Risk Control Matrix — Mortgage Division

Bank One

Operating
Division Process Steps
Segment

Mortgage Application Template

Application Documentation
Application Documentation

Creditworthiness Analysis
Process

Notice of Lending Decision

 Loan Agreement

Retail Mortgage

Loan Onboarding
 Loan Onboarding

Loan Servicing

Delinquency Servicing
 Continuous Monitoring

Escalated Loans

Loan Balances Paid In Full

 Risk Description Risk Type

Inconsistent application of mortgage application process leads to

complaints and reputational damage as all factors were not considered Operational Risk
in application.

Incorrect loan and or interest rate applied to application due to

incomplete information from borrower on mortgage application
Regulatory Risk
template which could lead to complaints, reputational damage, and
fines.

Incorrect population of mortgage application impacts loan negative and

Operational Risk
leads to complaints, reputational damage, and fines.

Incorrect credit decisions due to credit reports that are out of date
Credit Risk
leading to complaints, reputational damage, and fines.

Incorrect credit decisions due to credit reports not representing the

applicants current financial standing which could result in borrower
Operational Risk
missing payments and becoming indebted leading to complaints,
reputational damage, fines.
 Incorrect credit decisions due to credit reports not representing the
applicants current financial standing which could result in the borrower
Operational Risk
missing payments and becoming indebted leading to complaints,
reputational damage, and fines.

Incorrect information on which the borrowing decision is based due to

property appraisal not accurately representing the collateral identified
Operational Risk
within the mortgage application, leading to complaints, reputational
damage, and fines.

Errors in application not detected resulting in incorrect mortgage

amount and interest and impacting the borrower resulting in Operational Risk
complaints, reputational damage, and fines.

Errors in application not detected resulting in incorrect mortgage

amount and interest and impacting the borrower resulting in Operational Risk
complaints, reputational damage, and fines.

Errors in application review not completed in accordance with

internally defined/approved benchmarks could result in incorrect
Operational Risk
mortgage amount and interest and impact the borrower resulting in
complaints, reputational damage, and fines.

Inaccurate information in the Notice of Lending Decision could impact

Operational Risk
the borrower resulting in complaints, reputational damage, and fines.
 Non-compliance with regulatory/legal requirements in the mortgage
loan agreement could lead to regulatory fines, reputational damage, Operational Risk
and customer complaints.

A borrower is offered a loan that was not among the options provided
within the creditworthiness analysis process resulting in complaints and Operational Risk
reputational damage.

The Loan Agreement is not presented within the bank-approved form

Operational Risk
resulting in fraud, impersonation, and complaints.

Incorrect information on which the borrowing decision is based due to

inaccurate loan agreement, leading to complaints, reputational Operational Risk
damage, and fines.

Customer complaints and reputational damage due to loan terms

offered becoming stale due to the time taken to sign and return the Operational Risk
loan agreement.

Executed loan agreement cannot be located on demand resulting in

Regulatory Risk
customer complaints.

Inaccurate information in the collagenised property and misfiling of

Regulatory Risk
information, leading to complaints, reputational damage, and fines.
New loans are not completely/accurately updated within the servicing
Operational Risk
system resulting in delays and customer complaints.

Incorrect interest calculations result in customer complaints,

Operational Risk
reputational damage, and fines which negatively impact borrowers.

Fees calculated incorrectly result in customer complaints, reputational

Operational Risk
damage, and fines which negatively impact the borrowers.

Payments not applied to the correct account lead to customer

complaints and reputational damage, which negatively impacts the Operational Risk
borrowers.

Incorrect interest calculations result in customer complaints,

Operational Risk
reputational damage, and fines which negatively impact borrowers.

Outstanding loan balance will not be recovered on loans that have

Credit Risk
become delinquent, resulting in customer complaints.

Borrower creditworthiness significantly deteriorates after loan funds

are issued (and while loan balance is outstanding) resulting in the
Credit Risk
borrower not being able to repay loan funds and financial loss to
company.

Outstanding loan balance will not be recovered on loans that have

Credit Risk
become delinquent

Outstanding loan balance will not be recovered on loans that have

Credit Risk
become delinquent
 Borrower creditworthiness significantly deteriorates after loan funds
are issued (and while loan balance is outstanding) resulting in borrower Credit Risk
not being able to repay loan funds and financial loss to company.

Collateral value significantly deteriorates after loan funds are issued

(and while loan balance is outstanding) resulting in the borrower not Credit Risk
being able to repay loan funds and financial loss to company.

For loans where the borrower's credit score or collateral value has
significantly deteriorated, mortgage payments may become delinquent
Credit Risk
impacting the ability of the borrower to repay funds and financial loss
to company.

Loans which have not been paid in full have been marked for closure
Operational Risk
and impact the borrower's future loan applications.

Closure of loan within the Mortgage Servicing Portal was not performed
completely resulting in customer complaints and the overcharging of Operational Risk
the borrower.

The deed associated with the loan collateral was released before the
loan was paid in full resulting in the borrower not paying outstanding Operational Risk
money which could lead to legal disputes.
 Control Description

Each mortgage applicant is provided a standard template which must be populated completely.

Each year, the Legal Division reviews the Mortgage Application Template to ensure that the required
information (as per the comprehensive set of applicable regulations) is completely represented within
the standardised document.

Upon review, the Legal Team will provide the Mortgage Division with the reviewed and approved version
of the template, which is then provided on a SharePoint site for Mortgage Division use (with older
versions of the template removed from circulation).

Before the analysis of the borrower’s creditworthiness begins, the Mortgage division reviews the
application for completeness. If the Mortgage division finds that some required information is missing,
they will reach out to the potential borrower (by phone) in order to obtain/populate the missing
information.

Per internal policy, the date of the credit reports must not exceed three business days from the date the
credit analysis is performed.

The Mortgage Analysis Portal is programmed to ensure that the applicant’s name and social security
number per the mortgage application agrees to the name and social security number per the credit
report.
 The appraisal must be conducted (i.e., dated) within one month of the creditworthiness analysis
performed.

The Mortgage Analysis Portal is automatically programmed to ensure that the address per the property
appraisal agrees to the collateral information represented within the mortgage application.

Within the Mortgage Analysis Portal, the system will disallow processing/analysis (via an error message)
of the documentation uploaded if the files uploaded are not complete.

To conduct analysis within the Portal, the Mortgage Division personnel must upload the missing
documentation, per the Portal’s error message, and submit the complete set of documentation.

Mortgage Analysis Portal is taken offline and tested by the IT Department quarterly to ensure that the
example documentation is completely and accurately interpreted per internal benchmarks defined.

The Mortgage Division conducts an annual review of their internal creditworthiness benchmarks to
define how the borrower's set of information should be scored, and to determine which types of
financing (if any) can be offered to a respective borrower.

Once approved, the Mortgage Division provides the defined terms to the IT Department, who will then
update the Mortgage Analysis Portal to reflect the updated terms defined.

The Mortgage Analysis Portal automatically produces the financing notice at the end of the analysis
process.

The notice is based on pre-approved templates, and is automatically populated with the applicant's
personal information and financing options.
 The Loan Agreement Template is reviewed and approved by the Legal Department and Mortgage
Department management annually.

To produce each Mortgage Loan Agreement, the Mortgage Department representative must access the
Mortgage Analysis Portal, and, within the system, will select the financing offer chosen by the borrower
(amongst the available options shown).

Only the loan offers which were presented within the Notice of Lending Decision will be presented within
this Portal view (for selection).

Mortgage Division representatives must only use the Mortgage Analysis Portal to produce Mortgage Loan
Agreements. The Portal solely uses the Loan Agreement template, which is pre-approved for use by both
the Legal and Mortgage divisions.

To produce the respective Mortgage Loan Agreement, the Mortgage Department representative will
access the Mortgage Analysis Portal, and, within the system, will select the financing offer chosen
(among the available options for the respective borrower).

Once a lending option is selected, the Portal automatically populates the Mortgage Loan Agreement
template with the details corresponding to the financing option selected by the borrower.

Per internal policy, the borrower must sign and return the document within seven business days of
receipt.

As soon as the executed version of the loan agreement is signed/returned to the Mortgage Division
representative, a copy is forwarded to the Legal Department.

This legally binding version is filed offsite (for physical copies returned) or is archived electronically via
cloud archival (for electronic signatures).

As soon as the executed version of the loan agreement is signed/returned to the Mortgage Division
representative, the Legal Department files a lien against the collateralised property.

The Legal Department maintains their own department-specific policies to ensure that all legal
documentation is filed with the appropriate governing bodies.
At the end of each month, the Financial Reporting team performs a reconciliation between the new loans
offered in the month (per the Loan Agreements produced within the Mortgage Analysis Portal) to the
new loans added to the Mortgage Servicing Portal during that month.

Any differences are investigated to determine all loans that were executed are represented within the
Mortgage Servicing Portal.

The Mortgage Servicing Portal automatically calculates the interest portion of the mortgage payment by
using the stated interest rate and current loan balance (as maintained within the servicing system).

The Mortgage Servicing Portal is programmed to automatically determine if late fees have been
triggered, and, if so, automatically calculates the amount of late fees due.

Online payments are automatically applied to a respective borrower's account via direct linkage between
the Bank One website (where electronic payments are made) to the Mortgage Servicing Portal.

The Mortgage Servicing Portal is programmed to automatically apply any payments received in the
following order:
1) Late fees accrued
2) Interest accrued
3) Outstanding principal balance

If late fees are charged, the Mortgage Serving Portal automatically generates a notice of the late fees,
which the Mortgage Division representative must provide to the borrower within two business days.

For loans 30+ days past due, a Notice of Delinquency is automatically produced by the Loan Servicing
Portal and must be sent to the borrower (by the Mortgage Division representative) within two business
days.

The contents of the notice include the Bank One delinquency team contract information for potential
solutions to reduce the monthly payment due each month.

For loans 60+ days past due, a notice of delinquency is sent to the borrower which includes a warning
that the file will be escalated for further collection efforts if the account is not made current.

The contents include the Bank One contract information for potential solutions to reduce the monthly
payment due each month.

For loans 90+ days past due, the loan file is referred to a third-party collections agency for further
collection efforts.

Bank One maintains a separate Third-Party Management Policy to govern the efforts of the servicer used
for severely delinquent accounts.
 Each quarter, the respective Mortgage Division representative pulls a current version of the credit
reports, and determines whether the borrower's credit score has significantly declined.

If the borrower's credit score has fallen by more than 50 points since their credit score at the time the
mortgage was approved, the loan will be flagged for escalation.

Each year, the respective Mortgage Division representative requests a current appraisal (from the
internal Appraisal Team) for the collateralised property to determine whether the value has significantly
declined.

If the property value has fallen by more than 20% since the valuation at the time the mortgage was
approved, the loan will be flagged for escalation.

The respective Mortgage Division representative reaches out to the borrower to ascertain the reasons for
the decline in financial condition and/or collateral value, and documents such response within the loan
file (Mortgage Servicing Portal).

Based on the response, the Mortgage Division representatives may be able to offer relief available via
various internal and government-sponsored programs.

Configuration within the Mortgage Servicing Portal precludes a loan to move to “Closed Loan” status if
there is any unpaid balance (including late fees, principal or interest) within the Portal.

Once “Closed Loan” status is selected within the Portal, a checklist is provided to the Mortgage Division
representative (which was compiled by Mortgage Division senior management and approved for use by
the Legal Department).

The checklist provides steps to fully close the servicing efforts of the loan which has been paid in full.

The process to release the deed associated with the mortgage collateral is owned by the Legal Division
and is described in further detail within their detailed policies and procedures.
Control Type

Preventative

Preventative

Preventative

Preventative

Detective
Preventative

Detective

Preventative

Preventative

Preventative

Preventative
Preventative

Preventative

Preventative

Preventative

Preventative

Preventative

Preventative
Preventative

Preventative

Preventative

Preventative

Preventative

Detective

Detective

Detective

Detective
Preventative

Preventative

Preventative

Preventative

Preventative

Preventative
 Control Owner
Control Frequency
(Division)

As Needed Mortgage Division

Annually Legal Team

As Needed Mortgage Division

As Needed Mortgage Division

As Needed IT Department
As Needed Appraisal Team

As Needed IT Department

As Needed IT Department

Quarterly IT Department

Annually IT Department

As Needed Mortgage Division

Annually Legal Team

As Needed Mortgage Division

As Needed Mortgage Division

As Needed Mortgage Division

As Needed Mortgage Division

As Needed Legal Team

As Needed Legal Team

As Needed Financial Reporting

Monthly IT Department

Monthly IT Department

Monthly IT Department

Monthly IT Department

As Needed Mortgage Division

As Needed Mortgage Division

As Needed Mortgage Division

As Needed Third Party Servicer

Quarterly Mortgage Division

Annually Appraisal Team

As Needed Mortgage Division

As Needed IT Department

As Needed Mortgage Division

As Needed Legal Team