Fieldstone Investment — Investor Presentation (January 2007)
35 slides from Fieldstone Investment's investor presentation, Jan 29, 2007
Slide 1: Securitization Program Update
Exhibit 99.1 Securitization Program Update January 2007 www.FieldstoneInvestment.com
Slide 2: Disclaimer
Disclaimer FORWARD-LOOKING STATEMENTS This presentation may contain “forward-looking statements” within the meaning of the federal securities laws including, but not limited to (i) statements regarding the expected building of Fieldstone’s portfolio and origination business in 2007; (ii) the expecte
Slide 3: Table of Contents
Table of Contents Page I. Fieldstone Summary 4 II. Portfolio Summary 14 III. Origination Summary 19 IV. Underwriting Summary 22 Supplemental Data : Collateral Performance and Trends 29 Collateral Risk-Adjusted Coupons 33 Management 34 3
Slide 4: Strategic Summary
Strategic Summary Fieldstone’s Business Proposition – Vertically integrated origination of and investment in residential mortgages – Complete dis-intermediation of the sector: pre-tax earnings direct to shareholders – Strong focus on loan quality, portfolio management and liquidity Strategic Imperat
Slide 5: Fieldstone Summary Information
Fieldstone Summary Information Publicly traded on NASDAQ: FICC Fieldstone’s businesses include: Originating residential mortgage loans, in its Taxable REIT Subsidiary (TRS) Investing in a mortgage portfolio in the REIT for net interest income over time Issuing mortgage-backed securities to finance l
Slide 6: Current Market Conditions
Current Market Conditions Mortgage originators under significant pressure Intense competition for loans in a contracting mortgage market Increased levels of early payment defaults and repurchase requests Continued imperative to lower costs requires significant investments in systems Volatile interes
Slide 7: Market Opportunity
Market Opportunity Origination growth positive over the long term Rising consumer debt will drive demand for non-prime and Alt-A products Aging and growing population will support home price appreciation Challenging market will eliminate poorly capitalized originators Sophisticated buyers continue t
Slide 8: Fieldstone's Strategic Initiatives for 2007
Fieldstone’s Strategic Initiatives for 2007 Reduce Cost to Originate Improve Servicing of Loan Portfolio Increase Market Share and Fundings 8
Slide 9: Strategic Initiatives: Reduce Cost to Originate
Fieldstone’s Strategic Initiatives for 2007 Reduce Cost to Originate Reduce number of operations centers Lower premiums paid for wholesale loans Achieve efficiencies from use of new Loan Origination System Train customers on self-serve use of on-line technology Commission plan focused on net revenue
Slide 10: Strategic Initiatives: Improve Servicing of Loan Portfolio
Fieldstone’s Strategic Initiatives for 2007 Improve Servicing of Loan Portfolio Accelerated manual intervention on delinquent loans Set-up loans initially with the permanent servicer Engaged delinquency and loss mitigation over-seer for 2006 loans Retain only selected products for portfolio: Already
Slide 11: Strategic Initiatives: Increase Market Share and Fundings
Fieldstone’s Strategic Initiatives for 2007 Increase Market Share and Fundings Simplified, discounted rate sheet on-line Focus customers on self-serve use of on-line technology Add sales force in strategic markets Add higher credit products with appropriate revenue opportunities Innovate on non-conf
Slide 12: Fieldstone Remains Focused on Loan Quality
Fieldstone Remains Focused on Loan Quality Appraisal Reviews AVM or review appraisal on all loans Lower tolerances for AVM values in current real estate market Focus on recent sale and listing information for current valuations Borrower Credit FICO-driven underwriting guidelines Focus on debt ratio,
Slide 13: Capital Structure and Liquidity
Capital Structure and Liquidity Fieldstone maintains: Adequate capital and liquidity $2.25 billion of lines of credit An increase of $500 million over September 30th Long-term, multifaceted relationships with our lenders In compliance with all covenants at September 30th Obtained amendments in Decem
Slide 14: Fieldstone's Investment Portfolio: Strategic Proposition
Fieldstone’s Investment Portfolio: Strategic Proposition Originate high quality non-conforming loans for REIT portfolio 2/28 hybrid ARMs primarily 648 average credit score as of September 30, 2006 Focus on median and lower priced, owner occupied homes Interest Only hybrid ARM’s begin amortizing afte
Slide 15: Fieldstone Portfolio as of September 30, 2006
Fieldstone Portfolio as of September 30, 2006 Collateral Characteristics Investment Portfolio Balance ($ millions) $7,000 Average Credit Score 648 $5,855 $6,000 $5,273 $5,526 $5,487 $5,688 $5,106 $4,836 First Lien Hybrid ARMs 89.1% $5,000 $4,752 $4,129 $4,000 - Average Current Coupon 7.9% $3,000 - A
Slide 16: REIT Portfolio Strategy
REIT Portfolio Strategy Focused Strategy to Create Stable and High Yielding Cash Flows Consistent Issuance of MBS Debt Consistent Net Interest Income FMIC 2003-1 FMIC 2005-1 FMIC 2003-1 Caps at Forward LIBOR Size: $488,923,000 Size: $743,625,000 Priced: 10/3/03 Priced: 2/14/05 FMIC 2004-1 Swap at 1.
Slide 17: FMIC Program Distinguishing Characteristics
FMIC Program Distinguishing Characteristics Strong servicer – JPMorgan Chase Bank, N.A. maintains the highest servicer ratings from the rating agencies Strong Master Servicer / Servicing Oversight – Wells Fargo Bank, N.A. Reduced Basis Risk nd Primarily hybrid ARM collateral with limited fixed rate
Slide 18: Non-Conforming Hybrid ARM Mortgage - Initial Gross Interest Margin
Non-Conforming Hybrid ARM Mortgage - Initial Gross Interest Margin (prior to ARM re-set) 2 Year Hybrid Gross Int. Margin 9.0 8.5 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 2/28 Hybrids HFI 2/28 Hybrids HFS 2YR SWAP HFI v. Swap • Initial Coupon on 2 year hybrid ARM mortgages will re-
Slide 19: Fieldstone's Origination Strategy
Fieldstone’s Origination Strategy Established loan origination channels since 1995: Focus on loan quality, customer service and operating efficiency Opportunistic product development Net-Revenue based commissions Quality-based management incentives Mortgage loan operations driven by technology: On-L
Slide 20: National Origination Franchise
National Origination Franchise Everett Seattle Chicago Portland Bloomington Cedar Rapids Boston Davenport Des Moines Corporate Denver Headquarters, Omaha Concord Columbia, Maryland Independence Sacramento Wichita Indianapolis Hanover Las Vegas Overland Park Springfield Carson Phoenix Tempe Irvine Me
Slide 21: Quarterly Loan Originations
Quarterly Loan Originations $1,800 $1,643 $1,600 $1,400 $1,261 $1,264 $1,207 $1,200 $1,000 $861 $800 $600 $400 $236 $165 $151 $196 $188 $200 $0 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 Non-Conforming Wholesale Division Retail Division 21
Slide 22: Underwriting Summary
Underwriting Summary Fieldstone’s Investigative Underwriting Process is designed to deter fraud and limit default frequency and loss severity. Full credit underwriting completed on all loans prior to funding Default Frequency control Full doc loans require execution of 4506 T Stated loans » require
Slide 23: Underwriting Summary - continued
Underwriting Summary - continued Loss Severity control: Fieldstone’s Appraisal Policy Appraisal checklist completed by underwriters Appraisal validated through AVM or other review products unless completed by approved National Appraisal firm or new construction by approved national builder All desk
Slide 24: Controls
Controls Underwriting completed in regional offices Provides strong knowledge of local statutes Better knowledge of local real estate values Credit approval authorities are assigned to each underwriter by the Chief Credit Officer Underwriter performance tracked monthly via Underwriters’ Report Card
Slide 25: Income Documentation Requirements
Income Documentation Requirements Fieldstone Offers Five Documentation Levels. Verbal Verification of Employment Is Always Obtained by FMC Within Five Days of Closing Full Documentation Current pay stubs and most recent year’s W-2s for wage earners; two-years tax returns (business and personal) for
Slide 26: Income Documentation Requirements - continued
Income Documentation Requirements - continued Limited Documentation Wage Earners: Most recent YTD pay stub required; average YTD income used to qualify; must verify two years in the same profession 1099 Employees: Most recent year’s 1099 and YTD statement of earnings required. 75% of average income
Slide 27: Selected Recent Guideline Changes
Selected Recent Guideline Changes • Eliminated seller held second liens • Revised requirements for review appraisals: 8% tolerance (from 12%) • Increased minimum FICO requirements for Wall Street 100% combo loans to 620 for Full Doc and 660 for Stated Income • Eliminated seller concessions below 600
Slide 28: Supplemental Data
Supplemental Data January 2007 www.FieldstoneInvestment.com
Slide 29: FMIC Static Pool Prepayment Analysis
FMIC Static Pool Prepayment Analysis Constant prepay rates generally track the market, with spikes around the reset dates as the average life of Fieldstone’s loans is 22 months. FMIC Static Pool Prepayment Analysis 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 3
Slide 30: Loan Performance - Delinquencies
Loan Performance - Delinquencies As delinquencies and losses have increased on recent originations as well as due to the overall aging of the portfolio, Fieldstone will focus on loss mitigation initiatives to improve loan performance. FMIC Static Pool Delinquency Analysis 60+ Days Delinquent (OTS Me
Slide 31: FMIC Static Pool Cumulative Loss Analysis
FMIC Static Pool Cumulative Loss Analysis FMIC Static Pool Cumulative Loss Analysis 1.00% 0.90% 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 Deal Seasoning (months) 2003 Non-Prime ARM Data from LP/CS Weighted Average of FMIC 2003 Vintage 2
Slide 32: Credit Risk Management
Credit Risk Management Credit Score by Income Documentation Level 740 Q3 2006 Non-Conforming Originations 720 700 675 674 679 680 660 648 645 640 622 620 600 Full or Alternative 24 Month Bank 12 Month Bank Limited Stated Income Stated Income Documentation Statements Statements Documentation Self Emp
Slide 33: Credit Risk Management-Risk-Based Pricing
Credit Risk Management-Risk-Based Pricing Portfolio Composition - Risk-Based Pricing (as of September 30, 2006) 10.0% 9.4% 9.0% 8.3% 7.9% 7.8% 7.7% 8.0% 7.0% 6.0% 5.0% 500-549 550-599 600-649 650-699 >700 _ Credit Score Weighted Average Coupon: 7.9% 33
Slide 34: Management Experience
Management Experience Michael Sonnenfeld, President and Chief Executive Officer since 1995 18+ years of experience in mortgage banking and mortgage securities Former Director of the Subprime Residential Mortgage Conduit for Nomura Securities International, Inc. Former President for Saxon Mortgage Fu
Slide 35: Securitization Program Update
Securitization Program Update January 2007 www.FieldstoneInvestment.com
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