6, 2011
iv. Independence.
1. Independence of Consultant Conducting Foreclosure Review
Promontory has been retained to conduct the Foreclosure Review, an independent review of certain
residential foreclosure actions regarding individual borrowers with respect to BAC's mortgage servicing
portfolio. Promontory agrees that the Foreclosure Review will comply with all requirements set forth in
Article VII of the Consent Order, and that Promontory will conduct the Foreclosure Review as separate
and independent from any review, study, or other work performed by BAC or its contractors or agents
with respect to BAC's mortgage servicing portfolio or BAC's compliance with other requirements of the
Consent Order, as set forth below:
1.1. Conduct of the Foreclosure Review by Promontory shall not be subject to direction,
control, supervision, oversight, or influence by BAC, its contractors or agents.
Promontory shall immediately notify the OCC of any effort by BAC, directly or
indirectly, to exert any such direction, control, supervision, oversight, or influence
over Promontory, its contractors, or agents.
1.2. Promontory agrees that it is solely responsible for the conduct and results of the
Foreclosure Review, in accordance with the requirements of Article VII ofthe
Consent Order.
1.3. The conduct of the Foreclosure Review shall be subject to the monitoring, oversight,
and direction of the Oce. Promontory agrees to promptly comply with all written
comments, directions, and instructions of the OCC concerning the conduct of the
Foreclosure Review, and that it will promptly provide any documents, workpapers,
materials, or other information requested by the OCC, regardless of any claim of
privilege or confidentiality.
1.4. Promontory agrees to provide regular progress reports, updates, and information
concerning the conduct of the Foreclosure Review to the OCC, as directed by the
Oce.
1.5. Promontory will conduct the Foreclosure Review using only personnel employed or
retained by Promontory to perform the work required to complete the Foreclosure
Review. Promontory shall not employ or use services provided by BAC employees,
or contractors or agents retained by BAC with respect to the Consent Order or with
respect to matters addressed in the Consent Order, in order to conduct the
Foreclosure Review, except where the OCC specifically provides prior written
approval to do so.
1.6. Subject to the requirements and restrictions of 1.5 above, including the requirement
of specific approval by the OCC, Promontory may utilize documents, materials or
other information provided by BAC, and may communicate with BAC, its
contractors, or agents, in order to conduct the Foreclosure Review. For example,
Promontory may communicate with BAC employees to obtain clerical assistance, to
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Bank of America
September 6, 2011
determine if information provided is complete or accurate, to verify or confirm
information concerning specific case files, or to communicate with BAC employees
regarding case files such that errors or omissions may be brought to Promontory's
attention; however, BAC employees may not influence or attempt to influence
determinations concerning the findings or recommendations of Promontory,
whether regarding specific case files, categories of cases, or the Foreclosure Review
more generally.
1.7. Promontory agrees that any legal advice needed in conducting the Foreclosure
Review shall be obtained from the outside law firm whose retention for that
purpose has been approved by the Oce. Promontory agrees not to obtain legal
advice (or other professional services) in conducting the Foreclosure Review from
BAC's inside counsel, or from outside counsel retained by BAC or its affiliates to
provide legal advice concerning the Consent Order or matters contained in the
Consent Order.
1.8. BAC and Promontory agree that if the OCC determines, in its sole discretion, that
Promontory has not been fully compliant with the foregoing standards (nos. 1.1 to
1.7 above), the OCC may direct BACto dismiss Promontory and retain a successor
consultant, in which case BAC shall have no further obligation to Promontory other
than for services performed up to that date for BAe.
2. Further Information Regarding Promontory's Independence
While the parties envision a consultative working relationship, as an independent consultant,
Promontory will have sole responsibility for the methodology, findings, and observations set forth in the
Foreclosure Review Report.
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Bank of America
September 6, 2011
None of Promontory's previous engagements with BAC relate closely to the subject matter of the
Foreclosure Review. The Foreclosure Review will not require Promontory to evaluate or re-evaluate any
of the findings and observations and recommendations it has made in prior engagements. Accordingly,
Promontory's prior work with BAC will not affect Promontory's objectivity and thoroughness in
performing the Foreclosure Review.
BAC has a history of engaging Promontory precisely for the purpose of providing independent advice.
Promontory and BAC agree that the success of the Foreclosure Review will require Promontory to
conduct itself with a high degree of independence.
3. Promontory's Past Work with BAC
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September 6, 2011
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4. Actual or Potential Conflicts of Interest
Promontory has been engaged by multiple clients to perform a variety of advisory services relating to
the April 13, 2011 consent orders issued by the OCC and FRB. Promontory believes these clients share a
common interest in complying fully with the requirements of the OCC and the FRB consent orders, that
their interests in this regard are not adverse, and that Promontory's work with them, accordingly, does
not present a conflict of interest.
Promontory's Conflict of Interest Policy is attached to the agreement as Attachment C.
5. Promontory Subcontractors
Ernst & Young, LLP ("EyJI)
EY primarily provides advisory and tax services in areas that include global markets, wealth
management, consumer banking, mortgage, finance, treasury, capital management, risk, compliance
and technology. EY's client base is broad and global and EY is not dependent on BAC for its economic
well-being, however, similar to other large firms providing professional services BAC is a significant
client. EY performs professional services pursuant to the applicable rules and regulations of the SEC,
Public Company Accounting Oversight Board, the American Institute of Certified Public Accountants, and
other professional standards setting bodies.
EY work has consisted
EY has also assisted BAC in preparing responses to regulatory inquiries in numerous cases. EY's role on
these matters has consisted primarily of assistance with project management, data gathering, and fact-
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based analysis. EY has not offered an expert opinion or acted in an advocacy role on any of these
regulatory inquiries.
BOA-EL-00000010
Bank of America
September 6, 2011
Hudson Cook LLP
Promontory legal counsel Hudson Cook, LLP ("Hudson Cook") has represented BAC from time to time in
connection with various related consumer finance compliance matters and a range of regulatory advice,
including Regulation B, Regulation Z, state limitations on fees in connection with foreclosure MRAs, and
CARD Act issues. Certain of these touch on mortgage servicing activities, although none of these has
been in a representation or advocacy role for BAC on foreclosure issues. BAC has not retained Hudson
Cook for any representation relating to the Consent Order or legal advice concerning BAC's obligations
under the Consent Order with respect to any corrective action that the Consent Order may require BAC
to take. Further, Hudson Cook also represents other mortgage servicers from time to time in
connection with similar types of consumer finance-related matters; however, none of these has been in
a representation or advocacy role on foreclosure issues.
Fried, Frank, Harris, Shriver, & Jacobson LLP
Promontory legal counsel, Fried, Frank, Harris, Shriver & Jacobson LLP ("Fried Frank"), has represented
BAC from time to time, although none of this work is of a nature that impacts Fried Frank's ability to act
independently. Specifically, Fried Frank has not engaged in any past work in a representation or
advocacy role for BAC on foreclosure issues (even of a minimal nature), including:
Conducting foreclosure re-filings or other foreclosure process remediation work for BAC.
Representation of BAC in response to inquiries by the state attorneys general, the DOJ, or
Bankruptcy Trustees on foreclosure matters.
Representation of BAC in negotiations with the state attorneys general, the DOJ, or Bankruptcy
Trustees on foreclosure matters.
Representation of BAC in negotiation of the OCC and the FRB Consent Orders.
Advising BAC regarding the OCC and FRB horizontal reviews from fall 2010.
Acting as foreclosure counsel for BAC by filing foreclosure actions on BAC's behalf.
Advising BAC regarding limitation of liability for its foreclosure-related practices.
Providing a legal opinion for BAC on a foreclosure-related matter at issue in the Foreclosure
Review.
Additionally, in the past and presently Fried Frank has not undertaken, and is not now engaged in, a
representation or advocacy role in work related to or for any other bank or financial institution with
respect to foreclosure issues in any of the following:
Representation of any such bank or financial institution in response to inquiries by the state
attorneys general, the DOJ, or Bankruptcy Trustees on foreclosure matters.
Representation of any such bank or financial institution in negotiations with the state attorneys
general, the DOJ, or Bankruptcy Trustees on foreclosure matters.
Representation of any such bank or financial institution in negotiation of the OCC and FRB
Consent Orders.
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Advising any such bank or financial institution regarding the acc and FRB horizontal reviews
from last fall 2010.
Acting as foreclosure counsel for any such bank or financial institution by filing foreclosure
actions on the bank's or financial institution's behalf.
Advising any such bank or financial institution regarding limitation of liability for its foreclosure
related practices.
Providing a legal opinion for any such bank or financial institution on a foreclosure-related
matter at issue in the Foreclosure Review.
v. Workpapers
Promontory will make all workpapers associated with performance of the Foreclosure Review available
to the acc immediately upon request.
d. PERFORMANCE PERIOD
i. Start Date of the Engagement. As of the date of the Agreement.
ii. Milestones. As set out in the Agreement and the Consent arder:
1. Promontory will complete the Foreclosure Review within an estimated 423 days3
depending on the sample size reviewed (see Attachment B for details regarding
estimated resourcing) following the acC's approval of the Agreement or such later
date as the acc may specify in response to a request for extension or otherwise;
2. Promontory will complete the Foreclosure Review Report within 30 days following
completion of the Foreclosure Review.
iii. End Date. Upon the acC's acceptance of or non-objection to the Foreclosure Review
Report.
e. WORK SITE: Primarily at BAC locations
f. FEES:
For the services of a team of management, team leads, senior analysts, and analysts, to deliver a review
of an estimated 35,000 files over a 14-month period, and related services, such as quality assurance
activities (estimated 5,600 files subject to quality assurance), quantitative analysis, interpretation of
sampling results, and Request for Information Team activities, Promontory will charge BAC a monthly
amount based on the number and mix of professionals required to perform such services.
3 This assumes an initial ramp-up period of 45 days plus a file review period of 378 days based on a sample size
range of 35,000 files, 200 File Reviewers, and an average file review time of ten hours. Detailed assumptions are
included in Attachment B.
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Bank of America
September 6, 2011
As further detailed in Attachment B, and based on the working assumptions set forth therein,
Promontory envisions that performance of necessary file review services will require it to field a File
Review Team with significant experience in mortgage servicing, foreclosure and loss mitigation activities,
or other relevant professional or educational backgrounds comprising approximately 274 FTEs
(including an estimated 200 File Reviewers, 20 Senior File Reviewers, three File Review Team Leaders,
ten Information Analysts, 20 File QA Reviewers, six Data Management specialists, and related
management staff) on average over the course of the engagement.
For the services of a team of management, team leads, senior analysts, and analysts to deliver a 100
percent review and disposition of an estimated 253,500 complaints submitted through the Complaint
Process (assuming a 20 percent response rate) and related quality assurance activities (estimated 31,700
complaints subject to quality assurance), Promontory will charge BAC a monthly amount based on the
number and mix of professionals required to perform such services at both the Claim Intake Company
and BAC sites.
As further detailed in Attachment B, and based on the working assumptions set forth therein,
Promontory envisions that performance of necessary complaint review services will require it to field a
complaint review team of analysts, professionals and management with appropriate experience and
subject matter expertise comprising approximately 195 FTEs (including 145 Complaint Reviewers, 15
Senior Complaint Reviewers, four Complaint Team Leaders, 19 Complaint QA Reviewers, and related
management staff) on average over the course of the engagement.
These monthly amounts incorporate general management of all services provided under the Agreement,
management and leadership of each major workstream (file review, quantitative analysis and
evaluation, quality assurance, complaints, data and documentation management), interviews of, liaison
with and periodic and ad hoc reporting to and consultations with members of BAC's senior management
and directors and representatives of the OCC, operation of a Project Management and Staffing Office,
recruitment, screening, and oversight of qualified human resources, provision of an effective case
management system and information technology expertise, process design and training activities,
oversight and management of external counsel support, preparation of a final report and creation of a
document repository that provides evidence of the performance of the Foreclosure Review at the
conclusion of the Foreclosure Review, and similar services.
Regulatory direction, results of the File Review, and the actual response to the borrower complaint
outreach process could require large adjustments in the number, qualifications, and cost of resources
Promontory must devote to one or more of the types of services described above.
BAC will reimburse Promontory for costs associated with engaging independent legal counsel, Hudson
Cook and Fried Frank, and for costs associated with populating and delivering appropriate review tools.
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September 6, 2011
BAC also agrees to reimburse Promontory for all reasonable out-of-pocket expenses incurred in the
course of providing professional services under the Agreement, such as travel, telephone, lodging
expenses, etc.
g. ACCEPTANCE CRITERIA
In addition to the terms of the Agreement, acceptance shall be subject to the Consent Order and any
requirements placed on this engagement by the ace.
h. BAC CONTACT
i. PROMONTORY CONTACT
See Attachment B for additional team members.
j. PROMONTORY SUBCONTRACTORS
Ernst & Young, LLP
Hudson Cook, LLP
Fried, Frank, Harris, Shriver, & Jacobson LLP
k. OTHER PROVISIONS
Cooperation. BAC's cooperation with Promontory is essential to Promontory's ability to fulfill its
responsibilities under this engagement. In particular, Promontory will expect BAC to make its officers,
directors, and employees reasonably available to Promontory for interviews, meetings, or discussions as
requested by Promontory, and to provide Promontory, pursuant to the terms of the Nondisclosure
Agreement referenced below, with timely access to documents and other records Promontory may
require to complete its work in a timely manner.
Intellectual Property. Promontory provides services to multiple clients and works on an ongoing basis
to improve the Promontory Materials (as defined below) for the benefit of all clients. BAC acknowledges
and agrees and the Agreement confirms that Promontory solely owns and will retain all right, title, and
interest, including all Intellectual Property Rights (as defined below), in and to all Promontory Materials,
whether conceived, developed, enhanced, reduced to practice, or otherwise created before or after the
course of performing this engagement so long as the Promontory Materials do not incorporate BAC
intellectual property or Work Product (as defined below). Promontory will not, however, use any
Promontory Materials in a manner that reveals to an unauthorized third party any confidential
information of BAC in violation of the Agreement.
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Bank of America
September 6, 2011
With the exception of any Promontory Materials incorporated therein, all information, data, materials,
discoveries, inventions, drawings, works of authorship, documents, documentation, models, computer
programs, software (including source code and object code), firmware, designs, specifications,
processes, procedures, techniques, algorithms, diagrams, methods, and all tangible embodiments of
each of the foregoing (in whatever form and media) conceived, created, reduced to practice, or
prepared by or for Promontory at the request of BAC pursuant to the Agreement or within the scope of
services provided under the Agreement, whether or not prepared on BAC's premises and all Intellectual
Property Rights therein (the "Work Product"), shall be owned exclusively by BAC. To the extent that the
Work Product incorporates any Promontory Materials, Promontory hereby grants to BAC a perpetual,
worldwide, irrevocable, transferable, sub-licensable (on multiple levels), royalty-free, non-exclusive
license to use, execute, reproduce, display, perform, distribute, and otherwise exploit any of the
Promontory Materials incorporated into the Work Product for any business purpose. For the avoidance
of doubt, "Work Product" shall not include Promontory's documentation of services (i.e., work papers),
which includes the working papers as required by professional standards, internal records of services
provided, internal quality control documentation, internal notes, internal records, internal emails,
internal records related to employee management, internal work plans, and internal status trackers.
For purposes of the Agreement, "Intellectual Property Rights" means any and all copyrights, copyright
registrations and applications, patents, patent applications, trade secrets, trademarks, service marks,
trademark and service mark registrations and applications, rights in trade dress, trade names, other
indicia or origin, domain names, and any other intellectual property or proprietary rights anywhere in
the world in any form or medium now known or later devised. For purposes of the Agreement,
"Promontory Materials" means any and all templates and other formats, checklists, methodologies, risk
calculators, other diagnostic tools, and other information, inventions and works of authorship
conceived, developed, enhanced, reduced to practice or otherwise created by or on behalf of
Promontory, but specifically excluding any Work Product.
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Confidentiality. The Agreement and all data, trade secrets, business information and other information
of any kind whatsoever that BAC discloses, in writing (which shall include any electronic transfer of
information by e-mail,overthe Internet or otherwise), orally, visually, orin any other medium, to
Promontory or to which Promontory obtains access and that relates to BAC shall be deemed
"confidential information" under the Nondisclosure Agreement, dated January 28, 2010, by and
between Promontory and BAC, and shall be subject to the terms and conditions of such Nondisclosure
Agreement. Promontory shall not knowingly permit any of its representatives, consultants, affiliates
and independent contractors (each a "Representative") to have access to the confidential information,
premises, records, or data of BAC when such Representative: (a) has been convicted of a crime or has
agreed to or entered into a pretrial diversion or similar program in connection with: (i) a dishonest act or
breach of trust, as set forth in Section 19 of the Federal Deposit Insurance Act, 12 U.s.c. 1829(a); or (ii) a
felony; or (b) uses illegal drugs. Notwithstanding anything in the Agreement to the contrary,
Promontory shall conduct at its expense background checks on its employees who will have access
(whether physical, remote, or otherwise and whether on or off BAC premises) to BAC facilities,
equipment, systems, or data and such background checks shall comply with BAC procedures and
requirements. Promontory shall report to BAC on background checks done, prior to such employee
being granted such access.
Recovery. Promontory agrees to establish, maintain, implement per the terms thereof, a Business
Continuity Plan. The Business Continuity Plan must be in place and delivered to BAC within forty-five
(45) calendar days after the effective date of the Agreement. The Business Continuity Plan shall be
delivered annually thereafter and shall include, but not be limited to, the items called for in Schedule B
entitled "Recovery," as applicable. If BAC objects in writing to any provision of such plans and controls,
Promontory shall respond in writing within thirty (30) calendar days, explaining, among other matters
Promontory wishes to include in its response, the actions Promontory intends to take to cure BAC's
objection.
Subcontracting. BAC acknowledges that Promontory engages the services of its affiliates, as well as the
services of consultants, such as EY, and law firms, such as Hudson Cook and Fried Frank, who are
independent contractors to assist Promontory in the execution of engagements for its clients
(Promontory affiliates, EY, and Promontory consultants, collectively "Approved Subcontractors"). BAC
agrees that Promontory may engage the services of the Approved Subcontractors in connection with the
services to be provided under the Agreement; provided, however, that with respect to subcontractors
other than the Approved Subcontractors, Promontory shall obtain BAC's prior written consent to their
use, such consent not to be unreasonably withheld, and provided that the Approved Subcontractors and
any such subcontractors are subject to the obligations contained within the Agreement and the
Nondisclosure Agreement.
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Bank of America
September 6, 2011
Not Law Firm or Lobbyist. BAC acknowledges and agrees that Promontory is not a law firm and that no
part of the services to be performed pursuant to the Agreement shall constitute or is intended to
constitute legal advice or the rendering of legal services. BAC further acknowledges that Promontory is
not a registered lobbyist under any state or federal laws. BAC agrees that Promontory will not be called
upon to engage in lobbying activities as part of its work on this engagement.
Standards. Promontory shall provide all services in accordance with the Agreement and with a high
degree of care and skill, utilizing its best professional judgment and commercially reasonable and
acceptable business practices. The services being performed under the Agreement are not intended to,
nor do they, constitute a promise or guarantee of a particular outcome.
Acknowledgment. Promontory provides services to multiple clients within the financial services
industry. BAC acknowledges that these clients may be direct or indirect competitors of BAC (including
major residential mortgage servicers subject to the interagency horizontal examination) and that the
services Promontory provides to such clients may be similar to the services provided to BAC hereunder
(including assistance with enforcement actions based upon the findings of the interagency horizontal
examination). Promontory anticipates that other similarly-situated mortgage servicers may retain it to
assist with enforcement actions based upon the findings of the interagency horizontal examination. In
such event, the Agreement envisions the creation of a central team, which will provide support to each
engagement, including quality assurance, may share information regarding regulatory expectations,
methodologies, project planning, reporting formats, etc., and, where appropriate, may communicate
with regulators on behalf of these clients. However, Promontory will not share confidential information
of BAC with its other clients, including similarly-situated mortgage servicers, nor will Promontory share
confidential information of its other similarly-situated mortgage servicer clients with BAC. Promontory
also provides certain services to MERSCORP, Inc. and MERS, which services derive from an examination
conducted by the banking agencies in conjunction with the interagency horizontal examination.
Notwithstanding the foregoing, BAC consents to Promontory's work for such clients subject to the
confidentiality obligations of the Agreement and waives any actual, potential, or perceived conflict of
interest that may arise from Promontory's work on this engagement. Notwithstanding anything to the
contrary in the Agreement and solely for purposes of the Agreement, "confidential information" shall
not include information obtained from regulators that does not uniquely apply to BAC or its affiliates.
Termination. Either party may terminate the Agreement at any time upon written notice delivered to
the other party; provided, however, that (i) BAC shall remain liable for fees and expenses payable to
Promontory in respect of this engagement and accrued through the effective date of termination; (ii)
termination of the Agreement will be without prejudice to any legal rights or obligations that may
already have arisen; and (iii) the intellectual property, confidentiality, limitation of liability, and
indemnification provisions of the Agreement shall survive termination.
BOA-EL-00000017
BOA-EL-00000018
BAC Foreclosure Review Engagement Letter: Attachment A
September 29, 2011
Attachment A
Foreclosure Review Methodology
Contents
Proprietary and Confidential Treatment Requested
2
3
6
6
6
8
10
23
33
1
BOA-EL-00000019
September 29, 2011
This document outlines the proposed methodology for Promontory Financial Group, LLC ("Promontory")' acting as
Independent Consultant, to perform a review of certain residential foreclosure actions by Bank of America ("BAC")
between January 1,2009 and December 31,2010, pursuant to Article VII of the Consent Order (AA-EC-11-12) (the
"Consent Order") of the Office of the Comptroller of the Currency (the "OCC"), dated April 13, 2011 (the
"Foreclosure Review"). The primary purpose of the Foreclosure Review is to identify borrower financial injury as a
result of operational issues that occurred during the course of foreclosure actions or proceedings, including
foreclosures that were in process or completed over the relevant period.
Reviewers will conduct a detailed review, determining if exceptions and financial injury are present. Article VII(3) of
the Consent Order specifies that the review at a minimum determine:
(a) whether at the time the foreclosure action was initiated or the pleading or affidavit filed (including in bankruptcy
proceedings and in defending suits brought by borrowers), the foreclosing party or agent of the party had
properly documented ownership of the promissory note and mortgage (or deed of trust) under relevant state
law, or was otherwise a proper party to the action as a result of agency or similar status;
(b) whether the foreclosure was in accordance with applicable state and federal law, including but not limited to the
SCRA and the u.s. Bankruptcy Code;
(c) whether a foreclosure sale occurred when an application for a loan modification or other Loss Mitigation was
under consideration; when the loan was performing in accordance with a trial or permanent loan modification;
or when the loan had not been in default for a sufficient period of time to authorize foreclosure pursuant to the
terms of the mortgage loan documents and related agreements;
(d) whether, with respect to non-judicial foreclosures, the procedures followed with respect to the foreclosure sale
(including the calculation of the default period, the amounts due, and compliance with notice periods) and post
sale confirmations were in accordance with the terms of the mortgage loan and state law requirements;
(e) whether a delinquent borrower's account was only charged fees and/or penalties that were permissible under
the terms of the borrower's loan documents, applicable state and federal law, and were reasonable and
customary;
(f) whether the frequency that fees were assessed to any delinquent borrower's account (including broker price
opinions) was excessive under the terms of the borrower's loan documents, and applicable state and federal law;
(g) whether Loss Mitigation Activities with respect to foreclosed loans were handled in accordance with the
requirements of the HAMP, and consistent with the policies and procedures applicable to the Bank's proprietary
loan modifications or other loss mitigation programs, such that each borrower had an adequate opportunity to
BOA-EL-00000020
2
September 29, 2011
apply for a Loss Mitigation option or program, any such application was handled properly, a final decision was
made on a reasonable basis, and was communicated to the borrower before the foreclosure sale;
(h) whether any errors, misrepresentations, or other deficiencies identified in the Foreclosure Review resulted In
financial injury to the borrower or the mortgagee.
As required by the Consent Order, this proposal will be presented to the Deputy Comptroller and the Examiner-in
Charge for approval before the full execution of the Foreclosure Review.
As Independent Consultant, Promontory will lead the execution of the work plan described herein, with Ernst &
Young ("EY") assisting with technology and data support for testing and review of individual foreclosures. Specific
testing will be driven by the requirements enumerated in Article VII(3)(a)-(h) ofthe Consent Order.
The Foreclosure Review will include an analysis of residential foreclosure actions or proceedings (including
foreclosures that were in process or completed) for loans serviced by BAC, whether brought in the name of BAC, the
investor, the mortgage note holder, or any agent for the mortgage note holder (including the Mortgage Electronic
Registration System ("MERS")), that have been pending at any time from January 1,2009 to December 31,2010.
The Foreclosure Review will consider a population in excess of 1.27 million residential owner-occupied foreclosed
loans from all loan portfolios, including first lien loans, reverse mortgages, and subserviced loans. A multi-stage
segmentation and sampling process with subsequent focused reviews - to include representation from all states,
the District of Columbia, and the three relevant u.S. territories - will be structured to discover foreclosure actions
leading to borrower financial injury.
The Foreclosure Review will utilize targeted judgmental and statistical sampling methodologies to execute a
sequential testing approach for completing the initial stage of the Foreclosure Review. Based upon the results from
the initial segmentation, sampling, and loan review, it is expected that a refined, second-stage segmentation for the
remaining population of loans will be developed, and that a "deep dive" review of additional foreclosures will take
place. This process will be structured to provide that any foreclosures with characteristics specifically identified by
the supervisors as requiring 100 percent review will be so treated.
The purpose of the second stage segmentation, review, and testing is to develop a final assessment of the existence
and magnitude of financially injurious foreclosure exceptions in the population. The second stage segmentation will
be designed using the results from the initial review to identify specifically targeted subpopulations of the overall
population of foreclosures for selection, review, and testing per the OCC Sampling Methodology Guidance. The
refined segmentation will be based upon judgmental and statistical analysis (e.g., risk scoring or classification tree)
of the initial review results. Second stage testing will be based upon the types of exceptions and errors identified in
the initial stage review.
A depiction of the overall Foreclosure Review process is presented in Figure 1:
Proprietary and Confidential Treatment Requested 3
BOA-EL-00000021
September 29, 2011
Figure 1: Foreclosure Review Process Flow
Identify foreclosure actions that took place during the Consent Order period, Two primary populations are identified:
completed foreclosure actions that result in a sale, and other foreclosures completed without sale, or in progress.
Use acc Methodology to Sample and Test Hypothesis of Zero
Harmful Errors in Segment with 95 percent Power.
Samples with Harmful Errors or Targeted Judgmental Segments
require 100 percent review of remaining foreclosures.
At all levels of review, Promontory will rely on test standards drawn from a vari
be encoded into the Foreclosure Review's case management system
available in paper and/or soft copy formats to manual reviewers at a
and
4
BOA-EL-00000022
September 29, 2011
Promontory will use a multi-level review process to promote accurate and consistent review of foreclosure files.
Each level of the process will incorporate strong quality control procedures. In addition, a separate, dedicated
Quality Assurance Team will audit every level of the review. Promontory, in its sole discretion, will ultimately
determine whether an error, misrepresentation or other deficiency within the scope of Article VII of the Consent
Order occurred, and, if so, whether it resulted in financial injury to the borrower.
At the initial level, reviewers recruited and trained by Promontory will review borrower data for sample files in the
incorporates test standards based on legal and other
research by Promontory and law firms Hudson Cook, LLC ("Hudson Cook") and Fried, Frank, Harris, Shriver &
Jacobson LLP. The 11 allow reviewers to evaluate data appropriate to the essential
characteristics of the files under their review (e.g., for a file relating to a foreclosure filing in Florida, the _
will direct the reviewer to review data essential to the analysis of compliance with applicable Florida
law.)
Specific testing programs have been developed to address the exception risks identified in the Consent Order. Each
time a test identifies such a potential exception, a reviewer will be prompted to confirm or otherwise clear the
exception with detailed explanation. Where a reviewer cannot confirm a particular answer because information in
the file is missing or insufficient, he or she will flag the file for escalation to the Request for Information Team, which
will attempt to locate and supply the missing information. If the results of the review continue to indicate an
exception when all information is present, the file will then flow to the review and Quality Assurance processes
described below.
This level of review will also incorporate strong quality control procedures, administered by Senior File Reviewers
responsible for reviewing files to confirm the accuracy of data entry and identify needs for further reviewer training.
This review process will seek to eliminate from further consideration immaterial or erroneous exceptions arising
from reviewer misunderstanding, data entry errors, etc. Promontory will consider errors, misrepresentations, or
deficiencies evidenced by the files and confirmed by Senior File Reviewer review as "unvalidated preliminary
exceptions."
Promontory will invite a designated BAC team to review each preliminary exception in order, as appropriate, to
supply missing information or bring potential flaws in Promontory's preliminary analysis to Promontory's attention.
At the final stage of review, Promontory project leadership will consider each preliminary exception for which BAC,
as a result of its review, has provided additional relevant information. If, upon consideration of BAC's supplemental
information or analysis, Promontory continues to believe that file analysis correctly indicates the occurrence of an
error, misrepresentation, or other deficiency within the scope of Art. VII(3)(a)-(h) of the Consent Order, Promontory
will deem the exception determination validated and final.
Additionally, Promontory's Quality Assurance Team will oversee the File Review process to ensure that the
established quality and accuracy standards are met within the Foreclosure Review. The Quality Assurance Team
will manually and independently review a random sample of files to revalidate the conclusions of the File Review
Team in regard to classification of an exception or not. The Quality Assurance section, below, provides further detail
BOA-EL-00000023
5
September 29, 2011
concerning the role of the Quality Assurance Team.
On an ongoing basis and in no event later than 30 days of completion of the Foreclosure Review, including the
comprehensive identification of harmful foreclosure errors, Promontory will provide a report of its findings (the
"Foreclosure Report") to the Deputy Comptroller, the Examiner-in-Charge, and the Board. Within 45 days of
submission of the Foreclosure Report, BAC will develop and submit to the Deputy Comptroller and the Examiner-in
Charge a plan to remediate financial injury to borrowers identified in the Foreclosure Report (the "Remediation
Plan"). According to the OCC, OTS, and Federal Reserve Board Foreclosure Review Guidance, financial injury to
borrowers means "monetary harm to the borrower or the mortgagee or owner of the mortgage loan directly caused
by errors, misrepresentations, or other deficiencies identified in the Foreclosure Review." Within 60 days after the
OCC provides supervisory non-objection to the Remediation Plan, BAC will make remediation payments and provide
credits required by the Remediation Plan, and provide the OCC with a report detailing these payments and credits.
BAC has established a governance process, including the chartering of a committee comprised of the Special Advisor
on Remediation Strategies and the heads of Audit and Risk, among others, to oversee the payments under the
Remediation Plan, and will monitor and test the Remediation Plan.
This section provides detailed information on aspects of the Foreclosure Review Process as required by Article VII
(2)(a)-(c) of the Consent Order.
The Foreclosure Review Team will evaluate and test information from several BAC systems, which will be
used to (1) identify the target population of foreclosures subject to the Foreclosure Review, and (2) support
the testing and determinations process conducted as part of the Foreclosure Review.
The major applications that will be used for the Foreclosure Review effort include, but will not be limited
to:

The central system for servicing that contains key data related to the loan. This
includes information on payments, bankruptcy status, and key information on the loan.
_ Modification support systems that track completion of a loan
modification. The systems include information about the modifications as well as status and
additional notes from the modification associates.

A sub-system for foreclosures that contains information related to foreclosure fees and
captures workflow tracking.
BOA-EL-00000024
September 29, 2011

An image repository that contains key documents, including signed modification
documents and modification solicitations to borrowers.

A workflow system that contains data related to short sales and is the primary workflow
system for the Short Sales group.
_ A loan administration portal.
Additional input will be obtained from various databases and spreadsheets maintained by BAC's
Business Area and Information Technology support personnel as well third party sources. Additional
ected to include but m not be limited
The population of foreclosures sub to the Foreclosure Review per the Consent Order has been
identified, using th to include approximately 270,000 loans for which the foreclosure
action was completed with a sale. These loans were identified by selecting all loans that were flagged as
having been in the foreclosure process and which also had a flag indicating that the property had been
sold.
The population of foreclosures that is in-process is also being determined using the The
population is estimated to include approximately 996,700 loans. The in-process population is being
identified by selecting all loans which were flagged as being in the foreclosure process as of January 1,
2009 or which entered the foreclosure process during the period specified by the Consent Order, but
which did not result in, or have not yet culminated in, a foreclosure sale. These foreclosure proceedings
may be ongoing or may have been resolved without a foreclosure sale.
Validation ofthe identified foreclosures is being implemented, and will leverage comparative
information from financial accounting systems of record or third party verifications. Beginning with an
independent calculation ofthe various subpopulations, the Foreclosure Review Team consisting of
personnel from EY, with assistance from BAC Subject Matter Experts, will calculate the individual
subpopulation counts. These counts will then be compared to the original estimated population counts
provided by BAC, with a secondary verification being conducted against the populations that have
previously been reported to the Oce. As this represents an intensive endeavor, validation will be an
ongoing effort and continue to be documented. Any material discrepancies and the associated
reconciliation will also be documented.
Additionally, in cases where reliance must be placed on data maintained by the Business Area or third
parties, alternative methods of verifying the integrity of the data will be employed where feasible. This
may include, but not be limited to, reconciling the information contained in the Business Area or third
party data to its original source data.
BOA-EL-00000025
7
September 29, 2011
We understand that backups of the Systems of Record are maintained in accordance with BAC policy.
Snapshots of the source files used to create both the original population estimates and the independent
calculations will be retained.
Section VII(3)(e) of the Consent Order requires the Independent Consultant to determine whether any fees
or penalties assessed were permissible, reasonable, customary, or if fees or penalties were excessive.
Promontory will make these determinations by testing files against defined exceptions, deeming an
exception to have occurred when the file indicates that BAC charged one or more fees or penalties that
failed one or more test conditions. Because Promontory will test identified loan files against all such
conditions, a single file could include multiple exceptions.
Promontory will test permissibility of fees and penalties by reference to limits established by state law,
federal law, and the borrower's mortgage instruments. Promontory will examine the identified files for
impermissible charges under each of these authorities. If one or more of these authorities limit fees or
penalties, or a particular type of fee or penalty, in the aggregate, Promontory will evaluate total fees and
penalties, or total fees and penalties of that particular type, by reference to that limit.
Considering any limitations on fees or penalties established by the law of the state in which the
residential property securing the loan is located, Promontory will test the identified loan files to
determine:
Whether the type(s) of individual fees and penalties charged to the account was permissible;
Whether the amount(s) of individual fees and penalties charged to the account was permissible;
Whether the sum(s) of individual fees and penalties charged to the account was permissible.
Considering limitations on fees or penalties established by federal law, Promontory will test each loan
file to determine:
Whether BAC impermissibly charged fees or penalties to the account during the pendency of a
borrower's bankruptcy proceeding;
Whether BAC impermissibly charged fees or penalties to the account of an active service
member;
Whether BAC impermissibly charged other fees and penalties.
Considering limitations on fees or penalties established by the mortgage instruments, Promontory will
BOA-EL-00000026
8
September 29, 2011
test the identified loan files to determine whether fees and penalties individually or in aggregate
exceeded amounts as provided for in the borrower's mortgage instruments.
Promontory will evaluate the customariness of fees and penalties by reference to documented surveys
of market rates for such fees conducted by BAC. In the absence of references on market rates for
specific fees, Promontory will consult servicer guidance promulgated by the Federal National Mortgage
Association ("Fannie Mae"), the Federal Home Mortgage Loan Corporation ("Freddie Mac"), the
Department of Housing and Urban Affairs ("HUD"), or the Veterans Administration ("VA") for their
respective insured and investor-owned loans. Promontory expects to deem as "not customary" any fee
or penalty inconsistent with a market rate reference or with guidance in type or amount.
For non-conforming, non-Federal Housing Administration and non-VA loans, Promontory will deem as
"not customary" any fee or penalty inconsistent with Fannie Mae guidance in type or exceeding such
guidance by more than ten percent in amount.
Promontory will evaluate each fee or penalty for reasonableness. Promontory will deem as
"unreasonable" any fee or penalty that:
Is associated with the processing of a borrower request for loss mitigation, including loan
modification;
Was assessed to protect the interests of a secured party when the borrower had accepted and was
in good standing under a temporary loan modification or Trial Period Plan;
Was assessed for late payment when the borrower had made timely payment in an amount
consistent with the terms of an accepted temporary loan modification;
Was assessed to protect the interests of a secured party while the borrower was in good standing
under a permanent loan modification;
Was assessed for forced placement of insurance when appropriate insurance coverage was already
in force; or
Was assessed for forced placement of insurance in an amount exceeding the higher of the loan
balance, property value, or cancelled policy coverage level.
Article VII(3)(f) ofthe Consent Order requires the Independent Consultantto determine whether the
frequency that fees were assessed to any delinquent borrower's account (including broker price
opinions) was excessive under the terms of the borrower's loan documents, and applicable state and
federal law.
BOA-EL-00000027
9
September 29, 2011
In performing this evaluation, Promontory will consider whether BAC assessed the fee or penalty with a
frequency that was:
Impermissible under the law of the state of the residential property associated with loan;
Impermissible under Federal law;
Impermissible under the terms of the borrower's promissory note; or
Uncustomary, based upon reference to the appropriate frequency of such fees as documented by
BAC's market rate fee studies or documented in guidance promulgated by Fannie Mae, Freddie Mac,
HUD, or the VA for their respective insured and investor-owned loans.
Specifically, ill prompt reviewers for detail concerning the types of fees
and penalties assessed and the frequency of their assessment. Preliminary determinations of potential
exceptions will flow to Senior File Reviewers and Quality Assurance for further review.
The balance of this section discusses how testing and review will specifically address the required
determinations in Article VII(3)(a)-(h) of the Consent Order.
The Consent Order requires the Independent Consultant to determine whether, at the time the
foreclosure action was initiated or the pleading or affidavit filed (including in bankruptcy
proceedings and in defending suits brought by borrowers), the foreclosing party or agent of the
party had properly documented ownership of the promissory note and mortgage (or deed of trust)
under relevant state law, or was otherwise a proper party to the action as a result of agency or
similar status.
To make this determination, Promontory will test documentation of ownership against the
standards of applicable state law. For assistance in identifying applicable state law standards,
Promontory has obtained from Hudson Cook, a reputable law firm with experience in state
foreclosure actions, a description of applicable state law in each of the 50 states, the District of
Columbia, Puerto Rico, Guam, and the U.S. Virgin Islands for the period 2007 to 2010.
Promontory will review loan file characteristics and documents to assess whether a particular
foreclosure action is more likely to have an exception relating to the documentation of ownership.
As applicable, Promontory will determine both (a) whether the pleading or affidavit on its face
complies with applicable state requirements, and (b) whether the party asserted as owning the
promissory note and mortgage (or deed of trust) was in fact the owner. Promontory expects to
make this determination by comparing the pleading or affidavit to the foreclosure title report, the
BOA-EL-00000028
September 29, 2011
copy of the recorded mortgage, recorded assignments, and note endorsements. In particular,
reviewers will test and review identified files to determine, among other things, the following:
Does BAC have a copy of the original mortgage note? If not, was there an affidavit of lost
note filed?
Is the note endorsed and signed by the originator of the loan?
Is there a complete chain of endorsements reflected on the note (and signed by an
authorized signor)?
Is there a final endorsement on the note from the seller to "Blank"?
If the endorsement chain is broken, is the foreclosure in a state where possession of the
note is deemed to constitute an overriding establishment of title, and did BAC possess the
note?
Does the name of the lender or mortgagee on the mortgage or deed of trust match the
note?
Did the Trustee Sales Guarantee policy show anything that would indicate an issue with title
that should have stopped foreclosure?
Is the name in the "foreclosed in the name of" field of BAC's database supported by the
review ofthe mortgage documentation?
Is the name in the "foreclosed in the name of" field consistent with the documents filed to
initiate the foreclosure proceedings?
The reviewers will also investigate whether there exist:
Indications that the borrower asserted or complained that the foreclosing party or agent of
the party had not properly documented ownership of the promissory note and mortgage (or
deed of trust).
As appropriate, Promontory will also consider information external to the sample files. External
sources of information may include:
Correspondence among BAC personnel and foreclosure counsel relating to information
concerning ownership of the promissory note and mortgage (or deed of trust); and
Examination and audit reports evidencing weaknesses in the process of establishing ownership.
BOA-EL-00000029
September 29, 2011
The Consent Order requires the Independent Consultant to determine whether the foreclosure
complied with applicable state and federal law, including the Servicemembers Civil Relief Act (
"SCRA") and the u.s. Bankruptcy Code. The Consent Order also requires the Independent
Consultant to determine whether, with respect to non-judicial foreclosures, the procedures
followed with respect to the foreclosure sale (including the calculation of the default period, the
amounts due, and compliance with notice periods) and post-sale confirmations were consistent with
the terms of the mortgage loan and state law requirements.
In making these determinations, Promontory will apply test standards from a compilation of state
foreclosure laws identified and warranted by Hudson Cook to describe applicable state law as that
term is used in Article VII of the Consent Order (the "Foreclosure Survey.") The Foreclosure Survey
includes state law applicable to both judicial and non-judicial foreclosures, including "the
procedures followed with respect to the foreclosure sale (including the calculation of the default
period, the amounts due, and compliance with notice periods) and post-sale confirmations," as
contemplated by Article VII(3)(d) of the Consent Order. With respect to non-judicial foreclosures,
Promontory will also consider the terms of the mortgage loan.
Promontory will consider applicable federal law to include the following:
SCRA; and
u.S. Bankruptcy Code.
Using th Promontory reviewers will review identified sample files
standards. Th II prompt
Promontory's reviewers to capture a range of specific information about the experience of the
borrower such as interest rate reductions, foreclosure stays, and fees assessed or paid. The
II also prompt Promontory's reviewers with a number of questions
depending on the state in which the foreclosure action was initiated, whether the foreclosure action
was judicial or non-judicial, the time at which the foreclosure action was initiated, and other
attributes.
In some instances, Promontory will supplement the file with additional information. For example,
while a certificate of military service or other information in the file may establish a borrower's
eligibility for relief under the SCRA, Promontory expects that the Department of Justice and the
Department of Defense will provide assistance by checking borrowers against available databases of
active military duty personnel to identify additional borrowers who might qualify for the protections
of the SCRA.
BOA-EL-00000030
September 29, 2011
The Consent Order requires the Independent Consultant to determine whether a foreclosure sale
occurred when an application for a loan modification or other Loss Mitigation (as defined in the
Consent Order) was under consideration; when the loan was performing in accordance with a trial
or permanent modification; or when the loan had not been in default for a sufficient period of time
to authorize foreclosure pursuant to the terms of the mortgage loan documents and related
agreements.
Promontory will make these determinations through (1) a targeted query of data extracted from
BAC's systems; and (2) reviewer examination of contents of identified sample files. Reviewers will
record any exceptions in th r review by a Senior File Reviewer and
Quality Assurance. Where a reviewer cannot answer a particular question because file information
is missing or insufficient, the reviewer will flag the file for escalation to the Request for Information
Team, which will attempt to locate and supply the missing information.
The Consent Order requires the independent consultant to determine whether Loss Mitigation
Activities (as defined in the Consent Order) with respect to foreclosed loans were handled in
accordance with the requirements of the Home Affordable Modification Program ("HAMP"), and
were consistent with the policies and procedures applicable to BAC's proprietary loan modifications
or other loss mitigation programs, such that each identified borrower in the sample had an
adequate opportunity to apply for a Loss Mitigation option or program, any such application was
handled properly, a final decision was made on a reasonable basis, and the final decision was
communicated to the borrower before the foreclosure sale.
Promontory will make these determinations through review of the contents of each identified
sample file. Specifically, the ill prompt reviewers for detail concerning
the applications for loan Mitigation programs, and related actions
and communications by BAC. will then prompt reviewers to apply
predetermined test standards to reach a preliminary determination. The test standards include
HAMP requirements for eligibility, solicitation, and qualification. In addition, these standards will
direct reviewers to examine how the bank collected, possibly adjusted and then used borrower and
loan financial information to construct tests for modification eligibility (including HAMP and any
proprietary tests such measuring debt-to-income (DTI) or Net Present Value (NPV)). In instances
where reviewers determine that the inputs to such tests have been incorrectly calculated by the
bank, reviewers will perform the test again, using corrected inputs applied to the bank's own
independently validated models, to alternative models validated by the independent consultant, or
to widely accepted models provided by the US Government or by a Government Sponsored Entity
(GSE). If input errors are found to have led to a modification denial or to a modification being
BOA-EL-00000031
September 29, 2011
granted on less favorable terms for the borrower, an exception will be identified.
Any exceptions thus identified and captured in th will flow to a Senior
File Reviewer for review and validation, and results will also be forwarded to Quality Assurance for
their review. Where a reviewer cannot answer a particular question because file information is
missing or insufficient, the reviewer will flag the file for escalation to the Request for Information
Team, which will attempt to locate and supply the missing information.
Article VII(3)(h) of the Consent Order requires a determination of whether the borrower has
suffered financial injury. The OCC and the Board of Governors of the Federal Reserve System (the
"FRB") issued ace and FRB Guidance - Financial Injury or Other Remediation (the "Financial Injury
Guidance") defining financial injury to the borrower as "monetary harm directly caused by errors,
misrepresentations or other deficiencies identified in the Foreclosure Review." The Financial Injury
Guidance clarifies that "monetary harm does not include physical injury, pain and suffering,
emotional distress or other non-financial harm or financial injury that did not result as a direct
consequence of errors, misrepresentations, or other deficiencies identified in the Foreclosure
Review." Further, the Financial Injury Guidance states that "financial injury does include monies
actually expended by the borrower or mortgagee that directly relate to the foreclosure action,
proceeding, or sale and otherwise would not have been required but for the error,
misrepresentation or other deficiency by the servicer identified in the Foreclosure Review."
In evaluating financial injury to the borrower, Promontory will adhere to the Financial Injury
Guidance, and as it may be modified from time to time by the regulatory agencies. In conducting
this evaluation to assess whether a borrower was subject to financial injury, Promontory will
consider whether investor servicing agreements and/or investor servicing guidance, including those
of the government sponsored enterprises, required BAC to proceed in a certain manner with respect
to a loan. In addition, Promontory will seek the advice of independent legal counsel in order to take
into account relevant legal and administrative precedent and interpretations in determining
whether financial injury to the borrower occurred.
Promontory's Quality Assurance Team will oversee the processes within the Foreclosure Review. The
Quality Assurance Team will inspect 100 percent of all case files until it determines, through
revalidation, that the File Review Teams have achieved a 90 percent accuracy rate, in terms of the
Quality Assurance Team's agreement with their conclusions. Then, Promontory's Quality Assurance
Team will continue to ensure that standards are met through manual and independent review of a
random sample of files decisioned by the File Review Teams. Quality Assurance will also review 100
percent of those exceptions determined to merit financial injury and will reserve the right to apply
discretionary sampling.
BOA-EL-00000032
September 29, 2011
Promontory, as the Independent Consultant, will work with BAC to develop a robust borrower outreach
complaint process (the "Complaint Process") as outlined below and ensure, through ongoing quality
control testing and other oversight measures, that the Complaint Process is functioning to meet its
requirements and objectives. Annex A-1 (attached hereto) sets forth the contemplated end-to-end
process flow ofthe Foreclosure Complaint Process.
Independent, fair, transparent, and well-documented review of borrower complaints is essential to
accomplishing the goals of the Foreclosure Review. Accordingly, the Foreclosure Review will include
both careful analysis of files associated with complaints during the Foreclosure Review period and a
process to prompt and resolve additional borrower complaints while the Foreclosure Review is
underway. In particular, as further described below, under Promontory's independent oversight and
control, BAC will solicit, review, and propose complaint resolutions to Promontory from the relevant
borrower population.
The goals of the Complaint Process are to:
Find and remediate financial injury to borrowers within the scope of the Foreclosure Review;
and
Enhance the effectiveness and credibility of the Foreclosure Review effort through
implementation of another strategy (in addition to statistical and judgmental sampling) that
allows borrowers who believe they have been harmed to identify themselves.
The Complaint Process will include review of 100 percent of in-scope complaints received from
borrowers through any channel since January 1, 2011, and all complaints received through the borrower
outreach process.
1
"In-scope complaints" are defined as complaints regarding residential mortgage
foreclosure actions against a borrower's primary residence that were initiated, pending, or completed in
2009 or 2010. Complaints for borrowers in active litigation will be included if they are otherwise in
scope. For all in-scope complaints received through the borrower outreach process or through any
other channel since January 1, 2011, the Foreclosure Review will be conducted so as to analyze and
resolve the specific complaint raised by the borrower. In cases where the borrower submits a more
generalized complaint (i.e. "my foreclosure was mishandled"), a review of all criteria under Article
VII(3)(a)-(h) ofthe Consent Order will be performed. All in-scope complaints received through this
borrower outreach process, from the launch date of the outreach to the cut-off date 120 days later will
1 Complaints received include those complaints received directly by BAC or through other channels, including, but not limited to: state Attorneys
General, state banking agencies, all other regulatory agencies, housing counselors, and BAC's Executive Customer Relations group.
BOA-EL-00000033
September 29, 2011
be subject to the Foreclosure Review.
Promontory will validate the list of in-scope borrowers prepared by BAC to ensure reliability.
At Promontory's request, BAC is developing a proactive outreach plan for promoting the Complaint
Process to in-scope borrowers consistent with the objective of reaching as many members of the in
scope borrower population as practicable. The borrower outreach process will be a distinct, separate
process from BAC's existing customer service channel.
BAC is participating in an industry consortium effort to maximize consumer awareness of the Complaint
Process, accelerate speed to market and operational execution, simplify messaging and avoid consumer
confusion, and ensure eligible complaints are expeditiously routed to the correct servicer for review.
This solution involves all participating servicers using an experienced and qualified third-party vendor,
Rust Consulting, Inc ("RUST") under a process developed and approved by Promontory and the other
Independent Consultants, subject to the acC's review and non-objection.
Under the oversight of Promontory and other Independent Consultants, the RUST will perform outreach
activities, including direct mail and an outbound/inbound call center, skip tracing or address location
services, and establishing and maintaining a website capable of accepting all complaints and a client
portal to allow servicers to retrieve their respective complaints for processing. A consolidated approach
will minimize borrower confusion by avoiding servicer-specific campaigns in markets simultaneously
while maximizing the impact of mass market advertising.
The third-party solicitation and complaint handling services would be jointly developed and funded by
the participating servicers, under the oversight of the Independent Consultants, and subject to approval
by the ace. These channels will display notification from all participating servicers versus individual
servicers in order to increase third-party impartiality.
Borrower communication will be conducted through a variety of methods and be multi-lingual where
this will increase effectiveness:
Targeted communication: A mix of targeted channels, including direct mail (subject to review by
the acC) and outbound calling, will be used to communicate to these borrowers directly. "Skip
tracing" and other contact management best practices will be employed, including the National
Change of Address database, to improve contact rates. Also, RUST may consider transmittal of
recorded telephone messages to in-scope borrowers informing them of the Complaint Process
and providing a toll-free number and website contact information. Given previous campaign
performance, this approach is expected to reach most impacted borrowers.
Mass channels: Various channels will be used to drive overall awareness of the program and
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support targeted efforts. This will involve advertisements in national newspapers and prominent
publications based on the geographic concentration of relevant borrowers, and incorporating
the data patterns from the statistical sampling. In order to maintain a clear message and avoid
borrower confusion and misdirection, these placements will present a consolidated message
from all participating servicers versus being specific to any single servicer. BAC is working with
other participating servicers to develop a common print advertisement. It is anticipated that
print advertisements will encompass major U.S. media markets representing a substantial
percentage of the borrower population. National media would be utilized to drive awareness
across geographies and participating servicer footprints. National publications, such as People
Magazine and TV Guide, will provide broad and large scale support to responses to drive direct
components of the campaign. Additionally, servicers might purchase incremental media in local
markets with a high concentration of eligible and difficult to contact borrowers. This would
likely focus on cities in California, such as Riverside, Sacramento, Los Angeles, San Diego, cities in
Florida, such as Miami, Fort Lauderdale, Orlando, and Tampa, and Phoenix, Detroit, and Las
Vegas.
Grassroots Awareness: BAC will conduct outreach to neighborhood and not-for-profit groups so
that they can spread awareness of the program, educate their constituents of the Complaint
Process, and so encourage impacted and more difficult to reach borrowers to file a complaint.
This outreach will be selective based on historical performance and the market potential and
BAC would work with entities such as NeighborWorks, Affordable Housing Centers of America,
National Coalition of Asian Pacific, American Community Development (National CAPACD),
National Council of La Raza, and National Urban League.
Communication Content: The content of the communication to borrowers will be designed to
include the relevant information including, but not limited to, the following:
Why the borrower is being contacted;
How eligibility will be determined (i.e., based on in-scope status);
Necessary information that BAC needs from the borrower when the borrower responds;
Channels available to them to contact BAC (including telephone and internet contacts);
Timeframe for filing a complaint with BAC and what to expect from the process, including
when to expect an acknowledgment of the receipt of the complaint.
BAC's proposed messaging methods are as follows:
Sample 1
BOA-EL-00000035
September 29, 2011
Targeted Messaging: Targeted messaging would describe specific eligibility requirements, the process
and steps the borrower should follow, along with instructions on how to submit the required
information and deadlines for submission.
Borrower contact information acquired via: Existing and up-to-date contact information available from
BAC's systems of record; Borrower providing forwarding address; Skip tracing and/or national change of
address information.
Communication Tactics: Direct mail escalating to skip tracing as needed.
Sample 2
Mass/Non-Profit Messaging: An advertisement would describe the eligibility requirements and
encourage anyone who believes they are "In-Scope" to respond.
Communication Tactics: Online: Develop website that applies to all participating servicers that contains
all relevant information for impacted borrowers and the functionality to complete and submit complaint
form. Publications: Placements in national publications to supplement the direct mail program.
BAC's anticipated response channels would include the following:
Industry-wide toll-free number: Borrower information would be collected, including dates they were in
the foreclosure process, name of servicer and loan number, and other pertinent information to assist in
the screening process. Borrowers will be screened, and borrowers passing the screening questions
would either be mailed a complaint form that they can return to file the complaint or be provided the
URL to complete the form online. Data will be compiled by RUST for processing.
Industry-wide website: Borrowers would complete basic screening questions online and if they pass,
they would be prompted to complete a complaint form online. Data would be compiled by RUST for
processing.
Dedicated P.O. Box: A dedicated P.o. Box will be established to receive mailed responses.
In addition, a dedicated webpage within BAC's distressed borrower website domain will be set up where
borrowers can submit a claim online. The website will provide borrowers with relevant background
information and the process for submission of complaints electronically, with email acknowledgment of
the receipt of the complaint.
BAC is already working with other participating servicers to develop a standardized complaint form that
will facilitate the collection of required information and any documentation in an efficient manner. The
BOA-EL-00000036
September 29, 2011
intention is to follow a similar format to that used by borrowers registering complaints via the acC's
Customer Assistance Group and maximize complaint rates by providing borrowers a simple and effective
means of registering a complaint. The Complaint Form will provide a consistent set of questions to be
answered by borrowers, including the current contact information, eligibility determination questions,
the specific nature of the issue, and previous complaint details (if any). A sample Complaint Form is
attached hereto as Annex A-2.
Borrower communication will begin no later than the launch date agreed upon by the servicers and the
ace. Tactical executions will begin with direct mail, followed by mass media support the following the
direct mail program. In addition, for targeted communication, skip tracing, and re-mailing, will follow
the initial wave of direct mail in an effort to contact borrowers for whom BAC receives returned mail. A
clearly defined return mail process (incorporating a dedicated p.a. Box, skip tracing, and reasonable
attempts to locate and contact the borrower) subject to review and approval by Promontory and the
acc will be established to effectively handle all returned mail and to trace the borrower's current
address.
BAC will equip its extensive retail branch network with appropriate materials and training to support the
outreach and awareness process and ensure they are able to address inquiries from walk-in or phone-in
borrowers.
BAC's outreach plan will be subject to Promontory's review and approval, which Promontory expects to
provide in consu Itation with the ace. Promontory, at its sole discretion, may requ ire BAC to adjustthe
plan in order to better achieve the objectives of the Foreclosure Review.
BAC's outreach communications will alert the targeted population to the Complaint Process, explain the
process of submitting complaints, and provide a mail and website response channel. A sample borrower
correspondence is attached hereto, as Annex A-3. The channels will have a unique address to identify
and segregate Foreclosure Review complaints from other complaints. As outlined above, BAC will use a
standard complaint form, approved by Promontory, to promote relevant scope and uniform capture of
essential data to investigate complaints effectively. RUST, under the oversight and control of
Promontory, will perform intake processing involving direct mail and call center, skip tracing, or address
location services, and will establish and maintain a website capable of accepting complaints and a client
portal to allow servicers to retrieve their respective complaints for processing.
Comprehensive training will be developed for the call center agents to effectively handle and document
the complaints, including key information to be collected, information on forwarding/transferring in
scope complaints from the normal customer service processes, and relevant foreclosure complaint
scripts, frequently-asked-questions documents, and other materials.
All complaints received through the borrower outreach process will be logged by RUST. A written
BOA-EL-00000037
September 29, 2011
acknowledgement will be provided to the borrower within seven calendar days of receipt of a complete
complaint form by RUST. A sample acknowledgement letter is attached hereto, as Annex A-4. This
intake process will involve screening of the complaint to confirm that it is in-scope and bona fide. After
validation by Promontory, complaints deemed out of scope will be forwarded to BAC via a clearly
defined transfer process to address through BAC's established complaint processes. Promontory's
validation process for out-of-scope complaints includes 100 percent review of RUST's determination,
coupled with a third level review, performed on a sampling basis, by Promontory's Quality Assurance
Team. Stated another way, Promontory will validate each complaint deemed out of scope by RUST.
Promontory's Quality Assurance Team will review a sample of the complaints where Promontory
concurred with RUST's determination that the complaint was out of scope.
Promontory will track the nature and resolution of each complaint received and periodically report data
to the acc regarding: (i) complaints received through the borrower outreach process; (ii) exclusions of
complaints from the Foreclosure Review and the reason for exclusion; (iii) resolution of the complaint;
and (iv) other data specified in section (h) below.
Each incoming complaint or claim and any supporting documentation provided by a borrower will be
logged and captured by RUST under Promontory's oversight. RUST will then forward all complaints to
BAC. BAC will prepare the case file utilizing a case management system and conduct the initial review of
the complaint. This system will be the repository for the Complaint Process information received from
borrowers, records of BAC's investigation of in-scope claims and complaints, Promontory's review notes,
and the final claim or complaint disposition letter sent to the borrower.
All complaints will be documented and stored in a database that will be archived according to BAC's
existing policies.
Review of complaints received will take place in three stages. In the first stage performed by RUST,
under Promontory's oversight, for complaints that are within scope, the borrower will, if necessary, be
sent an "Incompleteness Letter" to request additional information. Borrowers who do not respond to
the "Incompleteness Letter" will be sent a resolution letter based on an incomplete complaint.
Second, actionable complaints that are within scope will be passed by RUST to BAC. BAC will determine
whether the complaint was resolved previously and:
If the borrower's same complaint was resolved previously, BAC will pass the original complaint,
supporting resolution documentation, and report of its findings to Promontory for review; or
BOA-EL-00000038
September 29, 2011
If the complaint was not resolved previously, or still in the process of resolution, BAC will
process the complaint and provide the complaint, supporting resolution documentation, report of
its findings, and proposed resolution to Promontory for independent review and decision
concerning the complaint at issue. Processing of the complaint by BAC will involve direct borrower
contact where necessary to ensure the complaint is fully understood and assessed.
Third, Promontory will review 100 percent of in-scope borrower complaints and claims, together with
BAC's recommended resolution and supporting documentation, and provide a decision on the
complaint. If Promontory's review requires additional information, Promontory will request such
information from BAC. There are four logical outcomes to a completed initial complaint review:
If Promontory concurs with borrower and BAC resolution and assessment of financial injury,
Promontory logs complaint and resolution for inclusion in the Foreclosure Review Report;
If Promontory disagrees with borrower, concurs with BAC resolution and assessment of
borrower harm, Promontory logs complaint and resolution for inclusion in the Foreclosure
Review Report;
If Promontory concurs with borrower but not with BAC resolution and assessment of borrower
harm, Promontory notifies BAC; or
If Promontory disagrees with the borrower and also disagrees with BAC's resolution and
assessment of borrower harm (e.g., file review indicates BAC responded inappropriately
because borrower was unclear or mistaken in describing the issue), Promontory will notify BAC.
If a disagreement remains, Promontory will make the final determination and log the complaint and
borrower financial injury for inclusion in the Foreclosure Review Report.
All complaints will receive a written response within the period indicated in the written
acknowledgement. In the response, borrowers will be provided information that outlines the results of
the analysis ensuring it adequately addresses all issues the borrower raised in the complaint. Ifthe
analysis/investigation determines remediation is required, the borrower will be so informed in the
written response, which will state that remediation is forthcoming within a specified time period
following approval by the acc of the Remediation Plan.
BAC will create a dedicated Foreclosure Review Group to manage proactively the execution of any
immediate actions resulting from review of the borrower complaint. This may involve stopping a
foreclosure in process, adjusting loan modification agreements, processing rescissions, or any other
action required to promptly address any errors or deficiencies identified and limit any identified
borrower harm. Any such action will be subject to subsequent review by Promontory and any additional
BOA-EL-00000039
September 29, 2011
requirements of the Remediation Plan approved by the ace.
BAC has developed, and will further extend in coordination with RUST, for review and approval by the
Promontory, a detailed suite of complaint metrics and reporting that will facilitate robust management
and oversight by Promontory and the ace. This will include extensive daily and weekly volume,
production, and pipeline statistics and measures for the Complaint Process.
Throughout the Complaint Process, Promontory will publish bi-weekly reports covering at a minimum:
Total complaints and claims received;
Number of in-scope complaints and claims;
Number of exclusions of complaints and the reason for exclusion;
Number of in-scope complaints and claims pending BAC investigation;
Number of in-scope complaints and claims pending Promontory review; and
Number of closed cases.
In addition, BAC will report monthly (internally and to the acc, in a standardized format to include loan
level and aggregate numbers) on the following:
Number of complaints received;
Type or nature of complaint received;
Number of complaints in-scope and out-of-scope;
Number of exclusions of complaints and the reason for exclusion;
Number of complaints acknowledged;
Number of complaints in process;
Number of complaints not yet analyzed;
Number of complaints responded to;
Complaints disposition;
Number of complaints requiring remediation;
Number of complaints remediated;
Aging reports as warranted; and
Comments section to provide for other pertinent information.
The infrastructure and technology to support the handling of complaints is anticipated to include a call
center, web-site and web-form, and a case management system and database. Extensive capacity and
critical testing will be performed to ensure the infrastructure can handle the anticipated high complaint
intake volumes.
In addition to Promontory's 100 percent review of in-scope complaints, Promontory's Quality Assurance
Team will perform random sampling of the Complaint Process, including out-of-scope complaints,
BOA-EL-00000040
September 29, 2011
incomplete complaints, and in-scope complaints to revalidate the conclusions of the Complaint Process.
The Complaint Process is anticipated to launch on a date agreed upon by the servicers and the OCC, with
a cut-off date for complaints 120 calendar days after mailing the final batch of direct mail solicitations.
The overall population for the Foreclosure Review is specified in the Consent Order. It consists of residential
foreclosure actions or proceedings (including foreclosures that were in process or completed) for loans
serviced by BAC, whether brought in the name of BAC, the investor, the mortgage note holder, or any agent
for the mortgage note holder (including MERS), pending at any time from January 1, 2009 through
December 31, 2010 as well as residential foreclosure sales that occurred in this period.
Specifically, the overall population is determined by identifying the foreclosures from two primary
populations:
1. Foreclosure actions that were completed with a property sale -- the foreclosure sales population,
and
2. Foreclosure actions that completed without a sale (e.g., the borrower entered a loan modification
program) or were in progress at the end of the period identified in the Consent Order - the
foreclosure no-sale or in-progress population.
To improve the efficiency of the review, Promontory will divide the two primary populations into targeted
subpopulations, designed to support two objectives:
Ensure that that the statistical sampling methodology is applied to subgroups of loans for which
there is reason to believe that foreclosure exception types or frequency differ; and
Allow for the further file review in targeted subpopulations where sampling reveals evidence of
foreclosure exception rates in excess of specified tolerance levels.
Targeted subpopulations are identified based upon supervisory or BAC-identified targeted risk-based
criteria (as appropriate for each primary population) and based upon geographic location of the collateral.
BOA-EL-00000041
September 29, 2011
The characteristics used to target subpopulations have been (i) identified through previous analysis to be
associated with potential operation deficiencies in the foreclosure process, (ii) deemed to be indicative of
factors (a) that might affect the complexity of the loan file, or (b) that might result in different treatments of
loan files.
Within the foreclosure sales population, the following targeted subpopulations will be 100 percent
reviewed:
SCRA-Related:
1. Loans where the borrower{s} had identified themselves as qualifying for SCRA protection.
Complaint-Related:
2. Loans with any type of escalated complaint referred to BAC by a state or federal authority.
Bankruptcy-Related
3. Foreclosure sales that potentially took place while a bankruptcy may have been active.
4. Loans with a foreclosure sale, referred for review by the u.s. Bankruptcy Trustee {Note that
presently, no in-scope referrals have been found for the foreclosure sales population}.
Modification-Related
5. Loans that were declined for a HAMP modification due to ineligible financial criteria {e.g. the
borrower's OTt was already below 31 percent, an NPV test yielded negative return, or an excessive
forbearance would be required in order to reduce the OTt to below 31 percent}.
6. Loans that were declined for a non-HAMP modification due to ineligible financial criteria {e.g. the
borrower's OTt was already below a target value, an NPV test yielded negative return, or an
excessive forbearance would be required in order to reduce the OTt to a target value}.
Other
7. Rescinded foreclosures.
8. Loans where the borrower had an active borrower protection plan or filed a claim under such a plan
at any time during the review period.
and the following subpopulations will be initially sampled:
Complaint and Litigation-Related:
9. Loans with complaints of any type submitted subsequent to the initiation offoreclosure actions,
other than complaints referred by state or federal agencies.
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September 29, 2011
10. Loans where the borrower has brought a litigious claim against BAC.
Bankruptcy-Related
11. Instances where a foreclosure referral took place while a bankruptcy may have been active.
12. Loans for which a bankruptcy case was identified sometime within 2009-2010, but where the
foreclosure referral or sale occurred outside of active bankruptcy.
Modification and Workout-Related
13. Loans with HAMP modifications that were denied for reasons other than ineligible financial criteria
(e.g. investor denial, borrower rejection or failure to submit documentation, ineligible mortgage
characteristics, failed trial mod performance).
14. Loans with non-HAMP modifications that were denied for reasons other than ineligible financial
criteria (e.g. investor denial, borrower rejection or failure to submit documentation, ineligible
mortgage characteristics, failed trial mod performance).
15. Loans where the borrower has submitted a HAMP modification appeal.
16. Loans that were declined for a short sale prior to the foreclosure sale date.
17. Short Sales Declines that were not considered for any Mod.
18. Short Sales Declines that were accepted for a Mod.
19. Short Sale Declines that were declined for a HAMP Mod.
20. Short Sale Declines that were declined for a Non-HAMP Mod.
17. Loans that were modified in the first quarter of a loan modification program.
18. Loans that completed a workout within 120 days prior to the foreclosure sale date, through any time
after the foreclosure sale date. Workout categories include Repayment Plans, Modifications (HAMP
and Non-HAMP), Short Sales or Deeds-In-Lieu.
Other
19. Sub-serviced foreclosures.
20. Cases handled by law firms known to have significant deficiencies related to foreclosure activities,
were delis ted by any of the GSEs, or discontinued by the institution.
21. Legacy BAC loans originated prior to Countywide acquisition and system conversion (MSP).
22. Loans where BAC processed a standard mortgage payment within 30 days prior to or anytime
following the foreclosure sale date, but within the lookback period.
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September 29, 2011
23. Reverse mortgages for which a foreclosure sale occurred.
24. An additional targeted population, representing foreclosure sales not captured by any of the above
risk criteria.
Within the foreclosure no-sale or in-progress population, the following targeted subpopulations will be 100
percent reviewed:
SCRA-Related:
25. Loans where the borrower had identified themselves as qualifying for SCRA protection.
Complaint and Litigation-Related
26. Loans with any type of escalated complaint referred to BAC by a state or federal authority.
Bankruptcy-Related
27. Loans with a foreclosure action (other than sale), referred for review by the u.s. Bankruptcy Trustee.
and the following subpopulations will be initially sampled:
Complaint and Litigation-Related:
28. Loans with escalated complaints of any type submitted subsequent to the initiation offoreclosure
actions, other than complaints referred by state or federal agencies.
29. Loans where the borrower has brought a litigious claim against BAC.
Bankruptcy-Related
30. Foreclosure referrals that took place while a bankruptcy was active.
31. Loans for which a bankruptcy case was identified sometime within 2009-2010, but where the
foreclosure referral occurred outside of active bankruptcy.
Modification and Workout-Related
32. Loans that were declined for a HAMP modification due to ineligible financial criteria (e.g. the
borrower's OTt was already below 31 percent, an NPV test yielded negative return, or an excessive
forbearance would be required in order to reduce the OTt to below 31 percent).
37. HAMP Mod financial criteria related declines that did not apply for a Non-HAMP Mod.
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September 29, 2011
38. HAMP Mod financial criteria related declines that were also declined for a Non-HAMP Mod.
39. HAMP Mod financial criteria related declines that were not declined for a Non-HAMP Mod.
33. Loans with HAMP modifications that were denied for reasons other than ineligible financial criteria
(e.g. investor denial, borrower rejection or failure to submit documentation, ineligible mortgage
characteristics, failed trial mod performance).
34. Loans that were declined for a non-HAMP modification due to ineligible financial criteria (e.g. the
borrower's OTt was already below a target value, an NPV test yielded negative return, or an
excessive forbearance would be required in order to reduce the OTt to a target value).
35. Loans with non-HAMP modifications that were denied for reasons other than ineligible financial
criteria (e.g. investor denial, borrower rejection or failure to submit documentation, ineligible
mortgage characteristics, failed trial mod performance).
43. Loans where the borrower has submitted a HAMP modification appeal.
44. Loans that were declined for a short sale.
45. Short Sales declines that were not considered for any Mod.
46. Short Sales declines that were accepted for a Mod.
47. Short Sale declines that were declined for a HAMP Mod.
48. Short Sale declines that were declined for a Non-HAMP Mod.
49. Loans that were modified in the first quarter of a loan modification program.
50. Loans that completed a HAMP Modification within 120 days prior to the foreclosure referral date,
through any time after the foreclosure referral date.
51. Loans that completed a Non-HAMP Modification within 120 days prior to the foreclosure referral
date, through any time after the foreclosure referral date.
52. Loans that completed a Short-Sale or Oeed-in-Lieu within 120 days prior to the foreclosure referral
date, through any time after the foreclosure referral date.
53. Loans that completed a Repayment or Other type of workout within 120 days prior to the foreclosure
referral date, through any time after the foreclosure referral date.
Other
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September 29, 2011
54. Foreclosure referrals where the borrower had an active borrower protection plan or filed a claim
under such a plan at any time during the review period.
55. Sub-serviced foreclosures.
56. Cases handled by law firms known to have significant deficiencies related to foreclosure activities,
were delis ted by any of the GSEs, or discontinued by the institution.
57. Legacy BAC loans originated prior to Countywide acquisition and system conversion (MSP).
58. Reverse Mortgages in the process of a foreclosure.
59. An additional targeted population, representing in progress or no-sale foreclosures not captured by
any of the above risk criteria.
The identification of the targeted subpopulations reflects the OCC, OTS, and Federal Reserve Board
Foreclosure Review Guidance provided by the OCC at a meeting held with servicers and independent
consultants on May 20, 2011 (the "May 20, 2011 Guidance"). The May 20, 2011 Guidance identified that
some of the targeted subpopulations will be 100 percent reviewed, while others initially will be statistically
sampled and reviewed, with both reviews performed per the complete set of Consent Order criteria.
For instance, per the May 20, 2011 Guidance, 100 percent of cases related to SCRA-protected borrowers
(subpopulations #1 and #29) as well as loans with complaints referred by state or federal agencies (#2 and
#30), will be reviewed and tested per the criteria established in the Consent Order. Loans associated with
complaints submitted by an entity other than a state or federal agency (#9, #32), or foreclosures where the
borrower has filed a litigious claim against BAC (#10, #33) will be sampled and reviewed.
Other segments have been identified for 100 percent review by BAC, including selected cases related to
borrower bankruptcy. In light of the high number of bankruptcy cases where there exist dismissals,
discharges prior to foreclosure, or where relief is not granted per the mortgage, it is prudent to initially
consider for 100 percent review those cases where BAC may have violated the stay required by an active
bankruptcy (#3). Cases referred for review by the u.s. Bankruptcy Trustee (#4, #31) will also be subjected to
100 percent review. Foreclosures actions associated with other types of bankruptcy behavior (#11, #12, #34,
and #35) will be initially statistically sampled, reviewed, and tested per the full set of criteria identified in the
Consent Order.
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September 29, 2011
The concern for exceptions in the modification process had led Promontory to target for 100 percent review
modification denials resulting from a failed test of financial criteria (#5, #6) in the foreclosure sales
population. In the in-progress population, denials related to failed tests for financial criteria will be sampled
(#36, #37, #38, #39, and #41.) In addition, several subpopulations focusing on other types of modifications
will be sampled and tested, including modifications that were denied for reasons other than failed financial
criteria including cases where the borrower did not apply for, or was declined for, a non-HAMP modification
(#13, #14, #40, #42), and modifications whose proximity relative to either the start of a modification
program (#21, #49) or proximity relative to foreclosure sale or referral date (#22, #50, #51, #52, #53) gives
rise to a concern for exceptions. Lastly, loans with HAMP modification appeals (#15, #43) or short-sale
declines (#16 - #20, #44 - #48) will also be sampled and reviewed.
The May 20,2011 Guidance indicates that the characteristics considered for targeting subpopulations
should include the presence of rescinded foreclosures (#7) and borrower protection plans (#8) when there
has been a foreclosure sale. These populations will be 100 percent reviewed. Promontory has also
identified a population, where there is a potential for regular payments being processed within 30 days
before or anytime after a foreclosure (#26), that will be sampled and reviewed. Loans with active borrower
protection plans, but which have not experienced a foreclosure sale (#54) will be sampled and reviewed.
The subpopulations of foreclosure actions that were subserviced by third parties (#23, #55) or that were
handled by law firms known to have significant deficiencies (#24, #56), will be sampled and reviewed.
However, at BAC, the role played by "large volume foreclosure firms" or "Document Execution Service
Providers" is minimal, and consequently these two types of May 20, 2011 Guidance-identified
characteristics are not represented in Promontory's list of targeted subpopulations.
There are some segmentation characteristics mentioned in the May 20, 2011 Guidance that have not been
incorporated into the above initial list oftargeted subpopulations. In particular, Promontory has not been
able to identify metrics that would allow for the identification of foreclosures where there was a potential
for "pyramiding fees." If the testing for the permissibility, customariness, reasonableness, and frequency of
fees should identify instances of such pyramiding fees, then Promontory will attempt to identify
characteristics of these foreclosu res that will allow us to implement second stage segmentation specifically
targeting these loans for a deep dive.
BOA-EL-00000047
September 29, 2011
Similarly, the foreclosure servicing process and operations at BAC have not been implemented in a manner
that would suggest pools of loans with foreclosure documentation or process errors could be associated
with different processing centers, units or management groups. Promontory has, however, identified two
targeted subpopulations (#25, #57) relating to loans originated by legacy BAC (before the conversion to the
Countrywide servicing system). Should it become apparent following Promontory's initial review that
deficiencies are indeed associated with particular operating units or centers, Promontory will again
construct a second stage refined segmentation to facilitate a deep dive for these associated types of errors.
In response to guidance provided in late August 2011, Promontory has identified two additional targeted
subpopulations, respectively comprised of reverse mortgages that experienced a foreclosure sale during the
Foreclosure Review period (#27) and reverse mortgages that were in the foreclosure process during the
Foreclosure Review period, but which did not experience foreclosure sales (#58). Both these subpopulations
will be sampled and reviewed per criteria in the Consent Order.
Finally, Promontory has identified two targeted subpopulations of loans (#28 and #59) which, while part of
either the foreclosure sale or no-sale/in-progress populations, were not otherwise identified as a member of
the other targeted groups. Again, both these subpopulations will be sampled and reviewed per criteria in
the Consent Order.
Documentation: Populations, Methodology, and Verification
Table A-l in the attached appendix lists the targeted subpopulations and their size. It also indicates how the
targeted subpopulations that will be sampled are distributed geographically across the two largest states for
BAC's foreclosure activity (California and Florida) and then across all other states. Consistent with the May
20, 2011 Guidance, the targeted subpopulations that will be statistically sampled will have samples drawn
from each of these two subsegments. The samples will include a representative distribution of both states
within the first group, and of the judicial and non-judicial populations within the second group. If required,
follow-up sampling will be conducted to ensure that the overall sample is representative and includes case
files for every state in which foreclosures were conducted by BAC.
The methods used to identify the primary foreclosure populations and to identify targeted subpopulations
are described in Tables A-2 and A-3 presented in the attached Appendix. These tables document the
rationale for selecting the criteria used to identify the populations, discuss how appropriate conservatism
was employed in the face of management information system or data challenges, and finally, document how
data verification and reconciliation processes were implemented to ensure the integrity of the methods
BOA-EL-00000048
September 29, 2011
used to identify the targeted subpopulations and reconcile counts to totals of foreclosure activity previously
reported to supervisors.
Random samples will be selected from each of the targeted subpopulations for which 100 percent review is
not initially required, the purpose being to review and analyze these foreclosures to identify patterns of
foreclosure process exceptions that may be associated with borrower financial injury, and to provide a
broad representative sample of analytical results to drive a second, focused "deep dive" segmentation and
review. In order to ensure that the initial samples are representative, Promontory has determined the initial
sample size using a binomial formula which assumes the true exception rate in a targeted subpopulation is 3
percent, and which allows 95 percent confidence that the error rate is within approximately plus or minus 3
percent of the hypothesized error rate-sometimes called a "95/3/3" sampling rule
2
The resulting initial
sample size is 124 per targeted subpopulation. If the harmful exception rate for a sample exceeds the
upper bound of the corresponding confidence interval (8.1 percent,) Promontory proposes to sample that
population more intensively to determine the harmful exception rate for that segment.
Table A-1 in the attached Appendix also presents the size of the loan samples to be initially reviewed. Using
a sample size of 124 per targeted regional subpopulation (or the regional subpopulation size, if less than
124), the table lists the total counts of foreclosures that will be initially reviewed at a 100 percent rate or
though sampling (the right most column of the table). Targeted subpopulations requiring 100 percent
review are identified in blue; sampled subpopulations are indicated in red. The total initial review count is
expected to be approximately 29,623 foreclosed loans, of which 18,066 are in 100 percent review
subpopulations. These totals exclude the review of complaints generated pursuant to the process
specified in the Consent Order.
During the review of foreclosure files sampled under initial segmentation described above, reviewers will
record the presence of several indicative characteristics of the foreclosure, including characteristics relating
to loan structure, foreclosure or modification actions, borrower actions, fees, etc. In addition, record will be
made of indicators characterizing the presence of any exceptions or financially injurious exceptions. Upon
completion of the review of the initial sample, statistical techniques (including risk scoring and decision tree
analysis) along with expert judgment will be used to identify which reviewer-recorded indicators are
associated or correlated with the propensity for an exception or financially injurious exception.
2 The confidence interval for the normal approximation used to construct the symmetric +/- 3 percent interval is actually inaccurate
when the sample size lin" and the error rate lip" are small (i.e., if nxp<5). In such circumstances, a better approximation to the
asymmetric confidence interval is given by an approximation based upon Wilson's(1927) score test; for implementation see Agresti
and Coull (1998) IIApproximate is Better than IIExact" for Interval Estimation of Binomial Proportions" The American Statistician, Vol
52, No, 2, pp 119-126. Note that the selection of an appropriate sample size is not significantly impacted by the approximation
issue, since Promontory is not testing a hypothesis in the first stage of its review - Promontory is only attempting to get a sufficiently
large sample to facilitate analysis.
BOA-EL-00000049
September 29, 2011
If evidence of potential financial injury is found amongst the initially sampled foreclosures, then a second
stage, focused "deep dive" review will be undertaken to test and fully identify cases with the type of injury
in question. The second "deep dive" segmentation would be based upon results from the initial review,
with a focus on isolating those foreclosures with financially injurious exceptions into well-defined segments
- separate from those foreclosures without such injury. This segmentation should be designed to use the
first stage analysis to specifically identify risk-based segments of foreclosures that may be reviewed and
tested per the OCC Sampling Methodology; the purpose being to develop a comprehensive and complete
final assessment of the existence and magnitude of financially injurious foreclosure exceptions in the
foreclosure population.
As an example of how the second stage of segmentation might work, consider the further analysis of
instances where a foreclosure sale followed a loan modification within 120 days (#22). Based upon first
stage analysis, Promontory may find that there exist instances of fee errors in the subset of these sampled
foreclosures, and that all instances of fee error were associated with a particular law firm that handled the
sale in a particular state. In such an instance, Promontory would proceed to define a narrow "second stage
segment" consisting of all such foreclosure sales (following a modification by 120 days or less) that were
handled by the identified law firm in the particular identified state. A 100 percent deep dive review of all
such foreclosures in the population, testing for the particular fee error found in the initial stage, will be
conducted.
Promontory's second stage statistical sampling methodology will use statistical techniques developed for
quality control testing. Here, the quality that Promontory is seeking to test is whether BAC's loan servicing
was consistent with avoidance of the exception criteria mentioned above and in the Consent Order.
Statistical quality control tests recognize that quality failures, foreclosure exceptions in the present case, will
potentially occur - but that in a "quality process", the rate at which such errors occur will be below a pre
defined critical level. The testing procedures that Promontory uses are consistent with those articulated in
the OCC Comptroller's Handbook on Sampling Methodologies (August 1998).
We will test hypotheses about the rate of financially injurious foreclosure exceptions; financially injurious
exceptions will constitute a subset of, and therefore occur less frequently than, all foreclosure exceptions.
3
The hypothesis to be tested-the null hypothesis--is that there are no financially injurious foreclosure
exceptions in a segment of the population. Accordingly, Promontory's statistical sampling process will focus
on testing for the risk that financially injurious foreclosure exceptions in the underlying population exceed
an exceptionally small, albeit non-zero level.
4
3 Indeed, the individual types of foreclosure exceptions will potentially occur at different rates even if these rates were all low.
BOA-EL-00000050
September 29, 2011
Promontory's sampling and testing rule is designed to use the smallest appropriately determined sample,
that allows for a powerful (reliability = 95 percent) rejection of the initial hypothesis when one or more
financially injurious errors are found in the sample and when the alternative hypothesis (as specified by the
precision rate) is actually true.
For purposes of the Foreclosure Review, Promontory proposes to apply this "power" test to the second
stage segments of foreclosure files using segment level sample sizes consisting of the lesser of:
All of the files in the segment; or
The number of files required to test the hypothesis that the level of financially injurious foreclosure
exceptions in the underlying population segment exceeds a precision of 3 percent with 95 percent
reliability; this number is 99 foreclosures per segment.
Reviewers will conduct a targeted review and testing of the random samples of files from each of the second
round segments, determining if exceptions and financial injury are present. The targeted review and testing
for any given segment will be based upon analyzing the results from the initial review and testing, the latter
determining which tests are indicative of borrower harm and appropriate for the segment.
Promontory's decision whether to conduct additional file review in each population segment will depend on
whether Promontory's testing of the associated segment sample identifies one or more financially injurious
foreclosure exceptions. Note that Promontory has constructed its sample sizes such that if the sample
contains ANY financially injurious exceptions, Promontory will need to conclude that the entire segment
will require review for the same injurious exceptions.
Analytically, by virtue of the sample design, the absence of any foreclosure exceptions in a given segment
sample will indicate, at a high level (95 percent) of reliability, that the incidence of financially injurious
foreclosure exceptions in the underlying population segment is consistent with the initial hypothesis of
being exceptionally low (i.e., zero).
Table 1, below, summarizes the decision rule Promontory will apply in determining whether to conduct
4 Statistical tests give rise to two types of errors. The first entails incorrectly rejecting a maintained hypothesis when it is true, and is
known as a Type I error. Alternately, a Type II error entails failing to reject a maintained hypothesis when it is false. Quality controls
tests like those Promontory intends to implement are focused on the Type II error rate; this is reasonable, since the consequences of
serious errors are significant and Promontory wants a test that is powerful enough to lead us to reject the null hypothesis when the
latter is truly false. The smaller the Type II error, the more useful the quality control test, or the more powerful the test. In
statistical terminology, IIPower" is defined as 1 minus the Type II error. The acc Sampling Methodology uses the term reliability to
specify the Power of the test, to be chosen by the user of the Methodology. Assessing a test's power requires specifying an
alternative hypothesis. The alternative hypothesis in this quality control example is a financially injurious foreclosure error rate that
is higher than the null hypothesis. The acc Sampling Methodology defines the notion of precision to articulate an alternative
hypothesis about the financially injurious foreclosure error rate. The Sampling Methodology is designed to find the smallest sample
size that is consistent with a test of the chosen Power and precision.
BOA-EL-00000051
September 29, 2011
additional file review activity based on the outcome of testing in each segment sample.
Table 1 Decision Rule for Further File Review
Initial Sample Testing Outcome Implication for Further Review
No financially injurious exceptions identified in No further review of population segment
tested segment sample
One or more financially injurious exceptions All files in population segment reviewed for
identified in tested segment sample presence of financially injurious exceptions
identified in segment sample.
The second stage "deep dive" sampling and review process is expected to result potentially in up to an
additional 5,779 loans being sampled reviewed - or 50% of the loans expected to be sampled and reviewed
initially (and as presented in Appendix Table A-i) - for a total review of approximately 35 thousand
foreclosures. Note that these projections exclude any foreclosure reviews that are contemplated under the
Complaint Process specified in the Consent Order.
BOA-EL-00000052
September 6, 2011
Table A-1: Targeted Populations and Initial Review Counts
Foreclosure sa
population
(270,468)
Foreclosure Counts for Various Targeted Subpopulations
100% Review
Total
Initial
Sample Size
Initially Sampled
at 124 per
Targeted Cell
(italicized counts)
BOA-EL-00000053
September 6, 2011
Table A-I (continued): Targeted Populations and Initial Review Counts
Foreclosure Counts for Various Targeted Subpopulations
Total
100% Review
Initial
Sample Size
Foreclosure
completed
without sale or in
process
population
(996,666)
Initially Sampled 1----l---------'-'--------------------l--......::::z.:...:4--="-==--+---=-::<.::..:=--+------':.=J
at 124 per
Targeted Cell
(italicized counts)I----l-__________________--'-____l-_-===+_-===-_+--===--+__----':.=J
BOA-EL-00000054
September 6, 2011
Table A-2: Criteria Identifying Primary Populations
Population
Foreclosure actions related to
SCRA cases
Foreclosure actions that
completed with a property sale
during the review period
Foreclosure actions that were
completed without a sale or were
in progress at the end of the
lookback period identified in the
Consent Order
Criteria
Any residential loan that
has been qualified or
reviewed for SCRA benefits
through 12/31/2010
Residential loans with
foreclosure sales having a
warning code 5 (foreclosure
in process) and lockout code
3 (foreclosure, property has
been conveyed) or lockout
code 9 (foreclosure sale
held, loan not conveyed)
recorded by BAC during the
1/01/2009 - 12/31/2010
time period.
Loans in foreclosure in
process status at the
beginning of 2009 and loans
that entered into
foreclosu re in process
status during the time
period of 1/1/2009-
12/31/2010, excluding loans
with Completed foreclosure
sales.
Information Systems I Data
Sources
BOA-EL-00000055
September 6, 2011
BOA-EL-00000056
September 6, 2011
Table A-3: Criteria Identifying Targeted Subpopulations
Control
Number
1
2
3
4
Category
SCRA-Related
Complaint-
Related
Bankruptcy-
Related
Bankruptcy
Related
Targeted
lation
Borrowers
identified as
qualifying for
SCRA protection
Federal or State
Regulatory
Referred
Complaints
Potential
population where
a foreclosure sale
that potentially
took place during
active bankruptcy
Foreclosure sale
referred by u.S.
Bankruptcy
Trustee (Note:
Presently, no in
scope referrals
have been found
for the
foreclosure sales
population)
Criteria
State or Federal Authority,
Including u.S. Bankruptcy
Trustee
Identify loans with
foreclosure sales and in
process foreclosures that also
have bankru
Identify loans with
have bankruptcies
Identify loans with
have bankruptcies
Information Systems I Data
Sources
39
BOA-EL-00000057
September 6, 2011
5
6
7
Modification
Related
Modification
Related
Other
HAMP Mod
Decline due to
ineligible financial
criteria
Non-HAMP Mod
Decline due to
ineligible financial
criteria
Rescinded
Foreclosu res
Identify loans that were ever
declined for a HAMP
modification
Identify loans that have a non
HAMP proprietary
modification during the
lookback period
Identify loans from the
foreclosure sale population
where the foreclosure was
BOA-EL-00000058
September 6, 2011
8
9
Other
Complaint
and Litigation
Related
Borrower
Protection Plan
Complaints not
referred by state
or federal
rescinded
Identify loans where the
borrower had an active
Borrower Protection Plan (
"BPP
JI
) or where the
borrower had filed an actual
BPP claim
Identify loans with
complaints submitted
uent to the initiation
BOA-EL-00000059
September 6, 2011
10
11
12
Complaint
and Litigation
Related
Bankruptcy
Related
Bankruptcy
Related
Litigations
Instances where a
foreclosure
referral took place
for loans in active
bankruptcy
Foreclosu re
occurred outside
of active
bankruptcy
of foreclosure actions, for
categories related to
foreclosure action.
Identify loans that had an
active litigation during the
lookback period
Identify loans with
process foreclosures that als
have bankruptcies
Identify loans with
process foreclosures that als
have bankruptcies
BOA-EL-00000060
September 6, 2011
13
14
Modification
and Workout
Related
Modification
and Workout
Related
HAMP Mod
Declines other
than ineligible
financial criteria
Non-HAMP Mod
Declines other
than ineligible
financial criteria
declined for a HAMP
modification.
declined for a Non-HAMP
modification.
BOA-EL-00000061
September 6, 2011
15 Modification HAMP Mod
and Workout- Appeal
Related
16 Modification Loans that were
and Workout declined for a
short sale prior to
the foreclosure
sale date
17 Modification Short Sales
and Workout Declines that were
not considered for
any Mod
18 Modification Short Sales
accepted for a
Mod
19 Modification Short Sale
declined for a
HAMP Mod
20 Modification Short Sale
declined for a Non-
HAMP Mod
21 Modification First Quarter Loan
and Workout- Mods
Related
Identify loans that were
handled in the first quarter
a loan modification program.
This segment comprises
loans solicited and modified
in the first uarter of the
BOA-EL-00000062
September 6, 2011
22
23
24
Modification
and Workout
Related
Other
Other
Workouts
completed 120
days prior to or
any time after
foreclosure sale
date. (HAMP and
Non-HAMP)
Sub-Serviced
Loans
GSE Delisted
MHA trial modifications and
the FHA HAMP Loan
population.
Loans that had a completed
workout from 120 days prior
to the foreclosure sale date
through any time after the
foreclosure sale date.
Workout categories include
repayment plans,
modifications, short sales,
deeds-in-lieu, and SCRA.
Identify the populations of
sub-serviced loans for
BOA-EL-00000063
September 6, 2011
GSE Delisted
25 Other MSP Loans
26 Other Loans where BAC
processed a
standard
mortgage
payment within
30 days prior to or
anytime following
the foreclosure
sale date, but
within the
lookback period
27 Other Reverse
Mo s for
Legacy BAC loans were
serviced on t h ~
until they were onboarded to
the in Nov.
2009 at me servicing
was converted to the
_These loans were
identified from the ..
reporting cumulative
BOA-EL-00000064
September 6, 2011
28
29
30
31
Other
Other
SCRA-Related
Complaint
and Litigation
Related
Bankruptcy
Related
Reverse
Mortgages for
which a
foreclosure sale
occurred
Foreclosure sales
not captured in
any other
Borrowers
identified as
qualifying for
SCRA ction
Complaints
referred by state
or federal
authority
Loans referred by
u.s. Bankruptcy
Trustee
Identify loans not captured in
any other category
Identify loans with
subsequent to the initiation
foreclosure action.
u.s. Bankruptcy Trustee
identified loans with
have bankruptcies
BOA-EL-00000065
September 6, 2011
33
34
35
36
and Litigation-
Related
Complaint-
and Litigation-
Related
Bankruptcy-
Related
Bankruptcy
Related
Modification
Related
referred by state
or federal
agencies
Litigation
Foreclosu re
referrals that took
place during
active bankruptcy
Foreclosu re
referral was
outside of active
bankru
HAMP Decline
Mod due to
subsequent to the initiation
foreclosure action that were
not referred by federal or
state agencies.
Identify loans that had an
active litigation during the
lookback d
have bankruptcies
declined for a HAMP
ineligible financial modification due to ineligible
criteria financial condition.
BOA-EL-00000066
September 6, 2011
37 Modification
38 Modification
HAMP Mod
Financial Criteria
Related Declines
that did not Apply
for a Non-HAMP
Mod
HAMP Mod
Financial Criteria
Related Declines
that were
Declined for a Non
HAMP Mod
declined for a HAMP
modification due to ineligibl
financial condition that did
not apply for a Non-HAMP
mod.
declined for a HAMP
modification due to ineligibl
financial condition that were
declined for a Non-HAMP
Mod
BOA-EL-00000067
September 6, 2011
39 Modification HAMP Mod
Financial Criteria
Related Declines
declined for a HAMP
modification due to ineligible
that were Not financial condition that were
Declined for a Non- not declined for a Non-HAMP
HAMP Mod Mod
BOA-EL-00000068
September 6, 2011
40 Modification
and Workout
Related
HAMP Mod
Financial Criteria
Related Declines
declined for a HAMP
modification due to ineligible
that were Not financial condition that were
Declined for a Non- not declined for a Non-HAMP
HAMP Mod Mod
HAMP Mod
Declines other
than for ineligible
financial criteria
declined for a HAMP
modification for reasons
other than ineligible financial
condition.
BOA-EL-00000069
September 6, 2011
41
42
Modification
and Workout
Related
Modification-
and Workout-
Related
Modification-
and Workout-
Related
HAMP Mod
Declines other
than for ineligible
financial criteria
Loans that were
declined for a non-
HAMP
modification due
to ineligible
financial criteria
(e.g. the
borrower's DTI
was already below
a target value, an
NPV test yielded
negative return,
or an excessive
forbearance
would be required
in order to reduce
the DTI to a target
value).
Non-HAMP Mod
Declines other
than for ine ble
declined for a HAMP
modification for reasons
other than ineligible financial
condition.
Identify loans that have a no
HAMP proprietary
modification duri the
BOA-EL-00000070
September 6, 2011
43
44
45
Modification
and Workout
Related
Modification-
and Workout-
Related
Modification-
and Workout-
Related
Non-HAMP Mod
Declines other
than for ineligible
financial criteria
HAMP Mod
Appeal
Short Sale
declines
Modification- Short Sales
and Workout- declines that were
Related not considered for
any Mod
Identify loans that have a non
HAMP proprietary
modification during the
lookback period
borrower has submitted a
HAMP modification appeal
before or after the
foreclosure sale date.
declined for a short sale
during the lookback period
that were not considered for
any Mod
BOA-EL-00000071
September 6, 2011
Related not considered for
any Mod
46 Modification- Short Sales
Related accepted for a
Mod
that were not considered for
any Mod
that were accepted for a
Mod
BOA-EL-00000072
September 6, 2011
Related accepted for a
Mod
47 Modification- Short Sale
Related declined for a
HAMP Mod
that were accepted for a
Mod
that were declined for a
HAMP Mod
BOA-EL-00000073
September 6, 2011
Modification- Short Sale
Related declined for a
HAMP Mod
48 Modification- Short Sale
Related declined for a Non-
HAMP Mod
that were declined for a
HAMP Mod
that were declined for a N
HAMP Mod
BOA-EL-00000074
September 6, 2011
Modification- Short Sale
Related declined for a Non-
HAMP Mod
49 Modification- Loans that were
and Workout- modified in the
Related first quarter of a
loan modification
ram
50 Modification- Loans that
and Workout- completed a
Related HAMP
Modification
within 120 days
prior to the
foreclosure
referral date,
thro time
that were declined for a N
HAMP Mod
BOA-EL-00000075
September 6, 2011
Modification- Loans that
Related HAMP
Modification
within 120 days
prior to the
foreclosure
referral date,
through any time
after the
foreclosure
referral date
and Workout- completed a Non-
Related HAMP
Modification
within 120 days
prior to the
foreclosure
referral
date, through
any time after the
foreclosure
referral date
and Workout- completed a Short-
Related Sale or Deed-in-
Lieu within 120
days prior to the
foreclosure
referral
date, through any
time after the
foreclosure
referral date
Related Repayment or
other type of
workout within
120 days prior to
the foreclosure
referral d
BOA-EL-00000076
September 6, 2011
Modification- Loans that
Related Repayment or
other type of
workout within
120 days prior to
the foreclosure
referral date,
through any time
after the
foreclosure
referral date
54 Other Borrower
Protection Plan
55 Other Sub-serviced
foreclosures
56 Other Delisted by GSEs
57 Other MSP Loans
58 Other Reverse
Mortgages
ed to a
borrower had an active BPP
or where the borrower had
filed an actual BPP claim
Identify the populations of
sub-serviced loans for
Greentree and PHH
Identify loans handled by the
followi
Legacy BAC loans were
serviced on thdilisystem
until they were onboarded to
the_inNov.
2009 at which time servicing
was converted to the l;mn1'
system.
BOA-EL-00000077
September 6, 2011
Other Reverse
Mortgages
exposed to a
foreclosure
process, but for
which no
foreclosure sale
has taken place
59 Other Loans not
captured in any
other
Identify loans not captured in
any other category
BOA-EL-00000078
FORECLOSURE REVIEW END TO END - TARGET STATE
BORROWER OUTREACH &CLAIMS INTAKE PROCESS (PROCESS 1 OF 3 - PAGE 1)
I
..c
u
ro
/

/ 1.11
:::J
1.10
Receives
1.12
0
I- Receives Outreach
population info
Prepares outreach
en
program (direct mail and ::::>
materials from BAC Mktg
from BAC Data 0::
advertising materials)

Team
I Intake 1
1.5
Borrower Receives a DM

letter from RUST
I--- It-

1.5.1

Borrower Files
e 1 Intake 41
Yes RFR via RUST
B selects web
CD Web
1.3

Borrower makes BAC
inquiries

Q)
c.
"" ::;
..
:;2:J!2
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1.2
..>:: ro
1.1 .l9..c
Borrower y EO
Direct Borrower to
Proceed with

References es------.

Rust IFR Web/800
Complaint via BAU
CD
Program
processes
'(
No
t
1;5
:::J
0::
1.13
Direct Mail
I
I
No
...
1.6 Borrower
successfully files
No
1.15
Provides dedicated
phone support
DRAFT
r

1.14
Mass Marketing
1 Intake 21
I Intake 3 I

1.5
Borrower Sees Mass
-
1.3.1 Borrower submits Media
RFR via US mail

YfS
I Go To I
1.19
1.4.1
Caller Identified
1.4.3 Refer
As Borrower In-
No Borrower To
Scope
Servicer
Yes
"
1.4.2
Mail RFR from to In-Scope
Borrower
CONFIDENTIAL: Foreclosure Review Complaint Review End To End_092911
BOA-EL-00000079
BORROWER OUTREACH &CLAIMS INTAKE PROCESS (PROCESS 1 OF 3 - PAGE 1)
7
/
1.6
1.20
1.19 1.22
Receives RFR from
Log, image,
Send "Acknowledge"
f-------.
index, and
~
...
I
..
customer letter to Borrower
.....
load Claim into
~ y
~ ~
1.3.1
Rust Portal
\
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ro
u
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ro
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o 0
~ u
o.f:
CD
1.21 1.23
Claim yes.... Screens for "In-
Complete? Scope"
No
No
,
1.16
t-rom
Send "Incomplete"
1.27.2
~
letter to Borrower
A
~ ~
,
1.8
1.9
Receives
Provides
"Incomplete" letter
additional
~
i rmati
Yes
2
DRAFT
From
1.28
-
1.24
1.25
A
Yes------' 2.24 Claim moves to BAC
~
In-Scope?
FRG For Evaluation
From 148
-
~
No
l
1.26
Send to PROM PFG
~
1-1X 1.27
7
for Review
i
BOA-EL-00000080
BORROWER OUTREACH &CLAIMS INTAKE PROCESS (PROCESS 1 OF 3 - PAGE 2) DRAFT

1.30
From 1,26
1.27
Receives "Out-of
Scope" Claim
1.27.1 O-o-S
Based On Yes
1.27.2
Concur
with
1.28
Concur
with

1.29
QA Sampling?
No
Notify RUST to send
"Exclusion" Letter with
reason (including
incomplete)
C
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c.
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o
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I
2:
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c
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1.43
QAReview

V" No
B
N0-----V
Yes
Yes
(Add'i
outreach required)
(Concurs all efforts to obtain information exhausted)
1.37
BAC ECR Intake Team
assigns claims to the
dedicated ECR team in
Getzville
1.44
1.31 1.32
Receives PFG Update Claim
confirmed Portal with
determination
Conclusion
1.38
ECR team in _reviews a
claim, customer
complaint, update record and
Yes
engages FCL team if needed
1.45
Upload confirmation
of exclusion to Rust
Claim Portal
1.47
No____________.,
Upload correction to
Rust Claim Portal
3
1.33
Send Exclusion Letter
1.34
with Reason
RUST sends
(O-o-S or Incomplete) O-o-S file to
to Borrower BAC ECR
1.39
FCL assistance
required?
Yes
ECR team final
resolution and final
resolution

1.46
QAComplete
1.48
QAComplete
1.42
FCL Team researches the
case and submits case
resolution to ECR team in
1.41
End
BOA-EL-00000081
CLAIM REVIEW PROCESS (PROCESS 2 OF 3- PAGE 1)
From 1.25
/
2.0
. 2.1 . 2.3 I
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2.4.1
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2.4.5
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2.12.1
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Recommendation to
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2.4.2
2.4.3
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2.4.7
2.4.6
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r
2.4.9
2.4.10
Info Available
Team Lead Determines
to Complete Data Source and Make
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2.4.12
2.4.11
Team Lead Provide Data
Team Lead Obtains and
to File Reviewer
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2.12.2
From
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2.19
Recommendations
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BOA-EL-00000082
CLAIM REVIEW PROCESS (PROCESS 2 OF 3- PAGE 2)
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Resolution
2.24
Financial
Harm?
2.32
Update Claim
Tracker Portal
With Final
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2.14
PFG decision is
consistent with
B ower and B ?
Yes
2.15
Yes

2.16
2.17
PFG Decision is: 2.18
FG decision is
consistent with
orrower but no
BAC?
Disagree with
Borrower and BAC
First Review?
2.19
Submit to BAC for
revision

2.20
Final
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2.21
Notify BAC of Final
Determination
2.22
Include in
foreclosure report
2.26
DRAFT
2.23
QASamplin
.rB

Yes

2.25
QA confirmed?
Ye Include in
Reporting
2.27
QAComplete
,----------------------------yes-----------------------------,
2.29
QA confirmed?
No
2.33
Financial
Harm?
2.30
Correction to Claim
Review (for training)
2.34
Send letter to
No customer wI cc to
PFG and BAC
2.35
Send letter to
Yes customer wI cc to
PFG and BAC
5
Claim Closed
2.31
QAComplete
Borrower Awaits
Remediation
No
2.36
Notify BAC to
Proceed with
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2.28
Correction to
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GoTo3.0
BOA-EL-00000083
CLAIM REMEDIATION PROCESS (PROCESS 3 OF 3 PAGE 1)
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3.13
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3.2
3.3
3.1
Receive, Log and
BAC LAS
No Rescission
Assign Complaint
Remediation
to Rep
(As Required)
Yes
3.17 3.16
Receive, Log and
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BAC HL Disburse
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(As Required) to Rep
6
3.4
Adjust loan
~ o
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Yes
3.9
BAU Process
TBD
DRAFT
3.6
3.5
other errors or
No
Yes Yes
3.10 3.11
BAU Process BAU Process
TBD TBD
3.14 3.15
Perform Financial Provide Final
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3.18
Complete Root Cause
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Reporting to
Promontory
3.19
Research and Resolve
Return Mail
(Return to State or Re
mail
Error or
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third party /
d
Yes

3.12
BAU Process
TBD
3.20
Stop
No
BOA-EL-00000084
I
Page 1 of 5
BOA-EL-00000085
Page:2 of 5
BOA-EL-00000086
Page 3 of 5
BOA-EL-00000087
Page 4 of 5
BOA-EL-00000088
Page 5 of 5
BOA-EL-00000089
BOA-EL-00000090
BOA-EL-00000091
BOA-EL-00000092
BOA-EL-00000093
BAC Foreclosure Review Engagement Letter: Attachment B
September 6, 2011
Attachment B
RESOURCES AND EXPERTISE
Contents
1. About Promontory Financial Group ..................................................................................................... 2
2. Organizational Structure ...................................................................................................................... 3
a. Overview........................................................................................................................................... 3
b. Project Leadership ............................................................................................................................ 3
c. File Review ........................................................................................................................................ 5
i. Senior File Reviwers and Team Leads ........................................................................................... 6
ii. File Reviewers ............................................................................................................................... 6
iii. Request for Information Team ..................................................................................................... 6
d. Complaint Review ............................................................................................................................. 6
e. Quality Assurance and Validation ..................................................................................................... 7
f. Training ............................................................................................................................................. 9
3. Information Systems............................................................................................................................. 9
4. External Resources and Sourcing ......................................................................................................... 9
5. Contingency Plans for Analyst Recruitment ....................................................................................... 10
6. Project Leadership and Management Biographical Detail ................................................................. 10
1
BOA-EL-00000094
September 6, 2011
Attachment B
RESOURCES AND EXPERTISE
This attachment describes the resources and expertise Promontory Financial Group, LLC
("Promontory") will dedicate to perform a review of certain residential foreclosure actions by Bank
of America ("BAC") between January 1,2009 and December 31, 2010, pursuant to Article VII of the
Consent Order (AA-EC-11-12) (the "Consent Order") of the Office of the Comptroller of the
Currency (the "occ"), dated April 13, 2011 (the "Foreclosure Review"), including personnel and
information systems. It further describes Promontory's plans for enlisting additional resources
necessary to complete the Foreclosure Review in the event that initial sampling identifies needs
for more extensive file review.
1. About Promontory Financial Group
Former Comptroller of the Currency Eugene Ludwig founded Promontory in 2001. Promontory's
senior professional team has unusually deep experience in the management, direction, and
leadership of major financial institutions, financial regulatory agencies, and policymaking bodies.
In the United States, members of Promontory have served as senior executives or directors of
numerous leading financial institutions and financial regulatory agencies, including, to name but a
few, the New York State Banking Department, the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System (the "Federal Reserve")' the United States
Treasury Department, and the Occ.
Promontory works with the leadership of financial institutions throughout the world to identify,
evaluate, and resolve issues of actual or potential concern to their directors, senior executives, and
regulators. Promontory provides them with a wide range of services, including evaluation and
assistance in strengthening risk management units and practices, compliance, corporate
governance, and risk reporting; forensic reviews and reports; due diligence reviews; policy
development; and strategic advice relating to the establishment or acquisition of new financial
services businesses.
Promontory is headquartered in Washington, D.C. and maintains additional U.S. offices in New
York, Atlanta, and San Francisco. We also have a substantial international practice, with affiliate
offices in Brussels, Dubai, Hong Kong, London, Milan, Paris, Singapore, Sydney, Tokyo, and
Toronto.
Promontory has significant experience and expertise working with mortgage lenders and servicers
to meet the requirements of regulatory enforcement actions, strengthen risk management or
compliance, or enhance corporate governance. The firm has successfully concluded several
engagements related to mortgage origination and servicing and is deeply experienced in forensic
2
BOA-EL-00000095
September 6, 2011
and look-back reviews and statistical analysis. Several members of Promontory's leadership and
numerous members of its professional staff have spent significant portions of their careers in the
mortgage sector, in regulatory supervision and examination of mortgage lenders, or both.
2. Organizational Structure
a. Overview
The chart below reflects the proposed structure of Promontory's SAC Foreclosure Review Team.
The individuals and roles reflected in the chart should be considered representative and may be
subject to change as roles and responsibilities are further developed.
b. Project Leadership
Promontory's project leadership will provide the project team with strategic direction, supervision
of project management and quality assurance ("QA"), liaison with acc and SAC senior executives
3
BOA-EL-00000096
September 6, 2011
external counsel relationship.
Roles & Responsibilities of Promontory's BAC Foreclosure Review Leadership Team
PMO & Staffing Manager
Methodology and QA
Management
Quantitative Analysis
Management
File Review Manager
primary point of contact with senior BAC
management and OCC
Manages project reporting, MIS, and staffing
logistics.
Oversees development of the methodology for
the Foreclosure Review, as well as QA review
process and team of QA reviewers.
Oversees statistical analysis and execution of
sampling methodology; evaluates results of
Foreclosure Review to determine when
expanded sampling and testing is required.
Manages primary File Review execution;
manages team of reviewers; manages File
Review logistics.
Complaint Review Manager Oversees complaint receipt and evaluation
process; manages team of Complaint
Reviewers.
Documentation & Data
Management
Manages the delivery of data and
documentation to the File and Complaint
Review teams. Ensures integrity and accuracy.
4
BOA-EL-00000097
September 6, 2011
Reporting & External
Counsel Manager
Manages reporting and relationship with
external counsel.
c. File Review
Promontory's File Review will be conducted principally from BACs_facilities. The File
Review Team will consist of nearly 230 team members, including a Team Leader, three Site File
Review Managers, and 20 Senior File Reviewers.
Table B-1 shows the key working assumptions underlying Promontory's resource planning in
connection with the File Review.
Table B-1
File Review Resource Planning: Preliminary Estimates & Assumptions
Average File Review Time 10 hours
Production Hours/Day (net of training, vacation, etc.) 6.5
Number of Files to be Reviewed 35,000
Person-Days to Complete File Review 54,000
Estimated Number of File Reviewers 200
Work Days per Week 5/week
Work Weeks 10,800
Estimated Elapsed Time for File Review 54 weeks
Total Days for File Review 378 days
Senior File Reviewer/File Reviewer Ratio 1:10
Team Lead/Senior File Reviewer Ratio 1:5
i. Senior File Reviewers and Team Leads
Senior File Reviewers will provide oversight and review of work performed by File Reviewers, and
will further investigate foreclosure files as needed. Senior File Reviewers will typically have three
or more years of servicing experience in loss mitigation and/or foreclosure. Based on a planned
staffing ratio of one Senior File Reviewer for every ten File Reviewers, Promontory expects to
deploy approximately 20 full-time equivalent ("FTE") Senior File Reviewers on average to complete
the Foreclosure Review. These Senior File Reviewers, in turn, will report to Team Leaders having
extensive mortgage and supervisory experience. Team Leaders will perform frontline supervision,
5
BOA-EL-00000098
September 6, 2011
and will prepare and provide daily exception and production reports. Based on a planned staffing
ratio of one Team Leader for every five senior analysts, Promontory expects to need four Team
Leaders to complete the Foreclosure Review.
ii. Foreclosure File Reviewers
The primary responsibilities of File Reviewers will include ensuring the receipt of documentation,
Review case management syste
potential errors, misrepresentations, or other deficiencies. Promontory has estimated a team of
200 FTE analysts on average to complete the File Review. Promontory will review these
assumptions and adjust analyst staffing levels appropriately as it gains actual experience
conducting the review of BAC files.
iii. Request for Information Team
The Request for Information Team will consist of 11 professionals - one manager and 10 FTE
Information Analysts with skill sets and experience levels similar to those of the File Reviewers.
d. Complaint Review
A separate Complaint Review Team will be established to review foreclosure-related borrower
complaints. This Team will have similar qualifications to the File Review Team. During complaint
intake Promontory will review and validate all complaints deemed out of scope. It is then
anticipated that BAC will review and provide a proposed resolution for all in-scope complaint
cases. Promontory will then complete a 100 percent review of all such cases processed.
connection with the Complaint Review.
Table B-2
Complaint Review Resources: Preliminary Estimates & Assumptions
In-Scope Out-at-Scope
Average Complaint Review Time 1 hour 0.25 hour
Estimated Number of Complaints to be Reviewed 152,100 101,400
(assumes 20% response rate, of which 60% in-scope/40% out of scope)
Work Days per Week/Hrs per Day 5 days/6.5 hrs 5 days/6.5 hrs
Person-Days to Complete Complaint Review 23,400 3,900
6
BOA-EL-00000099
September 6, 2011
Work Weeks Required
Estimated Number of Complaint Reviewers
Estimated Elapsed Time for Complaint Review
Estimated Days for Complaint Review
Senior Complaint Reviewers/Complaint Reviewers
4,680 780
100 45
47 weeks 17.5 weeks
329 123
1:10 1:10
Promontory expects to establish an in-scope Complaint Review Team averaging 100 FTE Complaint
Reviewers, ten FTE Senior Complaint Reviewers, and two Team Leaders, and an out-of-scope team
of 45 Complaint Reviewers, five Senior Complaint Reviewers and one Team Leader.
e. Quality Assurance and Validation
The QA Team will provide independent oversight of the File and Complaint Review Teams. The QA
Team's objectives will include:
Providing third party validation of findings noted by the File Review and Complaint Review
Teams;
Ensuring that the File Review and Complaint Review processes adhere to established
quality and accuracy standards; and
Identifying areas of weakness through errors detected, and providing feedback to the File
Review and Compliant Review leadership teams.
connection with QA dedicated to the File Review.
Table B-3
File Review Quality Assurance Resourcing: Preliminary Estimates & Assumptions
Average File Review Time
QA Coverage of Files
System Break-in Period (initial 4% of files)
Thereafter
Estimated Files Subject to QA
Estimated Number of QA Reviewers
Work Days per Week/Hrs per Day
6 hours
100% - 1,400 files
12.5%
5,600
20
5 days/6.5 hrs
7
BOA-EL-00000100
September 6, 2011
Person- Weeks Required
Estimated Elapsed Time for File Review QA
1034
52 weeks
Promontory estimates that the QA Team for File Review will consist initially of approximately 20
FTE QA Reviewers on average, two Team Leaders, and one On-site QA Manager to provide
effective oversight of File Review activities. Promontory will adjust QA staffing levels based on
actual experience.
The QA Team will also apply the same oversight and sampling process to the Complaint Review as
will be employed for the File Review. QA will review out-of-scope or incomplete complaints, as
well as in-scope complaints.
connection with the QA Team dedicated to the Complaint Review.
Table B-4
Complaint Review Quality Assurance Resourcing: Preliminary Estimates & Assumptions
In-Scope Out-of-Sco pe
Number of Excluded/Incomplete Complaints 152,100 101,400
Review Time 1 hour 0.25 hour
QA Coverage of Complaints 12.5% 12.5%
Work Days per Week/Hours per Day 5 days/6.5 hrs 5 days/6.5 hrs
Work Weeks Required 585 98
Estimated Number of Complaint QA Reviewers 13 6
Estimated Elapsed Time for Complaint QA 45 weeks 16.5 weeks
Based on these assumptions, Promontory estimates that the QA Team for the Complaint Review
will consist initially of six QA Reviewers (and one Team Leader) to perform review of complaints
classified as out of scope during intake, and 13 QA Reviewers (and one Team Leader) for in-scope
complaints.
The QA Management will review and make hiring decisions for candidates for QA Reviewer
positions. Typical qualifications for the QA Reviewer will include several years of experience in
foreclosure, mortgage servicing, or quality control. All QA Team members will receive one week of
training and orientation, as discussed below, but will also receive hands-on experience in
8
BOA-EL-00000101
September 6, 2011
foreclosure file and complaints reviews, as well as in-depth training on the QA process and
sampling methodology.
f. Training
Promontory will provide a standardized one-week of training to all personnel, whether they are
acting in the capacity of File Review, Complaint Review, QA. The required training will include:
An introduction to the Foreclosure Review;
Detailed information on the File Review process which outlines the file review flow chart,
work flow, and review tests to be utilized in the evaluation of case files;
Overview of subject matter topics, such as Borrower Protection Plans, loan modifications,
and the Servicemembers Civil Relief Act;
In-depth review of the BAC systems involved in loan servicing and default management;
and
Review of the Foreclosure Review System.
Training will be continuously enhanced to provide targeted instruction in support of the File
Review, Complaint Review, and QA efforts as well as to incorporate feedback received over the
course of the engagement.
3. Information Systems
Promontory will utilize the an automated case management system,
for the performance of Foreclosure Review services consistent with the requirements of Article VII
of the Consent Order. Th as the ability to automatically load data
from BAC's systems; prompt the application of test rules drawn from legal and other research for
use by analysts; support file review and QA by multiple parties; and provide flexible, customizable
reports.
4. External Resources and Sourcing
Promontory maintains substantial in-house expertise on many aspects of financial services
compliance, including in the mortgage field. Promontory has been engaged by multiple clients to
perform a variety of advisory services relating to the Consent Orders and related orders of the
same date issued by the Federal Reserve. To ensure it has adequate resources to staff these
engagements simultaneously, Promontory has retained knowledgeable subcontractors, such as
Ernst & Young, LLP ("EylI), and made contingency arrangements with other talent and staff
augmentation providers. Also, Promontory has contracted with Hudson Cook, LLP to obtain
additional expertise in state-by-state application of mortgage law and with Fried, Frank, Harris,
9
BOA-EL-00000102
September 6, 2011
Shriver & Jacobson LLP to provide legal advice relating to the Foreclosure Review. Promontory
expects that the Foreclosure Review may require it to supplement its own resources with
additional legal expertise specifically knowledgeable about applicable law in particular jurisdictions
from time to time in the course of conducting the Foreclosure Review. Promontory expects to
meet this need by relying on its extensive network of associations throughout the financial
services, regulatory, and legal fields to obtain the necessary resources. Promontory will require
any attorney or firm that may be retained for the provision of such advice to advise Promontory of
any actual or potential conflicts of interest, will consult with the OCC regarding any such actual or
potential conflicts prior to engaging such attorney or firm, and will consult with BAC legal counsel;
although Promontory, in its independent capacity, will make the final decision.
Promontory expects to initiate on-boarding of its team members, QA, and complaint teams
immediately, and to complete the staffing process in a measured and deliberate manner over the
course of approximately three months. Based on preliminary recruiting efforts, Promontory
believes it will be able to recruit a propriately experienced analysts from resources available in or
reasonably proximate to and where review locations are expected to be
established.
5. Contingency Plans for Analyst Recruitment
While Promontory believes it can meet the staffing needs of this assignment, a variety of
circumstances may present staffing challenges. For example, the OCC could require substantial
increases in our proposed initial sample; results of initial sampling could indicate needs for more
extensive file review than currently contemplated; or the volume of responses to the complaint
process could prove unexpectedly large.
If Promontory is for any reason unable to recruit the resources necessary to perform the
Foreclosure Review, Promontory would expect to follow one or more of two contingency plans:
Bring in additional resources as necessary from one or more firms with which Promontory
has established agreements precisely for the provision of such additional resources;
Open an additional temporary file review facility in another metropolitan area with
concentrated and available servicing talent, and source additional resources from that
labor market. In that regard, working with Robert Half, Promontory has recently
conducted a successful test of the market for qualified resources in the
labor market.
6. Project Leadership and Management Biographical Detail
Promontory staff who will lead the engagement include:
10
BOA-EL-00000103
September 6, 2011
11
BOA-EL-00000104
September 6, 2011
12
BOA-EL-00000105
September 6, 2011
13
BOA-EL-00000106
September 6, 2011
14
BOA-EL-00000107
September 6, 2011
15
BOA-EL-00000108
September 6, 2011
16
BOA-EL-00000109
September 6, 2011
17
BOA-EL-00000110
September 6, 2011
Promontory's subcontractor, Ernst &Young, LLP, will devote several senior staff to the
engagement, led by:
18
BOA-EL-00000111
September 6, 2011
Finally, the following additional senior Promontory professionals are active on engagements
relating to mortgage servicing at one or more Promontory clients and will be available as sources
of technical and strategic advice to both SAC and to the Promontory leadership team described
above:
19
BOA-EL-00000112
September 6, 2011
20
BOA-EL-00000113
September 6, 2011
21
BOA-EL-00000114
September 6, 2011
Promontory may adjust the composition of its teams from time to time in response to client needs
and logistical considerations.
22
BOA-EL-00000115
BAC Foreclosure Review Engagement Letter: Attachment C
September 6, 2011
Attachment C
BOA-EL-00000116
September 6, 2011
Page 2
BOA-EL-00000117
September 6, 2011
Page 3
BOA-EL-00000118
Letter
the purpose of
WFB-EL-00000001
!
Wells Fargo Bank, N.A.
August 31, 2011
any other respect perform the Foreclosure Review as further detailed in this letter. Promontory will
conduct the Foreclosure Review entirely Independently of Wells Fargo, subject to the direction of the
OCC and not Wells Fargo. WeJls Fargo may not oversee, direct, or supervise the engagement, but this
will not preclude Wells Fargo and Promontory from working consultatively, or Wells Fargo from
communicating with Promontory as necessary both to identify opportunities to Improve the operations
of its foreclosure processes in light of information rearned by Promontory through the performance of
the Foreclosure Review, and to confirm that Promontory's performance of the Foreclosure Review
complies with the requirements of the Consent Order. Promontory will be subject to review and
oversight by the OCC at all stages of the Foreclosure Review, will regularly brief the OCC on the work
being performed, and will follow comments and directions provided by the OCC.
1. B.ACKGROUND
The Consent Order: On April 13, 2011, Wells Fargo and the OCC entered into the Consent Order, which
relates to the conduct of Wells Fargo's mortgage servicing business. Article VII of the Consent Order
requires Wells Fargo, within 45 days of the date of the Consent Order, to retain an independent
consultant to review certain residential mortgage foreclosures completed or initiated by Wells Fargo in
calendar years 2009 and 2010 (the "Foreclosure Review") within 120 days following the OCC's approval
of the independent consultant's retention.
The Foreclosure Review Preparation SOW: In anticipation of the Consent Order, and in accordance with
the MSA, Wells Fargo and Promontory entered into a Statement of Work (the (Foreclosure Review
Preparation SOW") that obligated Promontory to perform various planning and preparation tasks to
ensure the smooth and effective conduct ofthe Foreclosure Review. Those tasks included the
development of this Agreement.
2. ORGANIZATION OF THIS AGREEMENT
Section 3 of this Agreement sets forth its essential terms and conditions. Section 3.a sets forth an
affirmative statement of the parties' intent to comply with the terms of the Consent Order. Section 3.b
identifies the project name. Section 3.c describes the scope and timing of services to be provided by
Promontory pursuant to this Agreement. Section 3.d describes the performance period. Section 3.e
identifies work sites. Section 3.f identifies Attachment D as describing the fees that Promontory expects
to charge Wells Fargo for services performed under this Agreement, as well as the costs for which Wells
Fargo will reimburse Promontory. Section 3.g sets forth acceptance criteria. Sections 3.h and 3.1
WFB-EL-00000002
August 31, 2011
identify project managers. Section 3.j identifies subcontractors that Promontory intends to use. Section
3.k sets all other terms and conditions governing the conduct of this agreement.
Article VII(2) of the Consent Order requires this Agreement to include four items. The table below
summarizes those items and indicates the section and page of this Agreement that responds to each of
them.
AGREEMENT
REQUIREMENT SECTION PAGE
Methodology for conducting the File Review Process Attachment A Ai
Expertise and resources to be dedicated to the Foreclosure Review Attachment C C"i
Completion of the Foreclosure Review within one hundred twenty
(120) days from approval of this Agreement Section 3.d.ii,1 6
Commitment that any workpapers associated with the Foreclosure
Review be made available to the acc immediately upon request Section 3.e.vi 5
Nine attachments provide important supplemental information and are integral to this Agreement
Attachment A ("File Review Process and Methodology") sets forth the methodology Promontory intends
to use in performing the File Review Process. In accordance with the terms of the Consent Order,
Attachment A includes (i) a description of the information systems and documents that Promontory will
review, including the selection of criteria for cases to be reviewed; (ii) the criteria Promontory intends to
apply in evaluating the reasonableness of fees and penalties; (iii) other procedures necessary to make
the required determinations (such as through interviews of employees and third parties and a process
for submission and review of borrower claims and complaints)j and (iv) Promontory's proposed
sampling techniques, induding both a full description of the statistical basis for the sampling methods
chosen, as well as procedures to increase the size of our sample depending on results of the initial
sampling.
Attachment B ("Complaint Process and Methodology") sets forth the methodology Promontory intends
to use in performing the Complaint Process. Attachment B describes how Promontory envisions that
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Fargo Bank, N.A.
August 31, 2011
Wells Fargo, in coordination with other servicers, will promote the complaint opportunity to borrowers
within the scope of the Foreclosure Review and the processes that Wells Fargo and Promontory will use
to ensure that every complaint received from an in-scope borrower receives independent consideration
and disposition.
Attachment C ("Resources and Expertise") describes the resources and expertise Promontory will use to
complete the Foreclosure Review, Including personnel and information systems. Attachment C further
describes Promontory's plans for enlisting additional resources necessary to complete the Foreclosure
Review in the event that initial sampling identifies needs for more extensive file review.
Attachment D ("Fees") describes the fees that Promontory expects to charge Wells Fargo for services
performed under this Agreement, as well as the costs for which Wells Fargo will reimburse Promontory.
Attachment E ("Project Plan") provides a high-level Foreclosure Review Project Plan. The parties intend
this Plan to be a working document, subject to periodic revision upon mutual agreement of the parties
throughout the performance of services pursuant to this Agreement.
Attachment F ("Security and Access Provisions") describes certain additional understandings regarding
system and facilitIes access, network connections, data safeguards, and related matters.
Attachment G ("Out of Pocket Expenses Reimbursement Policy") details certain additional
understandings of the parties regarding reimbursement by Wells Fargo for out-Of-pocket expenses
.incurred by Promontory in the course of performing services under this Agreement.
Attachment H ("Dispute Resolution Procedures") details the steps to be taken by the parties in resolving
any dispute that may arise in regard to this Agreement.
Attachment I ("Conflicts of Interest Policy") details Promontory's policy on conflicts of interest.
3. TERMS AND CONDITIONS
a. COMPLIANCE WITH CONSENT ORDER
The parties intend this Agreement to comply fully with the requirements of Article VII of the Consent
Order and with all Interpretive guidance the occ may issue pursuant thereto. In the event that the ace
requires further refinement of this letter as a condition of its approval, the parties agree to work
together in good faith to make refinements acceptable to the OCC.
b. PROJECT NAME:
Foreclosure Review
c. SCOPE ANDTIMING OF PROMONTORY SERVICES
Foreclosure Review Engagement letter, page 4
WFB-EL-00000004
i. Foreclosure Review.
Within the performance period set forth in section 3.d, Promontory will conduct an independent review .
("Foreclosure Review") of certain residential foreclosure actions initiated or completed on owner
occupied, 1-4 family dwellings by divisions of the institution that process first lien mortgage
foreclosures. Promontory's review shall include residential foreclosure actions or proceedings (including
foreclosures that were in process or completed) for loans serviced by Wells Fargo, whether brought in
the name of Wells Fargo, the investor, the mortgage note holder, or any agent for the mortgage note
holder (including MERS), that have been pending at any time from January 1, 2009 to December 31,
2010, as well as residential foreclosure sales that occurred during this time period.
ii. Report of Findings.
Within thirty (30) days of completing the Foreclosure Review, Promontory will prepare a written report
detailing the findings of the Foreclosure Review ("Foreclosure Review Report"). Upon completion,
Promontory will simultaneously deliver the Foreclosure Report to the members of the Board of Directors
of Wells Fargo, to the Compliance Committee established in conformance with the Consent Order, to
the acC's Deputy Comptroller for Large Bank Supervision, to the acC's Examiner in Charge of Wells
Fargo, and to you.
iii. Reporting.
1. Periodic Reports to Management.
Promontory will report to Wells Fargo at regular intervals and in a form to be mutually agreed, no less
than every fourteen {14} days, concerning the status of its performance of services under this
Agreement. At a minimum, Promontory's reporting will identify any respects in which the
accomplishment of milestones set forth in the Forecfosure Review Project Plan (Attachment E) is at risk,
any need(s} for assistance from Wells Fargo, and any findings or observations believed by Promontory
likely to warrant indusion in the Foreclosure Report.
2. Ad Hoc Reports to Management.
Managing Directors assigned by Promontory to this engagement shall be reasonably available to Wells
Fargo management by telephone, e-mail, or in-person for ad hoc consultations and status reports
throughout the period of this Agreement.
3. Reporting to the Board(s).
Upon reasonable notice, Promontory will report to the Board of Wells Fargo & Co.; the Board of Wells
Fargo Bank, N.A., or any committee of such boards charged with oversight of Wells Fargo's efforts to
comply with the Consent Order for the purpose of discussing the status of Promontory's provision of
WFB-EL-00000005
services pursuant to this Agreement and any findings or observations Promontory may have made in the
course of providing such services.
4. Reporting to the OCC.
If requested by Wells Fargo orthe acc, Promontory will meet with representatives of the acc to discuss
. the status of the Foreclosure Review, the findings set forth in the Foreclosure Report, or any other
matters germane to this engagement.
iv. Independence.
Promontory envisions a consultative working relationship with Wells Fargo, with the shared objective of
Identifying Wells Fargo borrowers within scope of the Foreclosure Review who have incurred financial
injury attributable to errors, misrepresentations or other deficiencies within the scope of the Consent
Order.
As independent consultant, Promontory will have sole responsibility for the methodology, findings and
observations set forth in the Foreclosure Report. Promontory has confidence in its ability to conduct
itself independently for five reasons.
First, Promontory has no ongoing relationship with Wells Fargo and does not act for Wells Fargo in any
advocacy capacity. Beyond its current efforts to assist Wells Fargo in preparing for the foreclosure
review, Promontory has no active engagement with Wells Fargo & Co. or any Wells Fargo subsidiary.
Second, Promontory's engagement is conducted under the oversight of the Wells Fargo Board of
Directors and the independent Corporate Risk function, not the residential mortgage servicing area that
is subject to review.
Third, none of Promontory's previous engagements with Wells Fargo relate closely to the subject matter
of the Foreclosure Review. The Foreclosure Review will not require Promontory to evaluate or re
evaluate any of the findings and observations it has reached in prior engagements. Accordingly,
Promontory's prior work with Wells Fargo is unlikely to affect objectivity and
thoroughness in performing the Foreclosure Review.
Fourth, as further described below, Wells Fargo has a history of engaging Promontory precisely for the
purpose of providing independent advice. Several of Promontory's previous engagements with Wells
Fargo involved the provision of advice directly to Wells Fargo's corporate risk management functions,
internal audit function, and committees of the Board of Directors. Promontory and Wells Fargo agree
that the success of the Foreclosure Review will require Promontory to conduct itself with a high degree
of independence.
Finally, Promontory enjoys a large and growing clientele. The firm's economic success does not depend
and never has depended on its business relationships with Wells Fargo.
WFB-EL-00000006
August31, 2011
1. Independence of Consultant conducting Foreclosure Review
Promontory agrees that the Foreclosure Review will comply with all requirements set forth in Article VII
of the Consent Order issued to Wells Fargo on April 13, 2011, and that it will conduct the Foreclosure
Review as separate and independent from any review, study, or other work performed by the Bank or its
contractors or agents with respect to the Bank's mortgage servicing portfolio or the Bank's compliance
with other requirements of the Consent Order, as set forth below:
a. Conduct of the Foreclosure Review by Promontory shall not be subject to direction, control,
supervision, oversight, or influence by the Bank, its contractors or agents. Promontory shall
immediately notify the Office of the Comptroller of the Currency (the "OCC") of any effort by the
Bank, directly or indirectly, to exert any such direction, control, supervision, oversight, or
influence over the Independent Consultant, its contractors or agents.
b. Promontory agrees that it is solely responsible for the conduct and results of the Forecfosure
Review, In accordance with the requirements of Article VII of the Consent Order.
C. The conduct of the Foreclosure Review shall be subject to the monitoring, oversight, and
direction of the Occ. Promontory agrees to promptly comply with all written comments,
directions, and instructions of the OCC concerning the conduct of the Foreclosure Review, and
that it will promptly provide any documents, workpapers, materials or other information
requested by the OCC, regardless of any claim of privilege or confidentiality.
d. Promontory agrees to provide regular progress reports, updates and information concerning the
conduct of the Foreclosure Review to the OCC, as directed by the OCC.
e, Promontory will conduct the Foreclosure Review using only personnel employed or retained by
Promontory to perform the work required to complete the Foreclosure Review. Promontory
shall not employ or use services provided by Bank employees, or contractors or agents retained
by the Bank with respect to the Consent Order or with respect to matters addressed in the
Consent Order, in order to conduct the Foreclosure Review, except where the OCC specifically
provides prior written approval to do so.
f. Subject to the requirements and restrictions of paragraph e above, including the requirement of
specific approval by the OCC, Promontory may utilize documents, materials or other information
provided by the Bank, and may communicate with the Bank, its contractors or agents; in order
to conduct the Foreclosure Review.
g. Promontory agrees that any legal advice needed in conducting the Foreclosure Review shall be
obtained from the outside law firm whose retention for that purpose has been approved by the
OCC. Promontory agrees not to obtain legal advice (or other professional services) in conducting
the Foreclosure Review from the Bank's inside counsel, or from outside counsel retained by the
WFB-EL-00000007
Bank or its affiliates to provide legal advice concerning the Consent Order or matters contained
In the Consent Order.
h. If the OCC determines; in its sole discretion, that Promontory has not been fully compliant with
the foregoing standards (paragraphs a-g, above), the OCC may direct the Bank to dismiss
Promontory and retain a successor consultant, in which case the Bank shall have no further
obligation to Promontory other than for services performed up to that date for the Bank.
2. PromontorYs Past Work with Wells Fargo
Promontory has performed several previous engagements for Wells Fargo. Promontory and Wells Fargo
believe this experience gives Promontory institutional knowledge of Wells Fargo that will contribute to
the success of the Foreclosure Review, and that Promontory's history of engagement with Wells Fargo
does not present.alevel of entanglement or conflict that would be likely to compromise Promontory's
independence in performing the Foreclosure Review.
Promontory's previous engagements with WelJs Fargo include:
WFB-EL-00000008
:
August 31, 2011
WFB-EL-00000009
3. Actual or Potential Conflicts of Interest
Promontory has been engaged by multiple clients to perform a variety of advisory services relating to
the Consent Orders and related orders of the same date issued by the Federal Reserve Board of
Governors. Promontory believes these clients share a common interest in complying fully with the
requirements of the ace and Federal Reserve, that their interests in this regard are not adverse} and
that Promontory's work with them, accordingly} does not present a conflict of interest.
WFB-EL-00000010
August 31, 2011
Promontory's Conflict of Interest Policy is attached to this agreement as Attachment I.
4. Promontory Subcontractors
Promontory subcontractor AlionhiU, LLC has never previously provided professional services to Wells
Fargo and has no other assignment with Wells Fargo in progress or pending acceptance.
Promontory legal counsel Hudson Cook, LLP has represented Wells Fargo from time to time in
connection with various consumer finance compliance matters. Wells Fargo has not retained Hudson
Cook for any representation relating to the Consent Order or legal advice concerning Wells Fargo's
obligations under that Order wIth respect to any corrective action that the Order may require Wells
Fargo to take.
v. Workpapers.
Promontory will make all workpapers associated with performance of the Foreclosure Review available
immediately upon the request of the OCC or Wells Fargo.
d. PERFORMANCE PERIOD
i. Start Date of the Engagement. As of the date of the OCC's acceptance of or formal non
objection to this Agreement.
n. Milestones. As set out in this A g r e e m e n ~ and the Consent Order and further detailed in
Attachment E ("Project Plan"):
1. Promontory will complete the Foreclosure Review within 270 days following OCC
approval of this Agreement or such later date as the OCC may specify in response to
a request for extension or otherwise;
2. Promontory will complete the Foreclosure Review Report within 30 days following
completion of the Foreclosure Review.
iii. End Date. Upon the DeC's acceptance of or non-objection to the Foreclosure Review
Report.
e. WORK SITE: Promontory offices, Allonhill offices. additional rented space
_ or other locations as needed, and various Wells Fargo locations.
f. FEES
See Attachment D for a discussion of fees.
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August 31, 2011
g. ACCEPTANCE CRITERIA
Acceptance shall be subject to the Consent Order and any requirements placed on this engagement by
the OCC.
h. WElLS FARGO MANAGER
i. PROMONTORY PROJECT MANAGER
See Attachment C for additional team members.
j. PROMONTORY SUBCONTRACTORS
Allonhill, LLC;
Hudson Cook, LLP and, In"the event that Hudson Cook lacks sufficient resources to support this
engagement, co-counselor local counsel to Hudson Cook, subject to the approval of Wells Fargo and the
OCCi
McDermott Will & Emery, LLPi and
Promontory Risk Review, lLP (a wholly-owned subsidiary of Promontory newly-formed for the purpose
of supporting Promontory's foreclosure reviews and related work).
See Attachment C for additional details.
k. Additional Terms and Conditions
i. Definitions
1. "Affiliates" means Wells Fargo & Company and any present or future subsidiary
thereof as defined under 12 U.S.C. 1841(d).
2. "Confidential Information" means any and all information, including trade secrets,
know-how and proprietary information, techniques, plans or any other information
relating to the business of a Party, including without limitation, work in process and
information regarding a Party's present Or future products, customers, employees,
investors or affiliates and disclosed or otherwise supplied in confidence by the Party
who disclosed the information ("Disclosing PartyJl) to the other Party ("Receiving
PartyJl), or received by the Receiving Party in the course of carrying out the tasks
hereunder, or as a result of access to the premises of the Disclosing Party. This
includes information furnished in the course of the provision of Services by
Promontory, or related to discussions between the Parties in anticipation of this
WFB-EL-00000012
Agreement or any particular scope of work under this Agreement. Confidential
Information Includes: (i) information disclosed in a written or other tangible form
whIch is clearly marked with a "confidential" or "proprietary" legend or other
comparable legend; (il) information discfosed orally or visually which is Identified as
confidential at the tIme of disclosure and confirmed in writing within a reasonable
time; (iii) any other information which a reasonable person would deem confidential
under the context of dlscfosure or due to the nature of the information; and{ivJin the
case of Wells Fargo, Customer/Consumer Information. Exceptions to the term
/lConfidentiallnformation" are set forth in Section 3.k.vi.1.b (Exclusions).
3. IICustomer/Consumer Information" means any and all information or data that is
provided by, through or on behalf of Wells Fargo or any Affiliate to any Promontory
Personnel, or is otherwise acquired by any Promontory Personnel in the course of
performing Services under this Agreement that relates to any: (i) current, prospective
or former customer (whether an individual, business entity, governmental unit, or
otherwise) of Wells Fargo or any Affiliate, (ii) consumer of Wells Fargo or any
Affiliate, (iii) nonpublic personal Information of Wells Fargo or any Affiliate regarding
its customers or consumers (within the meaning of Title V of the Gramm-Leach-Bliley
Act and its implementing regulatlons,or any similar provision under any other
applicable law), (iv) information subject to Section 628 of the Fair Credit Reporting
Act and any regulations or guidelines adopted under those laws (or any similar
provision under any other applicable law), or (v) information from which a customer
or consumer's identity can be ascertained, either from the Information itself or by
combining the information with information from other sources.
"Customer/Consumer Information" includes, but is not limited to, financial
information, medical or health-related information. Examples are credit history,
income, financial benefits, information in an application, loan or claim information,
health information such as medical records, names or lists of individuals derived from
non public personally identifiable information or otherWise derived from Wells Fargo
or an Affiliate, or the identification of an individual as a customer or as an individual
claimant under a financial product or service provided by Wells Fargo or an Affiliate.
4. "Oeliverables" means materials that Promontory will furnish to Wells Fargo as a
result of the services performed under this Agreement, including, but not limited to
the Foreclosure Review Report and the reports described above in Section 3.c.iv
(Reporting).
5. "Intellectual Property Rights" means all patents (including originals, divisionals,
continuations, continuations in-part, extensions, foreign applications, utility models
and re-issues), patent applications, copyrights (including all registrations and
applications therefor), trade secrets, service marks, trademarks, trade names, trade
WFB-EL-00000013
August 31, 2011
dress, trademark applications and other proprietary and intellectual property rights,
including moral rights.
6. "Services" means the services to be provided by Promontory under this Agreement.
7. "Promontory Personnel" means Promontory and each of its employees, along with
any subcontractors or agents of Promontory, and any Dependent Provider (as
defined in Section 3.k.U.l.b.ii (Dependent Providers) below.)
II. Standards for Performance of Services
1. Promontory Personnel
a. Independent Contractors. Promontory may select its own Promontory
Personnel, and these individuals will be and act under the exclusive supervision
and control of Promontory, subject to the terms of this Agreement, including
the Dependent Providers and individuals described in Section 3.k.ii.1.b
(Subcontractors) below. The relationship between the Parties created by this
Agreement is that of independent contractor and not partners, joint venturers,
agents or employees. Promontory wilt ensure that all Promontory Personnel
who perform Services under this Agreement comply at all times with the terms
of this Agreement and aflStatements of Work, and will be responsible for any
faifure of Promontory Personnel to so comply.
b. Subcontractors
i. Individuals. Promontory may not use individuals who {i} are not employees
of Promontory, or (U) are in the United States pursuant to the l-I category of
visas (or any succeSsor legislation or regulations), in the performance of
Services, unless approved by Wells Fargo in a signed writing, which approval
must be obtained prior to when the individual commences performing any
aspect of the Services; and which approval will not be unreasonably
withheld or unduly delayed.
ii. Dependent Providers. Promontory will rely on Allonhill, LLC for information
technology support and subject matter expertise essential to Promontory's
performance of the Services. Promontory will provide Wells Fargo with no
less than ninety (90) days' notice of any intent to discontinue its reliance on
Allonhill or to replace Allonhill with another vendor of such support, and will
obtain Wells Fargo's prior written approval for any such change, which
approval will not be unreasonably withheld or unduly delayed. Promontory
has also engaged Hudson Cook, llP, to provide legal advIce regardIng state
WFB-EL-00000014
.
August 31, 2011
foreclosure laws. Promontory will also rely on Promontory Risk Review, LLP,
a wholly-owned subsidiary of Promontory newly-formed for the purpose of
supporting Promontory's foreclosure reviews and related work.
2. Replacement. Wells Fargo and Promontory will meet to discuss either party's
concerns about the unsatisfactory performance or lack of the requisite skllls of
Personnel, and will use good faith efforts to resolve any issues so raised to both
parties' reasonable satisfaction, including through replacement of Personnel.
Notwithstanding the foregoing, Promontory shall have sale discretion to determine
whether to replace its Personnel.
3. Non-Exclusive. The Parties acknowledge and agree that the procurement of Services
under this Agreement will be on a non-exclusive basis and that neither Wells Fargo
nor its Affiliates guarantees to Promontory any minimum amount of business other
than as agreed herein. Promontory and Promontory Personnel may contract to
perform similar services for others during the term of this Agreement, subject to
Promontory's obligations under this Agreement.
4. Non-Solicitation. Neither Party will directly solicit for employment any employee of
the other Party during the term of this Agreement or for three (3) months after its
expiration or termination. If either Party directly solicits and then employs an
employee of the other Party during this timeframe, the Parties will agree to a
recruitment fee, which will not exceed Ten Thousand Dollars ($10,000) for any single
hiring. For the avoidance of doubt, neither Party is prohibited from employing an
. individual who approaches such Party about employment opportunities in response
to a posting, employment advertisement, or other general solicitation of
employment, whether such application is during the term of this Agreement or
thereafter.
5. Offshore Services.
a. Prior Approval Required. Promontory will not perform any Services under this
Agreement, whether directly or via a subcontractor, outside of the United States
of America ("United Stat,es") without the prior written consent of a Wells Fargo
Executive Vice President. In the event that Wells Fargo does not consent to a
Promontory request to utilize Promontory Personnel resident or otherwise from
outside the United States, Wells Fargo will indicate to Promontory the reasons
therefore, and the parties will work in good faith to reach a mutually agreeable
solution.
b. Exceptions. The foregoing restrictions of this Section 3.k.ii.S (Offshore Services)
shall not apply to (a) Promontory efforts to develop or modify Promontory's
WFB-EL-00000015
Wells Fargo Bank. N.A.
August 31. 2011
commercially available software; (b) Promontory's telephone or email technical
support of its products or services that does not require (i) access to Wells Fargo
Confidentiallnformatloni (ii) access to or connectivity with Wells Fargo's
computing environments, or (fll) direct communication with any Wells Fargo
Customer or Consumer; and (c) Promontory's manufacture of commercially
available goods.
iii. Intellectual Property Rights
1, Wells Fargo's Data, Promontory acknowledges and agrees that Wells Fargo shall
retain all right, title and interest in and to all Wells Fargo Confidential Information,
including all Intellectual Property Rights therein and any derivatives of Wells Fargo's
Confidential Information or improvements to Wells Fargo's Confidential Information,
Wells Fargo grants no licenses to Promontory to use the Wells Fargo Confidential
Information other than for the purposes of performing Services hereunder, pursuant
to the terms of this Agreement. The foregoing is not intended to prohibit
Promontory, in the conduct of its business from developing, creating or reducing to
practice derivative works or improvements to any know-how gained While providing
services to Wells Fargo or from using Residual Information {as defined in Section
3.k,ilI.S below}.
2. Promontory's Technology. The Parties agree that whereas Promontory provides
services to multiple clients and works on an ongoing basis to improve the
Promontory Technology for the benefit of all clients, all right, title and interest,
including Intellectual Property Rights, in and to the Promontory Technology, whether
conceived, developed, enhanced, reduced to practice or otherwise created before,
during or after the term of this Agreement are and shall remain the sale and
exclusive property of Promontory. For purposes of this Agreement, "Promontory
Technology) shall mean any and all templates and other formats, checklists,
methodologies, risk calculators, other diagnostic tools, and other information,
inventions, discoveries) innovations, improvements and works of authorship
conceived, developed, enhanced, reduced to practice or otherwise created by or on
behalf of Promontory, and any derivative works thereof or improvements thereto,
whether or not expressed in Deliverables. Promontory Technology specifically
excludes Wells Fargo Confidential Information, and Promontory will not use any
Promontory Technology in a manner that reveals to an unauthorized third party any
Wells Fargo Confidential Information in violation of this Agreement. Promontory
hereby grants to Wells Fargo the right and license (which is fully paid-up) to use the
Promontory Technology as required to receive the Services for Wells Fargo's own
intenlal business operations and activities, including the use of any software that
may be required to access the Promontory Technology, or use the Services, via the
WFB-EL-00000016
August 31, 2011
Internet or otherwise which Promontory owns or for which Promontory has the right
to assign or to grant sublicenses; it being understood that (a) the foregoing license
includes the right to provide copies of Oeliverables containing any Promontory
Technology to government authorities and to other third parties solely in connection
with work they are performing for Wells Fargo, but not for further publication or
distribution by such third parties; and (bl the foregoing license does not permit Welts
Fargo to sell, sublicense or assign the Promontory Technology to any unaffiliated
third party, which is expressly prohibited. Notwithstanding the foregoing, in the
event that the provision of any Services require the modification of Promontory
Technology for the sole use of Wells Fargo, the Parties will address the scope of the
requested Promontory Technology modification, the related fees for such
modification, and applicable ownership and license rights with respect to any such
modifiedPromontory Technology in a writing that wilt be negotiated and executed
by an authorized representative of each Party.
3. Wells Fargo Technology. The Parties agree that all Intellectual Property Rights in and
to the inventions, discoveries, or innovations developed by Wells Fargo prior to or
during the term of this Agreement that are embodied in the products and processes
utilized by Wells Fargo in its own internal business operations or its business
activities undertaken with current or prospective customers, consumers or service
providers ("Wells Fargo Technology"), along with Wells Fargo's or its agents'
improvements to that technology and any derivative works ofsuch technology, are
and shall remain the sale and exclusive property of Wells Fargo.
4. Ownership. Except as noted herein with respect to the Promontory Technology in
Section 3.k.m.2 above, or as set forth in Section 3.k.iii.5 below, the Parties agree that
Wells Fargo is the sale and exclusive owner of the OeJiverables.
5. Exclusions. Each Party may, during the course of the performance of Services by
Promontory for WelJs Fargo, discover or learn information or develop knowhow of
general application regarding the subject matter of the Services, which discovery,
information or knOW-how would not deprive the other Party of any vested
proprietary rights in any system, process or other business operation disclosed to
such Party (tlResiduallnformation"). Each party is entitled to use Residual
Information it learns from the other Party without the need to seek the approval of
the other Party or pay any compensation for such Residual Information. The limited
permission set forth in this Section 3.k.iii.S does not permit intentional memorization
of the other Party's Confidential Information for the sale purpose of evading
obligations contained in this Agreement, or the unlicensed use of a party's
tlTechnology" (as such term Is defined in Sections 3.k.iii.2 and 3.k.iii.3, above). Each
Party agrees to instruct its personnel on the obligations under this Section.
WFB-EL-00000017
August 31, 2011
Notwithstanding anything to the contrary in this paragraph, nothing contained in this
Section 3.k.iii.5 gives the recipient of the Residual Information the right to disclose,
publish or disseminate:(a) the source of the Residual Information; (b) any financial,
statistical or personnel data of the other Party; (c) the business plans of the other
Party; or (d) in the case of Promontory, the Customer/Consumer Information of
Wells Fargo.
iv. Pricing and Payment
1. Payment Terms. Promontory will invoice Wells Fargo on a monthly basis for Services
actually rendered. Promontory will comply with all invoicing procedures reasonably
requested by Wells Fargo, including any requests that invoices be centralized through
a single Wells Fargo office, or, in certain instances, for separate invoices by Wells
Fargo accounting unit ("AU"), itemization on consolidated invoices, and that regular
and customary charges be differentiated (so that any "extra" charges - i.e., overtime,
services outside the scope of what is specifically contracted for, or related expenses
are apparent to Wells Fargo). Promontory will ensure all invoices are accurate,
include appropriate identification and AU numbers, and are delivered to the proper
individual or bUsiness unit. Promontory acknowledges that submission of invoices
. more than ninety (90) days late may result in significant delays in payment of those
invoices by Wells Fargo. Wells Fargo will pay the undisputed amounts in any
Promontory invoice no later than thirty (30) days after Wells Fargo's receipt of s u ~ h
invoice, and any additional amounts in respect of disputed amounts fifteen (15) days
after the dispute has been settled to the Parties' mutual satisfaction.
2. Rates and Overtime. Promontory will comply with all applicable state and federal
wage and hour laws with respect to the payment of overtime to Promontory
Personnel, but Promontory will not charge Wells Fargo any additional amounts for
overtime unless Wells Fargo previously authorized the overtime in writing.
3. Expenses. Promontory will be reimbursed for aU actual and reasonable travel and
living expenses, telecommunications charges, duplicating and other document
production charges and delivery service charges ("Expenses") that are incurred by
Promontory while performing Services under this Agreement, if the Expenses are (i)
in accordance with Wells Fargo's standard reimbursement policy set forth in
-Attachment G (H) Wells Fargo has approved in advance the general
parameters of the Expenses (e.g., travel to a place certain on a date certain), and (iiI)
reflected in Promontory's invoice; its being understood that notwithstanding
Promontory's obligation to submit invoices on a monthly basis, Promontory will
submit invoices for expenses incurred during the preceding month with the next
WFB-EL-00000018
Involce submitted after receipts or other documentation of such expenses become
available.
4. Taxes. On its invoices, Promontory will itemize amounts for any and all sales, use,
excise, value-added, or goods and services taxes due under federal, state, local, or
f o r ~ j g n law that are associated with the Services or Deliverables rendered by
Promontory under this Agreement (but specifically excluding taxes in the nature of
ordinary personal property taxes assessed against or payable by Promontory, taxes
based upon Promontory's net income, Promontory's corporate franchise taxes and
the like) (collectively, the "Taxes"). Wells Fargo will payor reimburse Promontory for
all Taxes and Promontory will remit those amounts to the appropriate taxing
authority, and keep appropriate records of the assessment and payment of the
Taxes. Promontory will be exclusively liable for any penalties, Interest and other
charges of any Jurisdiction and any other fees ofcosts arising from Promontory's
failure (i) to assess, or timely assess, any applicable Taxes (although Wells Fargo will
remain liable for the underlying Taxes that Promontory should have assessed), or (ii)
to remit any amounts for Taxes it has collected from Wells Fargo.
v. Security
1. . Compliance with Wells Fargo Standards. It is not contemplated that Promontory will
have access to Wells Fargo's secure facilities or information systems, or to
"Restricted" Confidential Information of Wells Fargo (e.g., symmetric encryption
keys, passwords, etc.), in a manner that would necessitate information security
planning processes. However, Promontory will have access to Wells Fargo facilities
and ConfIdential Information. Therefore, Promontory, for itself and Promontory
Personnel, will comply with all of Wells Fargo's requirements in relation to the
security of the Wells Fargo facilities and Confidentiaflnformation that have been
provided to Promontory in writing in advance. This obligation includes the obligation
of all Promontory Personnel performing the Services, wherever to comply
with the terms of (i) Attachment which
document may be updated and revised by Wells Fargo from time-to-time; (Ii) any
Welfs Fargo security or information processing requirements set forth in this
Agreement; or (iii) in a mutually agreed upon information security procedures
between the Parties. Security measures for a given set of Services may be changed by
Wells Fargo from time-to"time, and Promontory will abide by any Wells Fargo
security measures that are communicated to Promontory in writing in advance.
Notwithstanding the foregOing, upon receipt of written notice from Wells Fargo of
changes to information security or other security measures ~
including, without limitation, or written notice of changes to _
_ Promontory shall have fifteen {is} business days in which to review such
WFB-EL-00000019
August 31, 2011
changes and if Vender cannot comply with such changes, then Promontory may
notify Wells Fargo in writing and may terminate this Agreement.
2. Promontory's Program. Promontory will implement such security measures as it
deems reasonably necessary to comply with its general obligations in this Section
3.k.v (Security) in order to control and mitigate the risks of loss, theft or disclosure of
any Wells Fargo Confidential Information or Wells Fargo Technology to which
Promontory has access in relation to the Services, and in a manner commensurate
with the sensitivity of the Services and such information and technology.
3. Risk Assessments. Wells Fargo reserves the right to conduct, at its cost, an initial risk
assessment prior to commencing Services to determine the risks associated with the
Services to be performed. Depending on the results of this assessment, Wells Fargo
may also conduct, at its cost, a site audit, source code audit, or other risk evaluations
of the operations of Promontory Personnel, but these sorts of evaluations are not
generally anticipated by the Parties in the ordinary course of Wells Fargo receiving
Services from Promontory. Promontory Personnel will cooperate with Wells Fargo in
such initial assessment, and any subsequently required evaluations, in order to
permit Wells Fargo to evaluate the ability of Promontory Personnel to comply with
Wells Fargo internal policies and procedures In relation to the Services initially
contemplated, including information security. This process will apply with equal force
to any modifications to the initial Services procured, and also to any subsequent
Services procured by Wells Fargo under this Agreement.
vi. Confldentialitv
1. Mutual Obligations
a. Standards. Confidentlallnformation of the Disclosing Party will be maintained In
confidence by the Receiving Party, who will safeguard this information using the
same degree of care as it uses to safeguard its own Confidential Information,
but in no case less than a reasonable degree of care. Subject to the terms of this
Agreement} the Receiving Party will limit (a) access to the Disclosing Party's
Confidential Information to those of its employees, officers, subcontractors and
agents with a need to know such Confidential Information for the performance
of obligatfons under this Agreement, and (b) use of the Disclosing Party's
Confidential Information for the exclusive purpose of fulfilling its obligations
under this Agreement. Confidential Information of the Disclosing Party is and
will remain the sole and exclusive property of the Disclosing Party, and the
Receiving Party has no right in or to the Disclosing Party's Confidential
Information.
Foreclosure Review Engagement letter} page 20
WFB-EL-00000020
August 31, 2011
b, Exclusions, Except for Customer/Consumer Information (which will always
remain as Confidential Information without exception), Confidential Information
will not include information to the extent that: (a} such information is or
becomes publicly available other than through any act or omission of either
Party in breach of this Agreement; (b) such information was received by the
Receiving Party other than under an obligation of confidentiality from a third
party, which third party had no obligation of confidentiality to the Disclosing
Party; or (c) such information was in the possession of the Receiving Party at the
time of the disclosure, or was independently developed by the Receiving Party
without reference to the Disclosing Party's Confidential Information. The burden
of proof that Confidential Information falls into anyone of the above
exemptions will be borne by the Party claiming such exemption(s).
2. Mutual Obligations
a. Generally. Promontory acknowledges that Wells Fargo's Confidential
Information includes both "Confidential Information" (defined in Section 3.k.i.2
above) and "Customer / Consumer Information" (as defined in Section 3.k.i.3
above). Promontory and Wells Fargo will only provide the other party's
Confidential Information to its respective Personnel after Promontory or Wells
Fargo, as the case may be, has (a) informed each individual or legal entity of the
confidential nature of the information and of the obligation to maintain its
confidentiality, and (b) it has procured a written agreement from each such
Personnel to maintain the confidentiality of the other party's Confidential
Information, it being understood that such Personnel's obligation of
confidentiality may be expressed in the form of a written agreement applicable
generally to the confidentiality of information belonging or pertaining to parties
with whom Promontory or Wells Fargo, as the case may be, does business.
b. Safeguards. Promontory maintains commercially reasonable safeguards against
the destruction, loss, alteration of or unauthorized access to its clients'
confidential information, including, without limitation, Wells Fargo's
Confidential Information in the possession of Promontory Personnel, which
safeguards include policies for the disposal/destruction of any such data that
are commensurate with the sensitivity of the materials to be disposed, but are
otherwise in accordance with the terms of this Agreement regarding the return
and/or destruction of Wells Fargo's Confidential Information.
c. Encryption. Promontory acknowledges that Wells Fargo Confidential
Information, in particular Customer/Consumer Information, may, in accordance
with WeJls Fargo information security policies, require encryption and/or other
WFB-EL-00000021
August 31, 2011
information security controls when it is transmitted over a network, or is stored,
processed or managed on equipment belonging to Promontory Personnel
(including portable equipment such as laptops and other portable devices),
whether thJs equipment is used at a Wells Fargo site or elsewhere, and
Promontory agrees to conform to such encryption policies, pursuant to the
terms of Section 3.k.v.l (Compliance with Wells Fargo Standards), above.
3. Legal Proceedings. In the event a subpoena or other legal process is served upon the
Receiving Party that, pursuant to the requirement of a judicial authority,
governmental agency or law of the United States or any state thereof (or any
governmental or political subdivision thereof), requires the disclosure of either
Party's Confidential Information disclosed hereunder, to the extent practicable and
legally permissible, the Receiving Party will notify the Disclosing Party promptly upon
receipt of such subpoena or other request for legal process (unless such notice is
prohibited by applicable law, rule Or regulation), and will cooperate with the
DisclOSing Party, at the Disclosing Party's expense, in any lawful effort by the
Disclosing Party to contest the legal valldity or scope of such subpoena or other legal
process.
4. Third Party Proprietary Information. No Party will disclose any information to the
other Party that it actually knows to be the proprietary or confidential information,
or trade secret, of a third party, except as permitted by the license or other terms of
use under which the Disclosing Party received such information from the third party.
Each Party will take all reasonable steps necessary to ensure the fulfillment of this
obligation.
5. Injunctive Relief. The Receiving Party acknowledges it would be difficult to fully
compensate the DisclOSing Party for damages that may result from the breach or
threatened breach of the foregoing prOVisions and, accordingly, that the Disclosing
Party will be entitled to seek injunctive relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions, to enforce such provisions. This
provision with respect to injunctive relief will not, however, diminish the Disclosing
Party's right to claim and recover damages.
6. Publicity. Except when disclosure is compelled pursuant to Section 3.k.vi.3 (legal
Proceedings}, Promontory will not disclose the existence of this Agreement or the
business relationship between Wells Fargo and Promontory to any outside third
party without Wells Fargo's prior written approval, from a Wells Fargo Executive Vice
President. This restriction includes, but is not limited to, using Wells Fargo's name,
likeness or logo ("Wells Fargo's Identity"). By way of example and not limitation,
Promontory will not use Wells Fargo's Identity, directly or indirectly, in conjunction
WFB-EL-00000022
with any other clients of Promontory, any client list, advertisements, news/press
releases or releases to any professional or trade publications, or in any document
that Promontory plans to file with the Securities and Exchange Commission without
the aforementioned approval.
7. Background Checks. Applicable law and regulatory guidance obligates Wells Fargo to
ensure that no person who has been convicted of any criminal offense involving
dishonesty, a breach of trust, or money laundering, or who has participated in a pre
trial diversion with respect to such an offense, or who has been convicted of a felony
within the last ten (lO) years, participates in the provision of Services that (i) require
access to Customer/Consumer Information, or (ii) require access to Wells Fargo's
computer networks, information systems, databases or secure facilities under
circumstances that would permit modifications to such systems. Subject to applica ble
law, prior to the performance of any Services pursuant to this Agreement in which
the aforesaid access in items (i) and/or (ii) is required, Promontory will conduct or
cause to be conducted third-party criminal background checks on all Promontory
Personnel assigned to perform such Services (whether these individuals are
employees of Promontory or fit within the other categories within the defined term'
"Promontory Personnel"), such background checks to Include screening aSSigned
Promontory Personnel against the Specially Designated Nationals and Blocked
Persons list published by the Office of Foreign Assets Control of the U.S. Department
of the Treasury (the "OFAC List"). Wells Fargo may require that Promontory provide
written evidence of successful background checks conducted under this section at
any time. In the event that Promontory does not comply with the terms of this
Section 3.k.vi.7, Wells Fargo will have the right, in its sole and absolute discretion, to
terminate this Agreement immediately. In the event that Services that require
background checks pursuant to this section are to be performed by Promontory
Personnel or any Dependent Provider outside the United States, Wells Fargo may
Impose reasonable, additional or different background check requirements on the
use of such Individuals, which requirements will be communicated to Promontory in
writing.
8. Security Breach. In the event of any actual or suspected security breach Promontory
either suffers or learns of that either compromises or could compromise Wells
Fargo's Confidential Information, including Customer/Consumer Information (e.g.,
physical trespass on a secure facility, computing systems intrusion/hacking, loss/theft
of a PC (laptop or desktop), loss/theft of printed materials, etc.) (collectively, an "IT
Security Breach"), Promontory will immediately notify Wells Fargo security personnel
of such Security Breach at the following 24-hour phone number: 800-947-4915 (or
other number provided by Wells Fargo to Promontory in writing from time to time),
WFB-EL-00000023
August 31,2011
and will immediately coordinate with Wells Fargo security personnel to investigate
and remedy the Security Breach, as directed by such Wells Fargo security personnel.
Except as may be required by applicable law, Promontory agrees that it will not
inform any third party of any such Security Breach without Wells Fargo's prior
written consent, which consent will not be unreasonably withheld or delayed;
provided, however, if such disclosure is required by applicable law, then to the extent
practicable and legally permissible, Promontory will notify Wells Fargo promptly
upon receipt of any subpoena, disclosure order or other request for legal process
(unless such notice is prohibited by applicable law, rule or regulation), and will
cooperate with Wells Fargo, at Wells Fargo's expense, in any lawful effort by Wells
Fargo to contest the legal validity or scope of such subpoena, disclosure order or
other legal process. Promontory will maintain records of any known or suspected
security breaches in accordance with its information security practices, and will make
such records reasonably available to Wells Fargo upon request.
9. Disclosure to Regulators. Notwithstanding anything herein to the contrary, upon
prior written notice to Promontory, Wells Fargo may disclose to any federal or state
bank examiner, or other regulatory officials having jurisdiction over Wells Fargo, the
Confidential Information of Promontory, at the advice of Wells Fargo counsel.
vii. Warranties
1. Compliance. Promontory represents and warrants to Wells Fargo that: (0 the
entering into and carrying out of the terms and conditions of this Agreement will not
violate or constitute a breach of any obligation legally binding upon Promontory; and
(Ii) Promontory will comply with all applicable international, federal, state and local
laws (and all corresponding regulations/directives) in connection with its
performance under this Agreement. Wells Fargo represents and warrants to
Promontory that the entering into and carrying out of the terms and conditions of
this Agreement will not violate or constitute a breach of any obligation legally
binding upon Wells Fargo.
2. Performance. Promontory represents and warrants that it will provide competent
Promontory Personnel with sufficient skill, knowledge, and training to perform the
Services for Wells Fargo that are set forth in this Agreement, and that such
Promontory Personnel will perform such Services in a diligent and professional
manner, and the Services and any Deliverables will comply with the performance
specifications set forth in this Agreement, as the same may be modified by mutual
agreement of the parties from time to time in writing. Except as may be authorized
by the terms of this Agreement, Promontory warrants that the performance of the
Services will take place solely within the United States.
WFB-EL-00000024
August 31
1
2011
3. Relationship. Promontory will monitor, supervise and direct Promontory Personnel
in the performance of the Services for Wells Fargo. Promontory represents and
warrants that: (i) Promontory is an independent contractor and Promontory
Personnel assigned to provide Services under this Agreement wiil not be, nor be
deemed to be for any purpose, an employee or agent of Wells Fargo; {iiI each
Promontory Personnel assigned to provide Services to Wells Fargo under this
Agreement will be and remain an employee, independent contractor or
subcontractor of Promontory for the entire period such person is providing Services
to Welts Fargo hereunder,; (iii) that Wells Fargo has no obligation whatsoever to
provide Promontory Personnel with liability or health insurance, or any other
benefits provided to Wells Fargo employees; (Iv) Promontory is solely responsible, at
its own expense, for complying with all laws, rules and regulations or any
governmental authority having appropriate jurisdidion relating to Promontory's
employment activities, including immigration, payroll and income taxation, workers
compensation, disability and unemployment insurance, certification, documentation,
and maintenance; and (v) that Promontory Personnel will not claim benefits from
Wells Fargo under Wells Fargo's employee benefit plans, or under applicable
unemployment or workers' compensation laws for any injuries sustained by
Promontory Personnel while performing Services. Promontory acknowledges that it
is solely responsible for the payment of compensation to Promontory Personnel,
including the payment, withholding and transmittal of all applicable taxes and
insurance, unemployment contributions and workers' compensation contributions.
Additionally, Promontory represents that it assumes full responsibility for processing
unemployment and workers' compensation claims involving Promontory Personnel.
4. Warranty PaSS-Through. In the event that Promontory procures hardware, software
or other materials related specifically to its performance of the Services ("Related
Products"), Promontory hereby assigns to Wells Fargo all assignable warranties
provided by the manuf<!cturer(s} and/or licensor{s) of such Related Products;
however, if the warranties provided by the respective manufacturers and/or
licensors of such Related Products cannot be so assigned, Promontory will cooperate
with Wells Fargo and assist in Wells Fargo's receipt of appropriate warranty support
with respect to the Related Products. No Related Products disclaimer or limitation of
liability will relieve Promontory of its obligations to deliver the Services or any
Deliverables pursuant to the standards set forth in this Agreement.
5. Authority. Promontory represents and warrants to Wells Fargo that (i) it has full
power and authority to grant the rights granted by this Agreement to Wells Fargo
with respect to the Services and any Deliverableswithout the consent of any other
person or entity; (ii) its execution and delivery of this Agreement and Promontory's
WFB-EL-00000025
performance or compliance with the terms of this Agreement will not conflict with,
result in a breach of, constitute a default under, or require the consent of any third
party under any license, sublicense, lease, contract, agreement or instrument to
which Promontory is bound or to which Promontory's properties are subject; and (iii)
there are no pending or threatened lawsuits, actions or any other legal or
administrative proceedings against Promontory which, if adversely determined
against Promontory, would have a material adverse affect on Promontory's ability to
perform its obligations under this Agreement. Wells Fargo represents and warrants
to Promontory that (i) its execution and delivery of this Agreement and Wells Fargo's
performance or compliance with the terms of this Agreement will not conflict with,
result in a breach of, constitute a default under, or require the consent of any third
party under any license; sublicense, lease, contract, agreement or instrument to
which wells Fargo is bound or to which Well Fargo's properties are subject; and (ii)
there are no pending or threatened lawsuits, actions or any other legal or
administrative proceedings against Wells Fargo which, if adversely determined
against Wells Fargo. would have a material adverse affect on Wells Fargo's ability to
perform its obligations under this Agreement. Each of Wells Fargo and Promontory
represent and warrant to the other that: (x) this Agreement has been validly
executed and delivered, (y) this Agreement constitutes the legal, valid and binding
obligation of such Party enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, reorganization and other Jaws affecting creditors' rights
generally, and, with regard to equitable remedies, to the discretion of the court
before which proceedings to obtain those remedies may be pending; (z) such Party
has all reqUisite corporate power and authority to enter into this Agreement and to
carry out the transactions contemplated by this Agreement, and that the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly authorized by all
requisite corporate action on the part of such Party.
6. Intellectual Property Warranty. Promontory represents and warrants to Wells Fargo
that (i) all Deliverables and Services performed by Promontory will be the original
work of PromontorY (or duly licensed by Promontory for the purposes for which they
are delivered) such that ownership may be granted as set forth in this Agreement; (ii)
Promontory is the lawful owner or licensee of all technology used by rt in the
performance of the Services and creation of the Deliverables (except that technology
provided by Wells Fargo); and (iii) if access to such technology is granted hereby,
Promontory has the right to permit Wells Fargo access to or use of such technology.
Promontory further warrants to Wells Fargo that to the best of Promontory's actual
knowledge: (x) there is no claim, litigation or proceeding pending or threatened
against Promontory with respect to the Services or Deliverables. or any component
WFB-EL-00000026
Bank, N.A.
August 31, 2011
thereof, alleging infringement of any Intellectual Property Rights of any person or
entitYi and (y) neither the performance of the Services by Promontory nor the
furnishing of the Deliverabtes, will In any way constitute an infringement or other
violation of any Intellectual Property Rights, non-disclosure agreement, or other
rights of any third party. Wells Fargo warrants to Promontory that to the best of
Wells Fargo's actual knowledge: (I) there is no claim, litigation or proceeding pending
or threatened against Wells Fargo with respect to the Wells Fargo Technology, or any
component thereof, alleging infringement of any Intellectual Property Rights of any
person or entity; and (ii) the furnishing of Promontory with access to the Wells Fargo
Technology in connection with the Services, will not in any way constitute an
infringement or other violation of any Intellectual Property Rights, non-disclosure
agreement, or other rights of any third party. Without prejudice to any other rights
of Wells Fargo against the Promontory, including any indemnification Obligations, if
any Deliverable, or any part thereof, under this Agreement becomes, the subject of
any claim, suit or proceeding for infringement of any Intellectual Property Rights. or if
any Deliverable, or any part thereof, is held or otherwise determined to infringe any
Intellectual Property Rights, Promontory will at its expense achieve the following
results in the listed order of preference: (A) secure for Wells Fargo the right to
continue using the affected product; or (B) replace or modify the product to make it
non-infringing without degrading its performance or utility.
7. Virus. Promontory represents and warrants that any software code writtenby
Promontory Personnel or materials furnished by Promontory to Wells Fargo will be
free from: (al any computer code or instructions that may disrupt, damage or
interfere with Wells Fargo's use of its computer and/or telecommunication facilities,
e.g. malicious code. viruses, etc., and (b) devices capable of automatically or
remotely stopping the code from operating (e.g., passwords, fuses, time bombs,
etc.).
8. Each of the foregoing warranties is continuous in nature and will be deemed
provided by Promontory on the Effective Date hereof and throughout the term of
this Agreement.
9. Disclaimers. TO THE MAXIMUM EXTENT PERMITIED BY LAW, PROMONTORY
DISCLAIMS ALL WARRANTIES EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT
AND All IMPLIED OR STATUTORY WARRANTIES, INCLUDING ANY IMPLIED OR
STATUTORY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, ACCURACY, QUIET ENJOYMENT, OR SYSTEMS INTEGRATION. EXCEPT FOR
PROMONTORY'S EXPRESS OBLIGATIONS IN THIS AGREEMENT, THE ENTIRE RISK AS TO
SATISFACTORY QUALITY, PERFORMANCE, ACCURACY, AND EFFORT OF ANY
WFB-EL-00000027
August 31, 2011
SOFTWARE AND ANY OTHER PRODUCT OR SERVICE THAT MAY BE PROVIDED SHAll
BE WITH WELLS FARGO.
viii. Indemnification
WFB-EL-00000028
August 31, 2011
ix.
x. INSURANCE. Without limiting Promontory's liability to Wells Fargo or its Affiliates under
this Agreement, Promontory, at its sale cost and expense, will maintain comprehensive
general liability insurance coverage in at least the amounts shown on the Certificate of
Insurance During the term of
this Agreement, Promontory wilt provide to Wells Fargo evidence of such coverage
annually upon request.
xi. TERM AND TERMINATION
1. General. This Agreement commences on the Effective Date, and continues in full
force and effect until terminated by either Party under the termination rights set
forth in this Agreement.
WFB-EL-00000029
i
rgo Bank, NA
August 31, 2011
2. Termination for Cause
a. With prior DCC consent, Wells Fargo may terminate, in whole or in part, this
Agreement for cause if: (a) Promontory breaches any material provision of this
Agreement or repeatedly breaches any such provision; (b) Promontory generally
fails to pay its debts as they become due, admits in writing its inability to pay its
debts generally, makes a general assignment for the benefit of creditors or any
proceedings are instituted by or against Promontory or Promontory takes any
corporate action to authorize any of the actions set forth in this Section 3.k.xi,2;
(cl Promontory breaches any of its obligations under Section 3.k.vi
(Confidentiality) or Section 3.k.vii.6 (Intellectual Property Warranty); or (d)
Promontory fails to comply with its reporting and remedy obHgations related to
Security Breaches, in accordance with the provisions of Section 3.k.vi.8 (Security
Breach), and then fails to cure or remedy such breach within thirty (30) calendar
days (but in the case of Security Breaches, within ten (10) calendar days) of
receiving written notice from Wells Fargo specifying in reasonable d e ~ a i l the
nature of such breach(es}. Any termination pursuant to subsections (a) through
(d) above will be effective as of the date specified in such termination notice,
upon Wells Fargo providing Promontory with written notice of such termination
pursuant to the terms of Section 3.k.xii.3 (Notice).
b. With prior DCC consent, Promontory may terminate, In whole or in part, this
Agreement for cause If Wells Fargo {al violates a material provision of this
Agreement or repeatedly breaches any such provisionj breaches any of its
obligations under Section 3.k.vi (Confidentiality) or Section 3.k.viI.6 (Intellectual
Property Warranty); and fails to remedy or cure such violation within thirty (30)
calendar days following written notice to Wells Fargo stating, with particularity
and in reasonable detail, the nature of the claimed breach. Any termination
pursuant to Section 3.k.xi.2, subsections (a) through (d) above will be effective
as of the date specified in such termination notice, upon Wells Fargo providing
Promontory with written notice of such termination pursuant to the terms of
Section 3.k.xii,3 (Notice).
c. Each Party acknowledges that any notice and cure period permitted will not
operate or be construed as a waiver of any subsequent, similar or other breach.
d. Notwithstanding termination, Wells Fargo shall timely pay Promontory's
accrued and unpaid fees and reimbursable expenses through the effective date
of termination. Wells Fargo will pay the undisputed amounts in any final
Promontory invoice no later than thirty (30) days after Wells Fargo's receipt of
WFB-EL-00000030
August 31,2011
such invoice, and any additional amounts in respect of disputed amounts fifteen
(15) days after the dispute has been settled to the Parties' mutual satisfaction.
3. No Fault Termination. If a court of competent jurisdiction or other administrative
body empowered to issue such orders issues a final order or judgment holding that
this Agreement or the Services offered hereunder, or some portion of the Services
pffered hereunder, are in violation of the law or if a Party is required to terminate
the Services of this Agreement by law, regulation or bank regulatory authority due to
objections regarding the third party relationship formed hereby ("Judgment"). In
such event, either Party may terminate those portions of this Agreement that
contravene such Judgment by providing the other Party with written notice of its
intent to do s.o, which termination is effective as of the date specified in such notice.
4. Termination without Cause. With prior DCC consent, each of the Parties may
terminate this Agreement without cause upon five (5) business days' prior written
notice to the other Party (or payment in lieu thereof). Notwithstanding termination,
Wells Fargo shall timely pay Promontory's accrued and unpaid fees and reimbursable
expenses through the effective date of termination. Wells Fargo wiJJ pay the
undisputed amounts in any final Promontory invoice no later than thirty (30) days
after Wells Fargo's receipt of such invoice, and any additional amounts in respect of
disputed amounts fifteen (15) days after the dispute has been settled to the Parties'
mutual satisfaction.
5. Mergers and Acquisition. Wells Fargo or its Affiliates may acquire or merge with
entities that, at the time of the closing of the acquisition or merger, have agreements
in effect with Promontory. Wells Fargo, in its reasonable discretion, will have the
right to terminate any and all of the acquired or merged entity's agreement(sl,
Statement(s) of Work, schedules or attachments with Promontory upon not less than
thirty (30) calendar days' prior written notice to Promontory. Such termination will
be without penalty or additional charge to Wells Fargo or the acquired or merged
entity(ies), unless otherwise provided for in the agreement(s), Statement(s) of Work,
schedules or attachments being terminated. Notwithstanding termination, Wells
Fargo shall timely pay Promontory's accrued and unpaid fees and reimbursable
expenses through the effective date of termination. Wells Fargo will pay the
undisputed amounts in any final Promontory invoice no later than thirty (30) days
after Wells Fargo's receipt of such invoice, and any additional amounts in respect of
disputed amounts fifteen (15) days after the dispute has been settled to the Parties'
mutual satisfaction.
6, Effect of Termination. Subject to each party's obligation to maintain certain records
in accordance with applicable law (and then only for the time period required by
WFB-EL-00000031
August 31, 2011
law), and further subject to applicable law or judicial or administrative order
regarding the return or destruction of documents, materials and other information,
in the event this Agreement is terminated by either Party, each Party will return or
irretrievably destroy all Confidential Information of the other Party that it (or its
subcontractors, including, in the case of Promontory, its Dependent Providers) has In
its possession, including any information stored on computing equipment, and will
provide the other Party with an officer's certificate attesting to such return or
destruction. In the event that the Confidential Information of a Party has been
commingled by the receiving Party with its own Confidential Information such that it
cannot feasibly be separated for return or destruction, such commingled data will be
protected by the Receiving Party as the Disclosing Party's Confidential Information.
Further, the Parties will work to ensure the termination of Services or transfer of
Services to another service provider selected by Wells Fargo (which may include
Wells Fargo) is orderly and is non-disruptive to the business continuation of each
Party, such cooperation to include, subject to applicable law or judicial or
administrative order, the transfer of all records, files (including computer tapes and
diskettes), and the latest versions of any Deliverables in progress upon the effective
date of termination, in the format mutually agreed by the parties as applicable.
However, If this transition has not been completed by the estimated termination
date, Promontory will, at the request of Wells Fargo, continue to perform the
Services on a month-to-month basis and be compensated for such Services as agreed
under Section 3.k.iv (Pricing and Payment) above on the condition that Promontory
has no obligation to provide the Services for longer than three (3) months from the
estimated date of termination of this Agreement. In the event this Agreement is
terminated by any Party for any reason whatsoever, Promontory will return to Wells
Fargo any fees prepaid by Wells Fargo for which Services have not been rendered.
Notwithstanding the foregoing, in the event Wells Fargo terminates this Agreement
without cause, Wells Fargo will remain obligated to pay for all undisputed fees and
expenses incurred prior to the effective date of termination. The Parties understand
and agree that no termination of this Agreement will discharge or excuse completion
of or performance of any liability or Services obligation herein undertaken or
occurring prior to the effective date of such termination. In addition, the termination
of this Agreement will not limit any other rights or remedies available to the
terminating Party.
7. User Access Termination. Upon the effective date of termination of this Agreement
for any reason, Wells Fargo will immediately terminate both Promontory's physical
access to Wells Fargo facilities and access to all Wells Fargo computer systems or
networks. In the case of a specific Promontory Personnel who is being removed or
replaced, Wells Fargo will terminate such access to all Wells Fargo computer systems
WFB-EL-00000032
August 31/ 2011
or networks within 24 hours of written notice to Promontory regarding the event
giving rise to the need for termination. In the event that Wells Fargo has permitted
Promontory to control any aspect of Promontory Personnel's access to Wells Fargo
facilities, computer systems or networks, then Promontory will terminate such access
as of the effective date of termination of this Agreement.
8. Survival of Certain Provisions. In the event this Agreement is terminated, the
provisions of Sections 3.kJJJ (INTElLECTUAL PROPERTY RIGHTS), 3.k.vii
(CONFIDENTIALITY), 3.k.ix (INDEMNIFICATION), 3.k.x (LIMITATION OF LIABILITY), and
3,k.xiii (GENERAL PROVISIONS) and Sections 3.k,v.4 (Taxes), 3.k.xii.6 (Effect of
Termination), 3.k,xii.7 (User Access Termination) and 3.k.xii,8 (Survival of Certain
Provisions) of this Agreement will survive such termination.
xii. GENERAL PROVISIONS
1. Not Law Firm or Lobbyist. Wells Fargo acknowledges and Agrees that Promontory is
neither a law firm nor a lobbyist and that no part of the services to be performed
pursuant to this Agreement shall constitute or is intended to constitute legal advice,
the rendering of legal services, or lobbying activities.
2. Acknowledgement. Promontory provides services to multiple clients within the
financial services industry. Wells Fargo acknowledges that these clients may be
direct or indirect competitors of Wells Fargo (including major residential mortgage
servicers subject to the interagency horizontal examination) and that the services
Promontory provides to such clients may be similar to the services provided to Wells
Fargo hereunder (including assistance with enforcement actions based upon the
findings of the interagency horizontal examination). Promontory anticipates that
other Similarly-situated mortgage servicers may retain it to assist with enforcement
actions based upon the findings of the interagency horizontal examination. In such
event, this Agreement envisions the creation of a central team, which wiff proVide
support to each engagement, including quality assurance, share information
regarding regulatory expectations, methodologies, project planning, reporting
formats, etc., and, where appropriate, may communicate with regulators on behalf
of these clients. However, Promontory will not share confidential information' of
Wells Fargo with its other similarly-situated mortgage servicer cfients, nor will
Promontory share confidential information of its other simila
consents to Promontory's work for such clients subject to the confidentiality
WFB-EL-00000033
August 31, 2011
obligations of the Agreement and waives any actual, potential or perceived conflict
of interest that may arise from Promontory's work on this engagement.
Notwithstanding anything to the contrary in the Agreement and solely for purposes
of this Agreement, "Confidentiallnformation" shall not include Information obtained
from regulators that does not uniquely apply to Wells Fargo or its affiliates.
3. Notice. All formal notices, consents and other communications hereunder must be in
writing and will be deemed to have been duly given when delivered personally, or
one (1) business day after being sent by a nationally recognized overnight courier
with package tracking capabilities. Notice that is delivered via facsimile or electronic
mail is sufficient to meet the notice requirement, provided it is: (i) confirmed as
received by the other Party, or Oi) an original copy follows it, as set forth above. All
notices should be sent to the following addresses and indicated contacts:
WELLS FARGO:
Charlotte, NC 28282
With a copy to:
San Francisco, CA 94104
And to the Welfs Fargo Engagement Manager.
WFB-EL-00000034
August 31, 2011
PROMONTORY:
. Promontory Financial Group, llC
Washington, DC 20004
With a copy to the Promontory Engagement Manager.
4. Assignment. Promontory will not assign anY-of its rights or delegate any of its duties
under this Agreement without the prior written consent of Wells Fargo, which
consent will not be unreasonably withheld; any unauthorized Promontory
assignment or delegation will be null and void. Promontory will not be relieved of any
of its obligations hereunder as a result of any assignment of this Agreement. Subject
to the foregoing, this Agreement will be binding upon and inure to the benefit of the
Parties' successors and assigns.
5. No Third-Party Beneficiaries. Except as stated in this Agreement, Promontory and
Wells Fargo intend that this Agreement will not benefit or create any right or cause
of action in or on behalf of any person or entity other than the Parties.
6. Modification and Waiver. No modification of this Agreement and no waiver of any
breach of this Agreement will be effective unless in writing and signed by an
authorized representative of each Party. No waiver of any breach of this Agreement,
. and no course of dealing between the Parties, will be construed as a waiver of any
subsequent breach of this Agreement.
7. Severability. The provisions of this Agreement are severable. If a court or arbitrator
holds any provision of this Agreement invalid, illegal or unenforceable, then the
validity, legality or enforceability of the remaining provisions will in no way be
affected or impaired thereby. If a court or arbitrator holds any such provision to be
invalid or unenforceable, the adjudicating entity will replace that provision with a
provision that is valid and enforceable, and most nearly reflects the intent of the
original provision.
8. Interpretation. Each Party acknowledges that it has had the opportunity to read and
review this Agreement with counsel, and that this Agreement has been the subject of
active and complete negotiations, and that this Agreement may not be interpreted or
construed in favor of or against any Party. Article and Section headings are provided
for convenience only and are not to be used to construe or interpret this Agreement.
WFB-EL-00000035
August 31,2011
However, if the terms "article(s}" and/or "section(s)" are used in reference to any
legislation, statute or regulation, then the reference ;s deemed to include all related
articles or sections within the same legislation, statute or regulation (as such articles
and/or sections may be amended from time to time). Whenever the words "include"
or "Including" are used in this Agreement, they will be deemed to be followed by the
words "without limitation."
9. Contrary1 Inconsistent, or Additional Terms. Any pre-printed terms and conditions
on any materials that Promontory regularly uses with its other customers (e.g., order
forms, invoices, browse-wrap or click-wrap terms and conditions) will be null and
void and of no consequence whatsoever in interpreting the Parties' legal rights and
responsibifities as they pertain to any of the contemplated Services provided
hereunder.
10. Consents. Except as expressly agreed by the Parties, or as provided in A Section 3.k.vl
(CONFIDENTIALITY), wherever this Agreement requires either Party's approval,
consent or satisfaction, such approval, consent or satisfaction may not be
unreasonably or arbitrarily withheld or delayed.
11. Governing Law. This Agreement will be construed as having been made in, and will
be governed in accordance with the laws of, the State of California, excluding any
applicable conflict of law provisions.
12. Remedies upon Default. Unless specifically set forth in this Agreement, in the event
of breach by either Party, the non-breaching Party wilt be entitled to exercise any and
all rights and remedies available to it at law or in equity, whether concurrently or
separately, and the exercise of one remedy will not be deemed either an election of
such remedy or a preclusion of the right to exercise any other remedy. Without
limiting the generality of the foregoing, either Party may offset any fees it owes to
the other Party against amounts it is otherwise owed.
13. Dispute Resolution. Subject to the terms of Section 3.k.vi.S (Injunctive Relief) and
Section 3.k.xii.12 (Remedies upon Default) set forth above, any action, dispute, claim
or controversy of any kind, whether in contract or tort, statutory or common law,
legal or equitable, now existing or hereafter arising under or in connection with, or in
any way pertaining to, this Agreement (each, a "Dispute") will be resolved
expeditiously, amicably, and at the level within each party's organization that is most
knowledgeable about the disputed issue, in compliance with the procedures outlined
in Attachment H_attachedhereto. Notwithstanding such procedures,
the Parties do not intend for the procedures outlined in Attachment H_
to supplant the routine handling of inquiries and complaints through informal
WFB-EL-00000036
lIs Fargo Bank, N,A,
August 31, 2011
contact with customer service representatives or other designated personnel of the
Parties.
14. Audit. Promontory Personnel will cooperate in providing to Wells Fargo or its
auditors (including any federal or regulatory auditors with jurisdiction over Wells
Fargo's operations, specifically. the Office of the Comptroller of the Currency ("0CC")
any information reasonably requested by Wells Fargo or its auditors that is necessary
or required for the verification of performance of Services by Promontory Personnel
under this Agreement in accordance with applicable law and the terms and
conditions of this Agreement, provided that (I) such audits by Wells Fargo may only
occur during normal business hours at the locations where Promontory Personnel
perform Services or retain records, and only after providing reasonable notice to
Promontory (not less than five (5) business days' notice), (ii) such inspections shall be
conducted in a manner that is designed to minimize any adverse impact on normal
business operations, (iii) Wells Fargo will comply with all standard safety and security
procedures of Promontory in conducting any such audits, and (iv) any information
accessed by Wells Fargo or its auditors in the performance of any such audit will be
deemed to be the Confidential Information of Promontory; however, the results of
the audit are the pro of Wells
15. Records
a. Services. Subject to the terms of this Agreement, Promontory will retain all
information obtained or created in the course of performance hereunder in"
accordance with applicable law (including the Sarbanes"Oxley Act), unless Wells
Fargo has requested, in writing, that Promontory hold any such records for a
longer period of time due to pending or threatened litigation obligations. The
Parties agree that any such records maintained and produced by Promontory
under this Agreement will be available, in English) during reasonable business
WFB-EL-00000037
Wells Fargo Bank, N,A.
August 31, 2011
hours, for examination and audit by governmental agencies having jurisdiction
over Wells Fargo's business, including all United States government agencies
having regulatory jurisdiction over Wells Fargo, and specifically the ace. Wells
Fargo acknowledges that the Director of Examinatlons of any Federal Agency or
his or her designated representative will have the right to ask for and to receive
directly from Promontory any reports, summaries or information contained in
or derived from data in the possession of Promontory related to Wells Fargo
under 12 USC 1867(e). Promontory will notify Wells Fargo of any formal request
by an authorized governmental agency to examine Wells Fargo's records
maintained by Promontory, if Promontory is permitted to make such a
disclosure to Wells Fargo under applicable law or regulation. Wells Fargo agrees
that Promontory is authorized to provide all such described records, upon
advance written notice to Wells Fargo if allowed by law, when formally required
to do so by an authorized governmental agency.
b. Personnel. With regard to: (a) the hire, tenure and conditions of employment
of employees, their hours of work, the rates of and the payment of their wages;
(bl the keeping of records and the making of reports; and (c) the payment,
collection or deduction Of federal, state and local taxes and contributions,
Promontory will keep and have available all necessary records and make all
payments, reports, collections and deductions, and otherwise do any and all
things as may be required to fully comply with applicable federal, state and local
laws, ordinances and regulations in regard to said matters so as to fully relieve
Wells Fargo from and protect it against responsibility or liability therefore.
Promontory wrtl file a FORM I099-MISC and all other reports required by law
with respect to each subcontractor assigned to Wells Fargo.
16. Execution, To facilitate execution, this Agreement may be executed (I) pursuant to
the process set forth in the Electronic Signatures in Global and National Commerce
Act (15 USC 7001 et seq.), or (ii) in as many counterparts as may be required to
reflect aJl Parties' assent; all counterparts shall collectively constitute a single
agreement. A legible facsimile signature that can be authenticated will constitute an
original and binding signature of a Party.
17. Entire Understanding This Agreement, induding its Attachments A through I,
constitutes the exclusive and entire agreement between the Parties with respect to
its subject matter, and as of the Effective Date, supersedes aU prior or
contemporaneous agreements, negotiations, representations and proposals of any
kind, whether written or oral, either express or implied, relating to this subject
matter. This Agreement includes and Integrates any properly executed attachments,
including the exhibits and addenda.
WFB-EL-00000038
WFB-EL-00000039
Attachment A
File Review Process and Methodology
Contents
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WFB-EL-00000040
Wells Fargo Foreclosure Review Engagement Letter: Attachment A
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August 31, 2011 Page 2
WFB-EL-00000041
1. Overview
The fundamental objective of the Foreclosure Review is to identify borrowers who have
suffered financial injury through errors or other deficiencies in the foreclosure process, in order
that their injury can be remediated. Achieving this objective presents numerous analytical and
operational challenges.
At the highest level, Promontory expects to meet these challenges through a combination of
two strategies:
Review of individual loan files combined with data analysis to build an increasingly clear
understanding of both the types of borrowers most likely to have incurred financial injury
and the specific borrowers who were injured (the "File Review Process"). Promontory
will begin by reviewing large populations of files selected at random, as well as
additional populations selected because they have characteristics that could suggest a
heightened probability of error in the foreclosure process. Combining the data captured
through its initial review effort with data already available through Wells Fargo,
Promontory will refine its statistical analysis iteratively. As the types of borrowers most
likely to have suffered financial injury come into focus, Promontory will review all files of
those types in order to find the specific borrowers in need of remediation.
Borrower outreach, complaint intake, and analysis (the "Complaint Process"). In parallel
with the File Review Process, Promontory will leverage Wells Fargo resources to execute
a process through which borrowers who claim they have suffered financial injury can
self-identify by submitting a complaint. Well Fargo will communicate the opportunity to
complain to borrowers within the scope of the Foreclosure Review pursuant to a
communication plan approved by Promontory, relying primarily on a combination of
direct outreach by mail and supporting mass media advertising. Promontory will
independently review and determine the disposition of every germane complaint
received in response to this outreach.
In combination, Promontory believes these strategies represent a sound and credible way to
achieve the purposes of the Foreclosure Review.
This attachment details how Promontory intends to execute the File Review Process. A
separate document, Attachment B, details how Promontory intends to execute the Complaint
Process. Although both documents represent the product of many weeks of planning and
analysis, Promontory expects that both methodologies will continue to evolve throughout the
course of the Foreclosure Review as new information, further analysis, and additional
WFB-EL-00000042
regulatory guidance continue to inform our understanding of how best to achieve the
Foreclosure Review's fundamental objective. Promontory will consult closely with both the
OCC and Wells Fargo in regard to every material change to the methodology described here.
2. Scope of review
a. Proceedings
As required by Article VII(l) of the Order, the Foreclosure Review will encompass "certain
residential foreclosure actions or proceedings (including foreclosures that were in process or
completed) for loans serviced by Wells Fargo, whether brought in the name of Wells Fargo, the
investor, the mortgage note holder, or any agent for the mortgage note holder (including
MERS), that have been pending at any time from January 1,2009 to December 31,2010, as well
as residential foreclosure sales that occurred during this time period" (hereafter, "in-scope
proceedings"). In-scope proceedings relate to liens secured by owner-occupied, one-four
family dwellings serviced by divisions of Wells Fargo that process first lien mortgage
foreclosures.
b. Portfolios
Wells Fargo maintained four in-scope mortgage servicing portfolios during the period January 1,
2009 to December 31, 2010. Table A-1, below, provides further detail.
Table A-1
In-scope Proceedings by Portfolio
Total 318,163 614,839
The combined total of 933,002 records represents the total population of foreclosure
proceedings completed or in process in calendar 2009 and 2010.
3
1 Includes Nowline.
933,002
2
2 During the development of earlier drafts of this engagement letter, the acc asked Promontory to reconcile the
total population to the acC's Mortgage Metrics database. This reconciliation effort became part of the data
validation process, described in section d, below.
3 The total number of files in scope has changed during the development of this engagement letter as the
definition of scope has become clearer and as a result of validation of the data. The validation of the data is an
WFB-EL-00000043
c. Information Systems and Documents
Table A-2 describes the information systems from which Wells Fargo, at Promontory's
direction, has drawn data extracts for Promontory's use in designing and executing the
Foreclosure Review.
Table A-2
Information Systems Providing Data Extracts for Use in the Foreclosure Review
Wachovia Mortgage San Antonio
At Promontory's direction, Wells Fargo provided multiple tables covering extracted data fields
from these systems, which Promontory has combined into a single table for analysis. Table A-3
details the data field name and descriptions and shows data availability by portfolio.
Table A-3
Data Dictionary and Data Availability by Portfolio
Attorney Firm Address, Line 2 NA NA NA
Attorney Firm Address - City
Attorney Firm Address - State
Attorney Firm Address - Zip NA
Attorney Firm Name
Principal balance due at referral NA
Bankruptcy Flag (V/N), ever BK
Bankruptcy Removal Reason Code NA
Bankruptcy Removal Date (Latest Date as NA
of 12/31/2010)
Bankruptcy Removal Description NA
ongoing process. The current population count does not include 738 files that were discovered to be missing
during validation. Collection of complete data for these missing files is still in process.
WFB-EL-00000044

Bankruptcy Status (Latest Status as of
12/31/2010)
Customer Complaints (Y/N) NA
Litigation Flag (Y/N)
Date of most recent dataset
22-Aug 22-Aug 22-Aug 22-Aug
Loan documentation at origination NA NA NA
Full-doc
NA
Foreclosure Sale Date
Foreclosure Completed (Sale Held) Flag
(Y/N)
Foreclosure Referral Date
Disaster Flag (Y/N) NA
Original FICO Score
Foreclosure State Type (Judicial or Non-
Judicia
High cost flag (WMSA only) NA NA NA
The month-end date used for the mailing NA NA
date fields
Name of investor or owner of the
m
Loss Mitigation (NowLine portfolio only) NA NA NA
MOD Denial Flag using latest denial date
(Y/N)
LM Denials After the latest FCL referral
Latest Mod Denial Date after latest FCL
Referral Date
Description of Most Recent Reason for
Most Recent Loan Modification Denial.
Loans that are active in loss mitigation on NA
the trial portion of a mod as of
Type of Loan Modification NA
HAMP
Regular Mod (Wells program)
MAP
Loss mitigation Type (WMSA) NA NA
SS =short sale
DIL =deed in lieu
Blank =not available
WFB-EL-00000045
Loan Modification under Active review as NA NA
of 12/31/2010 (WMSA)
Completed short sale or deed in lieu as of NA NA
12/31/2010
Denied flag using latest denial date as of NA
12/31/2010
Denial Reason for Short Sale and Deed in NA NA
NA
Flag Current or Not Current NA
(*WMSA Flag Current or Delinquent only
on active loans)
Loan Type
Loss Mitigation Setup Date
Loss Mitigation Status as of 12/31/2010 NA
A = Active
C = Completed

Mailing Address - City as of 12/31/2010
Mailing Address - State as of 12/31/2010
Mailing Address - Zip as of 12/31/2010
Masked Loan Number
MERS Registration (Y/N)
MI Coverage - Un-Insured or Insured
Multiple Rescissions per loan (Y/N) NA
Occupancy Status at most recent FCL NA
Referral
null,O,7,6 = Unknown
1,2 = Owner-occupied
4,5,9 = Vacant
3,8 = Non-Owner-Occupied
(WFHM - Data available starting
7/1/2007)
Optional Insurance (Y/N) NA
* WFHM excluded
Occupancy Status at Origination
1 = primary
2=second
3 >= investment
WFB-EL-00000046
Total Combined Original LTV-
(Origination Loan Amt/Origination Value)
<80%
80-100%
>100%
Origination date NA NA NA
Flag indicating if payment was made after NA NA NA NA
foreclosure sale
Payment amount made within 5 days of a NA NA
foreclosure sale
Flag indicating if payment was made prior NA NA NA NA
to foreclosure sale
Portfolio name
Product Type - (Fixed/ARM) NA
Property - City
Property - State
Property - Zip Code
Rescission entered Date - Latest Approval NA
Date
Rescission indicator if Rescission is NA
approved (Y/N)
Rescission Reason (Latest Reason to NA
prevent duplicate reason)
Reverse Mortgage Flag (Y/N) NA NA
Reviewed for Loss Mitigation Flag (Y/N) NA
SCRA code NA NA NA
SCRA Flag (Y/N)

Source of complaints NA NA
Subprime indicator (Y/N) NA NA
Written complaints
In addition to these data fields, certain screenshots from the servicing system platforms will be
systematically scraped into.pdf files for review. Table A-4 details these screenshots in the order
in which they will be indexed.
Table A-4
Servicing System Screenshots
4 Documents identified with a 11*" represent core documents.
WFB-EL-00000047
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
_I
-=========================
WFB-EL-00000048
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Finally, we will obtain electronic images of the relevant documents from each file sampled.
Table A-S details the documents to be obtained.
Table A-S
Additional File Documents
5 Documents identified with a 11*" represent core documents.
WFB-EL-00000049
2 Allonge, if applicable
3 Copy of recorded Mortgage-Deed of Trust-Security Instrument*
4 All recorded assignments
5 Origination appraisal*
6 Copy of BPO (during foreclosure)
7 Copy of DOD website data (SCRA)*
8 Military documents
9 Breach/acceleration/demand*
10 State required pre-foreclosure notices
11 Foreclosure title report*
12 Affidavit/Evidence of service completion
13 Evidence of required State Notification on pre-foreclosure notices
14 Entered Judgment (document)
15 Foreclosure sale results (letter from attorney office)
16 Foreclosure referral documentation*
17 First Legal filing documentation (NOD, NOS, Petition, Complaint)*
18 Copies/Affidavits of Publication
19 Affidavit/Notice of Service Completion for all loans where any foreclosure action occurred between
01/01/2009 through 12/31/2010
20 Executed Affidavit of Indebtedness/Judgment figures for all loans where any foreclosure action
occurred between 01/01/2009 through 12/31/2010
21 Entered Judgment for all loans where any foreclosure action occurred between 01/01/2009 through
12/31/2010
22 Foreclosure bid instructions for all loans where any foreclosure action occurred between 01/01/2009
through 12/31/2010
23 Scheduled foreclosure sale notice for all loans where any foreclosure action occurred between
01/01/2009 through 12/31/10
24 Foreclosure sale results (letter from attorney office)
25 Recorded foreclosure deed
26 Post foreclosure sale redemption/confirmation/ratification information
27 Executed affidavit of indebtedness/judgment figures
28 Bankruptcy 341 notice
29 Bankruptcy discharge documentation
30 Bankruptcy trustee abandonment documentation
31 Bankruptcy order granting motion for relief
32 Bankruptcy order closing case
33 Bankruptcy dismissal notice
34 Bankruptcy cram down, lien strip or lien avoidance documentation
35 Bankruptcy proof of claims
36 Bankruptcy Borrower Intent
37 Bankruptcy Schedules
38 Bankruptcy Plans
39 Pacer Report
40 Short sale/deed in lieu documentation
WFB-EL-00000050
41 Invoices to support all corporate advance transactions, including a breakdown of Attorney
fees/invoices*
42 Loss mitigation letters (solicitation, follow up, approval and denials) inbound and outbound
43 Borrowers financial package (hardship letter, financial information, 4506T, tax returns, etc.)
44 Trial modification agreements
45 Permanent modification agreements
46 Modification underwriting worksheet
47 Freddie/Fannie Loan Mod transmittal worksheet
48 Loss mitigation appraisal or BPa
49 NPV data/analysis (HAMP and Servicer Loss Mit decisions)
50 Legal Disputes: documents, notes, etc.
51 Litigation, contested, adverse matter documentation/correspondence
52 Recorded substitution of trustee
Where necessary to resolve preliminary unvalidated exceptions and preliminary validated
exceptions, Promontory will supplement information obtained from these sources with
additional information obtained from Wells Fargo or its foreclosure attorneys.
d. Data Validation
Promontory will rely on Wells Fargo data (1) to determine the in-scope population, segment the
population, and select samples from within the segments; and (2) to review sampled files,
including data regarding the sampled files drawn from Wells Fargo's systems. Accordingly,
Promontory will take steps to validate that the data on which it relies is accurate and reliable,
including the following:
Interview Wells Fargo business personnel who are custodians of the data and the
systems in which it resides for any known issues in the accuracy and reliability of the
data;
Identify and review relevant Wells Fargo audit reports for any known issues in the
accuracy and reliability of the data;
Conduct quality assurance tests of all files received from Wells Fargo for the purpose of
population identification and segmentation; and
Test samples of loan files to ensure that information in the files reconciles to the data in
the system.
In order to identify and access the data necessary to complete the work required by the
Consent Order, Wells Fargo organized a team of data owners and subject matter experts to
work with Promontory in the identification of the in-scope population, the identification and
access of the data items necessary to segment the population for file review, and the
WFB-EL-00000051
identification and access of the data to be used in file review. The Consent Order Data File
Vetting group ("Data Vetting Group") commenced meeting in May 2011, and meets twice
weekly by phone, supplemented by frequent e-mail exchanges. It includes representatives with
responsibility for each of the four affected portfolios (Wells Fargo Home Mortgage, Wells Fargo
Financial, Wachovia Mortgage San Antonio, and Wells Fargo Home Equity), as well as
representatives from Promontory and Allonhill. The Data Vetting Group has created a formal
process for identifying and addressing data quality issues, and fields queries from Promontory
as issues arise. The Group will continue to function through this engagement as needed to
ensure the availability and reliability of the data necessary to complete the tasks covered by the
Consent Order.
Promontory requested Wells Fargo Internal Audit reports pertaini
issues in the mortgage portfolio or mortgage servicing areas.
Promontory has validated both the in-scope population under the Consent Order and the data
elements in the file that has been used to create segments from the in-scope population.
Validation of in-scope population. Specifying the in-scope population of files under the
Consent Order involves identifying files from four different Wells Fargo portfolios
corresponding to actions taken during the prescribed period. Because the data systems
associated with those four portfolios use different data definitions and include different data
elements, the Data Vetting Group devoted considerable effort to designing the dataset and
implementing that design through computer code. The resulting population count has changed
over time as the Data Vetting Group has continued to refine the logic and programming
necessary to create the data set from Wells Fargo's systems of record.
We validated the Promontory Consent Order population file (lithe Promontory file") by
comparing it to a population count derived from the OCC Mortgage Metrics Report ("MMR")
data. The MMR data allow the OCC to count foreclosures initiated and foreclosure sales by
month during the time period covered by the Consent Order. We matched the files in the two
data sets and identified differences. By first identifying differences attributable to variances in
data design and scope of coverage, we were able to isolate remaining differences due to errors
in the logic and computer code used to build the data sets. That process enabled identification
of 11,396 files that were incorrectly missing from our original data set. As of August 222011,
we have added 10,658 of these files to our population and are continuing to collect necessary
WFB-EL-00000052
data on the remaining 738 files.
Validation of data elements. Promontory conducted a series of validation steps on the
Promontory data elements summarized in Table A-3 in order to confirm the completeness and
reliability of the data used for the definition of scope and identification of segments for review.
In particular, we tested the data for:
Duplicates. Promontory and Wells Fargo identified and removed duplicates using de
duplication logic provided by Wells Fargo.
Missing values. The four mortgage portfolios at Wells Fargo use different systems of
record, some of which do not include values for each variable that Promontory
requested. Wells Fargo provided Promontory with a spreadsheet indicating the
availability of data fields by portfolio. Promontory checked each field to validate that it
was missing as indicated on the spreadsheet.
Correct sign. Promontory has tested the data for non-negativity where appropriate.
Alpha or numeric data. The Promontory file consists of data drawn from four different
sources. Combining those data into a single population data set required the Wells
Fargo team to standardize the type and formatting of variables before delivering a
single, large file to Promontory. The standardization process included using the same
length for a given variable across all portfolios and setting all date and balance variables
to numeric data type. Promontory checked that the data types and formatting were
consistent with expectations.
Internal consistency. Internal consistency requires that each business unit use the same
definitions for each variable. Throughout the data aggregation and data cleaning
process, Promontory engaged business unit data experts at Wells Fargo to ensure that
variables had common definitions across portfolios. These discussions formed a
significant part of bi-weekly Data Vetting Group conference calls and e-mail
communication between Promontory and Wells Fargo.
Logical relationships among variables. Promontory checked that expected logical
relationships existed among sets of variables that describe a particular event in a
borrower's file. In particular, Promontory conducted logic checks on foreclosure,
bankruptcy, loss mitigation, and loan modification variables.
Variable Transformations. Promontory created summary statistics and frequency
counts for all variables provided by Wells Fargo. To facilitate development of a
segmentation scheme, Promontory created new variables to consolidate or summarize
WFB-EL-00000053
data consistently.
Validation of the data used for file review. Once files are selected for review, the data
summarized in Table A-4 and A-5 will be retrieved from Wells Fargo and used to populate the
File Review System. Promontory will conduct quality assurance of data received for use in file
reviews will through sampling and benchmarking against data elements identified from other
sources.
Where Promontory must rely on data maintained by the four business areas (WFHM, WSMA,
WFF, and WFHE) or by third parties, we will use alternative methods to verify data integrity to
the extent feasible. These methods may include, for example, reconciling the information
contained in the business area or third party data to original source data.
Promontory will report the results of its data validation efforts through both interim reporting
and final reporting at the conclusion of the review, along with any steps taken to account for
any identified issues with the data relied upon.
e. Data Integrity
Snapshots of the source files used to create both the original population estimates and the
independent calculations will be retained at Wells Fargo processing centers. Processing against
these files is performed in a READ ONLY mode to ensure the integrity of the original data.
Similarly, the extract files from the original source media, as well as the final output, will also be
retained at the Wells Fargo processing centers.
3. File Review Selection Approach
a. Overview
To ensure that the foreclosure review effectively and efficiently identifies errors,
misrepresentations and deficiencies within the scope of Article VII of the Order ("foreclosure
exceptions" or "exceptions"), Promontory will review files in three stages:
Stage 1: Segment the population for initial file review, conduct initial sample testing,
analyze results;
Stage 2: Resegment the remaining unreviewed population for further sampling based on
Stage 1 results, conduct further testing, analyze results; and
Stage 3: Further file review (sampling or 100%, to be determined in consultation with
OCC) in segments failing stage 3 statistical tests.6
6 Our review will identify a foreclosure exception when it becomes clear through file review that Wells Fargo
WFB-EL-00000054
We describe our sampling approach and the statistical tests we will apply in evaluating their
results below.
b. Stage 1: Initial Sampling
i. Segmentation
Promontory's proposed initial segmentation allocates the review population into segments
based on common characteristics. aur proposed initial segmentation includes 65 segments: 17
based on criteria of known interest to the acc or otherwise deemed of interest by Promontory
("judgmental segments") and 48 more based on origination factors or other characteristics
potentially affecting the complexity of the file or the manner of its servicing.
The proposed Stage 1 segmentation reflects Promontory's efforts to date to identify groups of
files that are candidates for focused file review in light of Promontory's expert judgment and
concerns expressed by representatives of the acc in a variety of formal and informal
communications. Analytical work to further refine this segmentation is ongoing. Further
changes could occur in response to further information received from Wells Fargo, analysis of
additional data, or additional acc guidance.
Table A-6 lists the current proposed configuration of 17 judgmental segments and their
descriptions, the proposed stage one review mode (100% file review or statistical sampling), the
proposed scope of the stage 1 review, and the number of files in the segment.
Table A-6
Judgmental Segments
1. SCRA related cases 100% file
review
Reviewed for
SCRA issues
only
871
serviced a mortgage loan in a manner impermissible under state or federal law, impermissible under the terms of
the note, or in a manner that was not reasonable and customary. Our review will identify a harmful foreclosure
exception (also referred to as IIharmful exceptions") when file review indicates the existence of one or more
foreclosure exceptions AND secondary file review establishes that the exception(s) caused the borrower financial
injury.
WFB-EL-00000055
2.
Governmental complaints (OCC or other regulatory agencies) 100% file Reviewed for 7,127
review complaints
issue(s) only
3.
Bankruptcy cases in which foreclosure sale happened during an 100% file Reviewed for 1,263
open bankruptcy, or the foreclosure referral was opened review bankruptcy
during an open bankruptcy issues only
4.
Bankruptcy cases in which the bankruptcy process was opened Statistical Reviewed for 43,523
during an open foreclosure proceeding and closed before a sampling and bankruptcy
foreclosure sale, but it is not known from the data whether the analysis issues only
foreclosure process was suspended during the bankruptcy
proceeding
5.
Handled by law firms with deficiencies or de-listed by GSEs Statistical Reviewed 45,920
sampling and under (a)
analysis through (h)
6.
Foreclosure referrals handled in Q3 2008, which displayed an Statistical Reviewed 48,382
84% increase over the previous quarter sampling and under (a)
7.
Rescinded foreclosures Statistical Reviewed 12,076
8.
IIContested" foreclosures Statistical Reviewed 30,940
9.
HAMP loan modifications denied due to DTI/NPV and a Statistical Reviewed 782
foreclosure sale occurred sampling and under (g) and
analysis (h) only
10.
A foreclosure sale occurred and HAMP loan modifications Statistical Reviewed 4,785
denied for reasons other than DTI/NPV, or at the behest of the sampling and under (g) and
investor, or lack of completion of the process by the borrower. analysis (h) only
This includes files where no reason is known for the denial.
11.
WF proprietary loan modifications denied due to DTI/NPV and Statistical Reviewed 9,646
a foreclosure sale occurred sampling and under (g) and
analysis (h) only
12.
A foreclosure sale occurred and WF proprietary loan Statistical Reviewed 41,578
modifications denied for reasons other than DTI/NPV, or at the sampling and under (g) and
behest of the investor, or lack of completion of the process by analysis (h) only
the borrower and a foreclosure sale occurred. This includes
files where no reason is known for the denial.
WFB-EL-00000056
13.
HAMP loan modifications denied due to DTI/NPV and no Statistical Reviewed 3,239
foreclosure sale occurred sampling and under (g) and
analysis (h) only
14.
No foreclosure sale occurred and HAMP loan modifications Statistical Reviewed 7,135
denied for reasons other than DTI/NPV, or at the behest of the sampling and under (g) and
investor, or lack of completion of the process by the borrower. analysis (h) only
This includes files where no reason is known for the denial.
15.
WF proprietary loan modifications denied due to DTI/ NPV and Statistical Reviewed 11,801
no foreclosure sale occurred sampling and under (g) and
analysis (h) only
16.
No foreclosure sale occurred and WF proprietary loan Statistical Reviewed 52,510
modifications denied for reasons other than DTI/NPV, or at the sampling and under (g) and
behest of the investor, or lack of completion of the process by analysis (h) only
the borrower. This includes files where no reason is known for
the denial.
17.
Non-regulatory complaints processed by the Office of the Statistical Reviewed for 10,566
President sampling and complaints
analysis issue(s) only
The remaining 48 segments result from application of the following waterfall of criteria:
Whether the loan is in the WFHM, WFF, WFHE, or WMSA portfolio (4 classes);
For files in the WFHM portfolio:
o Whether the foreclosure was completed between January 1, 2009 and
December 31, 2010, or was in process but not completed during that period (2
classes);
o Whether the file was in loss mitigation, i.e., loss mitigation status of the file was
listed as active or completed (2 classes);
o Whether the investor type is public (Fannie, Freddie, or FHA), private, or Wells
Fargo (3 classes); and
o Whether the property is located in the top five states by foreclosure activity
(California, Florida, Texas, Arizona, or Illinois), or another state (2 classes).
o In order to reduce the size of some of the resulting geographic segments, we
further segmented the other state segments based on foreclosure type (judicial
WFB-EL-00000057
or non-judicial) and MERS registration status (yes or no).
For files in the much smaller WFF, WMSA, and WFHE portfolios, we performed further
segmentation based on foreclosure status or product type, respectively, followed by
geography or region.
Table A-7 details the resulting proposed division of the WFHM portfolio into 28 segments with
the population count for each segment.
Table A-7
Proposed WFHM Segmentation
Other
y
AZ/CA/FL/I L/TX
Other
y
N AZ/CA/FL/I L/TX 16,612
Other 16,397
y
AZ/CA/FL/I L/TX 41,400
Other 37,387
Public N N AZ/CA/FL/I L/TX 17,318
Other 30,192
y
AZ/CA/FL/I L/TX
Other
Non-Judicial
y
N AZ/CA/FL/I L/TX
Other
y
AZ/CA/FL/I L/TX
Other Judicial
Non-Judicial
Wells N AZ/CA/FL/I L/TX 5,722
Other 5,796
y
AZ/CA/FL/I L/TX 2,643
Other 2,913
WFB-EL-00000058
Table A-8 details the segmentation of the WFF portfolio into four segments based on
foreclosure completion and geography.
Table A-8
Proposed WFF Segmentation
Other 4,825
Table A-9 details the segmentation of the WMSA portfolio into eight segments, starting with
product type, then splitting on geography.
Table A-9
Proposed WMSA Segmentation
y
Option ARM N
y
Other 3,778
Table A-10 details the segmentation of the WFHE portfolio into eight segments, starting with
investor type, then splitting on foreclosure completion and region.
Table A-10
Proposed WFHE Segmentation
WFB-EL-00000059
Other 2,037
Y AZICAlFL/I L/TX 199
Other 581
Wells N AZICAlFL/I L/TX 11,481
Other 13,070
y
AZICAlFL/I L/TX 1,728
Other 2,385
The proposed Stage 1 segmentation endeavors to address recent acc guidance relating to
segmentation of files featuring bankruptcy actions, loan modifications, and complaints. Efforts
to address other topics of interest to the acc will continue in stage 2 of the review.
Promontory has considered whether available data would enable it to identify a segment that
would feature the risk of pyramiding of fees. We have found no feasible way to do so, and
believe, accordingly, that this phenomenon, if it occurred, is best identified in the course of file
review. Similarly, we have concluded that the behaviors of third parties ("other third party
vendors" and "document execution service providers") can be captured in the course of file
review according to the proposed segmentation. If warranted, any of those characteristics or
behaviors could serve as the basis for re-segmentation and further testing in Stage 2.
Table A-ll details Promontory's proposed treatment of segmentation guidance provided in the
May 20, 2011 joint agency foreclosure review guidance.
Table A-ll
Handling of May 20 Segmentation Suggestions
Geography Top states where
institution conducted
foreclosure (Fe) activity
Ensure sample is
representative and
included case files for
every state in which
foreclosures were
conducted
August 31, 2011
We are segmenting the population using a
number of characteristics designed to achieved
granularity and complete coverage of the
population. One of the splitting characteristics is
whether the property is located in one of the top
5 states by WF FC activity or in the other states.
Using a very granular segmentation technique
that achieves the objective
No deviation.
No deviation. We
have tested our
preliminary
segmentation
scheme and
confirmed that it
achieves coverage
Page 21
WFB-EL-00000060
Using a very granular segmentation technique No deviation. We
that achieves the objective have tested our
preliminary
segmentation
scheme and
confirmed that it
achieves coverage
of all of the states
Third Identify law firms known Promontory identified law firms de-listed by the No deviation.
parties to have significant GSEs and law firms identified in media reports as
deficiencies related to having problems. That list was supplemented by
foreclosure activities, firms that have been disqualified by Wells Fargo
were delisted by any of for inadequate performance.
the GSEs, or
discontinued by the
institution
Large volume One of the de-listed law firms i No deviation.
foreclosure firms from _ which is a high volume firm.
Other-third party We will gather data in stage 1 in order to No deviation.
vendors determine through statistical analysis whether
this population warrants more extensive file
review in subsequent stages, then proceed
accordingly.
Document execution We will gather data in stage 1 in order to No deviation.
service providers determine through statistical analysis whether
this population warrants more extensive file
review in subsequent stages, then proceed
accordingly.
Behaviors Rescinded foreclosures Rescinded foreclosures have been identified and No deviation
will constitute a segment for random sampling.
Depending on the results of that analysis, we
may perform more extensive file review in
subsequent stages. See Table A-6.
Modifications that were Identify the HAMP and proprietary loan No deviation.
foreclosed, application modification denials resulting in FC sales for
pending for loan either DTI or NPV, and review a random sample.
modification or loss Review a random sample of remaining HAMP
mitigation, or loan not in rejections and a separate random sample of
default for sufficient denied proprietary loan modifications resulting
period of time to in FC sales.
authorize foreclosure
Borrower had a debt No separate treatment in initial segmentation No deviation.
cancellation contract because Wells Fargo did not use debt
cancellation contracts.
WFB-EL-00000061
Fees assessed prior to We will capture data in stage 1 sufficient to The initial data pull
the delinquency evaluate whether this population warrants more did not allow us to
precipitating foreclosure careful sampling, then proceed accordingly in identify this
subsequent stages of file review. circumstance.
Claims and 100% of review of claims See Table A-6 and discussion in Section 3 No deviation.
Complaints and complaints
submitted to process
required by the Consent
Order
Appropriate samples of Complaints previously received through the No deviation.
claims and complaints Office of the President, other than those
previously submitted to channeled through governmental agencies
the institution comprise a judgmental segment to be randomly
sampled
"Additional 100% review of Identify the files in which FC sales took place No deviation.
Segments" Bankruptcy (BK) cases in with active BKs and review 100% of those files.
process of foreclosure or Identify files where FC actions were commenced
foreclosed in 2009-2010 with an open BK, and review 100% of those files.
Identify the remaining files where a FC sale took
place after an open BK, and review a random
sample of those files.
100% of foreclosure Review 100% of the files referred to the Office of No deviation.
cases referred by state the President by the governmental agencies.
or federal agencies
100% of SCRA cases Review 100% of all files in the WFHM consent No deviation. 100%
order portfolio that were identified by the Wells of SCRA files will be
Fargo system as having been foreclosure subject to
protected under SCRA, and all of the files in the comprehensive and
other three portfolios with an SCRA flag thorough review
and remediation.
Appropriate sample of Identify the HAMP rejections for either DTI or No deviation.
HAMP cases and the NPV, and review two random samples, with one
institution's proprietary segment for sales and one for foreclosures in
loss mitigation program. process. Review two random samples of
remaining HAMP rejections, one for sales and
for foreclosures in process. Identify the
proprietary loan modification denials for DTI or
NPV and review two random samples, one for
sales and one or in process foreclosures. Review
two random samples of remaining denied
proprietary loan modifications, one for sales and
one for in process foreclosure.
WFB-EL-00000062
Appropriate samples of Identify and review a random sample of files We focused on the
cases from processing referred to foreclosure in the third quarter of time period in which
centers, units where 2008, when the number of foreclosures case load growth
substantial numbers of increased by 84% over the previous quarter. appears most likely
documentation errors to have
have been found overwhelmed
through testimony, resources.
interviews, or other
means of disclosure.
ii. Statistical Methodology
Interval hypothesis testing is a statistical technique appropriate to the task of estimating the
rate of harmful exceptions in each of the population segments proposed for testing in Stage 1.
Accordingly, in Stage 1, Promontory proposes to apply interval hypothesis testing using the
following parameters:
Confidence level = 95%
Error rate = 3%
Confidence interval = +/- 3%
iii. Sample Size
From the selected testing parameters, we calculate the required sample size necessary to
perform statistical testing as 124 files per segmenf and the total size of the Stage 1 sample,
accordingly, as the sum of (a) the product of 124 (sample size per segment) and 62 (number of
segments proposed for sampling and statistical testing), and (b) the number of files in the
segments in which we propose to conduct 100% review in Stage 1- i.e., (124 x 62) + 871 (SCRA
files) + 7,127 (governmental complaints) + 1,263 (bankruptcy cases) = 16,949 filess.
iv. Statistical Analysis
7 The confidence interval for the normal approximation used to construct the symmetric +/- 3% interval is
inaccurate when the sample size lin" and the error rate lip" are small (i.e., if n x p < 5). In such circumstances, a
better approximation to the asymmetric confidence interval is given by an approximation based upon Wilson's
(1927) score test; for implementation see Agresti and Coull (1998) IIApproximate is Better than IIExact" for Interval
Estimation of Binomial Proportions" The American Statistician, Vol. .52, No, 2, pp 119-126. Note that the selection
of an appropriate sample size is not significantly impacted by the approximation issue, since we are not testing a
hypothesis in the first stage of our review - we are only attempting to get a sufficiently large sample to facilitate
analysis.
8 The actual sample will be 16,985. The calculation is: 16,949 plus 45 records that were over-sampled in one non
judgmental segment in the test samples, plus 9 records to ensure that each state and territory has at least 5
records in the sample, minus 18 records that fall into more than one 100% review segment.
WFB-EL-00000063
Upon completion of initial testing, we will use statistical techniques consistent with the
parameters above (including risk scoring and CHAID decision tree analysis), together with
expert judgment, to identify which analyst-recorded indicators are associated or correlated
with the propensity for a foreclosure exception or harmful foreclosure exception.
c. Stage 2: Additional Sampling in Light of Analysis
i. Re-Segmentation
aur initial segmentation reflects only minimal a priori understanding of where in the review
population we might find borrowers who have suffered financial injury. As we conduct our
Stage 1 testing, however, and complete our statistical analysis of Stage 1 results, we expect to
identify numerous such borrowers and to gain substantially greater ability to specify file
characteristics associated with higher and lower probabilities of harmful exceptions. For this
reason, we propose to use the statistical results of Stage 1 to prepare a new segmentation of
files not sampled in Stage 1. This Stage 2 segmentation will seek to isolate foreclosures with
harmful exceptions into well-defined segments. We will review our proposed re-segmentation
with the acc for its concurrence.
Upon the acC's concurrence, we will sample files in each of the Stage 2 segments. Generally,
we believe that further statistical testing is appropriate to test the hypothesis that the Stage 2
segments contain unacceptable rates of harmful exceptions. For some Stage 2 segments,
however, the results of Stage 1 testing could be sufficiently clear and concerning that we will
propose to proceed immediately to 100% file review.
As a general matter, we believe segments should be targeted for 100% review based on
statistical analysis clearly indicating that those segments contain unacceptable rates of specific
types of errors. Accordingly, when conducting census review of such segments in Stages 2 or 3
of the Foreclosure Review, we expect to focus narrowly on the types of exception(s) known to
occur in those segments.
ii. Statistical Methodology
While the purpose of Stage 1 testing was to estimate the rate of harmful exceptions in specific
population segments, the purpose of sampling and testing in Stage 2 is to test the hypothesis
that Wells Fargo's foreclosure processing reliably avoided exceptions in specific population
segments. Consistent with testing procedures set forth in the acc Comptroller's Handbook on
Sampling Methodologies (August 1998), achieving this purpose requires the use of a power
test, rather than the interval hypothesis test used in Stage 1.
Because we are particularly concerned, in Stage 2 testing, to minimize the risk of Type II error
(concluding that a given population segment is free of harmful exceptions when in fact it is not)
WFB-EL-00000064
we will use statistical parameters intended to provide a high level of statistical power (the acc
Sampling Methodology calls this "reliability") in testing that harmful exceptions in particular
segments do not exceed a specified level of tolerance (the acc Sampling Methodology calls this
"precision") More specifically, assuming the most efficient sample size (see below), we can
frame our testing rule at this stage of the process as a binomial sampling problem: accept the
null hypothesis (that the harmful exception rate is 0) if the total number of harmful exceptions
found (X) in "n" sampled files is equal to zero; reject the null hypothesis if we find at least 1
harmful exception (X>=l).
In particular, in evaluating the results of sampling in all Stage 2 segments in which we do not
review 100% of the files, we will use the following statistical testing parameters:
Reliability/Power = 95%
Precision/Tolerance = 3%
The absence of harmful foreclosure exceptions in a given Stage 2 segment sample will tell us,
with a high (95%) level of reliability, that the incidence of harmful foreclosure exceptions in the
underlying population segment does not exceed the indicated level of precision (3%).
iii. Sample Size
Based on our choice of test and the statistical parameters described above, we calculate the
size of Stage 2 sample segment such that the reliability (statistical power) of the test is 95%
when the precision (the alternative hypothesized value of the harmful exception rate) is 3%.
Specifically, to compute the required sample size, "n," we search for the smallest "n" for which
this upper tail of the Binomial distribution, evaluated under the alternative, is at least equal to
.95. For a Power Test with a precision rate of 3% and 95% reliability, n =99.
9
We will review 100% of the files in any Stage 2 segment the underlying population of which
comprises less than 99 files.
9 The sample size was derived by solving the binomial expression in Excel for 1 minus the probability of 0
exceptions in n draws, with p=.03, varying levels of n, and selecting the level of n yielding a value of at least 95%.
We confirmed this result in the statistical programming language Rwith the expression l-dbinom(O,99,.03), which
yielded the result 0.9509768. An alternative approach to Stage 2 testing might test the hypothesis that the rate of
harmful exceptions is consistent with some hypothesized value (as opposed to looking for evidence to reject the
hypothesis of zero harmful exceptions.) Under this alternative approach, the testing rule would be specified in
terms of the realized value of the estimated binomial proportion (p-hat); such an implementation is likely to
require approximations to the sampling distribution for p-hat and could require different Stage 2 sample sizes than
those described above.
WFB-EL-00000065
d. Stage 3: Further Review of Segments Failing Stage 2 Testing
We will conduct further file review based on the results of Stage 2 testing. Generally, in Stage 3
we would expect to review all of the files in segments specified as likely to have significant rates
of harmful exceptions on the basis of Stage 1 results and confirmed to have such exceptions by
Stage 2 testing. Table A-12 below summarizes the decision rule we expect will apply in
determining whether to conduct additional file review activity based on the outcome of testing
in each Stage 3 segment sample.
Table A-12
Expected Decision Rule for Stage 3 File Review
Based on Stage 2 Sampling Results in Each Segment Sample
No harmful exceptions identified in tested
segment sample
Harmful exceptions identified in tested segment
sample
No further review of population segment
All files in population segment reviewed for
presence of harmful exceptions identified in
segment sample
In specific circumstances, analytical or logistical concerns could militate for still further testing
and analysis in Stage 3 before proceeding to 100% file review. We would expect to discuss
these circumstances with the OCC and Wells Fargo prior to determining the appropriate course
of action.
4. File Review Process
a. Review Process Overview
Promontory will use a multi-step review process to ensure accurate and consistent review of
foreclosure files. Each step of the process will incorporate strong quality control procedures. In
addition, a separate, dedicated Quality Assurance team will perform quality assurance of every
step of the review. A dedicated Wells Fargo subject matter expert team will be available to
assist in finding missing information or providing explanations as needed. Promontory, in its
sole discretion, will determine whether an error, misrepresentation or other deficiency within
the scope of Article VII of the Order occurred, and, if so, whether it resulted in financial injury to
the borrower.
WFB-EL-00000066
Diagram A-13 below depicts Promontory Foreclosure Review Process.
WFB-EL-00000067
Diagram A-13
Foreclosure Review Process
File Received

Analyst Review .----. Senior Review QA Review
Final Report

I
Mis ing
Doa: !Info
Report to RFI
Exception
Exceptions
Exceptions
+- Clearing -.
+--------. Clearing QA
Team
Docs!lnfo
Clearing Team
Review
Pipeline WF Provides
Conditions
Documents

As shown, the Foreclosure Review Process consists of ten steps:
Step 1. In this step, Promontory will receive files from Wells Fargo. Promontory will select the
files to be received according to the File Review Selection Approach described in Section 2.
Promontory will inform Wells Fargo of the files to be reviewed by portfolio name and loan
number.
lO
Wells Fargo will then compile information relating to the file from its systems and
records according to a set of requirements provided by Promontory, known as the "Document
Stacking Order./I This Document Stacking Order defines not only the information that is
required for each file, but the order in which it should be provided to facilitate expeditious
review. The Document Stacking Order includes the system screen shots and documents
described in Tables A-S and A-6 above. Once Wells Fargo compiles the information for each
10 Promontory has already requested 3,400 files from Wells Fargo for the purpose of (1) testing aspects of the
Foreclosure Review Process; (2) generating data to inform staffing assumptions; and (3) preparing an initial set of
files for review. Promontory's File Selection Team selected the files at random from the four in-scope portfolios in
such a way that they will likely be able to be included in the sample selected upon approval of the Methodology.
Promontory recognizes that there could be changes requested by the acc to its methodology that could require
Promontory to select different files for the Review, in which case the benefits of compiling the initial 3,400 files will
be limited to points (1) and (2) above. Promontory received approval from the acc to begin compiling a set of
sample files.
WFB-EL-00000068
file, Wells Fargo will transmit the information using a secure document transmission protocol.
Upon receipt of the files, Promontory/Allonhill will reconcile the received files against the
requested files and upload the received files into the Foreclosure Review System. The Quality
Assurance Team will validate this reconciliation.
Step 2. In this step, Analysts will perform a review of the documents provided in each file and
record key information about core documents in the Foreclosure Review System. In addition,
analysts will extract essential ana icalloan-Ievel data from servicer-provided documents and
input this information into the If available, Promontory will
leverage information extracted from Wells Fargo's systems of record to automatically populate
certain fields in the Foreclosure Review System, to reduce the amount of manual entry. Where
Promontory does so, it will validate the accuracy of the data extracted from the systems of
record.
Th will direct analysts in Step 2 to collect data appropriate to the
essential characteristics of the files under their review (e.g., for a file relating to a foreclosure
filing in Florida, the ill direct the analyst to capture data essential
to the analysis of compliance with applicable requirements, including Florida law). As analysts
populate t with required data, the system will apply encoded
decision rules to reach preliminary conclusions as to the presence or absence of errors
misrepresentations or deficiencies in each file. Each time th
identifies such a potential exception, it will prompt the analyst to confirm or otherwise clear the
exception with an explanation as system rules and permission levels permit.
During this stage of the review, th will generate "unvalidated
preliminary exceptions," some of which may subsequently be determined to be harmful
exceptions. Where a judgmental determination is required to evaluate whether an exception
resulted in financial injury to a borrower, Senior Analysts will make a preliminary determination
of harm based on Promontory guidance (Step 4). All unvalidated preliminary exceptions,
whether harmful or not, will then flow through the review process detailed below.
Once core documents are collected and key information input into the
_ it will apply encoded test standards
ll
to generate preliminary determinations of
potential exceptions which will flow to Senior Analysts (Step 3) and Quality Assurance (Step 9)
for further review.
11 The encoded test standards are based on legal and other research by Promontory, Hudson Cook, LLP (IiHudson
Cook"), and Allonhill. Promontory is converting these test standards into workflow diagrams, which Allonhill is
using to code th As noted in Section 4.d.iii below, each workflow diagram is
reviewed by the Quality Assurance Team to ensure it faithfully restates test standards.
WFB-EL-00000069
Step 3. In this step, Senior Analysts execute quality control procedures by reviewing exceptions
to confirm the accuracy of data entry and identify any needs for further analyst training. This
step will seek to eliminate from further consideration immaterial or erroneous exceptions
arising from, e.g., analyst misunderstanding, data entry errors, etc. Promontory will consider
errors, misrepresentations, or deficiencies evidenced by the files and confirmed by Senior
Analyst review as "unvalidated exceptions./I Where a senior analyst cannot confirm a particular
answer because documents are missing, he or she will flag the file and communicate the
missing document request to Wells Fargo via the Pipeline Conditions tracking website (Step 5).
The Request for Information Team review will review provided documents before forwarding
them to the senior analyst to complete his/her review. The Request for Information Team will
consist of an average of 10 professionals - one manager, one senior analyst, and eight analysts.
If the System continues to record an exception when all information is present, the file will then
flow to the review and Quality Assurance processes described below (Step 9).
Step 4. In this step, the Request for Information Team receives, monitors and logs any requests
for information arising from Steps 3, 7 and 9 that flow through the Pipeline Conditions
Tracking/Reporting Website. In addition, the Request for Information Team reviews
information provided by Wells Fargo in response to requests for information, ensures they are
responsive, and steps files to the next level for further review in
related to missing documents or to the Exceptions Clearing Team for exception responses.
Step 5. In this step, the Exceptions Tracking/Reporting Website receives system-generated
conditions generated by Steps 3, 7 and 9 relating to missing documents, requested information,
or unvalidated exceptions.
Step 6. In this step, Wells Fargo receives information relating to missing documents, requested
information, or unvalidated exceptions and, where possible, provides the missing documents,
information or exception responses. Wells Fargo will review each unvalidated exception in
order, as appropriate, to supply missing information that may resolve the exception or bring
flaws in Promontory's preliminary analysis to Promontory's attention. Wells Fargo will conduct
an initial review and a senior level review including, where appropriate, Wells Fargo foreclosure
counsel, to provide additional analysis prior to final disposition by Promontory.
Step 7. In this step, Promontory's Exception Clearing Team reviews information provided by
Wells Fargo in response to unvalidated exceptions identified by Step 4 (and subject to Quality
Assurance as described in Step 9). The Exceptions Clearing Team will consist of dedicated
personnel who will review files to determine whether:
o The exception can be closed;
WFB-EL-00000070
o Additional information is needed;
o Additional exceptions resulted from the provided documents/information; or
o The exception remains valid.
The Exceptions Clearing Team will also assess whether lessons learned from the additional
information may have applicability to other identified exceptions or to files that are still to be
reviewed. If the Exception Clearing Team concludes that an exception contested by Wells Fargo
is a valid exception, it will return the exception, with explanation, to Wells Fargo for a second
review and response.
Step 8. Once Wells Fargo has either completed its review, or failed to respond after a pre
determined time, the file will transfer to a unit of the Quality Assurance Team responsible for
reviewing the work of the Exceptions Clearing Team.
Step 9. In this step, Quality Assurance will provide final validation of the findings of the Senior
Analysts. In general, for files with unvalidated exceptions, Promontory's Quality Assurance
team will perform a second level of review to validate their accuracy, provide feedback to
analysts and senior analysts, or identify opportunities or needs for process improvement. The
Quality Assurance Team will inspect 100% of all unvalidated exceptions at least until it
determines that preliminary exceptions identified by analysts are consistently accurate.
Additionally, Promontory's Quality Assurance Team will independently review a random sample
of files preliminarily determined to show no indication of error, misrepresentation, or
deficiency using both manual review and system-based methods (as more fully described below
in Section 4.d). The Quality Assurance team will rely on the system-based review approach as
the review process seasons and as Quality Assurance is able to validate the system design in the
initial phase of the project.
In order to assure consistent quality, Quality Assurance will review the files completed by new
analysts until Quality Assurance is able to determine the reliability of their file review qualityP
We expect that this activity will be concentrated in the second and third months of the
Foreclosure Review, when we anticipate a ramp-up of project analysts and senior analysts.
The Quality Assurance Team will increase its sampling rate or deploy targeted manual review
whenever it determines that changes in the resource levels or system functionality may lead to
higher error rates. Section 4.d (Quality Assurance), below, provides further detail concerning
the role of the Quality Assurance Team.
12 Quality Assurance may apply an accuracy rate or sample for a certain number of days to determine the scope of
sampling new analyst work.
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Step 10. In this step, Promontory project leadership will review and validate each validated
exception. If, upon consideration of Wells Fargo's supplemental information or analysis,
Promontory continues to believe that file analysis correctly indicates the occurrence of an error,
misrepresentation or other deficiency within the scope of Art. VII(3)(a)-(h) of the Consent
Order, Promontory will deem the exception determination validated, final, and appropriate for
inclusion in Promontory's final report.
b. Test Standards
Promontory will re on test standards drawn from a variety of sources. These standards will be
encoded into the and available in paper and/or soft copy formats to
manual reviewers at all steps in the Foreclosure Review Process.
Table A-14 summarizes the sources of the test standards that Promontory will apply in
performing the Foreclosure Review:
Table A-14
Sources of Foreclosure Review Test Standards
Reasonableness,
customariness, excessiveness
FNMA, FHLMC, FHA and VA servicer guidelines where not otherwise
established law13
c. Testing for Potential Errors, Misrepresentations or Other Deficiencies
With the exception of certain segments involving denied loan modifications and bankruptcy
issues indicated by the OCC, for which the file review is more limited, the Consent Order
requires Promontory to make several specific determinations for each file it reviews, whether in
the course of sampling or in the course of reviewing 100% of specific file populations. This
section details how Promontory proposes to make those determinations.
i. Consent Order Article VII (3)(a) - Determining Proper Documentation
of Ownership
Article VII(3)(a) of the Consent Order requires the independent consultant to determine
whether, at the time the foreclosure action was initiated or the pleading or affidavit filed
(including in bankruptcy proceedings and in defending suits brought by borrowers), the
13 Defined tolerance levels associated with one GSE standard will be applied to accommodate various investor
guidelines.
WFB-EL-00000072
foreclosing party or agent of the party had properly documented ownership of the promissory
note and mortgage (or deed of trust) under relevant state law, or was otherwise a proper party
to the action as a result of agency or similar status.
standards of applicable state law. For assistance in identifying applicable state law standards,
Promontory has obtained from Hudson Cook, a reputable law firm with experience in state and
federal consumer financial regulation, a description of applicable state law in each of the 50
states, the District of Columbia, Puerto Rico, Guam, and the U.S. Virgin Islands for the period
2007 to 2010.
14
Promontory will review each in-scope proceeding to identify "flags" that may indicate that a
particular foreclosure action is more likely to have an exception relating to the documentation
of ownership. Promontory will identify potential flags based on information external and
internal to the in-scope proceeding. External sources of potential flags include:
Interviews with Wells Fargo personnel responsible for providing foreclosure counsel (or
attorneys defending bankruptcy proceedings) with information concerning:
o Ownership of the promissory note and mortgage (or deed of trust); or
o Agency or similar status sufficient to make Wells Fargo a proper party to
foreclosure proceedings.
Review of examination and audit reports for weaknesses in the process of establishing
ownership or agency or similar status sufficient to make Wells Fargo a proper party to
foreclosure proceedings; and
Independent research into public allegations that particular units, employees, agents, or
law firms failed to follow applicable state law when submitting pleadings or affidavits
documenting ownership agency or similar status sufficient to make Wells Fargo a proper
party to the proceeding.
Analysts will also seek to identify flags within the contents of each file. In particular, analysts
will review each file for:
Indications that the borrower asserted or complained that the foreclosing party or agent
of the party had not properly documented ownership of the promissory note and
mortgage (or deed of trust); and
14 We have gone back to 2007 because some in-scope proceedings may have been initiated prior to 2009. If our
sample includes in-scope proceedings that were initiated prior to 2007, we will determine whether there were
relevant changes in the applicable state law that apply to that particular in-scope proceeding.
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Any indication that ownership of the promissory note and/or mortgage (or deed of
trust) is or was inconsistent with the ownership asserted in the pleading or affidavit and
the foreclosure title report.
In proceedings presenting no flags, Promontory will determine whether the pleading or
affidavit on its face complies with applicable state requirements for properly documenting
ownership of the promissory note and mortgage (or deed of trust).
In proceedings presenting one or more flags, Promontory will determine both (a) whether the
pleading or affidavit on its face complies with applicable state requirements, and (b) whether
the available documentation and other information (including the information obtained from
interviews, review of examination and audit reports, and public allegations described above)
together indicate that the foreclosing party or agent of the party had properly documented
ownership of the promissory note and mortgage (or deed of trust) under relevant state law, or
was otherwise a proper party to the action as a result of agency or similar status. Promontory
will make this determination by comparing the pleading or affidavit to the foreclosure title
report, the copy of the recorded mortgage, all recorded assignments, note endorsements, and
(if applicable) any allonges.
Although precise components of this review will vary with the state law at issue, the review will
generally consist of the following analysis:
1. Judicial foreclosures:
a. An analyst will review the proceedings to determine if the plaintiff is the same
as:
i. The payee of the note (or the last endorsee);
ii.The mortgagee (or last assignee); and
iii. Owner listed in the foreclosure title report.
In making this determination, the analyst will consider information contained in
court pleadings, the note and any endorsements, the mortgage, and the title report
conducted immediately prior to the initiation of foreclosure proceedings.
b. Where the analyst finds that the plaintiff is not the same, the reviewer will flag
the file with a condition for determination by a senior analyst whether there is
an applicable exception. Such exception could include where, for example, the
plaintiff is the servicer agent of the holder of the note and mortgage or where
there is indication of intent to affix an endorsement to a note.
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c. The analyst will next review the pleadings to determine whether the plaintiff
complied with applicable state law regarding the authentication of the note and
the mortgage at the time the proceedings were initiated.
d. Where one or more flags are present, the analyst will determine whether the
flag can be resolved. For example, where the plaintiff contests foreclosure on
the ground that the plaintiff is not a proper party to the action, the analyst will
review the file for evidence that readily rebuts the claim. As another example,
where there is a public allegation that an affiant signed the note affidavits
without undertaking a search, the senior analyst will research for evidence in the
file to indicate that an actual search was conducted. A senior analyst will review
the analyst's determinations and, if necessary, place an exception on the loan for
subsequent review by Wells Fargo to determine if additional information needs
to be provided to Promontory to clear the exception.
e. Where the analyst finds that the plaintiff did not properly authenticate the note
and the mortgage at the time the proceedings were initiated, the analyst will
review the pleadings to determine whether the plaintiff subsequently properly
authenticated the note and/or mortgage.
2. Non-judicial foreclosures:
a. The analyst will review the file to determine if the party initiating the foreclosure
is:
L The payee of the note (or the last endorsee); and
iLOne of the following:
1. The mortgagee (or last assignee);
2. The trustee (or subsequent trustee);
3. Owner listed in the foreclosure title report; or
4. Another person authorized to initiate the foreclosure.
b. Where the analyst finds that the conditions of 2.a are not satisfied, the reviewer
will flag the file for escalation for determination by a senior analyst whether
there is an applicable exception.
c. Where one or more flags are present, the analyst will determine whether the
flag can be resolved. For example, where the borrower contests foreclosure on
WFB-EL-00000075
the ground that the party initiating the foreclosure is not entitled to do so, the
analyst will review the file to determine if there is evidence that readily rebuts
the claim. A senior analyst will review the analyst's determinations and, if
necessary, place an exception on the loan for subsequent review by Wells Fargo
to determine if additional information needs to be provided to Promontory to
clear the exception.
ii. Consent Order Article VII (3)(b) and (d) - Determining whether
Foreclosure Complied with Applicable Law and Mortgage Terms
Article VII(3)(b) of the Order requires the independent consultant to determine whether the
foreclosure complied with applicable state and federal law, including but not limited to the U.S.
Bankruptcy Code and the Servicemember's Civil Relief Act ("SCRA"). Article VII(3)(d) requires
the independent consultant to determine whether, with respect to non-judicial foreclosures,
the procedures followed with respect to the foreclosure sale (including the calculation of the
default period, the amounts due, and compliance with notice periods) and post-sale
confirmations were consistent with the terms of the mortgage loan and state law requirements.
In making these determinations, Promontory will apply test standards from a compilation of
state foreclosure laws identified and warranted by Hudson Cook to describe applicable state
law as that term is used in Article VII of the Consent Order (the "Foreclosure Survey"). The
Foreclosure Survey includes state law applicable to both judicial and non-judicial foreclosures,
including, with respect to the latter, "the procedures followed with respect to the foreclosure
sale (including the calculation of the default period, the amounts due, and compliance with
notice periods) and post-sale confirmations." With respect to non-judicial foreclosures,
Promontory will also consider the terms of the mortgage loan.
U.S. Bankruptcy Code; and
SCRA.
With respect to the SCRA, Promontory understands that Wells Fargo has undertaken internal
reviews of compliance. Promontory is validating those reviews to determine whether and to
what extent Promontory can rely on the review to establish errors in SCRA compliance for some
or all of the in-scope portfolios. This validation will consist of the following:
1. Review of the report of Wells Fargo's internal reviews and supporting workpapers;
2. Interviews of the Wells Fargo personnel who conducted the reviews; and
WFB-EL-00000076
3. Testing the conclusions of the reviews against a sample of files to determine whether
Wells Fargo:
a. Accurately identified borrowers who qualified for SCRA protections;
b. Identified errors in SCRA compliance that caused financial injury to borrowers;
and
c. Remediated any such injury.
Using the Foreclosure Review System, analysts will review each in-scope proceeding against
applicable state and federal standards. The System will prompt analysts to capture a range of
specific information about the experience of the borrower, such as interest rate reductions,
foreclosure stays, fees assessed and fees paid. The System will also prompt analysts with a
number of questions depending on the state in which the foreclosure action was initiated,
whether the foreclosure action was judicial or non-judicial, the time at which the foreclosure
action was initiated, and other attributes.
Precise components of this review will vary with the state or federal law at issue. Generally, the
review will consist of the following analysis:
1. State Law
a. Judicial foreclosures:
i. Analysts will review files to determine whether the plaintiff complied with state law
requiring default in the amount of time between default and the initiation of
foreclosure proceedings.
ii. Analysts will review files to determine whether the plaintiff complied with pre
complaint requirements including:
Notice of default; and
Notice of loss mitigation options.
iii. Analysts will review files to determine whether the plaintiff complied with complaint
requirements including content and service requirements. In addition to verifying
complaint inclusions required by state law, analysts will rely on their review of
whether the note and mortgage were appropriately authenticated and properly
endorsed/assigned.
iv. Analysts will review files to determine whether the plaintiff complied with post-
WFB-EL-00000077
complaint requirements, such as requirements to participate in mandatory
settlement proceedings.
v. Analysts will review files to determine whether the plaintiff complied with conditions
on seeking a judgment of foreclosure, including timing requirements, evidentiary
requirements, and notice requirements, and violation of any applicable stay (e.g.,
seRA or bankruptcy).
vi. Analysts will review files to determine whether the plaintiff complied with state law
requirements applicable to the sale. These requirements may include notice
requirements and time and place requirements, insofar as they relate to the plaintiff.
Analysts will not review whether parties other than the plaintiff or the plaintiff's
agents complied with such requirements. For example, where state law imposes
requirements on county officers (e.g., clerks or sheriffs), analysts will not review
compliance with those requirements.
vii. Analysts will review files to determine whether the plaintiff complied with applicable
post-sale state law requirements, such as requirements to file report of sale or
affidavits specifying the redemption amount and time period, where a right to
redemption exists.
viii. Analysts will not verify, however, activities performed by court-assigned third parties
or the court itself.
b. Non-judicial foreclosures:
i. Analysts will review files to determine whether the party initiating a foreclosure
complied with applicable notice of default requirements, including requirements to
contact the borrower via telephone and mail and requirements to publicize notice of
default and intention to foreclose as required by state law (e.g., publication in a local
paper).
ii. Analysts will review files to determine whether the party initiating the foreclosure
complied with applicable notice of sale requirements, including timing and
publication requirements.
iii. Analysts will review files to determine whether the party initiating the foreclosure
complied with applicable post-sale requirements, including report of sale
requirements and obligations on the party initiating the foreclosure arising from any
applicable redemption rights.
2. Federal Law
WFB-EL-00000078
a. U.S. bankruptcy laws. Analysts will review files to determine whether, where the
borrower filed for bankruptcy, Wells Fargo complied with the stay of foreclosure
proceedings pending a successful petition for relief from the stay.
b. SCRA. To the extent that Promontory cannot rely on the internal review of SCRA
compliance conducted by Wells Fargo, analysts will review files to determine whether
Wells Fargo complied with:
i. provisions applicable to the interest rate that can be charged borrowers on active
military service for obligations entered into prior to the date of their active military
service (50 USC 527); and
ii. stays of foreclosure proceedings against borrowers who defaulted on obligations
entered into prior to the date of their active military service during the borrower's
active military service or for 9 months following the termination of the borrower's
active military service (50 USC 533).
iii. Consent Order Article VII (3)(c) - Determining Appropriateness of the
Timing of Foreclosure
Article VII(3)(c) of the Consent Order requires the independent consultant to determine
whether a foreclosure sale occurred when an application for a loan modification or other Loss
Mitigation was under consideration;15 when the loan was performing in accordance with a trial
or permanent modification;16 or when the loan had not been in default for a sufficient period of
time to authorize foreclosure pursuant to the terms of the mortgage loan documents and
related agreements.
Promontory will make these determinations through: (1) an automated query of data extracted
from Wells Fargo's systems; and (2) analyst review of the contents of each in-scope proceeding.
As noted above, ill incorporate test standards related to state
law requirements on loan modification or other forms of Loss Mitigation contained in the
Hudson Cook Foreclosure Survey as well as relevant Federal law requirements on the same
topic. In addition the System will incorporate data extracted from Wells Fargo servicing
systems covering loan performance, modification or mitigation status, and other relevant data.
Finally, the System will also incorporate relevant terms from mortgage loan documents and
15 The question of what constitutes lI under consideration" is currently before the acc as part of the agency's
pending guidance on financial injury. Promontory will adhere to any definition promulgated by the agency in final
guidance. In the event that the final guidance does not provide adequately clear definition, Promontory will
escalate the matter through Wells Fargo's acc examination team.
16 Promontory will consider a loan to be IIperforming in accordance with a trial or permanent modification" where:
(1) Wells Fargo receives full payments in accordance with the trial or modification payment terms on or before the
scheduled due date for each payment; and (2) the borrower is current on trial or modification payments.
WFB-EL-00000079
related agreements.
Analysts will record any exceptions in the for review by a Senior
Analyst and Quality Assurance. Where an analyst cannot answer a particular question because
documents are missing or insufficient, the analyst will flag the file and communicate the missing
document request to Wells Fargo via the missing document and exceptions tracking website.
As discussed above, a similar process will be followed where the Request for Information Team
reviews provided documents before forwarding them to the analyst to complete his/her
review.
iv. Consent Order Article VII (3)(e) - Determining whether Fees and
Penalties Assessed were Permissible, Reasonable and Customary
Article VII(3)(e) of the Order requires the independent consultant to determine whether any
fees or penalties assessed were permissible, reasonable, and customary.
Promontory will make these determinations by testing files against defined exceptions,
deeming an exception to have occurred when the file indicates that Wells Fargo charged one or
more fees or penalties that failed one or more test conditions. Because Promontory will test
each loan file against all conditions, a single file could include multiple exceptions.
1. Permissibility
Promontory will test permissibility of fees and penalties by reference to limits established by
state law, federal law and the borrower's mortgage instruments. Promontory will examine
each file for impermissible charges under each of these authorities. If one or more of these
authorities limit fees or penalties, or a particular type of fee or penalty, in the aggregate,
Promontory will evaluate total fees and penalties, or total fees and penalties of that particular
type, by reference to that limit.
Considering any limitations on fees or penalties established by the law of the state in which the
residential property securing the loan is located, Promontory will test each loan file to
determine:
Whether the type(s) of individual fees and penalties charged to the account was
permissible;
Whether the amount(s) of individual fees and penalties charged to the account was
permissible; and
Whether the sum(s) of individual fees and penalties charged to the account was
WFB-EL-00000080
permissible.
Considering limitations on fees or penalties established by federal law, Promontory will test
each loan file to determine:
Whether Wells Fargo impermissibly charged fees or penalties to the account during the
pendency of a borrower's bankruptcy proceeding;
Whether Wells Fargo impermissibly charged fees or penalties to the account of an active
service member; and
Whether Wells Fargo impermissibly charged other fees and penalties.
Considering limitations on fees or penalties established by the loan document, Promontory will
test each loan file to determine whether fees and penalties individually or in aggregate
exceeded amounts disclosed in the borrower's promissory note.
2. Customariness
Promontory will evaluate the customariness of fees and penalties by reference to servicer
guidance promulgated by Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA),
the U.S. Department of Veterans Affairs (VA) and the Rural Development Agency (RDA) of the
U.S. Department of Agriculture for their respective insured and investor-owned loans.
Promontory will deem not customary any fee or penalty in excess of such guidance and not
otherwise approved by the GSEs or government insurer or investor as evidenced by a review of
borrower account records.
For loans other than GSE, FHA, VA and USDA loans, Promontory will deem not customary any
fee or penalty exceeding Fannie Mae guidance by more than 10% in amount.
3. Reasonableness
Promontory will evaluate each fee or penalty for reasonableness. Promontory will deem
unreasonable any fee or penalty that:
Relates to a service that was not in fact performed;
Is associated with the processing of a borrower request for a loan modification, but not
for those charges involving a recorded agreement for extension of term or
reamortization as allowed under 24 CFR 203.552(a)(7) for loans insured by the FHA;
Was assessed to protect the interests of a secured party when the borrower had
accepted and was in good standing under a trial loan modification or Trial Period Plan (
WFB-EL-00000081
"TPP
II
);
Was assessed for late payment when the borrower had made timely payment in an
amount consistent with the terms of an accepted trial loan modification;
Was assessed to protect the interests of a secured party while the borrower was in good
standing under a permanent loan modification;
Was assessed for forced placement of insurance when insurance was already in force; or
Was assessed for forced placement of insurance in an amount exceeding the higher of
the loan balance, property value or cancelled policy coverage level.
v. Consent Order Article VII (3)(f) - Determining whether Fees and
Penalties Assessed were Assessed with Excessive Frequency
Article VII(3)(f) of the Order requires the independent consultant to determine whether the
opinions) was excessive under the terms of the borrower's loan documents, and applicable
state and federal law.
In performing this evaluation, Promontory will consider whether Wells Fargo assessed the fee
or penalty with a frequency that was:
Impermissible under the law of the state of the residential property associated with
loan;
Impermissible under Federal law;
Impermissible under the terms of the borrower's promissory note; or
Uncustomary.
Specifically, th will prompt Analysts for detail concerning the types
of fees and penalties assessed and the frequency of their assessment. The System will then
apply encoded test standards to reach a preliminary determination. Preliminary
determinations of potential exceptions will flow to Senior Analysts and Quality Assurance for
further review.
vi. Consent Order Article VII (3)(g) - Determining whether Loss
Mitigation Activities were Properly Conducted
Article VII(3)(g) of the Order requires the independent consultant to determine whether Loss
WFB-EL-00000082
Mitigation Activities with respect to foreclosed loans were handled in accordance with the
requirements of HAMP, and consistent with the policies and procedures applicable to Wells
Fargo's proprietary loan modifications or other loss mitigation programs, such that each
borrower had an adequate opportunity to apply for a Loss Mitigation option or program, any
such application was handled properly, a final decision was made on a reasonable basis, and
was communicated to the borrower before the foreclosure sale.
Promontory reviews of the appropriateness of loss mitigation activities will seek to determine
whether borrowers were afforded appropriate opportunities to be considered for loan
modifications, and whether decisions reached by Wells Fargo in regard to such opportunities
met with HAMP and proprietary program criteria, subject to investor requirements. The review
population will include customers approved and customers denied for modifications.
Promontory will review loan modifications based on information available at the time of the
decision using then-applicable program guidelines. For all denied loan mod judgmental
segments (see table A-6), in reviewing the modification decisions, Promontory will examine
documented income as well as customer-specific inputs to the NPV model and any tools used to
determine modification terms. If the information considered is accurate to within a 5% margin
of error, Promontory will accept the decision without re-running the NPV model or tools. If not,
Promontory will re-perform all calculations and evaluate the file for potential financial injury.
For the non-judgmental review segments and all other judgmental segments for which VII(3)(g)
is in scope, in reviewing the modification decisions, Promontory will perform recalculations as
warranted. For approved modifications, we will consider the payment amount to be accurate if
the recalculation results in a payment that is no more than 10% less than the existing
modification payment (per HAMP rules). Promontory will not validate HAMP NPV models. For
proprietary modifications, Promontory will review the validation or review work performed by
Wells to determine the level of independence and whether further work is necessary to accept
model and assumption integrity and the validity of other tools used.
Attachment B provides additional detail on the manner in which the Complaint Process will
review loan modification decisions.
vii. Consent Order Article VII (3)(h) - Determining whether Errors,
Misrepresentations or Other Deficiencies Resulted in Financial Injury
to the Borrower or the Mortgagee
Article VII(3)(h) of the Consent Order requires a determination of whether the borrower has
suffered financial injury. The joint agency foreclosure review guidance defines financial injury
to the borrower or the mortgagee as monetary harm directly caused by errors,
WFB-EL-00000083
misrepresentations or other deficiencies identified in the Foreclosure Review. The guidance
clarifies that monetary harm does not include physical injury, pain and suffering, emotional
distress or other non-financial harm or financial injury that did not result as a direct
consequence of errors, misrepresentations or other deficiencies identified in the Foreclosure
Review.
In evaluating financial injury to borrowers, Promontory will adhere to relevant OCC guidance, as
issued on August 29, 2011, and as that guidance may from time to time be modified by the
agency.
Under terms of the Consent Order, remediation of financial injury is the responsibility of Wells
Fargo. Notwithstanding, the OCC has asked the independent consultants, including
Promontory, to consider how remediation should occur when financial injuries are identified in
the course of the Foreclosure Review.
5. File Review Quality Assurance
a. Quality Assurance Overview
As further detailed in this section, Promontory's Quality Assurance team will perform quality
reviews of key work products of the File Review Process, including:
Reviews of analysis during system and process trial runs, in order to provide early
feedback on the quality of system design and review process. In the trial period,
analysts and senior analysts, with the assistance of Quality Assurance, will test an initial
batch of files against each set of system review criteria.
Following formal commencement of the File review:
o 200 files or a statistically valid sample of the files processed by in the first three
days of the Review, whichever is a greater number. Based on the lessons
learned from the trial runs, the Quality Assurance Manager will determine the
sampling selection method for selecting these first week files.
o 100% of preliminary exception files following analyst review at least until
preliminary exceptions are consistently correct, and thereafter an ongoing
random sample of Levell files with unvalidated preliminary exceptions
17
;
17 Our staffing model assumes a ramp-up of new Levell analysts in the second and third months of the review, and
thereafter a steady state. As a relatively large group of analysts joins the project in those two months, Quality
Assurance will review their completed files until Quality Assurance gains confidence that the new analysts are
producing consistent quality work. Quality Assurance is considering applying an accuracy rate threshold, sampling
for a certain number of days, or using some combination method to determine the scope of sampling.
WFB-EL-00000084
o An ongoing, random sample of files in numbers at least large enough to be
statistically valid that are preliminarily found by analyst review to evidence no
exceptions; and
o Final validation of exceptions forwarded by the Exception Clearing Team as
described in Section 4 (please see descriptions of Steps 7 and 8).
Key inputs into the Foreclosure Review System.
b. Quality Assurance of File Review
Quality Assurance file review will seek to provide:
(1) Objective assurance of the quality of work performed by analysts and senior
analysts, particularly with respect to Type II errors or false negatives; and
(2) Feedback on the performance of individual review personnel and identification of
additional training opportunities based on Quality Assurance results.
i. Quality Assurance File Review Sampling and review methodology
Promontory will base its Quality Assurance sampling methodology on sampling guidance
published by the OCC, using tolerances and reliability thresholds established by the primary
sampling method; as circumstances warrant and on a case by case basis, the Quality Assurance
function may use sampling rates that will exceed the OCC guidance on minimum samples. (See
Section 2, above.)
Assignment to Quality Assurance Segments based on Levell results. Following completed Level
1 review, the Quality Assurance Team will assign each reviewed file to one of three segments (
"Qua lity Assu ra nce Segments"):
Un validated preliminary exception segment. The Quality Assurance Team will review
100% of files in this category until the Quality Assurance Team determines that
preliminary exceptions identified by analysts and senior analysts are reliably correct.
High risk no preliminary exception segment. The Quality Assurance team will separate
files determined by senior analyst review to be exception free into high risk and low risk
segments.
iS
The high risk segment will include files reviewed by senior analysts with
18 The Foreclosure Review System assigns scores to analysts based on the number and types of errors corrected by
Senior Analysts. We propose to use the scoring system to inform the Quality Assurance sample.
WFB-EL-00000085
high past error rates. The Quality Assurance Team will review 15% of files in this
segment. If the Quality Assurance Team finds Type II errors or false negatives in this
category, it will supplement its review with judgmental sampling of other files reviewed
by the same senior analyst or with similar file characteristics. The Quality Assurance
team will independently recommend re-performance of file reviews by the foreclosure
analyst team where it determines the work quality of an individual senior analyst does
not support high confidence in the absence of Type II errors.
Low risk no preliminary exception segment. The low risk segment will include files
reviewed by experienced senior analysts with low past error rates. The Quality
Assurance team initially will review 10% offiles in this segment and later adjust as
appropriate based on our actual experience. If the Quality Assurance Team finds Type II
errors or false negatives in this category, it will supplement its review with judgmental
sampling of other files reviewed by the same senior analyst or with similar file
characteristics.
Assignment to Quality Assurance Segments based on Level 3 Exception Clearing results.
Following completed Exception Clearing review, the Quality Assurance Team will validate all
final exceptions forwarded by the Exception Clearing Team to assure consistency in the
interpretation and application of definitions of exceptions.
19
Sampling rate adjustments. In order to reduce likely errors in the early days of the Review, the
Quality Assurance team will use a combination of system and manual review methods to: (1)
perform reviews of partial file analysis activity and results during system and process trials
during which analysis activity may take place, but cannot yet be completed for any single file;
and (2) inspect at least 200 files in the first week immediately following formal commencement
of the Review.
Likewise, the Quality Assurance team will adjust its sampling rate for the "low risk no
preliminary exception segment" as appropriate based on our experience with the review. The
Quality Assurance team will maintain its sampling rate for the "high risk no preliminary
exception segment" to 15% throughout the Review period.
The Quality Assurance Team will increase its sampling rate or deploy targeted manual review
whenever it determines that changes in the resource levels or system functionality may lead to
higher error rates.
19 The Exception Clearing Team will forward all exceptions to the final QA exception review team, except in cases
where Wells Fargo agrees that an exception had occurred. Quality Assurance believes that the risk of using
inconsistent exception definitions or the risk of making erroneous decisions at the Exception Clearing Team level
would be low in those cases and therefore plans not to review them.
WFB-EL-00000086
ii. Quality Assurance File Review Reporting
The Quality Assurance Leads will review and report key weekly Quality Assurance metrics on
files for which analyst and senior analyst review is completed during the Foreclosure Review.
Weekly reports will contain:
Total number and type of files reviewed by the Quality Assurance Team during the
reporting period and to date;
Total number of files with exceptions validated by the Quality Assurance Team during
the reporting period and to date;
Description of exceptions validated by Quality Assurance Team;
Number and types of exceptions found by Quality Assurance in files determined by Level
1 review to be exception free;
Quality Assurance metrics by analyst. The Quality Assurance metrics will represent the
quality of review conducted by individual analysts and derive from the number and
types of corrections made on their respective files during the Quality Assurance process;
Common errors or issues requiring team-wide communication;
Recommendations for System changes based on Quality Assurance results; and
Recommendations for additional analyst training and for re-performance of file reviews
based on Quality Assurance results.
In addition, the Quality Assurance Team will provide feedback to individual analysts on an
ongoing basis and will maintain Quality Assurance documentation regarding Quality Assurance
history and results in the Foreclosure Review System.
c. Key Data Input Quality Assurance
Quality Assurance will review the business rules and other key system inputs prior to system
programming. Business rules translate applicable legal or regulatory standards into decision
logic inputs that are compatible with the coding requirements of the Foreclosure Review
System.
For example, Promontory will review state legal workflow diagrams and business rules, both of
which are critical inputs to the Foreclosure Review System. The Quality Assurance unit of the
Promontory team will conduct secondary reviews of all diagrams and business rules to ensure
that they match the legal standards as researched and summarized by the external law firm
WFB-EL-00000087
retained by Promontory. Similarly, Quality Assurance will validate the business rules for fee
standards (impermissible, reasonable, customary, or excessive fees), SCRA, RESPA, TILA, and
other key standards as appropriate.
Quality Assurance will rely on its team of subject matter experts to execute this task.
6. Preparation and Submission of Report
Consistent with the requirements of Article VII(4) of the Consent Order, Promontory will
provide Wells Fargo and the OCC with a final report (the "Foreclosure Report") covering both
the File Review and Complaint Processes. The Foreclosure Report will include a summary and
analysis of the file exceptions found during the Foreclosure Review, together with detail
appropriate to support the development of a remediation plan, including the identity of each
borrower determined by Promontory to have been harmed and the nature and amount of the
harm incurred to the extent of Promontory's ability to determine that amount based on the
information available to Promontory.
WFB-EL-00000088
Attachment B- Draft of August 31, 2011
Complaint Process and Methodology
Contents
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Wells Fargo Foreclosure Review Engagement Letter: Attachment B
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1. Overview
The objective of the Foreclosure Review is to identify borrowers who have suffered financial
injury through errors or other deficiencies in the foreclosure process, in order that their injury
can be remediated. Attachment A describes a methodology for pursuing this objective through
sampling and review of borrower loan files. This Attachment describes a supplemental
methodology (the "Complaint Process") for pursuing the same objective, by establishing an
outreach process and reviewing complaints from borrowers within the scope of the Foreclosure
Review. In combination, Promontory believes these approaches represent a sound and credible
way to achieve the purposes of the Foreclosure Review.
This attachment details how Promontory currently envisions execution of the Complaint
Process. Although the current plans represent the product of many weeks of planning and
analysis, they are continuing to evolve in light of new regulatory direction and coordination
efforts among the similarly situated mortgage servicers and their independent consultants.
Promontory will continue to consult closely with the acc and Wells Fargo in regard to material
changes to the methodology described here.
2. Prompting and Reviewing Customer Complaints
a. Introduction
Close review of borrower complaints is essential to accomplishing the goals of the Foreclosure
Review. Accordingly, as Attachment A details, the File Review Process entails careful analysis of
files associated with complaints during the review period, including both random sampling and
analysis of complaints submitted to Wells Fargo directly by members of the in-scope population
during the review period and census review of such complaints referred to Wells Fargo by
governmental agencies.
The Complaint Process seeks to enhance the effectiveness and credibility of the File Review
Process by supplementing statistical and judgmental sampling with a process that allows
borrowers who believe they have been harmed to identify themselves.
Making the Complaint Process successful, however, involves difficult process engineering
choices and requires, especially, a carefully balanced approach to promoting the complaint
opportunity to in-scope borrowers. The success of the Complaint Process is at risk both to
insufficient or ineffective efforts to promote the complaint opportunity and to promotional
efforts that would have the effect of overwhelming the Complaint Process with high volumes of
out-of-scope, frivolous, or fraudulent complaints.
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WFB-EL-00000091
b. Overview
As further described below, Wells Fargo, in coordination with similarly-situated mortgage
servicers, will conduct outreach to in-scope borrowers through a combination of direct mail and
advertising; receive complaints; review and evaluate those complaints; and propose complaint
resolutions to Promontory. Promontory will independently review and either affirm or reject
each proposed resolution in light of relevant file documentation. Upon Promontory's
independent decision, Wells Fargo will administer any necessary remediation or other follow
up activity. Wells Fargo will provide both Promontory and the acc with comprehensive
reporting on its administration of this complaint process, sufficient to support Promontory's
efforts to validate that Wells Fargo is properly executing every element of the process.
In consultation with the acc, Promontory will review and approve Wells Fargo's outreach plan
and process design; validate Wells Fargo's list of in-scope borrowers for reliability; validate
Wells Fargo's outreach and complaint intake processes; review and approve program elements
relating to borrower follow up; validate in-take processing of complaints received in the
Foreclosure Complaint Process; independently review Wells Fargo's proposed resolutions and
accept or reject them; and perform thorough quality assurance testing and other process
oversight. Promontory and Wells Fargo currently anticipate that Wells Fargo will propose and
Promontory will approve an outreach plan, process design, and intake process in coordination
with other similarly situated mortgage servicers, broadly consistent with the approach jointly
presented to the acc by Wells Fargo, J.P. Morgan Chase, Bank of America, and Citibank on
August 2, 2011. Efforts to refine that approach in consultation with the acc and other servicers
are currently ongoing.
c. Scope
The Foreclosure Complaint Process will provide independent review and decisioning of all
complaints by in-scope borrowers who:
Submit complaints through the outreach and intake processes described below within
the prescribed timeframe; or
Submit relevant complaints through other Wells Fargo channels or indirectly (e.g.,
through state Attorneys General, federal regulatory agencies, etc.) during the period
from January 1, 2011 through the end of the Foreclosure Review.
The scope of the Complaint Process will not extend to complaints that do not relate to the
subject matter of the Foreclosure Review, that relate to alleged actions or omissions outside
the time period of the Foreclosure Review, or that relate to borrowers who are not members of
the review population.
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d. Opportunities to Coordinate
Promontory has convened several meetings of the independent consultants in an effort to
explore opportunities to coordinate elements of the Foreclosure Complaint Process. These
discussions have centered on potential coordination of outreach activities, including both direct
mail communications and advertising, and to a lesser extent on opportunities to coordinate on
the intake of borrower complaints. Absent a coordinated effort, compliance with the Consent
Order will require numerous servicers to run very different advertisements for essentially the
same purpose simultaneously in every major media market in the United States.
Coordination is, however, difficult to achieve in practice. The various servicers and their
independent consultants have divergent perspectives and differing sensitivities. In addition, the
prospect of coordination raises significant conceptual, operational, legal, and financial
challenges, all of which must be worked through to the satisfaction of a large group of servicers
and consulting firms.
On August 2, 2011, Promontory and Wells Fargo, together with representatives of PwC,
Deloitte, Bank of America, J.P. Morgan Chase, and Citibank presented the OCC with a proposed
coordinated approach to borrower outreach and customer intake. The OCC has expressed
general support for the proposed approach, subject to refinement of details and resolution of
certain open items, and encouraged other servicers to support it as well. Promontory and
Wells Fargo are continuing to work with the other large servicers and their independent
consultants, and with other servicers and independent consultants wishing to participate, to
finalize the approach.
While there can be no assurance that servicer and independent consultant efforts to coordinate
will succeed, Promontory and Wells Fargo believe that the four largest servicers and at least
some of the smaller servicers will pursue a coordinated approach under the oversight of their
independent consultants. The descriptions of this approach provided below are subject to
ongoing refinement through the course of the coordination effort and in consultation with the
Occ.
e. Borrower Communication Plan
i. Status
At Promontory's request, and in consultation with other major servicers and their independent
consultants, Wells Fargo has been working to develop an outreach plan intended to reach as
many members of the in-scope population as practicable, both to let them know about the
Foreclosure Complaint Process, and to encourage them to submit any complaints they may
have about financial injury they believe were caused by errors in Wells Fargo's foreclosure
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WFB-EL-00000093
process. Wells Fargo has made substantial progress in developing its plan, and Promontory and
Wells Fargo have had numerous exchanges regarding its contents. Nevertheless, the plan
remains the subject of ongoing discussions among the major servicers and their independent
consultants. Promontory expects to provide its final review and approval only in consultation
with the Occ. Sample borrower communications appended to this attachment likewise
continue to undergo refinement.
ii. Direct mail outreach
Consistent with outreach strategies that have proven successful in the class action context,
Promontory and Wells Fargo expect the borrower communication effort to rely primarily on
first class mail. Wells Fargo believes it is feasible to launch a coordinated mail outreach effort
approximately 45 days after approval from the OCC of common solicitation letters, in-take
forms and advertising copy. In consultation with other servicers, Wells Fargo is studying
opportunities to launch sooner, in accordance with the expressed preference of the Occ.
The direct mail communication will explain the purpose of the communication (to provide an
opportunity for independent complaint review); set forth eligibility criteria, minimum
information requirements, and the timeframe for responding; describe the nature of the
independent review process; and explain how the Complaint Process will work, setting
expectations for the timeframe in which the borrower should expect a response.
Outreach by first class mail has significant advantages over alternative forms of outreach. First,
mail outreach can be highly effective in reaching the target population. Wells Fargo expects to
be able to obtain valid, current mailing addresses for well over ninety percent of in-scope
borrowers using a combination of industry databases, skip tracing, and current address
information associated with other Wells Fargo accounts. No other outreach strategy promises
comparable penetration of the in-scope population. Second, equally important to the success
of the complaint process, by focusing specifically on borrowers known to be in scope, mail
outreach mitigates the risk that complaints received from borrowers outside the scope of the
Foreclosure Review could overwhelm the Complaint Process.
Promontory and Wells Fargo are concerned about the potential for direct mail outreach to
generate unmanageably large response volumes if borrowers "try their luck" in the process
irrespective of actual financial harm. In consultation with the other independent consultants
and servicers, we are working to craft an implementation approach to mitigate this risk. An
important component of this strategy will be a pilot mailing intended to test response
processes and refine our response estimates prior to launching on a broader scale. We will
consult with and obtain the OCC's approval of any such approach prior to adopting it.
Depending on the response estimates resultant from the pilot, staggered mail drops and
Page 6
WFB-EL-00000094
associated advertising may also prove integral parts of this strategy.
iii. Advertising
Along with the other major servicers and their independent consultants, Promontory and Wells
Fargo have had extensive discussions concerning the type of advertising to be conducted in
support of the Complaint Process. We share the concern that an advertising campaign
addressed to the general population could attract large volumes of out of scope, irrelevant,
frivolous, and insubstantial complaints, and that these volumes could jeopardize our ability to
review and appropriately resolve the legitimate complaints of borrowers in need of
remediation for genuine financial injuries. For this reason, we expect Wells Fargo's approved,
coordinated outreach plan to feature an advertising campaign focused primarily on heightening
awareness of the Complaint Process among in-scope borrowers and secondarily on bringing the
process to the attention of in-scope borrowers who, for whatever reason, may fail to receive or
attend to the direct mail notification.
More specifically, the advertising campaign in support of the Complaint Process will seek to (a)
educate in-scope borrowers about the existence of the special complaints process; (b)
encourage them to open the mail they will receive as part of the direct mail outreach effort;
and (c) encourage them to respond if they meet the eligibility criteria. In addition, for the
benefit of borrowers who did not receive or attend to the direct mail notification, advertising
will provide both an 800 number and website for the benefit of those in need of more
information. Authenticated in-scope customers may submit a complaint form via the website
or may request that a form be mailed to them for submission.
Promontory anticipates that, as part of the coordinated borrower outreach strategy, the
servicers will negotiate and agree upon a proposed joint media buy. Promontory will review
the joint proposal to confirm that it appropriately addresses Wells Fargo's in-scope population.
Preliminary analysis indicates that only slightly more than half of Wells Fargo's in-scope
population resides in one of the twenty largest U.S. MSAs. The remainder of the population
resides in smaller MSAs (35%) or outside of MSAs altogether (11%). These circumstances
strongly suggest an advertising strategy concentrated on national newspapers and publications,
but there may be a need for supplemental local general market advertising in the MSAs with
the largest in-scope concentrations and in publications serving large African-American
communities and Hispanic communities.
f. Complaint Intake and Disposition
We envision making every effort to encourage in scope borrowers to submit complaints to the
Complaint Review Process on standard forms. Use of standard complaint forms will help to
Page 7
WFB-EL-00000095
ensure consistent data capture, assist in minimizing out-of-scope complaints, and facilitate
complaint processing. Wells Fargo will include these forms in every direct mail piece associated
with the Complaint Review Process, allow for submission of forms over the internet, and
provide them upon request to those in-scope borrowers phoning the 800 number established
for the Complaint Review Process.
i. Intake Channels
Incoming mail complaints will arrive via a lockbox maintained by a third party administrator
retained by Wells Fargo, currently anticipated to be Rust Consulting, Inc. We envision providing
process information and forms via both an 800 number and the internet and expect to be able
accept complaints through the internet.
Following receipt, Wells Fargo's administrator will categorize each incoming complaint as either
out-of-scope, in-scope, or incomplete.
ii. Out-of-Scope Complaints
Wells Fargo's administrator will deem complaints out of scope and exclude them from the
Complaint Review Process if they do not relate to the subject matter of the Foreclosure Review
or are outside the time period of the Review. Wells Fargo will divert complaints deemed out of
scope to its normal customer service channels.
Promontory will establish the standards for excluding any received complaints and will review
and validate the administrator's exclusions from the Complaint Review Process.
iii. Incomplete Complaints
Wells Fargo's administrator will deem complaints incomplete if they are in scope, but fail to
provide essential information required by the standard complaint intake form. These
complainants will receive a letter asking them to provide additional information. Wells Fargo
will instruct its administrator to issue such letters within seven (7) days of receipt of each
incomplete complaint or, alternatively, within a time period jointly agreed upon by the
coordinated servicers and their independent consultants.
Borrowers who do not respond within thirty (30) days thereafter, or within an alternative time
period jointly agreed upon by the coordinated servicers and their independent consultants, will
be considered to have dropped their complaints.
Promontory will establish the standards of a complete complaint and will review and validate
the incomplete determinations of Wells Fargo's administrator as well as all decisions to close
complaints on the basis of borrower failure to respond to requests for additional information.
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WFB-EL-00000096
iv. In-scope Complaints
Wells Fargo's administrator will image each incoming complaint and any supporting
documentation provided by a borrower and upload the electronic image into its case
management system. Within seven (7) days of initial receipt, either Wells Fargo or its
administrator will send an acknowledgment letter to the complainant.
Promontory review of each in scope complaint will occur in two stages and focus narrowly on
the complaint specified by the borrower, except that, in cases where the borrower submits a
complete, generalized complaint, Promontory will conduct a review for all provisions of Article
VII of the Order to be reviewed as part of the File Review Process. Promontory will establish
the standards for generalized complaints to be identified by Wells Fargo's administrator in the
in-take process.
First, Wells Fargo will review the complaint, initially to determine whether the complaint was
previously submitted and resolved.
If the borrower has previously made the same complaint and Wells Fargo
determines it was previously resolved, Wells Fargo will transmit the original
complaint and supporting resolution documentation to Promontory for
Promontory's independent review and validation;
If the borrower has not made the same complaint previously, or has made the same
complaint previously and the complaint remains unresolved, Wells Fargo will
process the complaint, prepare a recommended disposition, and provide the
complaint, the recommendation, and supporting documentation to Promontory for
independent review and decisioning.
Following Wells Fargo's review, Promontory will review each file to evaluate Wells Fargo's
analysis of it and its proposed disposition. If Promontory's review requires additional
information, Promontory will request such information from Wells Fargo.
With regard to section (3)(g) of Article VII, the Wells Fargo staffed complaint review function
will evaluate the appropriateness of previously completed loss mitigation activities to
determine whether borrowers were afforded adequate opportunities to be considered for loan
modifications, and whether the decision at the time met with investor, HAMP, and proprietary
program criteria. Wells will review loan modifications based on information available at the
time of the decision using then-applicable program guidelines. Promontory will review the
recommended disposition reached by Wells Fargo using then applicable program guidelines,
make a final decision and evaluate the file for potential financial injury.
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There are four logical outcomes to a completed initial complaint review:
o If Promontory agrees with the borrower's complaint and Wells Fargo resolution,
Promontory will log the complaint and its resolution for inclusion in its
Foreclosure Review Report;
o If Promontory disagrees with the borrower's complaint and concurs with Wells
Fargo resolution, Promontory will log the complaint and its resolution for
inclusion in the Foreclosure Review Report;
o If Promontory agrees with the borrower's complaint but not with Wells Fargo's
proposed resolution, Promontory will request re-review by Wells Fargo; or
o If Promontory disagrees with the borrower's complaint and also disagrees with
Wells Fargo's resolution (e.g., file review indicates WF responded inappropriately
because borrower was unclear or mistaken in describing the issue), Promontory
will request re-review by Wells Fargo.
If Wells Fargo revises its resolution on reconsideration, it will pass the complaint, the final
resolution, and the supporting documentation to Promontory and, if Promontory agrees,
Promontory will log the resolution for inclusion in the Foreclosure Review Report. If a
disagreement remains, Promontory will make the final determination and log the complaint
and borrower injury for inclusion in the Foreclosure Review Report.
Annex B-1 and Annex B-2 (attached hereto) depict in diagrammatic form the contemplated end
to-end process flow of the Foreclosure Complaint Process and the process flow for post January
1, 2011 complaints received through other channels.
v. Return Mail
Wells Fargo's administrator will conduct skip tracing or take other steps as necessary to identify
a current address, phone number, or email for any former borrower whose mail is returned and
will take additional steps by mail, telephone, or email to alert them to the Foreclosure
Complaint Process.
g. Reporting
Wells Fargo and Promontory are working to develop robust controls to ensure that each
complaint is appropriately logged and tracked from the moment of receipt through final
disposition and follow up.
Throughout the Foreclosure Complaint Process,
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Promontory will track and periodically report to the acc regarding:
o Complaints received through the borrower outreach process;
o Exclusions of complaints from the Foreclosure Complaint Process and reasons for
exclusion;
o Complaint resolution; and
o ather data as requested by the acc.
Wells Fargo will publish weekly reports covering:
o Total complaints received;
o Number of in-scope complaints;
o Type of in-scope complaints received;
o Number of complaints acknowledged;
o Number of in-scope complaints in review process;
o Number of in-scope complaints pending Promontory review;
o Number of in-scope complaints responded to;
o Disposition of in-scope complaints responded to;
o Number of in-scope complaints requiring remediation;
o Number of in-scope complaints remediated; and
o Number of follow-up requests of in-scope complaints.
h. Timeline
The Foreclosure Complaint Process will adhere to the following timeline:
Within 15 days of acc approval:
o Special complaint function launches for review of in-scope complaints
received since January 1,2011 through Wells Fargo's normal channels;
Within 45 days of acc approval or such earlier date as may prove operationally
feasible:
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o Pilot promotion of solicited Foreclosure Complaint Process begins;
Approximately 30 days following pilot launch:
o National coordinated borrower outreach launches;
120 days following the last mail drop of the national coordinated borrower
outreach:
o Special complaint function intake ceases (further incoming complaints
diverted to routine channels); and
180 days following the last mail drop of the national coordinated borrower
outreach launch:
o Promontory complaint review is complete.
3. Complaints Quality Assurance
a. Quality Assurance Overview
Promontory's Quality Assurance team will perform quality reviews of the Complaint Process.
The Quality Assurance team will perform random sampling of the Foreclosure Complaint
Process.
Promontory will describe its approach to quality assurance of the Foreclosure Complaint
Process in an updated version of this methodology.
4. Remediation
Wells Fargo and Promontory anticipate that Wells Fargo will promptly remediate any borrower
found through the Complaint Process to have suffered financial injury. Wells Fargo will prepare
and propose to Promontory or the OCC, as the OCC may direct, a general plan for remediation
and, following approval of that plan, will make remediation in accordance with that plan.
The Foreclosure Report to be submitted in accordance with the requirements of Article VII(4)
will include a summary and analysis of exceptions found during the Complaint Process, together
with detail appropriate to support the development of a remediation plan, including the
identity of each borrower determined by Promontory to have been harmed and the nature and
amount of the harm incurred to the extent of Promontory's ability to determine that amount
based on the information available to Promontory.
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Foreclosure Complaint Review Process - Solicited Complaints -- DRAFT Updated 8/18/2011
Customer Intake Firm WFHM Promontory
scope population
Access complaint
,---_______ documentation and
Sends customer an
acknowledgement
letter
recommended
disposition
Customer
receives letter
describing the
process with
access code
completes and
submits form
via mail or
online
Customer
learns 01
promotional
outreach
Sends customer an
acknowledgement
letter I4-V
Research, collect
and place
documentation into
CRM
Draft recommended
disposition and case
summary
and submit
Independent review 01
complaint, supporting
L-----.t documentation and
recommended
Financial
Harm
WFB-EL-00000101
Foreclosure Complaint Review Process - Normal Channel Complaints - DRAFT Updated 8/18/2011
Customer
Customer submits
complaint through
Normal Channel
Load complaint
into management
system (Compass)
Image and Index
complaint
Identify complaint
type and
subsequent
required
ocumentatio
Research, review,
and
PFG designates
Complaint In
Scope
No
8
WFHM Promontory
Send
to Promontory Receive complaint
and response
documentation
Independent review
of complaint,
supporting
documentation and
disposition
Prepare
documentation
and case summary
Re-research and
submit subsequent
disposition and
remediation
Immediately I
T
Addressable
L--------No,---------+-__1.. Financial
Harm
Yes
Incl ude in ""'------- N Financial Harm
T
1
Include in
foreclosure
report
foreclosure report...... I
1
Yes
Close case
WFB-EL-00000102
Attachment C
Resources and Expertise
Contents
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Wells Fargo Foreclosure Review Engagement Letter: Attachment C
Attachment C
Resources and Expertise
This attachment describes the resources and expertise Promontory will use to complete the
Foreclosure Review, including personnel and information systems. It further describes
Promontory's plans for enlisting additional resources necessary to complete the Foreclosure
Review in the event that initial sampling identifies needs for more extensive file review.
1. About Promontory Financial Group
Former Comptroller of the Currency Eugene Ludwig founded Promontory in 2001. Our senior
professional team has unusually deep experience in the management, direction and leadership
of major financial institutions, financial regulatory agencies, and policymaking bodies. In the
U.S., members of our firm have served as senior executives or directors of numerous leading
financial institutions and financial regulatory agencies, including, to name but a few, Citigroup,
Bank of America, Visa, Wells Fargo, Goldman Sachs, American Express, the Federal Deposit
Insurance Corporation, Board of Governors of the Federal Reserve System, the United States
Treasury Department, and the Office of the Comptroller of the Currency.
Promontory works with the leadership of financial institutions throughout the world to identify,
evaluate, and resolve issues of actual or potential concern to their directors, senior executives
and regulators. We provide them with a wide range of services, including evaluation and
assistance in strengthening risk management units and practices, compliance, corporate
governance, and risk reporting; forensic reviews and reports; due diligence reviews; policy
development; and strategic advice relating to the establishment or acquisition of new financial
services businesses.
Promontory is headquartered in Washington, D.C. and maintains additional U.S. offices in New
York, Atlanta, and San Francisco. We also have a substantial international practice, with
affiliate offices in Dubai, London, Paris, Milan, Singapore, Sydney, Tokyo and Toronto.
Promontory has significant experience and expertise working with mortgage lenders and
servicers to meet the requirements of regulatory enforcement actions, strengthen risk
management or compliance, or enhance corporate governance. The firm has successfully
concluded several engagements related to mortgage origination and servicing and is deeply
experienced in forensic and look-back reviews and statistical analysis. Several members of
Promontory's leadership and numerous members of its professional staff have spent portions
of their careers in the mortgage sector, in regulatory supervision and examination of mortgage
lenders, or both.
2. Organizational Structure
WFB-EL-00000104
a. Overview
Diagram C-1 shows the general structure of Promontory's Wells Fargo Foreclosure Review
team.
Diagram C-1
General Structure of Promontory's Wells Fargo Foreclosure Review Team
b. Project Leadership
Promontory's project leadership will provide the project team with strategic direction,
supervision of project management and quality assurance, liaison with acc and Wells Fargo
senior executives and directors, and quality control of the Foreclosure Review.
will lead the project, dedicating the majority of their
WFB-EL-00000105
c. File Review
Two general operations managers, responsible for supervising end-to-end foreclosure
review;
Two process improvement analysts, assigned to work with process owners to improve
the foreclosure review process;
Two management information analysts, responsible for reporting key foreclosure review
information on a periodic basis;
One escalation manager, responsible for supervising the Request for Information and
Exception Clearing teams;
One quality control manager, responsible for ensuring quality control best practices
identified by QA, process improvement and file review leads are implemented on the
floor;
Two system support managers, responsible for providing day-to-day system operational
support; and
Three information technology support staff.
Table C-2 shows the key working assumptions underlying Promontory's resource planning in
connection with file review.
Table C-2
File Review Resource Planning: Key Working Assumptions
Item Assumption
WFB-EL-00000106
Average analyst file review time, full (a)-(h) review 9 hours
Average analyst file review time, (g) only 6 hours
Average analyst file review time, other partial review 4.5 hours
Average senior analyst review time
Number of files to be reviewed in Stage 1
Calendar days to complete Stage 1 file review
Work days
Production hours/day
Team leads/senior analyst
Additional files to be reviewed in Stages 2-3
Days to complete Stage 2-3 review
RFls generated per file
RFI review time minutes per outgoing or incoming
Exceptions per file
Average exception clearing review hours/exception
i. Foreclosure Analysts
3 hours
16,949
175
5/week
6.5
1:5
6,400 (50% of Stage 1
sample)
95
2
7 minutes
0.5
2
Both directly and through its subcontractor, Allonhill, Promontory will engage experienced
subcontractors to supplement its own resources as necessary in reviewing foreclosure files, and
for technical and administrative services as necessary to accomplish the Foreclosure Review at
a high standard of professionalism. The primary responsibilities of foreclosure analysts will
include ensuring the receipt of documentation, reviewing documentation and extracting critical
data, entering necessary data into the foreclosure review system, and identifying conditions of
potential errors, misrepresentations or other deficiencies. Analysts deployed on the
Foreclosure Review may have college degrees but will have some experience in the mortgage
sector.
Based on the assumptions set forth in Table C-2, Promontory expects to require a team of one
WFB-EL-00000107
hundred and sixty-five to one hundred and seventy-five full-time equivalent ("FTE") analysts on
average, approximately twenty-five of whom will specialize in loss mitigation file reviews, to
complete the review. Promontory will review these assumptions and adjust analyst staffing
levels appropriately as it gains actual experience conducting the review of Wells Fargo files.
ii. Senior Analysts and Team Leads
Promontory will also hire senior analysts to supplement its existing resources, provide quality
control of analyst file reviews, and further investigate foreclosure files as needed. Senior
analysts may have college degrees, but will have more than three or more years of servicing
experience in loss mitigation and/or foreclosure. Based on the assumptions set forth in Table C
2, Promontory expects to need approximately fifty to sixty FTE senior analysts and thirteen to
seventeen team leads on average, approximately five of whom will specialize in loss mitigation
file reviews, to complete the Foreclosure Review.
iii. Request for Information Team
As described more fully in Attachment A, the Request for Information Team will be responsible
for coordinating with the File Review Team and Wells Fargo to identify, request and review
missing documents. Based on the assumptions set forth in Table C-2, the team will consist of an
average of nine professionals, including one senior analyst and eight information analysts, who
will have skill sets and experience levels similar to those of the analysts that conduct the Levell
file review. The Escalation Manager will supervise the Request for Information Team.
iv. Exceptions Clearing Team
As described more fully in Attachment A, the Exceptions Clearing Team will be responsible for
reviewing information provided by Wells Fargo in response to unvalidated preliminary
exceptions. Under the current assumptions of 0.5 exceptions per file and two hours of review
time per exception, the team will consist of an average of eighteen to twenty professionals with
skill sets and experience levels similar to those of senior analysts in the Levell file review and
three to five team leads. The Escalation Manager will supervise the Exceptions Clearing Team.
d. Complaint Review
Promontory Director 'II lead a separate unit to review foreclosure-related
borrower complai s extensive experience in compliance and operational risk
management as well as consumer protection matters. Complaint Reviewers will have
qualifications similar to Foreclosure Analysts and Senior Analysts, sourced through similar
channels.
WFB-EL-00000108
connection with complaint review.
Table C-3
Complaint Review Resource Planning: Key Working Assumptions
Item Assumption
In-scope population 850,000
1
Mail response rate 20%
Replied out of scope No assumption
Incomplete 1%
January 2011 forward normal channel in-scope written complaints 50,893
Total in-scope complaints 219,193
Loss mitigation complaints 50%
Analyst review time for loss mitigation complaint 2 hours
Analyst review time for other complaint 45 minutes
FTE needed for in-take processing validation 4
Foreclosure Complaint Process expected start date September 12
Production hours/day 6.5
Days to complete complaint review 270 calendar days
Work days per week 5
Senior analyst /analyst ratio 1:10
Based on these assumptions, Promontory expects to require a Complaint Review team averaging two
1 The figure of 850,000 for the in scope population for complaints is lower that the in scope population for the file
review. Because the resource implications for complaints are more sensitive to the total population (whereas the
file review resource implications are more sensitive to the sample, not the total population), we have for planning
purposes assumed that the total population will be reduced by an estimated number of properties that were not
owner occupied.
WFB-EL-00000109
hundred forty five to two hundred ninety five analysts, twenty four to twenty nine senior analysts, two
complaint operations managers, one complaint process manager, one complaint RFI manager, two RFI
analysts, one general analyst, , one information technology systems and analytics manager, two
management information analysts, one project managers, two trainers, and three information
technology support staff.
e. Quality Assurance and Validation
Promontory Director_will provide day-to-day management of the quality assurance
effort as the Quality Assurance Lead.
The Quality Assurance team will operate
independently from the primary file and complaint review teams in order to maintain
objectivity. In her role as Quality Assurance Lead ill report directly to_
Quality Assurance Analysts will be responsible for day-to-day independent review of sample
files and for executing the Quality Assurance program. In addition, the Quality Assurance Team
will have subject matter experts for certain topics, including financial injury, state laws, and
loan modification programs, to serve as resources for the Quality Assurance Team._will
be supported by one quality assurance operations supervisor, one general operations manager,
one project manager, one general operations support staff, seven subject matter experts, and
one quality assurance management information analyst.
connection with quality assurance and validation of the file review.
Table C-4
Quality Assurance Resource Planning for File Review: Key Working Assumptions
Item Assumption
Average file review time (manual review - full (a)-(h) review files) 8 hours
Average file review time (manual review - partial review files) 4 hours
Average file review time (system-based review) 3 hour
QA coverage of files with Levell exceptions
System break-in period 100%
Thereafter 10-15%
WFB-EL-00000110
QA coverage of files from new analysts who start after system break-in period 25%2
QA coverage of files without preliminary exceptions (all periods) 10-15%
Days to complete stage 1 file review 175
Exception clearing QA review hours/exception 2
Work days per week 5
Production hours per day 6.5
Team Lead/staff QA Reviewer ratio 1:10
Based on these assumptions, Promontory estimates that the Quality Assurance Team for the
file review will consist of approximately nineteen to twenty-three Analysts on average to
provide effective oversight of Levell Analysts, plus approximately two Team Leads. The Quality
Assurance Team will also include an average of eighteen Exceptions Quality Assurance analysts
to oversee the Exceptions Clearing Team. Promontory will adjust Quality Assurance staffing
levels based on actual experience and in light of refined expectations of Stage 2 and 3 sampling
volumes.
The Quality Assurance Team will also perform random sampling of the complaint review
process, including both out-of-scope or incomplete complaints as well as in-scope complaints
deemed "closed" (i.e., those determined to have had no adverse financial impact on
borrowers). Table C-5 shows the key working assumptions underlying Promontory's resource
planning in connection with quality assurance and validation of the complaint review.
Table C-5
Quality Assurance Resource Planning for Complaint Review: Key Working Assumptions
Number of in-scope complaints deemed non-injury 152,074
Review time per in-scope complaint deemed non-injury, loss mitigation-related 90 minutes
Review time per in-scope complaint deemed non-injury other-related 30 minutes
QA coverage of complaints 10-15 %
2 Based on our time trials, we project that a new analyst will process up to eight files in the first two weeks of
hiring.
WFB-EL-00000111
Work days per week
5
Production hours per day 6.5
Based on these assumptions, Promontory estimates that the Quality Assurance Team for the
complaint review will require thirty-five to forty Analysts and seven to nine Team Leads on
average.
The Quality Assurance Lead will review and make hiring decisions for all candidates for Quality
Assurance positions. Key qualifications for the Quality Assurance Analyst position will include
several years of experience in foreclosure operations, quality control departments, mortgage
servicing, or paralegal experience in foreclosure law.
f. Training
i. File Review
Promontory will provide training to all personnel performing file review services in the course
of this project. Required training topics will include foreclosure timelines, loss mitigation, loan
modification, servicers' responsibilities, fees/penalties, investor rules, and state specific
foreclosure rules. The training sessions will include several interactive actual foreclosure case
studies. In addition to this pre-deployment training, Foreclosure Review personnel will receive
on-going training and feedback as issues or feedback needs arise in the course of the review.
ii. Quality Assurance
All Quality Assurance Team members will receive one week of training and orientation, focusing
on: (i) types of loan documents reviewed; (ii) the organization and indexing of those
documents created by Promontory/Allonhill, and the use of the document organization in the
Quality Assurance process; (iii) the functionality and analytical capability of the Foreclosure
Review System; and (iv) Quality Assurance objectives and protocols, including Quality Assurance
documentation, reporting, and feedback requirements. The training will also encompass case
studies and practice Quality Assurance sessions.
3. Information Systems
Promontory has subcontracted to Allonhill for development of the
a semi-automated case management system for the performance of foreclosure review services
consistent with the requirements of Article VII of the Consent Order. Based on a proprietary
system developed by Allonhill for use in mortgage file review, the
has the ability to automatically load data in virtually any format and from multiple sources;
WFB-EL-00000112
apply encoded test rules drawn from legal and other research to file data input by analysts;
support file analyses by multiple parties including analysts, senior analysts, and quality
assurance personnel; and provide flexible, customizable reports.
For the performance of the Foreclosure Review, Promontory and Allonhill will operate and
maintain a secure office suite and fulfillment center, technical infrastructure, and co-location
facility, in _ Promontory will also operate a secure office suite with technical
infrastructure in_ In addition, Allonhill maintains a warm, redundant site in_
Both with the data and in the physical environment, Promontory and its subcontractors will
practice in-depth, multi-layered security. Office security will be managed through a
combination of surveillance, keycards, and other controls designed to protect the environment.
The computer and network monitoring systems are both rule and heuristic based to ensure
maximum efficiency. Data at rest or in motion are encrypted by a variety of approved
methods. The_virtualization product is used to logically separate the data at the
virtualization layer; this, along with th for data protection, lends
additional security to the data in transit and at rest.
4. Contingency Plans for Analyst Recruitment
Promontory has entered into an agreement with Robert Half, pursuant to which it expects to
rely on Robert Half for assistance in sourcing the majority of senior analyst and analyst roles.
Working with Robert Half, Promontory has completed the on-boarding of its initial File Review
and Quality Assurance Teams in_where its subcontractor, Allonhill,
Promontory believes it can continue to meet the file review staffing needs of this assignment
sourcing senior analyst and analyst roles primarily within the_metropolitan area.
Notwithstanding its generally successful experience to date, Promontory has for several
reasons recently concluded that it should open additional temporary facilities in other
metropolitan areas. First, Promontory has recognized for some time that future developments
have potential to significantly increase its project staffing needs. For example, the OCC could
require substantial increases in our proposed initial sample or results of initial sampling could
indicate needs for more extensive file review than currently contemplated. In addition, recent
clarifications of the OCC's expectations regarding the independent complaint process and
Promontory's working assumptions in regard to complaint volume have significantly increased
the number of project resources we estimate this project will require.
Accordingly, in May 2011, Promontory recently requested and received from Robert Half an
analysis of relevant labor market depth in several metropolitan areas and, on the strength of
that analysis, determined to open additional temporary facilities in
Promontory has subsequently identified an appropriate facility for lease and, through Robert
WFB-EL-00000113
Half, has begun sourcing candidates for analyst and senior analyst roles. The ability to source
additional resources in a comparatively deep labor market such a provides
Promontory with a strong contingency plan in the event that the scale of file review needs in
connection with this project significantly exceeds current estimates. In the unanticipated event
that the market proves insufficient for our needs, Robert Half has identified
metropolitan_as another labor market with a deep pool of labor appropriately skilled to
assist in execution of the Foreclosure Review. Promontory is currently taking no steps to
identify or open additional project facilities in metropolitan_
Promontory has also entered into agreements with both Grant Thornton and PwC for the
specific purpose of having contingent access to large bodies of additional human resources.
Although we do not currently envision sourcing project resources from either Grant Thornton
or PwC, these firms are also available to us, subject to OCC review of any potential
independence concerns, should the need arise.
5. External Resources and Sourcing
Promontory maintains substantial in-house expertise on most aspects of financial services
compliance, including in the mortgage field. Promontory has been engaged by multiple clients
to perform a variety of advisory services relating to the Consent Orders and related orders of
the same date issued by the Federal Reserve Board of Governors. To ensure it has adequate
resources to staff these engagements simultaneously, Promontory has retained knowledgeable
subcontractors, such as Allonhill, and made contingency arrangements with other providers,
such as Grant Thornton and PwC, and with finder services, such as Robert Half International (
"Robert Half") and Solomon Edwards Group.
The timing, scope, and specific needs of the Foreclosure Review could, however, require
Promontory to supplement its resources with additional subject-matter experts. For example,
Promontory expects that the Foreclosure Review may require it to supplement its own
resources with legal expertise specifically knowledgeable about applicable law in particular
jurisdictions from time to time in the course of conducting this review. Promontory expects to
meet this need relying on its extensive network of associations throughout the financial
services, regulatory, and legal fields to obtain them. In addition, Promontory has contracted
with Hudson Cook, LLP to provide additional expertise in state-by-state application of mortgage
law and with McDermott Will & Emery, LLP to provide additional expertise in connection with
bankruptcy and foreclosure law, and, in consultation with the OCC, is in the process of
contracting with additional law firms as sources of contingent legal assistance in the event that
Hudson Cook's resources prove insufficient. Promontory will require every attorney or firm who
may be retained for the provision of such advice to advise Promontory of any actual or
potential conflicts of interest. Promontory will advise and consult with Wells Fargo regarding
WFB-EL-00000114
its selections of such attorneys and firms, but Promontory, in its independent capacity and in
consultation with the acc regarding any actual or potential conflicts, will make the final
decision.
WFB-EL-00000115
WFBEL00000116 0120
REDACTED COMPLETELY
Promontory may adjust the composition of its teams from time to time in response to client
needs and logistical considerations.
WFB-EL-00000121
Attachment D
Fees
This Attachment describes the fees Promontory expects to charge Wells Fargo for services performed
under this Agreement. Wells Fargo will compensate Promontory as follows:
i. Management Fee. For general management of all services provided under this
Agreement, management and leadership of each major workstream (file review,
statistical analysis, quality assurance, complaints), interviews of, liaison with and periodic
and ad hoc reporting to and consultations with members of Wells Fargo's senior
management and directors and representatives of the acc, adjustment and refinement
of project planning as circumstances may require, recruitment and oversight of qualified
human resources, provision of IT support and ongoing enhancement of the case
management system, and similar services, a monthly fee throughout the term of this
engagement based on the quantity and mix of Promontory professionals and contractors
devoted to the performance ofthese services. As further detailed in Attachment B,
Promontory currently envisions supporting this engagement with a management team
comprising 18 full-time equivalents ("FTEsJl) on average over the course of the
engagement. At an anticipated blended rate of_per hour, Promontory
estimates its fees for management of this engagement as likely to fall in the range of_
per month.
ii. Quality Assurance Fee. For quality assurance review of exceptions at all levels of
foreclosure file and complaint review, validation of system performance and system
enhancements, and testing and validation of Wells Fargo's application of exclusion rules
to ensure that relevant complaints route appropriately through the Foreclosure
Complaint Process, an amount based on the quality and mix of Promontory professionals
and contractors devoted to the performance ofthese services. As further detailed in
Attachment B, and based on the working assumptions set forth therein, Promontory
currently envisions that performance of necessary quality assurance services at a high
standard of professionalism will require it to field a Quality Assurance team comprising
approximately 80 to 115 FTEs on average over the course of the engagement with
significant subject matter expertise. At an anticipated blended rate per
hour, Promontory estimates that its fees for ual
engagement are likely to fall in the range per month.
iii. File Review Fee. For the services of analysts, senior analysts, team leads and mid-level
management retained by Promontory to perform Levell file review services, request for
information team services and exception clearing team services as described in
Attachment A, Promontory will charge Wells Fargo an amount based on the number of
professionals required to perform such services, the cost to Promontory of retaining such
professionals, associated overhead costs to Promontory, and a profit margin. As further
WFB-EL-00000122
Wells Fargo Foreclosure Review Engagement Letter: Attachment 0
detailed in Attachment B, and based on the working assumptions set forth therein,
Promontory envisions that performance of necessary file review services at a high
standard of professionalism will require it to field a file review team of analysts and
senior analysts with appropriate exposure to mortgage servicing or other useful
professional or educational backgrounds comprising approximately 285 to 335 FTEs on
average over the cou rse of the engagement. At an anticipated blended rate of _
_ per hour, Promontory estimates that its fees for file review are likely to fall in the
range of er month.
iv. Complaint Review Fee. For 100% review and disposition of complaints submitted
through the Foreclosure Complaint Process, an amount based on the number of
professionals required to perform such services, the cost to Promontory of retaining such
professionals, associated overhead costs to Promontory, and a profit margin. As further
detailed in Attachment B, and based on the working assumptions set forth therein,
Promontory envisions that performance of necessary complaint review services will
require it to field a complaint review team of analysts and professionals with appropriate
experience and subject matter expertise comprising approximately 300 to 345 FTEs on
average over the cou rse of the engagement. At an anticipated blended rate of_
.per hour, Promontory estimates that its fees for complaint review services are likely
to fall in the range of per month.
v. Report Preparation Fee. For analysis of Foreclosure Review data, preparation and
quality review of the Foreclosure Review report, a single fee based on the mix and
amount of professional time required to prepare the report to a high standard of
professionalism, and review it for factual accuracy and tone. Based on its experience
preparing similar reports, Promontory estimates this fee as likely to fall in a range of
The parties acknowledge that Promontory has based the estimates provided herein upon working
assumptions that may prove inaccurate in practice. Regulatory direction or the results of file review
could require large adjustments in the number, qualifications, and cost of resources Promontory must
devote to one or more of the types of services described above. In the event that Promontory's
resource needs prove substantially larger than currently anticipated, such that Promontory must resort
to one or more of the Contingency Plans for sourcing additional resources, as described in Attachment
C, Promontory's hourly costs, especially for file review services, could rise above the levels estimated
herein.
Promontory wishes to be able to provide Wells Fargo with greater certainty concerning the ultimate cost
of this project, especially in relation to file review services. Promontory expects to be in a position to
project those costs more precisely, on a per file basis, within several weeks following the
commencement of file review services, and will work with management to refine the estimates provided
herein at that time.
WFB-EL-00000123
Wells Fargo Foreclosure Review Engagement Letter: Attachment 0
As further detailed in Section 3.k.iv.3 of the Engagement Letter, Wells Fargo also agrees to reimburse
Promontory for all reasonable out-of-pocket expenses incurred in the course of providing professional
services under this Agreement, such as travel, telephone, lodging expenses, etc. In the event that
Promontory retains counsel to perform necessary legal research or to provide legal advice in connection
with the evaluation of file review exceptions or complaints, Wells Fargo will reimburse Promontory for
the associated costs; provided, however, that Promontory will not apply a markup to such costs and,
prior to retaining counsel, will consult with Wells Fargo regarding both the need to retain counsel and
the qualifications of counsel selected.
WFB-EL-00000124
Attachment E
Project Plan
This Attachment provides a high-level Foreclosure Review Project Plan. The Parties intend this Plan to
be a working document, subject to periodic revision upon mutual agreement of the Parties throughout
the performance of services pursuant to this Agreement.
Confidential
"Not Started" Activity not begun
"In Process" Activity begun and not Completed
"Completed" Activity is Completed
"OnGoing" in the "In
Process" and is of Execution
"Behind Sch." Activity is in ISSUE status
Activity
1.2 Set meeting schedules
1.3 Establish management oversight
structure
1.4 Establish reporting on progress/issues to
workstream leads
loS Draft project plan for the Planning Phase
1.6 Review project plan for the Planning
Phase
1.7 Finalize project plan for the Planning
Phase
2.2 Research background data
(a) Produce management reports on loan
data/s ntation
(b) Produce information on prior reviews
(internal and external)
2.3 Research Wells Fargo system capability to
segment/tabulate data
2.4 Develop sampling criteria
2.S Determine acceptable error rate
WF PFG AH Status
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Estimated Completion
Date
WFB-EL-00000125
Wells Fargo Foreclosure Review Engagement Letter: Attachment E
(a) Conduct informal research (industry best Completed
practices & OCC/Fed guidance)
(b) Develop options for error tolerance rate Completed
(c) to management and Completed
2.6 Design sample selections On Going
(a) Initiate initial sampling Completed
(b) Analyze stage one results and provide Not 1/16/2012
stage two sampling Started
(c) Data validation In Process 10/1/2011
2.7 Develop Review Methodology consistent On Going
with Article VII, Section 3 of the Order
(a) Determine information systems and Completed
documents to be reviewed
(b) Develop selection criteria for cases Completed
(mortgage files) to be reviewed
(c) Develop File Review procedure On Going
(d) Develop Complaint Review procedure On Going
(e) Develop QA Review procedure On Going
2.8 Draft File Review methodology and Completed
submit as attachment to required OCC
Engagement letter for conditional
approval
2.9 Draft End to End File Review procedure In Process 8/31/2011
and submit as attachment to required
OCC Engagement letter for final approval
3.1 Identify and retain state counsel in all 50 Completed
states
3.2 Obtain 54-jurisdiction survey from state Completed
counsel
3.3 Obtain 54-jurisdiction survey for look Completed
back riod
3.4 Assess sufficiency of 54-jurisdiction Completed
surveys against Order requirements
3.5 Compile federal survey Completed
(a) Identify and obtain legal resources Completed
(b) Identify federal standards Completed
WFB-EL-00000126
3.6
3.7
3.8
3.9
4.1
4.2
4.3
4.4
4.5
4.6
4.7
5.1
(a)
(b)
August 31, 2011
Develop inventory for legal documents
Prioritize states and respective legal
standards for coding Foreclosure Review
process
Assemble all legal standards for business
rule writers
Deliver federal and state legal business
rules to IT development team
Identify relevant electronic information
and servicing platforms for the Wells
Fargo set of portfolios for File Review; (i)
Pick-a-Pay portfolio, (ii) Home Mortgage
portfolio, (iii) Home Equity portfolio and
(iv) WFF portfolio.
Develop methodology for receiving
electronic files from Wells Fargo in
respective portfolio
Index imaged files
Review electronic files to determine data
elements & format
Upload initial batch of electronic Review
Files
Conduct QC review of initial batch of
electronic Review Files
Conduct QC review of sample files
Review electronic file formats for capture
of penalty and fee data
Identify gaps/data issues and determine if
supplemental electronic or hard copy
information is required
Request supplemental information in
necessary format
Completed
Completed
Completed
In Process 12/13/2011
Completed
Completed
Completed
Completed
Completed
Completed
On Going
Completed
Completed
Completed
Page 3
WFB-EL-00000127
5.2 Determine permissible penalties/fees and In Process 10/17/2011
penalty/fee frequency for each State for
each product inclusive of any changes
during the timeframe as identified in the
Order
(a) Identify and obtain legal counsel for Completed
determining State permissible
penalties/fees and frequency of
penalties/fees
(b) Develop state fee matrices Completed
(c) Develop business rules to convert In Process 10/1/2011
permissible penalties/fees and penalty/fee
frequency for each State into system
coding
(d) Validate business rules In Process 10/17/2011
5.3 Determine permissible penalties/fees and Completed
penalty/fee frequency for applicable
Federal law for each product inclusive of
any changes during the timeframe as
identified in the Order
(a) Research applicable Federal law limits Completed
(b) Develop business rules to convert Completed
permissible penalties/fees and penalty/fee
frequency for Federal law limits into
system coding
(c) Validate business rules Completed
5.4 Determine permissible penalties/fees and Completed
penalty/fee frequency for applicable
mortgage instruments for each product
inclusive of any changes during the
timeframe as identified in the Order
(a) Develop business rules to test for Completed
permissibility of mortgage instrument
penalties/fees limits
(b) Validate business rules Completed
5.5 Determine all customary penalties/fees In Process 10/18/2011
and penalty/fee frequency including
those for GSEs, FHA, VA, and USDA for
each product inclusive of any changes
during the timeframe as identified in the
Order
(a) Research applicable investor guide fee Completed
standards
WFB-EL-00000128
(b) Develop customary fee matrices Completed
(c) Develop business rules to convert In Process 10/11/2011
customary GSEs, FHA, VA, USDA for each
product penalties/fees and penalty/fee
frequency into system coding
(d) Validate business rules Not started
5.6 Determine actions that impact In Process 9/18/2011
reasonableness of fees and penalties and
develop criteria for system coding
(a) Synthesize and deliver all additional Completed
actions that impact reasonableness
criteria for system coding
(b) Develop business rules to convert the In Process 9/13/2011
impact of reasonableness into system
coding
(c) Validate business rules Not started
6.1 Incorporate final guidance into In Process TBD
methodology
(a) Determine and record Loan Modification In Process TBD
actions that impact fees and penalty
assessment
(b) Determine and record other bank actions In Process TBD
that impact fee and penalty assessment
6.2 Determine additional actions that may On Going
result in financial harm
(a) Identify and record errors resulting in On Going
financial harm
(b) Identify and record misrepresentation On Going
resulting in financial harm
(c) Identify and record other deficiencies On Going
resulting in harm
(d) Synthesize and deliver all additional On Going
actions criteria for system coding
(e) Develop protocol to convert financial In Process TBD
injury criteria into system coding.
WFB-EL-00000129
7.1 Define loss mitigation review process 11/2/2011
(a) Define Manual versus System Components In Process 11/2/2011
of loss mitigation review
(b) Develop loss mitigation review policies In Process 10/17/2011
(c) Develop loss mitigation review process In Process 10/17/2011
flow
(d) Procure all tools, models, and calculators In Process 10/6/2011
for loss mitigation review
(e) Develop loss mitigation desktop In Process 11/2/2011
procedures and desktop aids for loss
mitigation review
7.2 Develop P&P loss/mitigation work flow In Process 10/24/2011
7.3 Develop HAMP Business Rules In Process 9/6/2011
(a) Define Current HAMP Business Rules Completed 8/15/2011
(b) Define Historical HAMP Business Rules Completed 8/18/2011
with Dates
(c) Insert Date Ranges into Business Rules Completed 8/19/2011
(e) Internally Validate HAMP business rules Not 9/12/2011
and deliver to IT Started
7.4 Develop Proprietary and Non-HAMP In Process 10/24/2011
Program Business Rules
(a) Define Current Proprietary and Non-HAMP In Process 9/30/2001
Business Rules
(b) Define Historical Business Rules with Dates In Process 10/6/2001
(c) Insert Date Ranges into Business Rules Not 10/13/2011
Started
(e) Internally Validate Proprietary & Non- Not 10/25/2011
HAMP Business Rules & Deliver to IT Started
8.2 Define RFI/EC Scope Completed
(a) Draft RFI/EC Policies and Procedures In Process 9/2/2011
(b) Finalize RFI/EC Policies and Procedures In Process 9/9/2011
8.3 Develop process for initial file receipt, Completed
including trailing documents
8.4 Finalize interim manual process Completed
8.5 Determine system solutions for missing In Process 9/9/2011
document and exceptions clearing flow
between WF, AH, and PFG
WFB-EL-00000130
8.6 Develop and implement system solutions In Process 10/31/2011
for missing document and exceptions
clearing flow between WF, AH, and PFG
8.7 Develop functionality for process In Process 9/30/2011
monitoring and status reporting from FRS,
Pipeline, other sources
8.8 Finalize interim manual reporting Completed
solution: excel extract reporting
8.9 Creation of Audit Trail Completed
(a) Create back-up PFG server and bring it Completed
online
(b) Initiate PFG direct downloads Completed
(c) Transfer WF historical documents from AH Completed
shared drive to PFG back-up server
8.10 Creation of unified database In Process 9/30/2011
(a) Acquisition of hardware Completed
(b) Creation of front-end user interface and In Process 9/30/2011
reporting
9.2 Develop QA methodology In Process 9/23/2011
(a) Develop and draft sampling protocol Completed
utilizing guidance as provided by the acc
(b) Develop QA methodology for system- Completed
based review
(c) Develop QA process for manual review in In Process 9/9/2011
testing phase
(d) Implement interim QA tools (QA Screen- In Process 9/6/2011
Access)
(e) Finalize QA process for manual review In Process 9/23/2011
(f) Develop and draft OA process flows for In Process 9/16/2011
exception OA
9.3 Identify additional QA location In Process 9/15/2011
9.4 Recruit QA resources and train across all In Process 12/15/2011
locations
9.5 Establish Reporting Requirements Completed
WFB-EL-00000131
9.6
10.1
(a)
(b)
10.2
10.3
10.4
11.1
11.2
11.3
11.4
11.S
11.6
11.7
11.8
11.9
August 31, 2011
Implement interim QA reporting
requirements (Access)
Identify resources necessary to execute
File Review
Develop hardware and software
requirements for logistics and resources.
Estimate staffing resource needs for File
Review, Complaints & QA processes
Acquire Property
Acquire Personnel
Acquire Hardware and Software
Identify and make changes to
configuration that are necessary to
address client specific characteristics of
electronic and hard copy data
Identify, prioritize and make changes to
address identified legal standards.
Identify, prioritize and make changes to
address the financial injury and
reasonable of fees and penalties issue
Develop business logic
Develop Code
System Test
UATTest
Revise Code as required
Sign Off on System Configuration
Completed
Completed
Completed
Completed
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Page 8
WFB-EL-00000132
12.1 Determine form and content of Completed
engagement letter
12.2 Determine form and content of key Completed
attachments
(a) Description of information systems and Completed
documents to be reviewed
(b) Selection criteria for cases Completed
(c) Criteria for evaluating reasonableness of Completed
fees and penalties
(d) Other procedures necessary to make Completed
required determinations
(e) Sampling techniques (initial and additional Completed
sampling)
(f) Restitution criteria and process Completed
(g) Expertise and resources Completed
(h) Other provisions mandated by Article VII Completed
(see Order provisions 2(c) & 2(d))
12.3 Prepare initial draft letter and Completed
attachments
12.4 Obtain WF feedback Completed
12.5 Prepare revised draft engagement letter Completed
and attachments
12.6 Obtain WF feedback on revised Completed
documents
12.7 Prepare final draft engagement letter and Completed
attachments
12.8 Submit final engagement letter for OCC Completed
review
WFB-EL-00000133
Attachment F
Security and Access Provisions
1. System/Facilities Access.
Vendor will execute all documents required by Wells Fargo for access to Wells Fargo's computing
environment or other restricted access area. Except as may be specifically set forth in a Statement of
Work, Vendor represents and warrants that: (1) it will not alter or disable any hardware or software
security programs residing on Wells Fargo's hardware or systems, or (2) allow unauthorized traffic to
pass as a result of its access into Wells Fargo's networks. If Vendor does allow unauthorized traffic to
pass into Wells Fargo's networks, Wells Fargo may immediately terminate this access. Further, if any
individual, at any time during the life of this Agreement, is granted remote access to Wells Fargo's
network, or is telecommuting in any capacity, then such person will be subject to additional Wells
Fargo data security requirements, which additional requirements Wells Fargo will provide in writing
to Vendor. Upon receipt of such written requirements, Vendor shall have fifteen (15) business days
in which to review the same and if the subject individual cannot comply with such requirements"
then Vendor may notify Wells Fargo in writing and may substitute another individual, elect not to
authorize remote access or telecommuting or terminate this Agreement and the applicable SOW.
Vendor agrees that it will prohibit Vendor Personnel from possessing weapons or firearms of any
kind on Wells Fargo's premises.
2. Network Connections.
If a network connection is established between Wells Fargo and the computing environment(s) used
by Vendor to perform the Services, Vendor will ensure that (1) Wells Fargo is permitted to perform
network assessments of such computing environment(s) based on a mutually-agreed schedule, and
(2) Vendor maintains an alert status regarding the security of such computing environments,
including all vulnerabilities and security patches or corrective actions, by subscribing to an industry
recognized service, such as CERT or CIAC. Further, Vendor will permit Wells Fargo to conduct
appropriately-scoped penetration testing on a schedule mutually agreeable to the Parties, or will
furnish Wells Fargo with independent auditor reports of such testing of its systems, which testing
must occur on at least an annual basis. Vendor understands that, should a Wells Fargo assessment
or determination reveal inappropriate or inadequate security based on the pre-defined requirements
for security, Wells Fargo may, in addition to other remedies it may have, remove access by Vendor
Personnel to the Wells Fargo network until Vendor satisfactorily complies with the applicable
security requirements.
3. Data Safeguards.
Vendor maintains commercially reasonable safeguards against the destruction, loss, alteration of or
unauthorized access to its clients' confidential information, including, without limitation, Wells
Fargo's Confidential Information in the possession of Vendor Personnel, which safeguards include
policies for the disposal/destruction of any such data that are commensurate with the sensitivity of
the materials to be disposed, but are otherwise in accordance with the terms of this Agreement
regarding the return and/or destruction of Wells Fargo's Confidential Information.
4. Encryption. Pursuant to the terms of Section VIII.B.3 (Encryption).
WFB-EL-00000134
Wells Fargo Foreclosure Review Engagement Letter: Attachment F
5. Vendor and Wells Fargo Equipment.
If Vendor connects to any Wells Fargo network, Wells Fargo has the option of providing Vendor with
Wells Fargo owned or leased computer equipment and software ("Wells Fargo Equipment"). The
Wells Fargo Equipment is and will remain the property of Wells Fargo, and Vendor has no right, title,
or interest in the Wells Fargo Equipment. Further, if Vendor Personnel are given access to any Wells
Fargo physical location, computing equipment, applications (e.g., e-mail, word processing,
spreadsheet, presentation, database software, etc.), or the Wells Fargo computer network, whether
using Wells Fargo Equipment or using its own equipment, (a) Vendor will require Vendor Personnel
comply with Wells Fargo's policies and procedures communicated in writing for such use and access
(i.e., mobile devices require hard-disk encryption, such as PointSec), (b) such equipment will only be
used as necessary to perform the Services. Vendor-supplied equipment must meet the specifications
of Wells Fargo as defined in the applicable Statement of Work. The equipment supplied by Vendor is
and will remain the property of Vendor and Wells Fargo has no right, title or interest in the
equipment supplied by Vendor. Vendor will immediately return to Wells Fargo any Wells Fargo
Equipment provided to Vendor when the Agreement, or the applicable Statement of Work,
terminates.
8. Vendor Personnel.
All references to Vendor in this Exhibit 2 apply with equal force to all categories of Vendor Personnel
that Vendor uses in the performance of Services.
WFB-EL-00000135
Attachment G
Out of Pocket Expenses Reimbursement Policy
Out-of-pocket expenses incurred in connection with this Agreement will be subject to the following:
A. Vendor will invoice fees for out-of-pocket expenses to Wells Fargo on a monthly basis.
B. Itemization and receipts are required for all expenses.
C. Travel time is not billable.
D. Wells Fargo may require Vendor personnel to use lodging and travel arranged through Wells
Fargo's offices. Out-of-pocket expenses must be approved in advance by Wells Fargo, and the
following guidelines apply to these types of expenses:
1. Lodging. For less than one month, a single hotel/motel room at prevailing commercial rates
within a reasonable distance from job location.
2. Meals. At actual cost (in accordance with applicable IRS guidelines, determined by
geography).
3. Airline Fares. At actual cost for commercial coach or economy class (with copy of airline
ticket).
4. Ground Transportation. In accordance with applicable IRS guidelines. Commercial shuttle
services or hotel transportation to and from the airport should be used whenever practicable.
Taxi service should only be used if such transportation is not available, or in emergency
situations.
5. Auto Rental. Auto rental should only be used with Wells Fargo's prior approval, and should
be at actual cost for commercial standard size automobile, including operating expenses, if
any.
6. Parking Fees. Auto parking for site visits, attendance at meetings and parking associated with
lodging.
7. Tolls. Fees paid for bridge, highway and other public or private tolls.
8. Duplicating and other Document Production Charges.
9. Delivery Charges. Charges for mail, messenger/courier and overnight delivery.
WFB-EL-00000136
Attachment H
Dispute Resolution Procedures
The steps for Dispute Resolution are set forth below:
1. The complaining Party's representative will notify the other Party's representative in writing of
the Dispute, and the non-complaining Party will exercise good faith efforts to resolve the matter
as expeditiously as possible.
2. In the event that such matter remains unresolved ten (10) days after the delivery of the
complaining Party's written notice, a senior representative of each Party will meet or participate
in a telephone conference call within five (5) business days of a request for such a meeting or
conference call by either Party to resolve the Dispute.
3. In the event that the meeting or conference call specified in 2 above does not resolve the
Dispute, the President, Chief Operating Officer or Senior Vice President of each Party will meet or
participate in a telephone conference call within five (5) business days of the request for such a
meeting or conference call by either Party to discuss a mutually satisfactory resolution of the
Dispute.
4. If the Parties are unable to reach a resolution of the Dispute after following the above procedure,
any Dispute will be resolved by binding arbitration in accordance with the terms of this Exhibit 4,
except as otherwise set forth below. Any Party who fails or refuses to submit to arbitration
following a lawful demand by any other Party will bear all costs and expenses incurred by such
other Party in compelling arbitration of any Dispute.
5. Governing Rules. Arbitration proceedings will be administered by the American Arbitration
Association ("AAAJI) or such other administrator, as the Parties will mutually agree upon.
Arbitration will be conducted in accordance with the AAA Commercial Arbitration Rules. If there
is any inconsistency between the terms hereof and any such rules, the terms and procedures set
forth herein will control. All Disputes submitted to arbitration will be resolved in accordance
with the Federal Arbitration Act (Title 9 of the United States Code). The arbitration will be
conducted at a location in California selected by the AAA or other administrator. All statutes of
limitation applicable to any Dispute will apply to any arbitration proceeding in accordance with
choice of law under Section XIV.I (Governing Law). The parties may undertake such discovery as
may be approved by the arbitration panel. Judgment upon any award rendered in an arbitration
may be entered in any court having jurisdiction; provided however, that nothing contained
herein will be deemed to be a waiver, by any Party that is a bank, of the protections afforded to
it under 12 U.s.c. 91 or any similar applicable state law.
6. No Waiver; Provisional Remedies. No provision hereof will limit the right of any Party to obtain
provisional or ancillary remedies, including injunctive or other equitable relief, attachment or the
appointment of a receiver, from a court of competent jurisdiction before, after or during the
pendency of any arbitration or other proceeding. The exercise of any such remedy will not waive
the right of any Party to compel arbitration or reference hereunder.
7. Arbitrator Qualifications and Powers; Awards. Arbitrators must be active members of the State
Bar in the state in which the arbitration is held or retired judges of the state or federal judiciary
of the state in which the arbitration is held, with expertise in the substantive laws applicable to
the subject matter of the Dispute. Arbitrators are empowered to resolve Disputes by summary
rulings in response to motions filed prior to the final arbitration hearing. Arbitrators (a) will
WFB-EL-00000137
Wells Fargo Foreclosure Review Engagement Letter: Attachment H
resolve all Disputes in accordance with Governing Law, (b) may grant any remedy or reliefthat a
court of the state in which the arbitration is held could order or grant within the scope hereof
and such ancillary relief as is necessary to make effective any award, and (c) will have the power
to award recovery of all costs and fees, to impose sanctions and to take such other actions as
they deem necessary to the same extent a judge could pursuant to the Federal Rules of Civil
Procedure, the Rule of Civil Procedure in the state in which the arbitration is held or other
applicable law. Any Dispute in which the amount in controversy is $5,000,000 or less will be
decided by a single arbitrator who will not render an award of greater than $5,000,000 (including
damages, costs, fees and expenses). By submission to a single arbitrator, each Party expressly
waives any right or claim to recover more than $5,000,000. Any Dispute in which the amount in
controversy exceeds $5,000,000 will be decided by majority vote of a panel of three arbitrators.
8. Judicial Review. The Parties will have in addition to the grounds referred to in the Federal
Arbitration Act for vacating, modifying or correcting an award (provided that any such
modification shall not exceed the negotiated limitation of liability set forth in this Agreement),
the right to judicial review of (i) whether the findings of fact rendered by the arbitrators are
supported by substantial evidence, and (ii) whether the conclusions of law are erroneous under
Governing Law. Judgment confirming an award in such a proceeding may be entered in any
court of competent jurisdiction.
9. Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the Parties will
take all action required to conclude any arbitration proceeding within one hundred and eighty
(180) days of the filing of the Dispute with the AAA. No arbitrator or other Party to an arbitration
proceeding may disclose the existence, content or results thereof, except for disclosures of
information by a Party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights set forth herein. This
arbitration provision will survive termination, amendment or expiration of the Agreement or any
relationship between the Parties.
WFB-EL-00000138
Attachment I
Promontory's Conflicts of Interest Policy
WFB-EL-00000139
Wells Fargo Foreclosure Review Engagement Letter: Attachment I
WFB-EL-00000140
Wells Fargo Foreclosure Review Engagement Letter: Attachment I
WFB-EL-00000141

September 20,2011
The PNC Financial Services Group
Pittsburgh, PA 15222 ....
This letter sets forth the terms and conditions pursuant to which The PNC Financial
Services Group, Inc. and PNC Bank, National Association ("PNC") will retain Promontory
Financial Group, LLC ("Promontory") to perfol1n the services described below.
BACKGROUND
From October to December 2010, the banking agencies conducted an interagency
horizontal examination of residential mortgage foreclosure activities at residential mortgage
servicers, including PNC. Based upon those findings, the Office of Comptroller of the
Currency ("OCC") and the Board of Governors of the Federal Reserve System ("Federal
Reserve") issued Consent Orders dated April 13,2011 to PNC Bank and The PNC Financial
Services Group, Inc., respectively (referred to herein as the "occ Order" and the "Federal
Reserve Order").
SCOPE OF PROMONTORY SERVICES
Subject to OCC approval, Promontory proposes to perform the role of independent
consultant for the Foreclosure Review of certain residential foreclosure actions with respect to
PNC's mortgage servicing portfolio in accordance with Article VII of the OCC Order. The
objective of the review is to identify borrowers whose loans were serviced by PNC and who
suffered financial injury from errors, misrepresentations, or other deficiencies identified in the
review for pending or completed residential foreclosures in 2009 and 2010. The procedures for
achieving this objective are detailed in Attachment A, "Methodology and Workplan".
In accordance with the OCC Order Article VII (2)(d) all Promontory workpapers
associated with the Foreclosure Review will be made available to the OCC immediately upon
request.
INDEPENDENCE
Promontory has been retained to conduct an independent review of celiain residential
foreclosure actions regarding individual borrowers with respect to PNC's mortgage servicing
, hing(Dn, DC 20006 Telephone Fax
PNC-EL-00000001
n-...::::::::-

portfolio (the "Foreclosure Review"). Promontory agrees that the Foreclosure Review will
comply with all requirements set forth in Article VII of the OCC Order and that it will conduct
the Foreclosure Review as separate and independent from any review, study, or other work
performed by PNC or its contractors or agents with respect to PNC's mortgage servicing
p0l1folio or PNC's compliance with other requirements of the OCC Order, as set forth below:
1. Conduct of the Foreclosure Review by Promontory shall not be subject to
direction, control, supervision, oversight, or influence by PNC, its contractors or agents.
Promontory shall immediately notify the OCC of any effort by PNC, directly or indirectly, to
exert any such direction, control, supervision, oversight, or influence over the Independent
Consultant, its contractors or agents.
2. Promontory agrees that it is solely responsible for the conduct and results of the
Foreclosure Review, in accordance with the requirements of A11icle VII of the oce Order.
3. The conduct ofthe Foreclosure Review shall be subject to the monitoring,
oversight, and direction of the OCe. Promontory agrees to promptly comply with all written
comments, directions, and instructions of the OCC concerning the conduct of the Foreclosure
Review, and that it will promptly provide any documents, workpapers, materials or other
information requested by the OCC, regardless of any claim of privilege or confidentiality.
Additionally, for the purpose of conducting the Article VII Foreclosure Review, Promontory
and their Independent Legal Counsel agree to adhere to and apply guidance issued by the OCC
subsequent to any conditional or final approval of this engagement letter, including but not
limited to, the application of OCC guidance concerning the definition of "financial injury" (see
Exhibit 1 to Attachment A, supra, of this letter).
4. Promontory agrees to provide regular progress reports, updates and information
concerning the conduct of the Foreclosure Review to the OCC, as directed by the OCe.
5. Promontory will conduct the Foreclosure Review using only personnel employed
or retained by Promontory to perform the work required to complete the Foreclosure Review.
Promontory shall not employ or use services provided by PNC employees, or contractors or
agents retained by PNC with respect to the OCC Order or with respect to matters addressed in
the OCC Order, in order to conduct the Foreclosure Review, except where the OCC
specifically provides prior written approval to do so.
6. Subject to the requirements and restrictions of no. 5 above, including the
requirement of specific approval by the oce, Promontory may utilize documents, materials or
other information provided by PNC, and may communicate with PNC, its contractors or
agents, in order to conduct the Foreclosure Review. For example, Promontory may
communicate with bank employees to obtain clerical assistance, to determine if information
provided is complete or accurate, to verify or confirm information concerning specific case
files, or to communicate with Bank employees regarding case files such that errors or
omissions may be brought to the Independent Consultant's attention; however, Bank employees
may not influence or attempt to influence determinations concerning the findings or
recommendations of the Independent Consultant, whether regarding specific case files,
categories of cases, or the Foreclosure Review more generally.
2
PNC-EL-00000002

7. Promontory agrees that any legal advice needed in conducting the Foreclosure
Review shall be obtained from the outside law firm whose retention for that purpose has been
approved by the acc. Promontory agrees not to obtain legal advice (or other professional
services) in conducting the Foreclosure Review from PNC's inside counsel, or from outside
counsel retained by PNC or its affiliates to provide legal advice concerning the acc Order or
matters contained in the acc Order.
8. PNC's agreement with Promontory must provide that if the ace determines, in its
sole discretion, that Promontory has not been fully compliant with the foregoing standards
(nos. 1-7, above), the aec may direct PNC to dismiss Promontory and retain a successor
consultant, in which case PNC shall have no further obligation to Promontory other than for
services performed up to that date for PNC.
Engagement Team
The management team for this engagement will consist of the following personnel:
3
PNC-EL-00000003
III

a mortgage servicing background,
are former federal regulators or have auditor/accounting backgrounds. We anticipate
using 40 primary reviewers to complete the engagement. The number of primary
reviewers could increase depending upon the response rate to the Complaint Process
outreach (see Attachment A) and the number of financial injury exceptions detected in
the Lookback review (see Attachment A) of the foreclosure actions. The primary
reviewers are independent consultants and some of these consultants have been
contracted through Hilltop Advisors LLC. All consultants will be under the direct
supervision of Promontory personnel and are required to sign a confidentiality and
conflict statement.
Go Law firm - We will work with the law firms of Hudson Cook, LLP, McDermott Will &
Emery LLP and Bingham McCutchen LLP ("Legal Advisors") during the course of
our engagement to assist us with legal advice and guidance on state and federal
foreclosure matters.
For the services described above, PNC agrees to compensate Promontory in accordance
with its customary billing practice for work of this type, which is receipt of a fee based on the
4
PNC-EL-00000004
resources we commit. Promontory's fees for the services outlined in the Scope of Promontory
Services section to be the Project Leaders and Senior
Technical Team the primary nce all of
these personnel are engaged our fees should over the ternl
of the engagement for the foreclosure file review and the complaint review subject to the
potential additional staffing requirements discussed above.' per month
during the planning phase of the engagement to approximate The
planning phase of the engagement will cover the following activities:
8 Coordination with PNC for necessary hardware, software, access to systems and
office accommodations.
II Attend all meetings, conference calls and provide information with and to the
OCC as to their requirements as to the conduct of the engagement as well as
what is to be covered in the engagement letter.
41 Develop engagement specific training modules for our primary reviewers and
Senior Technical Team.
e Develop engagement specific tracking and documentation system to capture the
results of detail testing for the file reviews and complaint process.
I) Develop the Complaint Process to be used by PNC during the engagement.
iii Develop engagement specific review program templates for each step of the
Foreclosure Review including file reviews and the Complaint Process.
CiI Develop sampling methodology and validate the foreclosure action in-scope
populations and sampling segments.
G Perform a dry run ofPNC's foreclosure systems by conducting tests of access,
loan documents and review of foreclosure decisions. This dry run will be
conducted over a two week period with six primary reviewers and the Senior
Technical team.
Develop summaries for the primary reviewers of the Hudson Cook law firm
state foreclosure law surveys.
Coordinating with PNC the use of the technology that will be used to document
all the records that will be reviewed for each borrower.
Promontory will make a good faith effort to complete the Foreclosure Review within
the time frames described in the OCC Order Article VII (2)(c) and (4) subject to any OCC
directed scope changes during the course of our review and the number of exceptions detected
that will necessitate expanded sampling or 100% reviews. Any extension oftime required to
complete the engagement will require approval from the Oce. Our fee estimate above does not
include any of the fees and expenses from the expected assistance to Promontory from the
Legal Advisors. In addition to our fees, we will bill PNC for all fees we incur from the Legal
5
PNC-EL-00000005

Advisors. Our fees are also premised on the expectation that PNC will provide Promontory
complete access to the foreclosure files for our review.
If we determine that our fees will exceed our proposed estimate, we will promptly
notify PNC and discuss the matter in advance. The parties agree to act in good faith to reach an
appropriate adjustment.
PNC further agrees to reimburse Promontory for all out-of-pocket expenses that we
reasonably incur in connection with the performance of the services under this Agreement,
such as travel, telephone, lodging expenses, etc.
In the event that the Scope should be revised by PNC or otherwise modified to include
services not outlined in the Scope of Promontory Services above, this Agreement will be
amended to reflect necessary changes to scope, timing, pricing and other applicable terms. The
parties agree to act in good faith to reach an appropriate amendment.
Promontory will submit separate monthly invoices for fees and expenses.
OTHER PROVISIONS
This engagement will be subject to the following additional terms and conditions:
Cooperation. PNC's cooperation with Promontory is essential to Promontory's ability
to fulfill its responsibilities under this engagement. In particular, Promontory will expect PNC
to make its officers, directors, and employees reasonably available to Promontory for
interviews, meetings, or discussions as requested by Promontory, and to provide Promontory
with timely access to documents and other records in PNC's possession or under its control
that Promontory may require to complete its work in a timely manner.
Confidentiality. Promontory and PNC Bank, National Association are subject to a
mutual confidentiality agreement, dated as of March 25, 2010, which terms and conditions
shall apply to this engagement. Promontory hereby agrees to abide by the terms of the March
25,2010 confidentiality agreement with respect to information or documents received from
The PNC Financial Services Group, Inc. as well. The provisions of the March 25,2010
confidentiality agreement, and all provisions relating to confidentiality in this agreement, shall
6
PNC-EL-00000006
D-..:::::::

survive any termination or expiration of this agreement. All Consultants, to the extent that they
have not previously executed a confidentiality agreement in connection with their work for
PNC, shall do so in a form satisfactory to PNC and Promontory before participating in this
engagement. Consultants who have previously executed a confidentiality agreement in
connection with work for PNC shall remain bound by that confidentiality agreement.
Promontory acknowledges that it may in the course of this engagement receive
information and materials from PNC and/or PNC's outside counsel that are protected from
disclosure by the attorney-client privilege or the attorney work product doctrine. Promontory
hereby agrees to keep all such information confidential, and acknowledges that PNC does not
intend to waive attorney-client privilege, the attorney work product doctrine, the self-test
privilege or any other applicable privilege or doctrine by the provision of such information to
Promontory. Promontory further acknowledges that PNC considers the information and
materials related to Promontory's review "information [submitted] to any Federal banking
agency" within the scope of 12 U.S.c. 1828(x).
Access to Confidential Supervisory Information. In the event that it becomes
necessary for Promontory to have access to confidential supervisory information, including
examination reports or management responses, in order to provide the services required for this
engagement, then, upon Promontory's request, PNC will use its reasonable efforts to obtain
any approvals from the relevant bank regulatory officials required for Promontory to review
and, upon receipt of such information, otherwise have access to such information and will
provide copies of these approvals to Promontory upon Promontory's request.
Bank Examination Material. PNC and Promontory acknowledge that the Foreclosure
Review is being conducted in connection with the supervision ofPNC by its bank regulators
and that the information and material related to the review shall be considered bank
examination material.
In accordance with regulations promulgated by the acc, Promontory hereby (a) states
its awareness of and agreement to abide by the prohibitions on dissemination of non-public
acc information contained in 12 C.P.R. 4.37(b)(1) and (b) agrees not to use the non-public
acc information for any purpose other than as provided under its contract to provide services
to PNC. In the event that Promontory shares any non-public acc information with a
consultant who is not an employee of Promontory, such a consultant must first have a written
agreement with PNC in which the consultant: (i) states its awareness of, and agreement to
abide by, the prohibition on the dissemination of non-public acc information set forth above;
and (ii) agrees not to use the non-public OCC infonnation for any purpose other than as
provided under its contract to provide services to PNC.
Promontory further commits that any workpapers associated with the Foreclosure
Review shall be made available to the OCC immediately upon request.
Not Law Firm. PNC acknowledges and agrees that Promontory is not a law firm and
that no part of the services to be performed pursuant to this Agreement shall constitute or is
intended to constitute legal advice or the rendering of legal services.
7
PNC-EL-00000007
{j--";::::::::

Standards. Promontory shall provide all services in accordance with this Agreement
and with a high degree of care and skill, utilizing its best professional judgment and
commercially reasonable and acceptable business practices. The services being performed
under this Agreement are not intended to, nor do they, constitute a promise or guarantee of a
particular outcome.
Acknowledgment. Promontory provides services to multiple clients within the
financial services industry. PNC acknowledges that these clients may be direct or indirect
competitors ofPNC (including major residential mortgage servicers subject to the interagency
horizontal examination) and that the services Promontory provides to such clients may be
similar to the services provided to PNC hereunder (including assistance with
actions based the of the' horizontal .
Notwithstanding the foregoing, PNC
consents to Promontory's work for such clients subject to the confidentiality obligations of the
Agreement and waives any actual, potential or perceived conflict of interest that may arise
from Promontory's work on this engagement.
Termination. Either party may terminate this Agreement at any time upon written
notice delivered to the other party; provided, however, that (i) PNC shall remain liable for fees
and expenses payable to Promontory in respect of this engagement and accrued through the
effective date of termination; (ii) termination of this Agreement will be without prejudice to
any legal rights or obligations that may already have arisen; and (iii) the intellectual property,
confidentia1ity, and limitation of liability and indemnification provisions of this Agreement
shall survive termination.
Please acknowledge your agreement by countersigning this Agreement and returning it
to me.
We look forward to working with you.
Sincerely yours,
Accept , Inc. and PNC Bank, N.A.
Name:
Title:
Date:
8
PNC-EL-00000008

Attachment A
Methodology and Workplan
Methodology and the oee Foreclosure Review Guidance
As required by Article VII (1) of the OCC Order, the Foreclosure Review will encompass
"residential foreclosure actions or proceedings (including foreclosures that were in process or
completed) for loans serviced by PNC Bank, National Association (hereafter "PNC Bank"),
whether brought in the name ofPNC Bank, the investor, the mortgage note holder, or any
agent for the mortgage note holder (including MERS), that have been pending at any time from
January 1,2009 to December 31,2010, as well as residential foreclosure sales that occurred
during this time period" (hereafter, "In-scope Proceedings.") In-scope Proceedings relate to
first liens secured by owner-occupied, one-four family dwellings serviced by PNC Bank that
process first lien mortgage foreclosures.
The objective of the review is to identify borrowers whose loans were serviced by PNC and
who suffered financial injuryl from errors, misrepresentations, or other deficiencies
2
identified
in the review for pending or completed residential foreclosures in 2009 and 2010. The
procedures for achieving this objective will consist of sampling of the population of certain
residential foreclosures and the analysis of such foreclosure actions and the documentation
thereof.
The methodology and workplan to be used is described in the following paragraphs. The OCC
Consent Order sets forth the areas that need to be covered, at a minimum, as part of the
Foreclosure Review. All loan files that are part of any sample population will be reviewed to
detennine the following (as more fully detailed in part 3.b of this Attachment):
a) whether the foreclosing party had properly documented ownership or was otherwise
a proper party to the action;
b) whether the foreclosure was in accordance with applicable state and federal law;
c) whether the foreclosure sale occurred when loan modification or other loss
mitigation request was under consideration, or when the loan was performing in
accordance with a trial or permanent loan modification, or when the loan had not
been in default for a sufficient period to authorize foreclosure;
d) for non-judicial foreclosures, whether the foreclosure sale and post-sale
confirmations were in accordance with the mortgage loan and state law
requirements;
e) whether a delinquent borrower's account was only charged fees/penalties
I See Exhibit 1 to Attachment A for the definition of financial injury.
2 The terms "errors, misrepresentations, or other deficiencies" means those matters discovered during the
Foreclosure Review as set forth in Article VII(3)(a)- (h) ofthe acC's Order. "Errors" includes miscalculation of
fees or other charges, where the net total aggregate miscalculated fees or charges applied to and paid by the
borrower exceeds $99.00.
9
PNC-EL-00000009

permissible under the terms of the loan, applicable state and federal law, and were
reasonable and customary;
f) whether the frequency of fees assessed was excessive under the terms of the loan or
applicable state and federal law;
g) whether HAMP and proprietary loss mitigation requirements were followed; and
h) whether any errors, misrepresentations, or other deficiencies identified in the review
resulted in financial injury to the borrower or mortgagee.
1. Scope of review
a. Portfolios
Based on interviews of PNC personnel and review of documents, including internal audit
reports, Promontory has determined that PNC has the following population of foreclosures to
be considered for testing:
Table A-I
IN-SCOPE PORTFOLIO
The combined total of 81,474 records represents the total population of foreclosure
proceedings completed or in process from January 1, 2009 to December 31, 2010 (the
"Foreclosure Period"). The 57,536 In Process foreclosures is composed of 29,573 actions
which were still in process as of the end of the Foreclosure Period and 27,963 which were
removed or suspended from foreclosure status prior to the end of the Foreclosure Period.
h. Information Systems and Documents
Table A-2 describes the information systems, sources of information and/or documents for
Promontory's use in designing and executing the Foreclosure Review.
Table A-2
INFORMATION SYSTEMS PROVIDING DATA EXTRACTS FOR USE IN THE FORECLOSURE
REVIEW
PNC will be providing Promontory with direct access to the .ervicing platform
information system. Table A-3 below lists the screens that we will review as applicable.
10
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u-"::::::::-

Table A-3
SCREENS TO BE USED IN THE FORECLOSURE REVIEW
In addition, we will review, at a min'
each file sampled either
Table A-4
FILE DOCUMENTS
/ Deed of Trust
11
fthe relevant documents for
PNC-EL-00000011

sure sale results Sale Confirmation
Recorded foreclosure deed
Post foreclosure sale information
Executed affidavit of
I<r1lnt-r'u cram or lien avoidance documentation
Invoices to support all corporate advance transactions, including a breakdown of
TT"rnp,u fees/invoices
Loss mitigation letters (solicitation, follow up, approval and denials) inbound and
outbound
Borrowers financial package (hardship letter, financial information, 4506T, tax returns
Substitution of Counsel
Legal Disputes: documents, notes, etc
12
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Where necessary to resolve preliminary unvalidated exceptions and preliminary validated
exceptions, Promontory will supplement information obtained from these sources with
additional information obtained from PNC or its foreclosure attorneys.
2. File Review Selection Approach
a. Overview
To ensure that the foreclosure review effectively and efficiently identifies errors,
misrepresentations and deficiencies within the scope of Article VII of the acc Order
("exceptions"), Promontory will conduct the Foreclosure Review as follows:
1. Segment the population for initial file review and conduct sample testing;
2. Analyze testing results and determine the types of exceptions found, if any,
discuss findings with the OCC;
3. Determine if further sampling, 100% testing or targeted analysis is required on
sub-segments of the loan population or certain foreclosure situations to assess
borrower "harm", if any, after consultation with the acc;
4. Summarize any exceptions by type and whether any borrower harm was
identi fied/quantified;
5. Determine the necessary reportable exceptions and include in final report.
b. Sampling Process
Promontory will perform validation procedures for the total population of the loans covered by
the Foreclosure Review as well as the segments selected for review within the total population.
In addition, we will perform an overall reconciliation of the relevant_data .
with investor reports, elements of the general ledger and the_database. The database
is used to download the_nformation in order to select the total population segments
for the Foreclosure Review. Promontory will set up a separate environment with data and will
rerun the.scripts and Excel pivot tables used to derive segments as well as selected
segment scnpts. We will compare our findings of the total population and the segments to
those totals provided by PNC.
Promontory will segment the mortgage foreclosure actions population in the following manner
based on the May 20, 2011 guidance and subsequent discussions.
1. Geographic
a. Four initial samples of 100 loans/sales will be taken for each of
the following high volume states: California, Florida, Illinois and
Ohio. These represent the four states with the largest volume of
loans and represent 40% of Foreclosure Sales and In-Process
during the Foreclosure Period. The scope ofreview will be A_H3.
3 Refers to Article VII (3) (a) through (h) ofthe PNC Consent Order
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c\--..::::::::::

b. In the remaining states, four initial samples of 100 each will be
reviewed. The four samples will be: Foreclosures - Sales split
between judicial and non-judicial states and Foreclosures - In
Process split between judicial and non-judicial states. The
samples will be reviewed to ensure that each state has at least 5
loans for each of the two categories (Foreclosure - Sales and
Foreclosures in Process). If a state is not represented in the
samples with at least 10 loans (5 for each of the two categories),
additional loans will be randomly selected for review. We
estimate that an additional 223loans will be needed to achieve
this level of state coverage. The scope of review will be A-I-I.
2. Third Parties
a. Law Firms with known deficiencies, delisted by any GSE or
discontinued by the bank
There are four finns that the bank has
,been delisted the GSEs. The firms are
review will be A-H.
b. Large volume foreclosure firms
Five of the volume firms are already adequately
covered by the"Sample above under delisted by GSEs and
through the geographic samples for California, Illinois and Ohio.
The percentage of loans within those states covered by large
firms are as follows:
83% of the California loans
-79% of the Illinois loans
47% of the Ohio loans
There will be two initial
next two largest volume firms,_and _
_ Beyond these seven firms, there does not appear to be a
concentration in attorneys used. The scope of the review will be
A-H.
c. Other third party vendors
There are 3 third party who
performed loss mitigation work
14
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n--=:::::

initial sample ofl 00 loans/sales for this group. The scope of the
review will be A-H.
d. Document Execution Service Providers
None used.
3. Behavior
a. Rescinded Foreclosures
A bank prepared analysis was reviewed to determine areas of
highest risk.
An initial sample of 100 loans will be reviewed. The scope of
the review will be A-H.
b. Modifications that were foreclosed, applications pending for loan
modification or loss mitigation, or loan not in default for
sufficient period oftime to authorize foreclosure.
Data base will be screened to determine if there are any loans
where completed applications were submitted, but no denial
letter is on file and property was sold. These loans will receive a
100% review. The scope of the review will be A-H.
Data base will be screened to determine the number of days a
loan was in default vs. the foreclosure start date and the state.
Parameters to screen for loans will depend on state law, GSE
requirements or other governing laws. These loans will receive a
100% review. The scope of the review will be A-H.
c. Borrower has a debt cancellation contract
There are none of these loans.
d. Fees assessed to the account prior to the delinquency
precipitating foreclosure (pyramiding fees)
Review procedures for allloans/saies in the A-H samples include a review of the
payment history to determine the appropriate crediting of payments and assessment of
loan fees to detect cases of pyramiding.
4. Claims and complaints
a. Appropriate samples of claims and complaints previously
submitted to the institution.
15
PNC-EL-00000015

b. An initial sample of 100 complaints received by the bank from
Jan-I-09to Dec-31-1O related to in-scope loans in the
foreclosure process during 2009 and 2010 will be conducted.
The scope ofthe review will be focused on the issue raised by
the complainant.
c. A 100% review of all complaints received by the bank after Jan
1-11 related to loans in the foreclosure process during 2009 and
2010 will be conducted. The scope of the review will be focused
on the issue raised by the complainant. This segment is
discussed further under Reviewing Customer Complaints.
d. A 100% review of complaints forwarded by State and Federal
governmental agencies related to loans in the foreclosure process
during 2009 and 2010 will be conducted. The scope of the
review will be focused on the issue raised by the complainant.
e. A bank prepared analysis of contested foreclosures was reviewed
to determine areas of highest risk. An initial sample of 100
contested foreclosures will be reviewed. The scope of the review
will be A-H.
5. Additional Segments
a. Bankruptcy Cases
1) We will screen the population offorec1osures that were in
bankruptcy at some point during the foreclosure process
to determine the population of loans with no release date,
but having a foreclosure sale date. We will review 100%
of this group to determine if the sale was in accordance
with law.
2) We will screen the population of2009 and 2010
foreclosures for any loans in bankruptcy 1 year prior to
foreclosure or during the foreclosure process to determine
if there was an active foreclosure process while the
borrower was in bankruptcy and prior to receiving a
release. We will review 100% of this group to determine
if the foreclosure process was appropriately suspended
and not restarted until a release was received.
3) For loans that were in foreclosure, moved to bankruptcy,
moved back to foreclosure and then to sale, an initial
sample of 100 sales will be reviewed. The scope of the
review will be A-H.
16
PNC-EL-00000016

4) We will screen for foreclosure sales held less than 30
days after the release date and review 100% of this group.
The review will focus on whether the sale was in
accordance with law.
5) For loans that are in foreclosure where there was a
bankruptcy during the foreclosure process, an initial
sample of 100 loans will be reviewed. The scope of the
review will be A-H.
6) If a list is received from the US Bankruptcy Trustees of
cases that warrant attention, we will do a 100% review of
the issue designated.
7) For loans that were in Bankruptcy where the stay is lifted
and the loan remains in a suspended status, an initial
sample of 100 loans will be reviewed. The scope of the
review will be an analysis of the reason for the continued
suspended status.
b. Servicemember's Civil Relief Act ("SCRA")
A 100% review ofthe loans coded for SCRA and in foreclosure
during 2009 and 2010 will be conducted. The scope of the
review will be A-H.
c. RAMP and PNC Loss Mitigation Program
1) During the file reviews of all samples where an A to H
review is being performed, reviewers will determine if
RAMP was offered and the process was in accordance
with the rules in existence at the time, if PNC's loss
mitigation programs were offered and if the reason for
denial was valid.
2) It should be noted that all RAMP denials receive a
second review by the GSEs. We have reviewed the GSE
reports and have determined that there were no
exceptions that require review.
3) An initial sample of 100 loan modifications denied on the
basis of lack of income and an initial sample of 100 loan
modifications for those modifications denied on the basis
of DTI or NPV will be conducted. The review will focus
17
PNC-EL-00000017

on the accuracy of the DTI (front end and back end
ratios), NPV calculations and income supporting
documentation.
4) An initial sample of 100 loan modification applications
denied for incomplete packages will be reviewed. The
scope of the review will be the support for the loan
modification deniaL
d. Processing centers
PNC's processing was centralized in one center until Oct
25-10 when the_center started to assume
some of the processing functions. Only FNJ'vIA Loss
Mitigation was transferred at that time. No additional
samples are proposed.
e. Other - Ownership
From the population of all foreclosures, three additional
initial samples of 100 will be taken based on ownership
Bank-owned, Private and GSE. The scope ofthe review
will be A-H.
f. Other- Removed from foreclosure
1) An initial sample of 100 of those foreclosure actions
resolved through modifications, forbearance and other
means of remediation will be reviewed. This will include
PNC modifications, HAMP modifications, HAMP-FHA
modifications, FNMA modifications, Cured/Reinstated,
Long Term Forbearance and Repayment Plans. The
scope of the review will be A-H.
2) An initial sample of 100 ofthose foreclosure actions
repaid in part or full will be reviewed. Completed Short
Sales, Prequalified Short Sales, Paid in Full, Prior Sold,
Deed in Lieu and Settlement. The scope of the review
will be A-H.
3. Analysis of Sample Exceptions and Subsequent Follow-up
The hypothesis to be tested in the sample process is "PNC's servicing of loans that were in
foreclosure during the 2009 and 2010 time period consistently avoided foreclosure process
exceptions, which were financiaI1y hannful to the borrower." The elements of the foreclosure
process being tested in the initial samples are those items listed in Article VII (3) (a) to (h) of
the OCC's Consent Order. The exceptions to this scope are detailed in the discussion of sample
segments in section 2b above.
18
PNC-EL-00000018
n--.::::::
~ R O M O N " " O R Y
The first step in the analysis will be to review in detail all exceptions from all samples and
detennine if the borrower has been financially harmed and the elements of harm (how the
borrower was harmed). Two aspects of harm will be considered 1) borrowers charged
impennissible or excessive penalties, fees, or expenses, or who suffered other financial injury
(e.g., loan modification denials that were in error, misapplied payments, payments held in
suspense) and 2) any foreclosure sale where the foreclosure was not authorized in accordance
with the telms of the mortgage loan documents and state and F ederallaw or when the borrower
was perfonning under an approved loan modification or repayment plan. The absence of
financially harmful foreclosure exceptions in a given sample segment of the initial sample will
indicate, at a high level (95%) of reliability, that the incidence of financially harmful
foreclosure exceptions in the underlying population segment does not exceed the indicated
level of precision (3%). No further work will be done on these populations unless directed to
do so by the ace.
The second step is to analyze the financially harmful exceptions. Once the population of
borrowers who have been financially hanned is identified, it will be analyzed to determine
common causes of harm, i.e.; types of fees, penalties or expenses or inappropriate foreclosure
and common attributes, such as geography, originator, foreclosure attorney, loans modified or
not, bankruptcy and other segment characteristics being sampled. If a sample has only one
exception, we would still use this exception and all its attributes in analyzing all of the sample
exceptions to determine the root cause for exceptions and patterns. For example, if we have
exceptions in a specific law firm sample and exceptions in a state sample where the attorney is
the same, we would analyze the exceptions with respect to their original sample (state and law
finn) and also together to detennine a root cause as they share common attributes. The goal of
the analysis is to determine the root cause of financially harmful exceptions and whether
financially harmful exceptions are isolated occurrences or a pattel11 or practice.
The third step is to discuss all exceptions with the bank. We will detelmine jfthe exceptions
had been previously identified and whether some form of remedial action has been taken by the
bawe We will determine the adequacy of any remedial action and whether there was bank
action to identify and follow-up on others borrowers similarly impacted. In determining the
further segments of the population to be reviewed, we will consider the analysis of the sample
exceptions and additional intelligence gathered on any previous bank actions to identify similar
borrowers. Promontory will consult with the OCC on the results of the initial sample analysis.
We will document all exceptions that did not result in financial harm to the borrower, analyze
them for common problems and provide that information in the report. Promontory will
provide a listing of all these exceptions to the OCC for their review.
The fourth step will be to develop new sample segments and populations for 100% review and
to determine the targeted scope of these reviews. Based on the root cause analysis of the
samples, the intelligence gathered during the review process and input from the ace,
Promontory will develop new sample segments, which will be subject to OCC approval. The
goal is to create sample segments, which share attributes with previously identified financially
harmful exceptions. The scope of the review of these samples will be focused on areas where
problems were found. Where populations are small or there is cause to believe a systemic
19
PNC-EL-00000019

problem exists, we may require 100% review of similar loans. For example, the results of the
samples of geography and large volume foreclosure firms may both indicate that the fees a firm
is charging in a particular state exceed the allowable fee in that state. If the results showed a
problem with a substantial number of loans handled by that firm in a particular state, a 100%
review might be warranted. However, if the number ofloans that were exceptions is small and
no other common attribute was determined, a second sample of all loans handled by that
attorney in that state would be reviewed to determine whether fees were allowable and
reasonable and further define which borrowers groups were impacted.
The fifth step is to analyze the results of the second round of reviews similar to what was
done in steps one and two. As the goal is to identify financially harmed bOlTowers, once the
portion of the population impacted by a harmful exception is sufficiently identified/confirmed
through the sampling process, a 100% review will be conducted of all potentially impacted
borrowers. If the population impacted by a hannful exception is not sufficiently identified,
additional samples may be required. Where exceptions may be detected or populations refined
through an automated analytic review based on selected criteria, this will be considered and
discussed with the aee. An example of a potential automated analytic review is in the area of
inspection fees, where all inspection fees outside of allowable parameters would be searched
and loans that are outliers are identified on an automated basis. A 100% review of the outliers
would then be conducted to determine if financially harmful exceptions existed.
When additional samples are taken, a confidence/reliability factor of 95% and a
precision/tolerance level of 3% will be used. If the number of loans in the new sample
segment is less than 100, a 100% review will be done for the targeted harmful exception. If the
results of any sample segment do not result in identification of any harmed borrowers, we will
accept the hypothesis with 95% confidence that the harmful exception rate does not exceed
3%, and we will stop reviewing files for that segment unless otherwise directed by the oee.
The presence of a single exception in a given sample segment will require us to reject the null
hypothesis in regard to that segment and do additional reviews through sampling or 100% file
reviews.
During this process we will continue to confer with the aee on the results of subsequent
samples, analysis of exceptions and proposed additional sampling, automated analytic reviews
or 100% file reviews. Subsequent samples will be subject to aee approval. All exceptions
will be reviewed with the bank, oee and fully documented in the report.
4. Foreclosure Review Process
a. Foreclosure Review Process Overview
Promontory will use a multi-level review process to ensure accurate and consistent review of
foreclosure files. The initial review will be completed by the primary review team and
reviewed by a designated Review Supervisor. A Senior Technical Team member will review
all documentation and findings from the first two levels of review. Each exception will be
elevated to the Supervisor and Senior Technical Team to determine if they agree with the
findings of the primary review team. Further, the Senior Technical Team (very experienced
20
PNC-EL-00000020

default servicing and foreclosure team members) will also answer all questions about
interpretation of the loan foreclosure documents. Our legal liaison will also coordinate with
the Legal Advisors on all legal questions of State or Federal law or regulations. While
Promontory will consult with PNC, Promontory, in its sole discretion, will detennine whether
an error, misrepresentation or other deficiency within the scope of Article VII of the Order
occurred, and, if so, whether it resulted in financial harm to the borrower.
All primary reviewers and Supervisors will participate in a mandatory two day training session
which will cover the requirements of the Order, Promontory's detail workplan, PNC's
infonnation systems and documentation requirements. The training will be updated on a
weekly basis to alert the reviewers as to the findings of the review to date and any changes in
process.
A checklist of all documents and procedures to be performed will be utilized by all review
team members. The checklists and procedures are customized to meet the requirements of the
specific foreclosure situation and the State law and regulations governing foreclosure
requirements. As possible exceptions are identified by the primary assessment team,
Promontory will consider such errors, misrepresentations, or deficiencies evidenced by the files
as "unvalidated preliminary exceptions." For each "unvalidated preliminary exception", the
Supervisors and Senior Technical Team will provide further analysis steps to be performed.
The Supervisors and the Senior Technical Team will review 100% of all "unvalidated
preliminary exceptions" to determine final resolution as an "exception". The Senior
Committee will confirm the "final exceptions" that are to be reported in our final report. All
pending and finalized exceptions are captured in our review database and will support the final
issued report. As discussed above, all exceptions will be discussed with the OCC.
For each "final exception", a PNC team will review such exception, in order to supply missing
information or analysis relevant to Promontory's analysis or conclusions. Promontory's Senior
Committee will make its final determination of reportable exceptions and recommend
remediation to be made and/or compensation to be paid to the bOlTOwers.
b. Testing for Potential Errors, Misrepresentations or Other Deficiencies that
will be as "exceptions"
1. Consent Order Section VII (3)(a) - Determining Proper Documentation
of Ownership
Article VII(3)(a) of the Consent Order requires the independent consultant to determine
whether, at the time the foreclosure action was initiated or the pleading or affidavit filed
(including in bankruptcy proceedings and in defending suits brought by borrowers), the
foreclosing party or agent of the party had properly documented ownership of the promissory
note and mortgage (or deed of trust) under relevant state law, or was otherwise a proper party
to the action as a result of agency or similar status.
standards of applicable state law. Promontory will identify all exceptions relating to the
21
PNC-EL-00000021
II

documentation of ownership. Promontory will utilize information that is external and internal
to the files. External sources may include:
Interviews with PNC personnel responsible for providing foreclosure counsel (or
attorneys defending bankruptcy proceedings) with information concerning ownership
of the promissory note and mortgage (or deed of trust);
Review of examination and audit reports for weaknesses in the process of establishing
ownership; and
Independent research into public allegations that particular units, employees, agents, or
law firms failed to follow applicable state law when submitting pleadings or affidavits
documenting ownership.
Promontory will review each file for:
Indications that the borrower asserted or complained that the foreclosing party or agent
of the party had not properly documented ownership of the promissory note and
mortgage (or deed oftrust); and
o Any indication that ownership of the promissory note or mortgage, or other proper
party status, is or was inconsistent with the ownership or other proper party status
asserted in the pleading or affidavit.
2. Consent Order Section VII (3)(b) and (d) - Determining whether the
Foreclosure Process Complied with Applicable Law and Mortgage
Terms
Article VII(3)(b) of the Order requires the independent consultant to determine whether the
foreclosure complied with applicable state and federal law, including but not limited to the
SCRA and the U.S. Bankruptcy Code. Article VII (3)(d) requires the independent consultant
to determine whether, with respect to non-judicial foreclosures, the procedures followed with
respect to the foreclosure sale (including the calculation of the default period, the amounts due,
and compliance with notice periods) and post-sale confirmations were consistent with the
terms of the mortgage loan and state law requirements.
In making these determinations, Promontory will apply test standards from Table A-6 to
describe applicable state law as that term is used in Article VII of the Consent Order (the
"Foreclosure Survey."). The Foreclosure Survey includes state law applicable to both judicial
and non-judicial foreclosures, including "the procedures followed with respect to the
foreclosure sale (including the calculation of the default period, the amounts due, and
compliance with notice periods) and post-sale confilmations," as contemplated by VII(3)(d) of
the Consent Order. With respect to non-judicial foreclosures, Promontory will also consider
the terms of the mortgage loan.
22
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n-..:::::::

SCRA;
e US Bankruptcy Code;
Promontory will review each sampled file against applicable state and federal standards. The
workplan checklist will set forth the specifics of what tests and information is necessary to
make the determination that the foreclosure process was carried out in accordance with Federal
and State regulations and the terms of the mortgage, where applicable.
3. Consent Order Section VII(3)(c) - Determining Appropriateness of the
Timing of Foreclosure
Article VII (3)(c) of the ace Order requires the independent consultant to detennine whether
a foreclosure sale occurred when an application for a loan modification or other Loss
Mitigation was under consideration; when the loan was performing in accordance with a trial
or permanent modification; or when the loan had not been in default for a sufficient period of
time to authorize foreclosure pursuant to the terms of the mortgage loan documents and related
agreements.
Promontory will make these determinations through (1) a query ofPNC's.system that
will compare foreclosure action and loss mitigation action dates; and (2) a review of the
contents of each sampled file. An application for loan modification will be considered under
consideration if a completed information package was received by the borrower and an initial
determination had not yet been communicated to the borrower. We will record any exceptions
in the Foreclosure Review database. Where we cannot answer a particular question because
file information is missing or insufficient, we will flag the file for escalation to the Senior
Technical Team
4. Consent Order Section VII(3)(e) - Determining whether Fees and
Penalties Assessed were Permissible, Reasonable and Customary
Paragraph 3 ( e) requires the independent consultant to determine whether any fees or penalties
assessed were pennissible, reasonable, or customary, or excessive. Promontory will make
these determinations by testing files against defined exceptions, deeming an exception to have
occurred when the file indicates that PNC charged one or more fees or penalties that failed one
or more test conditions - either amount or type. Because Promontory will test each loan file
against all conditions, a single file could include multiple exceptions.
Promontory will test permissibility of fees and penalties by reference to limits established by
state law, federal law and the borrower's mortgage instruments. Promontory will examine
each file for impermissible charges under each of these authorities. If one or more of these
authorities limit fees or penalties, or a particular type of fee or penalty, in the aggregate,
Promontory will evaluate total fees and penalties, or total fees and penalties afthat particular
type, by reference to that limit. Considering any limitations on fees or penalties established by
23
PNC-EL-00000023

the law of the state in which the residential property securing the loan is located, Promontory
will test each loan file to determine:
Whether the type(s) of individual fees and penalties charged to the account was
permissible;
e Whether the amount(s) of individual fees and penalties charged to the account was
permissible;
o Whether the sum(s) of individual fees and penalties charged to the account was
permissible.
Considering limitations on fees or penalties established by federal law, Promontory will test
each loan file to determine:
Whether PNC impermissibly charged fees or penalties to the account during the
pendency of a borrower's bankruptcy proceeding;
Whether PNC impennissibly charged fees or penalties to the account of an active
service member.
Considering limitations on fees or penalties established by the loan document, Promontory will
test each loan file to determine whether fees and penalties individually or in aggregate
exceeded amounts disclosed in the borrower's promissory note.
Except as provided in the next paragraph, Promontory will evaluate the customariness of fees
and penalties by reference to servicer guidance promulgated by Fannie Mae, Freddie Mac, the
Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA) for
their respective insured and investor-owned loans. Promontory will deem not customary any
fee or penalty inconsistent with such guidance in type or amount.
For non-conforming, non-FHA and non-VA loans, Promontory will deem not customary any
fee or penalty inconsistent with Fannie Mae guidance (as in effect at the relevant time) in type
or exceeding such guidance by more than 10% in amount.
For those foreclosure related costs not covered by state law limitations or GSE and federal
agency guidance, the costs will be compared to the market rate to evaluate for reasonableness.
Market rate will be defined as the cost of the service or product to PNC that represents the
average cost for the product or service within the respective geographic area.
Promontory will evaluate each fee or penalty for reasonableness. Promontory will deem
unreasonable any fee or penalty that:
Is associated with the processing of a borrower request for loss mitigation,
including loan modification unless that fee was allowed by the relevant investor or
GSE;
Was assessed to protect the interests of a secured party when the borrower had
accepted and was in good standing under a temporary loan modification or Trial
Period Plan;
24
PNC-EL-00000024
II Was assessed for late payment when the borrower had made timely payment in an
amount consistent with the terms of an accepted temporary loan modification;
II Was assessed for forced placement of insurance when insurance was already in
force.
5. Consent Order Section VII (3)(f) - Determining whether Fees and
Penalties Assessed were Assessed with Excessive Frequeney
Article VII (3)(f) of the Order requires the independent consultant to determine whether the
opinions) was excessive under the terms of the borrower's loan documents, and applicable
state and federal law. In performing this evaluation, Promontory will consider whether PNC
assessed the fee or penalty with a frequency that was:
II Impermissible under the law of the state of the residential property associated with
loan;
o Impermissible under Federal law;
o Impermissible under the telIDS of the borrower's promissory note; or
II More than necessary or appropriate for completion of the underlying service.
Specifically, a query of the.system will be made regarding the fees and penalties assessed
and the frequency of their assessment for each foreclosure tested. All potential exceptions will
be reviewed by the Senior Technical Team for final determination as an exception.
6. Consent Order Section VII (3)(g)- Determining whether Loss
Mitigation Activities were Properly Conducted
Article VII (3)(g) of the Order requires the independent consultant to determine whether Loss
Mitigation Activities with respect to foreclosed loans were handled in accordance with the
requirements of the HAMP, and consistent with the policies and procedures applicable to the
Bank's proprietary loan modifications or other loss mitigation programs, such that each
borrower had an adequate opportunity to apply for a Loss Mitigation option or program, any
such application was handled properly, a final decision was made on a reasonable basis, and
was communicated to the borrower before the foreclosure sale.
Promontory will make these determinations through (1) review ofPNC's and (2)
a review of the contents of each sampled file. All borrower applications for loan modification
and loss mitigation programs and the related actions and communications by PNC will be
reviewed for each sampled file. The file review will include assessing both HAMP and
proprietary requirements for eligibility, solicitation, qualification and all quantitative borrower
analysis. Any exceptions identified will be reviewed by the Senior Technical Team for final
determination of exception status.
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7. Consent Order Determining whether Errors, Misrepresentations
or Other Deficiencies Resulted in Financial Injury to the Borrower
Article VII (3)(h) ofthe Consent Order requires a determination of whether the borrower has
suffered financial injury. The definition of financial injury can be found in Exhibit 1 to
Attachment A.
5. Reviewing Customer Complaints
a. Overview
Close review of borrower complaints is essential to accomplishing the goals of the Foreclosure
Review as contemplated by the OCC. As part of the Foreclosure Review, Promontory will be
reviewing complaints where the loan and issue are within the Foreclosure Review Scope as
follows: 1) 100% of the complaints forwarded by State and Federal agencies during 2009 and
2010; 2) a sample of complaints filed with PNC prior to Jan-l-ll; 3) 100% of all complaints
filed with PNC after Jan-I-II; and 4) 100% of complaints received through the coordinated
outreach process. The complaints received through the outreach program will be processed by
Rust Consulting Inc.,("Rust"), researched by PNC with oversight and quality assurance on
both the Rust and PNC processes perfonned by Promontory. Promontory will make the final
determination on the disposition of the outreach complaints including whether there was
financial injury and recommended remediation and/or compensation to be paid to the borrower.
Promontory will review complaints filed directly with PNC through a file review focused on
the nature of the complaint. We will determine whether there was financial injury to the
borrower and if so, whether PNC's response was adequate.
The Foreclosure Review will include an analysis of loan files associated with borrower
complaints during the review period. Promontory will independently oversee and validate
PNC's conduct of this process ("Foreclosure Complaint Process"), evaluating both the
underlying borrower's complaint and the appropriateness of PNC's disposition of it.
Specifically, Promontory will assess the PNC process to handle and review borrowers'
complaints and how such process ensures the following:
The complaint is reviewed promptly,
e PNC's review process is complete and timely,
e PNC resolves borrower complaints in an appropriate and timely manner.
b.Scope
The review of the Foreclosure Complaint Process will include the sample segments detailed
above and those complaints received directly by the bank starting on January 1,2011. The
26
PNC-EL-00000026

launch date for the complaint outreach process will be September 30, 2011 and the cut-off date
for filing complaints to be reviewed by Promontory will be 120 calendar days from the launch
date. "In scope complaints" are defined as complaints regarding residential mortgage
foreclosure actions on first lien mortgages secured by owner-occupied, one-four family
dwellings that were initiated, pending, or completed in 2009 or 2010. Complaints for
borrowers in active litigation will be included in the complaint review if they are otherwise in
scope.
c. Plan for Promoting Complaint Opportunities to Borrowers Potentially Harmed
PNC in coordination with the other 13 servicers will publicize the opportunity for borrowers to
submit foreclosure-related complaints through a variety of channels to reach as many
borrowers who have changed address as practicable. Publicity vehicles that will be used
include:
First class mail to in scope borrowers (where the borrower has initiated litigation all
communications will be directed to their legal representative);
In cooperation with other servicers, newspaper notices in national newspapers and
local newspapers in high volume foreclosure areas;
e An Independent Foreclosure Review website hosted by Rust, which will include a
link to the complaint form, information on how to fill out the form, "Frequently
Asked Questions" and a PNC website link;
A call center to provide complaint forms and answer questions hosted by Rust; and
e Notification of the process to relevant advocacy organizations.
d. Complaint Intake Process
The coordinated promotions handled through Rust and undertaken pursuant to paragraph c.
above will explain the process of submitting complaints to PNC and other servicers.
Communications will include:
o Why the borrower is being contacted;
o How eligibility will be detelmined;
Necessary information that PNC and the independent consultant will need from the
borrower when the borrower responds;
Channels available to the borrower to contact the Independent Foreclosure Review,
including telephone assistance and the internet;
G The timeframe for filing a complaint as part ofthe Independent Foreclosure
Review;
III What to expect of the process and when a response should be expected.
Borrowers will be asked to fill out a standardized form to be developed by all 14 Servicers and
approved by the OCC, which walks the borrower through their eligibility and key complaint
issues, while also providing for non-standardized comments from the borrower. In order to
ensure proper control of incoming complaints, borrowers will be asked to mail complaints to a
P.O. Box that will be dedicated to this process and controlled by Rust or fill out and submit the
27
PNC-EL-00000027

standardized form through the Independent Foreclosure Review website. Forms filed on the
website and mailed will be processed by Rust. Promontory will monitor and provide quality
assurance over the initial mailing process, return mail process, logging and imaging of
complaints, determination of in scope status and mailing of acknowledgement letters by Rust.
We believe that it is important to limit the vehicles to written complaints filed on the
standardized form, in order to exercise proper control and ensure that there is a means of
verifying the identity of the complainant.
The initial letters sent by Rust will have as the return address the dedicated P.O. Box
mentioned above. Undeliverable return mail will go back to the box and be controlled by Rust
with oversight of the process by Promontory. As normal skip tracing actions (both internal and
external) will be taken prior to mailing, one additional attempt will be made by Rust to further
trace the borrower and obtain a vaJid address for any mail that is returned.
There will be a unique 800 number with a well prepared team for handling the phone call
center that will be operated by Rust. The phone center will be able to provide standardized
forms and answer questions on eligibility and how to fill out the forms working from
Independent Consultant approved scripts. Training will be held for call center staff by Rust
with Promontory oversight prior to launch of the program. We do not plan to have Rust take
complaints over the phone, but the phone call center will do follow-up calls to develop
incomplete information once a written fonn is submitted.
A complaint received from the outreach process will be logged in the same day it is received
by Rust. Rust will send an acknowledgment letter within 7 calendar days of receipt of the
written complaint. The acknowledgement letter will indicate that a response or follow-up will
be forthcoming within several months.
e. Complaint Review Process
An initial review of the in scope complaint forms will be performed by Rust to determine
whether the form is complete and if so, Rust will classify the complaint by type of complaint
and place the complaint in a queue for PNC action. If the complaint form is incomplete, Rust
will contact the borrower by letter. If information is received from the borrower and the form
is considered complete, the complaint will be categorized and placed in the queue for PNC
action. If additional information is not provided, Promontory will review the form to
determine if there is sufficient information for the complaint to be actionable. If there is
sufficient information to take action on the complaint, but the complaint lacks specificity, the
borrower's file will be reviewed for all of the provisions of Article VII (3) (a) to (h). For
complaints with no actionable information, a follow-up letter and additional form wi1l be sent.
For borrowers who do not respond 30 days after the date of the "Incompleteness Letter," PNC
will send a resolution letter indicating no further action can be taken due to the lack of
information.
Promontory will map their templates for review to the categories/types of complaints. For
complaints that fall into the "Other" category, Promontory will review the complaint and
indicate on a case by case basis, which templates or template steps will be covered and provide
that direction to PNC. The bank will research the complaint and use the Promontory templates
28
PNC-EL-00000028

to document their review and findings. Upon completion PNC will provide the complaint and
all supporting documentation to Promontory.
Promontory will review 100% of in-scope borrower complaints and claims, together with
supporting PNC documentation. If Promontory's review requires additional information,
Promontory will request such information from PNC. Each loan will receive a Supervisory
and Senior Technical Team review.
When the review levels agree with PNC's findings, they will note exceptions and classify
findings into four categories: no exceptions, financial harm exceptions, reportable exceptions
and missing documentation exceptions. When Promontory does not concur with PNC's
findings, it will document the issues and return the file to PNC for further research and review.
Once PNC's second review is completed, Promontory will review the file and if in agreement,
note the exceptions and classify the findings into the four categories mentioned above. If a
disagreement is unresolved after the second review, Promontory will make a final decision on
the complaint, note exceptions and classify the findings.
When exceptions are found, Promontory's Senior Committee will make the final determination
on the category of the exceptions. For exceptions that are determined to involve financial
injury to the borrower, Promontory's Senior Committee will recommend remediation to be
made and/or compensation to be paid by the bank to affected borrowers. The results ofthe
review of all complaints, including the nature of any exceptions and recommended remediation
and/or compensation to be paid to the borrower will be logged by Promontory in the
Foreclosure Review Report. Based on the Promontory recommendation, PNC will draft a
response letter to the complainant. The letter will be reviewed by Promontory and sent by
PNC.
f. Reporting
A reporting process on the outreach complaints will be developed by Rust and approved by the
independent consultants. The source of the data will be the Rust data base. The MIS will be
used to monitor workflow on a daily/weekly/monthly basis by PNC and Promontory and will
also be used for internal and external (regulatory) reporting. Items to be included are:
Number of complaints received;
Type or Nature of complaint received;
Number of complaints in-scope and out-of-scope;
Number of complaints acknowledged;
e Number of complaints in process;
Number of complaints not yet analyzed;
e Number of complaints responded to;
Complaints disposition;
Number of complaints requiring remediation;
Number of complaints remediated;
.. Aging reports as warranted; and
29
PNC-EL-00000029
D---=:::::::-

Comments section to provide for other pertinent information.
Complaints received directly by the bank will be repOlted separately and be based on the
monitoring systems currently in place within the Complaint function. Reporting to the
regulators will include both complaints received as a result of the outreach and those received
directly by the bank and determined to be in-scope.
g. Documentation
the complaint process will be maintained in
_ which is the same data base being used by Promontory to document the
Lookback Review. Reporting information will initially be maintained on the Rust data base,
but at the completion ofthe process will be transferred to the_Copies of the data in the
_will be provided to the OCC and PNC at the completion of the Foreclosure Review.
Information will be archived per PNC's existing policies and procedures.
include copies of the original complaints, documentation of the file review, conclusions on
exceptions and any proposed remediation.
5. Test Standards
Promontory will rely on test standards drawn from a variety of sources. Table A-6 summarizes
the sources of the test standards that Promontory will apply in performing the Foreclosure
Review:
Table A-6
Sources ofForecIosure Review Test Standards
Reasonableness, customariness,
excessiveness
FNMA, FHLMC, FHA and VA servicer guidelines
where not otherwise established law
Consistent with the requirements of Article VII of the OCC Order, Promontory will provide
PNC and the ace with a final report (the "Foreclosure Report."). The Foreclosure Report will
30
PNC-EL-00000030
r,-...:::::::::

include a summary and analysis of the file exceptions found during the Foreclosure Review,
together with detail appropriate to support the development of a remediation plan, including
the identity of each borrower determined by Promontory to have been financially injured and
the details on how the borrower was financially injured. The report will recommend
remediation to be made and/or compensation to be paid to the borrower.
31
PNC-EL-00000031
n-..:::::::::
~ R O M O N T O R Y
Attachment B
Promontory's Past Work with PNC
Promontory has performed several previous engagements for PNC. Promontory and PNC
believe this experience gives Promontory institutional knowledge ofPNC that will contribute
to the success of the Foreclosure Review, and that Promontory's history of engagement with
PNC does not present a level of conflict that would be likely to compromise Promontory's
independence in performing the Foreclosure Review.
Promontory's previous engagements with PNC over the period 2009 through 2011 include:
32
PNC-EL-00000032
PNC-EL-00000033
33

Exhibit 1 to Attachment A
Definition of Financial Injury
acc and FRB Guidance - Financial Injury or Other Remediation
The April 13,2011 Consent Orders require the Independent Consultants (lCs) to make certain
findings in conjunction with the Foreclosure Reviews and to prepare a report of their findings
("Foreclosure RepOlt,,).4 The Consent Orders first require the IC to make a determination as to
whether the servicer committed any "errors, misrepresentations, or other deficiencies" (as
defined in Section II); and second, whether any such enors, misrepresentations, or other
deficiencies "resulted in financial injury" to the borrower or mortgagee/owner of the mortgage
loan. For this purpose, "financial injury" to the borrower or the mortgagee is defined as
monetary harm directly caused by errors, misrepresentations or other deficiencies identified in
the Foreclosure Review. Monetary harm does not include physical injury, pain and suffering,
emotional distress or other non-financial harm or financial injury that did not result as a direct
consequence of errors, misrepresentations or other deficiencies identified in the Foreclosure
Review. However, financial injury does include monies actually expended by the bonower or
mortgagee that directly relate to the foreclosure action, proceeding, or sale and otherwise
would not have been required but for the error, misrepresentation or other deficiency by the
servicer identified in the Foreclosure Review.
The Consent Orders require each institution to submit a plan, subject to approval by the OCC
and/or FRB, to compensate or remediate financially injured borrowers, based on the findings
contained in the IC's Foreclosure Report. While the Consent Orders contemplate
compensating harmed borrowers who have suffered financial injury, the Orders also
contemplate remedial action other than, or in addition to, compensation in other appropriate
circumstances. As such, for each file reviewed in the Foreclosure Review, the IC must first
identify (and include in the Foreclosure Report) their findings regarding any servicer error,
misrepresentation, or other deficiency. The IC must then identify (and also include in the
Foreclosure Report) any financial injury that has been suffered by the borrower as a result of
the identified error, misrepresentation, or other deficiency and any financial injury that may be
suffered by the bonower absent action by the servicer to remediate or cure the identified error,
misrepresentation, or other deficiency. The IC Foreclosure Report must include recommended
remediation to be made and/or compensation to be paid by the institution to borrowers who the
Ie has identified as having suffered financial injury or who may suffer financial injury.
The following scenarios provide guidance as to what may constitute financial injury that
requires compensation to the bonower or where other borrower remediation by the servicer
may be required to avoid financial injury. These scenarios are not exhaustive, and should be
viewed as setting forth the principles that ICs should apply when determining financial injury
attributable to errors, omissions, or other deficiencies by the serviceI'. The IC's determination
regarding the presence or absence of financial injury or whether compensation or other
remediation is required must, of course, take into account and be based on the specific facts
and circumstances surrounding each borrower's individual case.
4 See Article VII paragraphs 3(a)-(g) and (4) for the OCC Consent Orders; Paragraphs 16(a)-(g) and 17 for the
Consent Orders issued to the institutions that were previously subject to regulation by the OTS; and Paragraphs
3(a) and (b) for the FRB Consent Orders.
34
PNC-EL-00000034
r--.:::::::::
~ R O M O N T O R Y
I. Financial Injury Present or Other Remediation Required
Errors, misrepresentations, or other deficiencies that may result in financial injury and may
require compensation to the borrower or action by the servicer to remediate or cure the error,
misrepresentation, or deficiency, include the following. The DCC and FRB stress that this list
is not intended to be exhaustive, but rather contains examples highlighting the principles that
the les should use when assessing financial injury. In these examples, if a sale of the
borrower's home already has occurred, the IC must determine whether the serviceI' should
compensate the borrower for financial injury and if any other action by the servicer is required
to remediate or cure the error, misrepresentation, or deficiency. If the sale has not yet
occurred, the IC must also determine whether any payment to compensate for financial injury
or other action by the servicer is required to remediate or cure the error, misrepresentation, or
deficiency.
1) The borrower was not in default pursuant to the terms of the note and mortgage at the
time the servicer initiated the foreclosure action.
2) The servicer initiated foreclosure or conducted a foreclosure sale in advance of the time
allowed for foreclosure under the terms of the note and mortgage or applicable state
law.
3) The borrower submitted payment to the servicer sufficient to cure the default pursuant
to the terms of the note and mortgage, but the serviceI' retumed the payment in
contravention of the terms of the note or mOligage, state or federal law, or the servicer's
stated policy covering payments when in default.
4) The servicer misapplied borrower payments, did not timely credit borrower payments
(including failure to properly account for funds in suspense), or did not correctly
calculate the amount actually due from the borrower, in contravention of the terms of
the note and mortgage, state or federal law, investor requirements, or the servicer's
stated policy covering application of payments.
5) The borrower paid a fee or penalty that was impermissible, as defined in Section 11.
6) A deficiency judgment was obtained against the bon'ower that included the assessment
of a fee or penalty that was impermissible, as defined in Section II.
7) The servicer placed an escrow account on the borrower's mortgage and the placement
resulted in monies paid by the borrower into escrow in contravention of the terms of the
note or mortgage, state or federal law, or the servicer's stated policy covering escrow
accounts.
8) The serviceI' placed insurance on the borrower's mortgage and the placement resulted
in monies paid by the borrower towards insurance in contravention of the terms of the
note or mortgage, state or federal law, or the servicer's stated policy covering placed
msurance.
35
PNC-EL-00000035
9) The servicer miscalculated the amount due on the mortgage and secured a judgment
against the borrower for an amount greater than the borrower owed.
10) A borrower's remittance of funds to a third patty acting on behalf of the servicer (e.g.
law firm) was not credited to the borrower's account.
11) The borrower was performing under the terms of an approved trial loan modification or
an approved permanent loan modification, but the servicer proceeded to foreclosure in
contravention of the terms of the modification offered by the servicer to the borrower.
s
12)A borrower was denied a modification in contravention of the terms of the governing
modification program or the servicer's stated policy covering modifications.
13) There is evidence that the borrower provided or made efforts to provide complete
documentation necessary to qualify for a modification within the period such
documentation was required to be provided by the governing modification program and
the servicer denied the loan modification in contravention of the terms of the governing
modification program or the servicer's stated policy covering modifications.
14) The servicer initiated foreclosure or completed a foreclosure sale without providing
adequate notice as required under applicable state law.
15) The servicer foreclosed on or sold real property owned by an active military
servicemember in violation of the Servicemembers Civil Relief Act (SCRA). (This
provision applies to loans originated before the servicemember's active military service
and prohibits foreclosures and foreclosure sales of such property at any time during the
bon-ower's period of active military service and for 9 months thereafter, unless an
exception applies pursuant to the SCRA).
16) The servicer did not lower the interest rate in accordance with the requirements of the
SCRA on a mortgage loan entered into by a military servicemember, or by the
servicemember and his or her spouse jointly. (This provision applies where the
bon-ower provided written notice of military service pursuant to the SCRA for loans
originated before the borrower entered into military service; the effective rate on the
loan must be lowered to a rate not in excess of 6% per year during the borrower's
period of military service and for 1 year thereafter, unless an exception applies pursuant
to the SCRA).
17) The servicer failed to honor a borrower's bona fide efforts to redeem a sale under
applicable state law during the redemption period.
5 The requirement for the Independent Consultants, pursuant to this Guidance in connection with the Consent
Order Foreclosure Review, to evaluate and make determinations regarding financial injury in circumstances where
a borrower is denied a federal or proprietary loan modification is not intended to suggest that the borrower has a
legal right or entitlement to receive a loan modification from the servicer.
36
PNC-EL-00000036

18) The borrower was protected by the automatic stay under the bankruptcy code and a
court had not granted a request for relief from the automatic stay or other appropriate
exception under the bankruptcy code.
19) The borrower was making timely pre-petition arrearage payments required under an
approved bankruptcy plan and was current with their post-petition payments.
20) The borrower: 1) purchased a borrower payment protection plan; 2) was or should have
been receiving benefits under the plan; and 3) those benefits were not applied pursuant
to the contract terms.
21) The servicer was not the proper party, or authorized to act on behalf of the proper party,
under the applicable state law to foreclose on the borrower's home and this resulted in
or may result in multiple foreclosure actions or proceedings.
22) The servicer failed to comply with applicable legal requirements, including those
governing the fonn and content of affidavits, pleadings or other foreclosure-related
documents (to include improperly notarized documents or the practice of "robo
signing" generally), where such failure directly contributed to: (1) the borrower paying
fees, charges, or costs, or making other expenditures that otherwise would not have
been paid or made; or (2) the initiation of a foreclosure action or proceeding against a
borrower who otherwise would not have met the requirements for initiating such an
action or proceeding.
II. Other Definitions
"Certain residential foreclosure actions" - The telID "certain residential foreclosure
actions" means foreclosure actions initiated or completed on owner-occupied, 1-4 family
dwellings by divisions of the institution that process first lien mortgage foreclosures. This
term includes mortgages secured by individual condominium dwelling units and individual
cooperative housing units. This term also includes mobile homes, house boats, and other
owner-occupied dwellings that are treated as "real estate" or "real property" under
applicable state law pertaining to foreclosure.
"Impermissible" - The term "impermissible" as applied to a fee and/or penalty charged to
a borrower's account, means a fee or penalty that is anyone or more of the foHowing:
1) Exceeds the limits established by applicable state law, federal law or the borrower's
mortgage instruments, including as to type, amount, or sum of fees and/or penalties.
2) In the case of the acc Consent Orders, is not "reasonable and customary," or a
fee that is assessed at an "excessive" frequency. The tenn "reasonable and
customary" as applied to a fee and/or penalty charged to a delinquent borrower's
account means that institutions may only assess a fee for services actually rendered,
and may only assess a fee or collect a monetary penalty that does not exceed the
lesser of (a) any fee limitation or allowable amount for service under applicable
37
PNC-EL-00000037.
n-...:::::::

state or federal law; (b) any published, pre-established fee limitation or allowable
amount for the service under the guidelines for the applicable government
sponsored enterprise investing in the loan or the government agency insuring the
loan; and (c) the market rate for the service (as defined under the amount or rate
that is "customarily charged in the market for such fee or penalty" below). The
term "excessive" means any fee that exceeds the amount permitted by the
borrower's loan documents, by applicable state or federal law, or investor
requirements. Excessive frequency of a fee means the same or a similar fee that is
more than necessary or appropriate for completion of the underlying service.
3) In the case of the FRE Consent Orders, is "otherwise unreasonable." A fee or
penalty is "otherwise unreasonable" if it was assessed: (a) for the purpose of
protecting the secured partis interest in the mortgaged property, and the fee or
penalty was assessed at a frequency or rate, was of a type or amount, or was for a
purpose that was in fact not needed to protect the secured party's interest; (b) for
services performed and the fee charged was substantially in excess of the fair
market value of the service; (c) for services performed, and the services were not
actually performed; or (d) at an amount or rate that exceeds what is customarily
charged in the market for such a fee or penalty, and the mOltgage instruments or
other documents executed by the borrower did not disclose the amount or rate that
the lender or servicer would charge for such a fee or penalty.
i) A fee charged for services performed is not "substantially in excess ofthe fair
market value of the service" if it exceeds by no more than 10 percent the
maximum allowable fee under the "applicable investor guide" or, if there is no
"applicable investor guide", the guide published by Fannie Mae or Freddie
Mac that would apply if Fannie Mae or Freddie Mac were the investor.
ii) A fee or penalty does not "exceed" the amount or rate that is "customarily
charged in the market for such fee or penalty" if the fee or penalty does not
exceed the maximum allowable fee under the "applicable investor guide" or, if
there is no "applicable investor guide", the guide published by Fannie Mae or
Freddie Mac that would apply if Fannie Mae or Freddie Mac were the investor.
iii) "Applicable investor guide" means investor guides issued by Fannie Mae,
Freddie Mac, the Veterans Administration, and the Department of Housing and
Urban Development
or other deficiencies." The terms "errors,
misrepresentations, or other deficiencies" means those matters discovered during the
Foreclosure Review as set fOlth in Article VII(3)(a)-(g) of the OCC's Orders, OTS Order
paragraph 16(a)-(g), and Paragraphs 3(a)(i)-(vii) of the Board's Orders. "Errors" includes
miscalculation offees or other charges, where the total aggregate miscalculated fees or
charges applied to the borrower exceeds $99.00.
38
PNC-EL-00000038

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September 6, 2011

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