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60 to call a "ghost foreclosure." is is a term I am giving to a borrower that is close to default but the low interest rates have kept the borrower in their homes and now they have an ARM loan set to reset and a refinance is needed. In the case of an increased interest rate the only choice for this borrower might be to default. is trend, however, is notable for our industry but will be short lived. As the economy continues to recover and regulations loosen up, so will the ability to obtain a home loan. As this begins to happen I feel you will also see an increase in default activity. I think the other major factor that is already occurring and will continue to occur in the field services industry is that as the volumes continue to constrict from their current crisis level the GSEs and servicers will become much more organized within their own shops. ey will start to add smaller vendors into their vendor networks. is trend is going to continue to increase and it will benefit the smaller to mid-size field service firms. As this tactic continues there will be a changing of the guard within the field service industry which will put the dollars closer to the asset itself and put more money in the pocket of the vendor doing the work on the asset. is will lead to FHA properties conveying faster and REP assets selling faster as they are in a better marketable condition. TECHNOLOGY DEVELOPMENT MICHAEL HARRIS President, Exceleras For the last few years, technology develop- ment has been focused on regulatory compliance almost exclusively and to the detriment of profit-generating functionality and the user experience. Most recently it's been about the TILA/RESPA Integrated Disclosure on the origination side, while servicers have struggled to manage consumer complaint resolution, effective default management and REO disposition. With technology development focused mostly on keeping companies safe from non- compliance, little effort has been expended on creating new tools that will increase the profit- ability of the companies operating here. A new administration in Washington may have an impact, but it's too early to say with any certainty. In any event, the Consumer Financial Protection Bureau is not likely to go away and the government's general focus on consumer protection will not change. For the most part, the software we have today is meeting the needs of today's mortgage loan servicers. In the future, we expect to see more functionality added that will allow the servicer to shift focus from compliance concerns to higher efficiencies, better customer experi- ences and more bottom line profit. In addition to that, we see a huge under- served market in the real estate industry for technology that is easy to use and that can effec- tively connect various players, such as real estate investors, with the municipalities and commu- nity-based organizations that have properties to sell. Likewise, real estate agents are eager for opportunities to manage these assets, but need access to the right software and networks to get connected. Many of these users are experienced in the real estate business, but less so when it comes to the use of information technology. e software we're working on today makes it easy for these users to get what they need out of their busi- ness software without forcing them to become experts in IT. e other shift we're seeing and that we expect to see continue into 2017 is the fact that with the ability to more easily connect disparate software systems we're seeing a shift to consoli- date functionality into a single user experience. People don't want to manage three different software solutions for real estate acquisition, rental and disposition. ey want it all: work- flow and associated data to be contained within the same platform. Realizing this, we're seeing more companies work together to offer their shared clients better solutions that are easier to use, more secure in the way they handle data and more capable of meeting all of the needs in their businesses. As we move into 2017, watch for an increase in interesting software tools that will meet the needs of a broader real estate and home finance market. ese tools will likely go well beyond compliance and finally give businesses the power technology has long promised. VALUATION TAMI RUND President, Asset Valuation & Marketing ere are a number of factors which have an impact on our forecast of trends in the residential valuation space. One of the biggest drivers in the front end origination space is interest rates. ere has historically been a strong correlation between interest rates and residential 1st lien mortgage origination. In fact, the FED estimates that, for every 1 percent increase in the overall first mortgage interest rate on a 30 year fixed rate mortgage, first mortgage demand is reduced by between 2 and 3 percent (FED working papers, 2014). In light of that, we would expect first mortgage demand to drop some 3-5 percent over the next year as the FED continues to gently push the fed funds rate upward. Similarly, in the default servicing space, we have seen a sharp decline in the first mortgage delinquency rate since roughly Q2 2012. In fact, according to most indices, we are approaching default rates experienced prior to the meltdown. While we expect a continuing gradual decline in the overall volume of NP assets over the next few years, we have seen the delinquency rate start to stabilize and we expect that trend to continue. e residential valuation space is, generally speaking, a bifurcated market. We generally make the distinction between front end mort- gage origination valuation and default/portfolio servicing valuation. In light of the fact that AssetVal has exposure in both spaces, we have to look at the leading indicators for both spaces in order to appropriately allocate resources. With respect to the front end origination space, as EXPERT OPINION "As we move into 2017, watch for an increase in interesting software tools that will meet the needs of a broader real estate and home finance market." –MICHAEL HARRIS

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