mortgage bank implementation process

April 2009

De Novo Mortgage Bank Implementation Plan

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Executive Summary

The Pre-Launch Implementation Plan (the “Plan”) will provide a structure to support the

successful launch of Joint Venture’s retail and direct mortgage lending capabilities

The Plan provides the framework of activities that will occur over a twenty-four week period

between execution of the Joint Venture Agreement and the date of operational readiness

All required activities are broken into one of seven primary functional areas: Human Capital,

Facilities Implementation, Technology – Hardware and Software, Support Functions & Vendor

Development, Sales & Marketing, Licensing and Registration, Business Documentation and

Funding and Exits

Key assumptions to executing on the proposed timeline include:– Infrastructure – readiness for occupancy and availability of necessary supporting functionality (e.g.,

electrical, telephony, internet, etc.)

– Technology – timely delivery and successful installation of systems hardware and network equipment

– Licensing / Regulatory – all necessary government permits, licenses, etc. are attained in a timely

manner

– Vendors – disciplined management and of multiple vendors with key interdependencies and timely

execution by such vendors

3Phase 1 Phase 2 Phase 3Legend

Pre-Launch Implementation PlanHuman Capital, Facilities Implementation, Technology, Support Functions & Vendor Development

Phase 4

Delivery of Business

Documentation

April OctoberMay June July August September1 2 3

Support Functions

and Vendor Development

Technology -Hardware

Technology -Software

Human Capital

Facilities Implementation

Identify & Hire Senior Executives

Exec. Training, Middle Mgmt & Key Support Staff Hiring

General Training & Relocation of Executives

Approval of Business Documentation and Company Formation

Operational Readiness and

Launch

Design, Planning and Evaluation

Renovation and Construction

Move in and Set up

Network Installation and Testing, Datacenter Setup,

Infrastructure Testing

System Hardware/Software Design/Ordering

Network Design, Data Center Buildout, Network/Server Hardware

UAT Testing, Training and “Go Live”

Vendor RFP & Software Selection Process System Software Design/

Configuration/Ordering Test Plans, Application Installation/ Configuration,

Deployment of Code UAT Testing, Training and “Go Live”

Assess and Design Reporting; Identify Required Vendors

Complete Business System Tests; Finalize Vendor Relationships

4Phase 1 Phase 2 Phase 3Legend

Pre-Launch Implementation PlanSales and Marketing, Licensing and Registration, Business Documentation, Funding and Exit Strategies

Phase 4

Funding andExit Strategies

Sales and Marketing

Licensing andRegistration

Prepare and Submit Licensing Documents

Company Formation

Warehouse Line Negotiations

Develop Secondary Market Relationships

Business Documentation

Delivery of Business

Documentation


Approval of Business Documentation and Company Formation

Operational Readiness and

Launch

Business Documentation Submission

Finalize the Business Documentation

Acquire Advertising Partner; Begin Brand Effort

Kick-off Teaser Ad Campaign

Grand Launch Preparations

5


Human Capital

Source the best and brightest mortgage industry executives to manage the venture

Staff to be trained and tested in originating, processing, underwriting and closing loans prior to launch

Initial staff of 47 hired and fully trained with capacity to process and close 60 loans per month

Relocation of Executives and their families upon formation of the company

Chief Training Officer begins conducting general training of all non-management employees, focusing on topics including:

Product Suite and Features Sales Techniques & Customer Service Processing and Systems Credit Analysis and Policies Mortgage servicing

Conduct simulation and testing of mortgage life cycle from initial referral leads through processing, underwriting, quality control, closing, funding and post closing with specific focus on efficiency gains, systems and bottlenecks

Update and complete of training manual to be used to train newly hired employees during expansion

Hire senior management to formulate venture’s vision and establish operations:

CEO, CFO, CLO, COO, Head of Operations, Head of Sales, Head of Legal and Compliance, Chief Training Officer, HR Manager

Senior management will be, predominately American and European, while middle management and support staff will be mostly from GCC countries

Commence recruitment efforts with:

Two US-based recruiters specializing in mortgage industry placements and focusing on senior management candidates sourced primarily from the United States and Europe

The Dubai office of an international recruitment network to source senior management candidates from GCC countries

Locally based recruiters to hire middle management and support staff

Senior executives engaged and temporarily relocate

Management immediately assumes key responsibilities:

Modify and execute this implementation plan

Negotiate with vendors and oversee implementation and execution

Interview and hire middle management, loan officers and support staff (IT, accounting, underwriters, telemarketers)

Select executives will receive training at specific locations:

CEO will train with mortgage divisions specialists in the USA and UK

Chief Lending Officer will train with the Credit Risk Management Group in London

Chief Training Officer to design a comprehensive training program for new employees

Phase I Phase II Phase III

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Identify & Hire Senior Executives

Exec. Training, Middle Mgmt & Key Support Staff Hiring

General Training & Relocation of Executives

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Configure office layout according to original design and seating plan

Install furniture and remaining fixtures

Install computer terminals

Setup digital network infrastructure to insure cooperation and coordination between:

Telecommunications

Printing & imaging

Intranet

Test systems for basic functionality and resolve any discrepancies with vendors and contractors:

Electrical

Computer

Communications

Security

Begin renovation of office space – vendor responsibilities to be assigned as follows:

Interior decorator – finished design of interior space (ie: Glasswork, painting)

Contractor – sourcing of materials, execution of internal structure per architectural and interior design plans, installation of fixtures and HVAC, flooring, etc

Electrician – wiring of office for electric outlets, internet and telephone lines

Plumber – installation of relevant fittings and water lines

Register with utility contractors (Saudi telecom, internet, electric board) and register new connections

Finalize seating plan

Phase II Commence operations from the FAR Venture

office (temporary seating for 6 people)

Hire an interior decorator, contractor and architect to design a sophisticated office space

Sign contracts with vendors and utilities for:

Office Furniture (Jeraisy, Kinnarps, etc)

Computer hardware (IBM, Hewlett-Packard)

Data Center planning (build-out, cooling, fire protection, equip layout, circuit term)

Network, Telecom, Switches/Routers and Electric (Cisco, Saudi Telecom, Ebittikar)

Plumbing, HVAC, Water

Physical security systems (data center, video cameras, electric locks, etc.)

Schedule inspections with city officials to insure building codes are followed and approved

Phase I

Facilities Implementation

Establish a functional and attractive office facility with working electricity, plumbing, telecom, furniture and computer hardware

Establish required infrastructure to implement operations and systems

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Phase III

Design, Planning and Evaluation

Renovation and Construction

Move in and Set up


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Technology - Hardware

Lending, banking and other supporting business software acquired, designed, deployed and tested for operational readiness

Office technology – hardware, software, network, internet – deployed and operational

Begin process of designing networks, fiber/voice/internet connectivity requirements. Determine in-country network points and installation requirements based on sites and available vendor access points

Determine data center requirements, data closets, and overall layout leveraging information security guidelines

Determine vendor management contracts needed for procurement of hardware and networks

Determine overall hardware needs for network, desktops, vru’s, phones, and application servers

Order network connectivity and associated hardware. Network ordering requires the longest lead time for ordering and installation.

Phase I Use outputs from joint application

development sessions to determine application hardware capacity, viable operating systems/middleware software and configuration. Hardware interdependent with software selection due to possible proprietary software needs

Begin the buildout of data center/closets, vertical/horizontal wiring, data room security and access areas

Define location of all server hardware needed and sites for installation

Place orders for all technology software/server hardware/desktops. Build out for three environments (test, build, production) Plan for customs timelines and costs

Determine who will be receiving equipment at customs and at sites to prepare for storage and installation

Begin Testing with Business Group for User Acceptance

Deploy final software release into production verifying all products, pricing, documents, etc

Training sales and support on training systems across all products and channels

Finalize all technology installations and testing in production environments

Phase II Phase IV Installation/bringing up of

networks/voice/data to defined locations. Testing of networks (primary, secondary)

Datacenter completed and racks for equipment installed

Setup of server hardware, imaging hardware, voice equipment in datacenter

Order toll free numbers and test

Testing of hardware and software application across multiple platforms (test, build, production)

Configuration of training room and desktops

Install of desktops, phones, testing of vertical wiring and acceptable response times to locations

Begin application integration testing with technology teams/vendors

Phase III

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Network Installation and Testing, Datacenter Setup,

Infrastructure Testing

System Hardware/Software Design/Ordering

Network Design, Data Center Buildout, Network/Server Hardware

UAT Testing, Training and “Go Live”

8


Technology - Software

Lending, banking and other supporting business software acquired, designed, deployed and tested for operational readiness

Office technology – hardware, software, network, internet – deployed and operational

Streamline software system vendor list to select potential technology partners supportive of business requirements. Limit vendor customization in order to meet timelines

Draft and distribute RFP – one week

RFP Response within 10-14 days Evaluate responses and make

selection within one week Determine additional software

vendors required for secondary applications such as email, general ledger, human resources, and imaging

Finalize and negotiate all vendor software contracts

Phase I Joint application development (“JAD”)

sessions with business leaders, technology lead and vendor partners

Use outputs from JAD to form basis for software application design and overall configuration /customization of application

Formulate plan for integration into backend software applications such as General Ledger, Email, and or HR systems

Finalize requirements for secondary applications such as Imaging and Servicing functions

Determine release/deployment schedules for channels and products, with software vendor and technology teams

Place software orders for applications needed for Day 1 delivery

Begin Testing with Business Group for User Acceptance

Deploy final software release into production verifying all products, pricing, documents, etc

Training sales and support on training systems across all products and channels

Finalize all technology installations and testing in production environments

Phase II Phase IV Determine overall application Test

Plans and scripting across technology and business

Installation of software on hardware servers within data center or associated staging site. Configure test, build, production hardware facilities

Testing of hardware and software application across multiple platforms (test, build, production)

Configuration of training room and setup of desktops and phones

Begin application integration testing with technology teams/vendors

Phase III

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Ph

ase Vendor RFP & Software

Selection Process System Software Design/Configuration/Ordering Test Plans, Application

Installation/ Configuration,Deployment of Code UAT Testing, Training and “Go Live”

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Support Functions and Vendor Development

After technology systems deployment, implement and test accounting and financial reporting policies and procedures to insure the correct processing of data, financial reports and back-end accounting processes

Create budgets, forecasts and financial models to test accuracy of reporting system and prepare preliminary operating forecast and budget for operations

Design business documents, specific operating procedures, computer system input forms and training policies to describe standard process of interacting with third party vendors

Conduct testing and run sample credit reports to verify accuracy of the information received and test the ability of the system

Create test simulations to check accuracy and reliability of servicing and underwriting systems and procedures and ensure data flows correctly through the system

These simulations will also be used in training exercises to teach new employees correct procedures with respect to underwriting and servicing mortgages

Design parameters of accounting and financial reporting system to comply with GAAP and IFRS

Design a comprehensive accounting and financial model to incorporate all business aspects allowing accurate budgeting, forecasting and reporting of key accounting and financial information

Management dashboard with live P&L, Balance Sheet, production metrics and other key operational statistics

Design a collective reporting system to allow shareholders, executives, underwriters, accountants and credit underwriters easy access to customized reports tailored to their specific needs

Engage Financial Auditors

Negotiate and engage third party providers such as appraisers, notaries, records managers, cash collection agencies/banks, imaging services and couriers needed for daily operations

Apply and receive approval from SIMAH credit agency to:

Receive credit reports on demand on potential applicants

Write credit memos and notes to applicants and lessee’s credit files

Phase I Phase II

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Accurate and reliable financial and accounting reports generated and easily accessible

Selection and engagement of the best possible third party service providers

Approval of SIMAH agreement and verified accuracy of credit reports downloadedGo

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Ph

ase Assess and Design Reporting;

Identify Required Vendors

Complete Business System Tests; Finalize Vendor Relationships

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Sales & Marketing

Advertising and branding campaign that effectively and memorably conveys the right message to the right audience Agreements with developers for sole rights to mortgage sales in their current and future products

High impact, high visibility “Grand Opening Event”

At Phase III, advertising will increase in scope and scale to further inform customers about:

Details of launch event date

Value proposition to further reinforce the abilities, advantages and benefits of suite of mortgage products

Prepare for launch event

Hire an event planner to operate and host the Launch event to manage catering, decorations, location, amenities and ambiance

Attendance will include senior executives

Hire advertising agency (potentially Drive Communications) to create a comprehensive advertising and branding campaign:

Develop a marketing and public relations campaign that targets Home Buyers and select appropriate media that resonates with the demographic

Initiate Event Planning

Create a new company logo that shows strength, passion, excellence and dependability

Head of Sales to build relationships with real estate brokers, insurance agents and commercial developers with the goal of signing exclusive agreements to be the sole provider of mortgages for current and future construction and development

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Create brand awareness among potential customers to emphasize the core brand competencies: quality, service and product.

Invest in highly rated media vehicles and utilize ‘Call for Action” media to help build brand recognition, and educate potential customers about the details and benefits of mortgages to develop product awareness

Finalize agreements with developers to become sole mortgage provider for new construction projects.

Phase I Phase II Phase III

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Acquire Advertising Partner; Begin Brand Effort

Kick-off Teaser Ad Campaign

Grand Launch Preparations

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Licensing and Registration

Obtain the Incorporation Licenses and the Operating Licenses

Fully capitalize the new company

After initial approval, final documentation is submitted to the Ministry of Commerce including:

Notarized Articles of Association

CompanyBylaws endorsed by the constituent assembly

Signed minutes of the meeting of the constituent assembly

Ministry of Commerce announces the incorporation of the company by publishing it in the Official Gazette, the local newspaper

Upon completion of licensing and registration procedures, the company is incorporated and capitalized

Apply to SAGIA by submitting the SAMA “No Objection letter”, thus granting an investment license enabling ownership of shares of a Saudi corporation

Submit to MOCI an initial application for the incorporation of a joint stock company in KSA. The application consists of: the SAMA “No Objection Letter”, the draft Articles of Association and a draft of the company’s bylaws

Phase I Phase II

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Prepare and Submit Licensing Documents

Company Formation


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Business Documentation

Receipt of the Pre-Capitalization Licenses Notice and Approval Notice

Timely delivery of the Business Documentation, together with the Shari'ah Certificate and the Saudi Legal Opinion, after receipt of Credit Risk Approval

Deliver the Approved Business Documentation

Review of the Business Documentation

Approval of the Business Documentation in accordance with the established governance structure

Receipt of Credit Risk Approval

Receipt of the Pre-Capitalisation Licences Notice

Deliver the Business Documentation, after receipt of Credit Risk Approval

Receipt of Approval Notice

Deliver the Approved Business Documentation

Continue to prepare the other Business Documentation in accordance with the Business Plan and the established timeline

Prioritize the Business Documentation which will be covered by the Shari'ah Certificate and/or will be subject to Credit Risk Approval, to allot the proper amount of time for translation of the Business Documentation to be certified by the Shari'ah Committee, and review and approval of all of the Business Documentation

Continue to identify mortgage software providers and select a provider for each applicable automation area

Deliver to each software provider selected specifications and requirements to facilitate the design of the applicable software

Phase I Phase II

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Business Documentation Submission

Finalize the Business Documentation


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Funding & Exit Strategy

Arrange a warehouse line of funding prior to launch

Establish relationships with banks, pension plans and institutional investors regarding the sale of whole loans

Finalize negotiations and the arrangement of a long-term warehouse

facilities with multiple Saudi Banks

Formulate a strategy and plan to develop the whole loan market

Prepare presentation materials and sample mortgage loan pools

Create sample portfolios of mortgage to begin preparations for an exit

strategy to the secondary markets

Build visibility and goodwill by hosting workshops pertaining to the

analysis of mortgage cashflows and the unique payment characteristics

Begin preliminary discussions and negotiations with pension plans,

endowments, banks and various investors to present the benefits and

increased returns when adding secondary mortgage products to investment

portfolios

Prepare for Roadshow to be conducted upon commencement of operations

Chief Lending Officer commences negotiations with banks and financial institutions for the provision of warehouse lines of credit

Prepare presentation materials and sample mortgage loan profiles

Introductory dialogue with Saudi banks to discuss the venture, its vision and plans, and mutual benefits of providing a warehouse line

Present underwriting guidelines and competitive advantage in assessing credit risk

Commence negotiations with respect to the structure and terms of the facilities. Key points include:

Facility size

Fees and rates

Portfolio profile and underwriting restrictions

Tenor and conditions for asset disposition

Phase I Phase II

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Warehouse Line Negotiations

Develop Secondary Market Relationships

Indicative Seating Plan Meters 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

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38 Internal Stairs 2nd Floor39 Copier

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mortgage bank implementation process

Technology

launch design

middle management

senior management candidates

management employees

hire senior executives

technology hardware

hr manager senior management

company chief training