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40 Erik Schmitt Managing Director, Origination Division, Chase Home Lending {Editorial Advisory Board member] What are the biggest challenges you are trying to solve for in 2023? How are you working to surmount those challenges? ree of the top industry challenges that Chase's Home Lending team will work to tackle in 2023 are: • Driving financial inclusion: Due to indus- trywide challenges with expanding access to sustainable credit and driving financial inclusion, Chase will continue to work with various investors, guarantors, regulators, industry participants, and stakeholders to propose solutions. We are also actively engaged in industrywide efforts led by OCC (Project REACh), MBA, SFA, and HPC to find new and innovative solutions. • Improving loss mitigation toolkit: We are looking to ensure Chase and other servicers can provide industrywide solutions to assist distressed customers in a higher interest rate environment. Chase is working with trades (MBA/HPC/SFA), investors, guarantors, peer servicers, and regulators to propose solutions to help distressed customers achieve meaningful payment relief and avoid foreclosure. • Making it simple to do business with Chase: We are focused on making it simple and seamless for customers to obtain a mortgage from Chase and for our advisors to deliver a remarkable experience. Chase is investing in our people, technology, products, and policies to continuously improve the customer and employee experience. What are the victories from 2022 that you're most proud of yourself and your team for accomplishing? What were the keys to success that enabled you to succeed in these areas? Chase Home Lending is proud of several key 2022 accomplishments that were achieved through working together as a team across the various disciplines within our business: • High customer satisfaction achieved through relentlessly focusing on improving customer experience » JD Power Mortgage Originators Survey— No. 2 overall » JD Power Mortgage Servicers Survey— No. 5 overall • Making advancements in our digital platform including Chase MyHome, which won a Banking Tech Award for Best Use of IT in Lending. • Continue to support and promote financial inclusion and make homebuying easier for all Americans through our Community and Affordable initiatives such as: » Beginner to Buyer podcast named one of the 10 Best Personal Finance Podcasts of 2022 by U.S. News & World Report. » Leveraging ECOA's Special Purpose Credit Program to provide $5,000 home- buyer eligible in more than 10,000 census tracts—up from 6,700 earlier this year. Douglas Whittemore Head of Default Servicing, U.S. Bank (Editorial Advisory Board member) What are the biggest challenges you are trying to solve for in 2023? How are you working to surmount those challenges? • Macroeconomic Environment: Anytime we have a volatile and uncertain macroeconomic environment, it presents many complex chal- lenges for mortgage servicers. Servicers need to balance costs/expenses, impact on customers, regulatory requirements, and servicing SLAs defined by investors, among many other items in their staffing and delinquency forecasts. 2023 may be one of the more uncertain mar- kets we have seen in a long time with head- winds, tailwinds, and crosswinds all blowing at the same time. We will have more factors to consider that may, in the end, offset, or they could generate multiyear market and housing volatility that servicers will need to navigate. • Unemployment: is is always top-of-mind for servicers and is a key driver in forecasting delinquencies. However, this may be more of a regional issue than nationwide one as we move forward. We have recently seen big tech make announcements of layoffs, and more than likely will see more as the tech sector compresses to align more with a post-pandemic world that sees more people travel, return to the office, and reduce spending. As most companies try to avoid layoffs during the holiday season, Q1 2023 may be the first read we get on what corporations have planned to address earnings and revenue pressures. While we are cautiously optimistic some markets that are experiencing continued labor shortages may be able to di- gest increased layoffs, others may not have that capacity, leading to regional spikes in defaults. • Inflation: Inflation continues to be a global issue impacting supply chains, goods, and services everywhere while wage growth has not kept up at the same pace. Even if unemploy- ment remains stable and low, persistent and prolonged inflation can eat away at household savings, further pressuring delinquencies and affordability. is is not only due to higher costs for consumer goods; taxes and insurance (escrow payments) can also increase, putting more pressure on affordability. • Interest Rates: A rising and volatile rate environment puts pressure on more than the demand side of autos, housing, and cost credit. e trickle-down impact on corporate earn- ings, household balance sheets, and equities can all directly impact a customer's ability to repay mortgage debt. Even more important is the impact on government-insured mortgages and their loss mitigation programs. is pri- marily would be loans sold into GNMA trusts backed by FHA, VA, and USDA. As rates rise above the customers' existing note rates, it can limit a servicer's ability to assist customers with payment relief as the overall mechanics, water- falls, and economics can be prohibitive to do so without putting some lenders at material risk of liquidity. e industry, in cooperation with the Housing Policy Council, continues to press for solutions, but meanwhile, each servicer will need to devise their own tools and tolerances within HUD guidelines to maximize their Feature By David Wharton