USA Recovery Group

Program Protocol Summary

The basic mission of USA Recovery Group’s Distressed Asset Management and Disposition (Special Servicing) Program is to provide the owner(s) of the assets with a clear and concise path to resolution and maximized disposition of all assets while containing liability and costs.

USARG’s system has been progressively developed over the last 24 years of servicing these types of assets for financial institutions, the federal government and investors to ensure that the owner of the assets remain informed at all times of the status of the portfolio and the progress or challenges being faced in managing and delivering on expectations.

The challenges of managing this unique asset class are met with the tried and well tested approaches refined by USARG members in the distressed asset servicing of over $57 billion in institutional and federal government assets.

The core element driving the special servicing protocol is the initial Portfolio Business Plan and Quarterly Investor Update. The business plan is developed at the investment bid/acquisition stage and forms the basis for ongoing real time performance measurement by the investor. The Portfolio Business Plan will consist of an asset by asset (or asset class for small like-kind assets) plan for value and timing of disposition for each asset that will form the basis for the bid submitted for portfolio acquisitions. Within 90 days of asset assignment, a confirmed or revised business plan will be provided for Investor confirmation and regular (no less frequent than quarterly) revised Quarterly Investor Updates to the business plan will be provided on an asset by asset and portfolio basis with a direct comparison to original asset assumptions and includes variances from the original acquisition plan.

Extensive mapping of workflows form the basis for consistency in the delivery of asset management activities and illustrate the layers of procedures necessary to standardize efforts to the extent practicable, maximize resources by appropriate allocation of responsibility, ensure quality control, and provide effective bottom-up reporting mechanisms. Some sample workflows are provided herein to demonstrate the level of detail inherent in the program.

Additional fundamentals of this program are demonstrated by the Asset Stratification/Pipeline Management Reports which form the core of USARG’s systematic management style. A sampling of some these reports and pipeline management systems are provided herein to provide some basic insight into the process.

In addition, the following reports function both as an internal management tool to ensure that all assets are flowing through the pipeline per targeted expectations as well as an online-accessible investor reporting tool to provide clarity as to the stratification of the portfolio at any given time and enough asset detail to provide a clear vision as to USARG’s resolution progress on an asset by asset and portfolio overview basis. These reports are produced by broad asset category as follows:

Loans
Residential 1-4
Commercial, Multifamily and Land

The key reports are as follows:
Asset Stratification/Pipeline Tracking Summary & Detail – Loans
Asset Stratification/Pipeline Tracking Summary & Detail–Residential 1-4 Real Estate
Asset Stratification/Pipeline Tracking Summary & Detail - Commercial/MF/Land RE

Each report category contains a Summary Report that shows a portfolio rollup by total value of assets in each pipeline status. Pipeline statuses are defined steps through which assets must flow to reach final resolution and maximized disposition. In addition, each report contains a Detail Report that lists each asset and provides key information regarding that asset. The two combined reports give management an overall view of the portfolio by asset category and status of assets in that category (Summary Report) and at the same time allows for a drill down (Detail Report) into asset specifics that will lend clarity to the assets’ conditions that may hinder progress through the pipeline.

One of the key features of this approach is that targeted timelines can be set for the assets progress through the system and flags can be incorporated for those assets missing targeted expectations. Exception reports can then be produced at appropriate levels for management and staff consideration and action.

Additionally, these reports can be sorted by assigned Asset Management Specialist (either property preservation or disposition specialists) or Team Manager to provide insights into the performance of that assigned professional and need for attention and remedial guidance by team management or upper management

Contract Pending Pipeline – All Assets
Allows management to focus more intense attention on assets that have received contract offers to reduce fall out, expedite disposition and ensure maximization of returns. This report tracks and times all offersthrough 6 stages from contract received through closed and funded.

Portfolio Cash Flow/Returns Analysis
A summary roll up of all cash flows on an asset (detail) and portfolio basis (summary). This report allows the investor to consistently measure USARG’s performance as it relates to original expectations and current overall portfolio returns.

Foreclosure Tracking: This system developed by USARG has every state process (both judicial and non-judicial) programmed into the system to provide a targeted timeline by asset for the anticipated completion of the foreclosure process. An asset’s address can be entered along with the foreclosure procedure initiation date and the appropriate schedule will be produced for that asset for process management and exception reporting. Revised schedules are automatically produced as updates to the actual progress of the asset through the local process are entered into the system. Bankruptcy timelines are also tracked and incorporated into the asset tracking formula. From this, exception reports are produced to allow management to focus attention and provide information for effective decision making on both an asset portfolio basis. These exception reports can be sorted by assigned asset management personnel and/or assigned attorneys. The attached exhibits demonstrate this process:

Foreclosure Tracking Targeted Schedule by State
Judicial State Schedule
Non-Judicial State Schedule

Asset Foreclosure Tracking Schedule

Additional tools that allow for efficient management and maximized disposition that can be detailed at a later date are:

Custom Critical Date Ticklers:
To ensure that no critical dates are overlooked to diminish portfolio collateral.

Anecdotal Records Logs:
For logging all borrower contact efforts and results for assigned personnel effectiveness reviews and litigation support if that ensues.

Loan Resolution and Real Estate Contract Net Sheets:
Automated analyses populated from the system and incorporating the salient features of a purchase offer to support expedited and effective decision making at all levels and to be submitted to document case memoranda recommendations and requests.

Delegations of Authority:
The USARG program calls for levels of delegated authority that stratify the decision making process allowing for appropriate levels of action to expedite asset disposition without limiting action or over stepping authorities. The maximum level of delegated authority assigned by the investor resides with an USARG Oversight Committee that reviews and revises or concurs with any decisions of assigned staff. Policies and Procedures are developed on a program by program basis to define the levels of authority assigned to the rest of the management team and staff as appropriate.

Each pipeline status has well defined customized actions defined in extensive policy and procedures manuals that guide each property preservation and disposition specialist in their respective asset management activities for assets in that status. Specific delegations of authority set “go-no go” actions at each level and are intended to expedite asset progress to resolution without over-stepping assigned authorities.