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66 areas, along with some key questions and topics that an investor should consider when selecting a BPO partner. IDENTIFYING A PROVIDER NPL Experience e NPL market is vastly different than servicing or origination and investors need a partner who knows their business needs and can fulfill those needs quickly and accurately. e investor should understand the provider's experience with NPL BPOs, as volume is a strong indicator of their prowess and credibility in that area. Due to the enhanced risks that come with NPLs an investor needs to be able to trust the BPOs they are assessing to be accurate. When a trusted provider is used, the seller and bidder are more comfortable with their pricing. is reduces the scrutiny a bidder needs to apply to the property valuations and contributes to the confidence that enables successful deals. Credibility - Third-Party Validation Selecting a vendor that has received a high rating from a reputable third-party is one more level of assurance that the BPO provider is "who they say they are." A third-party assessment can substantiate claims of sound operational infrastructure, as well as the existence of sufficient security protections. e evaluation will also verify procedural consistencies and assess technological proficiency. ese assessments will generally evaluate a provider's pending legal cases or past due payments. If the third-party evaluator is a company the industry trusts (e.g. Morningstar, SSAE), the vetting process can be reduced or avoided all together, resulting in quicker on-boarding of the provider. is validation adds credibility to an investor's valuation provider and most importantly its valuations. Valuations that are viewed as credible will result in smoother processing when buying or selling pools. is credibility will also help to narrow the list of the top valuation partner candidates. e final selection can then be made based on which firm best aligns with the investor's business strategies and goals. Financial Strength and Stability e housing industry is cyclical, and it is important to have a vendor that has experience and staying power through any market cycle. Part of the initial evaluation process should include a review of the company's financials. Vendors are managing significant responsibilities on behalf of their clients, specifically the ability to pay their network of real estate agents in a timely manner, as well as the carrying the cost of receivables over time. Some questions to consider include whether the provider is a small firm, operating locally, regionally or nationally and whether they are publicly or privately held. Smaller, private firms may present greater risk over time, given the cash flow requirements of providing BPOs, especially with the increased compliance regulations and technological resources needed to remain competitive. Often times, larger companies have more liquidity and healthier balance sheets, which provide better counter-party risk. Additionally, publicly held companies sometimes provide an additional layer of risk mitigation given their compliance with Sarbanes-Oxley and Dodd-Frank. e bottom line is that the BPO provider, whether a small mom and pop or a Fortune 500 corporation, should provide the investor with confidence that it has the financial strength and history to sustain its offering and client relationship through a dynamic and risky market. Track Record of Internal Audits, Oversight and Controls Just as an investor would not want to be a babysitter of its employees, it certainly does not want to constantly monitor and hold the hand of its valuation partner. Investors benefit from partnering with companies experienced with both internal and external audits. Providers with extensive auditing history will be much more equipped to accommodate any future or specialized auditing that an investor requires. In addition, the provider should have historic audit records on file to demonstrate to an investor that they are a BPO partner with tight controls that are stringently followed. Compliance Compliance is obviously an important matter and is referenced throughout this article. An additional factor of compliance is the awareness of regulatory changes. Investors need a partner who is always up to date on the current regulatory requirements ranging from a county level, state level, to a national level, ensuring that all regulations are met. CHOOSING A PROVIDER Operational Expertise and Industry Reputation If the potential valuation partner has the right talent and training, then operational expertise and excellence will be apparent. e mortgage industry is vast but it is also a tightly knit community where reputations are key and networking is common. rough countless industry events, investors will easily see the most active players in the NPL space, but this visibility does not necessarily represent high quality. Investors want a partner that is well versed in the market and, as validation, may use these events to talk with real estate brokers that complete BPOs. ese conversations will often yield important insights into the mindset and practices of several providers. Investors should seek a valuation provider with a positive industry reputation and with credibility with agents, because this generally indicates that they keep their client's best interest in mind. Talent Acquisition and Continuous Training Having the right talent in place is critical for any business and that is no different when looking at valuation providers. Investors should seek partners who understand the business and their needs, and this knowledge must filter down to the staff level. Sound recruiting and continuous training processes ensure the team who will support the business has both the expertise and the support in place to provide accurate and timely results. Additionally, There are two key questions to ask when looking for a NPL valuation provider: 1. WHAT CONSTITUTES A SOUND BUSINESS? Identify potential providers: Select the right partner based on experience, credibility, financial strength, stability and compliance. 2. WHAT CONSTITUTES SOUND BUSINESS PRACTICES? Choose the best provider: Validate processes, quality, timeliness, communication, technology, and audits.

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