Jeanie Lutterbei First Vice President – Technology Integration

1. An Update on our Progress Jeanie Lutterbei First Vice President – Technology Integration

2. Federally chartered savings bank Founded in 1987 Corporate Headquarters Troy, Michigan

3. 200020022003 • Bank branches in Midwest 52 87 100 • Loan officers 180 700 950+ • Total assets $5.8B $8.4B $10.9B • Mortgages closed $9.8B $42B $56.4B • Mortgage servicing portfolio $6.6B $35B $40.0B • Employees 2000+ 4200+ 3500+

4. Review your Technology Strategy • Support the Vision • Support the Current Environment • Step Outside the Zone • Stop, Look, Listen, and Pro-Act! Institute Project Management as a Science Require Business Unit involvement Organize and deliver better results Perform a Competitive Response Analysis Change Your Environment • Look for New Products – It’s a New World

5. APPLICATION UNDERWRITING CLOSING POST-CLOSING SALE/SERVICE SHORTEN CYCLE TIME COMPLIANCE & AUDIT

6. Mortgage Volume High loan volume necessitated reducing paper and eliminating antiquated processes Underwriting Costs Paper processes require significant manpower which reduces profit per loan Post Closing Review Issues Lost loan documentation increases risk Processing Service Levels Customers are more interested in loan processing turn times than cost – paper processes were slow

7. “Paperless” Initiatives On-going goal to eliminate paper in all mortgage processes Increased Service in Underwriting Use technology to accelerate loan processing Reduce turn times and “touches” per loan Document Security Reduce lost loan documentation Become “audit proof”

8. Compelling Events eSign Legislation Rapidly changing interest rate environment Broker acceptance of new technology Image documents accepted in secondary market

9. Flagstar Bank Integrated Document Management (IDM) Image management and image workflow Eliminate Paper in Mortgage Processes Underwriting, post-close review and loan delivery Document access for loan servicing Document access for customers

10. Solution Elements • Hardware & Platforms AIX Application Servers & Dell W2K Web Servers Oracle Databases & Java Development Preference EMC Clarion magnetic storage BEA WebLogic - new standard • FileNet Tools Image Services, eProcess • ValueNET Assistance – Pyramid Solutions, Inc. User interface customization Workflow processing Image exporting tools On-site development & programmer training • Other Components FaxBack Inc. NET SatisFAXtion fax capture Kofax Ascent Capture Kofax DOKuStar Forms Recognition

11. IMAGING STATISTICS • 43,200-68,000 fax pages captured, processed, and routed per day • Over 180 million images (pages) managed • 2,300 internal users / 6,000+ external brokers

12. Departments using Solution: • Underwriting • Corporate – central underwriting Q4/2001 • Regional - remote office locations across the US Q2-Q4/2002 • Contract Underwriters – capable of working from home Q1/2003 • Government – FHA / VA loans Q4/2003 • Broker/Correspondent Communications • View images from wholesale.com web site Q1/2003 • 99% of appraisals uploaded to wholesale.com Q2/2003 • Document uploads directly to underwriting Q1/2004 • Correspondent Acquisition / Loan Review • Post closing operations Q2/2004 • Other • Consumer lending – home equity loans Q3/2004 • Accounting – accounts payable document storage Q1/2002 • Funding – processing of loan funding requests Q3/2003 • Loan Servicing Q3/2001

13. User Reluctance Users must shift to working with images and not have the comfort of paper. Customer Reluctance Originally, customers were familiar with mailing packages and uncomfortable faxing. Today, reluctance is gone and they are asking for more capabilities. Investor Challenges Loan investors familiar with taking paper on loan sales, must develop process for image transfers.

15. Paper underwriting processes had numerous steps and people to handle paper volume and customer inquiries

16. Electronic workflow automates many tasks and provides a more straightforward process with less “touches” per file Electronic submissions reduce fraud and increase speed

17. A single paper file loan transfer to an investor can take over 2,880 man-hours to process. Flagstar has up to 9 of these transfers or sales per year. Ship to Warehouse File & Log Loans Pull loans 12-13 FTE’s 3-7 Weeks Box Loans 25-40K loans 100 pg. each Load trucks Ship loans Across Country Investors Unbox Store paper in Warehouse Flagstar Bank Paper-Based Loan Sale

18. Get Loan Numbers from Shipping Dept Feed Loans #’s Image Export Customize Output Run Export 1-3 Weeks Monitor Only Write Data To Tape Mail to Investor Import into Imaging System Flagstar Bank Automated Electronic Loan Sale Automated loan transfer to investors takes only 50 man-hours to process.

19. Return On Investment • More loans processed per underwriter Twice as much at one-fifth the cost Before: 5 to 7 files daily (paper)After: 10 to 12 files daily (paperless) Contract underwriters 3x more productive • More loans processed in post closing review At least 30% more efficient Workflow: 8 month ROI saving $139,000/month Forms Recognition: 13 month ROI saving $36,000/month • Reduced processing costs Operations using paperless processes cost half of similar paper operations Underwriting costs - Before: $250 After $60

20. Return On Investment • Greater flexibility Easier opening and closing of offices / file transfers & load balancing • Stronger customer service Servicing access to all customer files (no requests to warehouses or file rooms) • Reduced paper costs No fax machines or file rooms • Reduced time to transfer loans to investors No paper files Reduce effort from 2,880 man-hours to 50 man-hours per transfer

21. Business Challenges Addressed • User Reluctance Rewards for using systems - flat panel monitors Manager support - forwarded paper fax lines/removed printers • Investor Challenges Work to help investor overcome their system and operational issues

22. Decision making process • Process started in 2000 by Information Systems RFP to five vendors RFQ to final two vendors • Users were final decision makers Information Systems provided a recommendation • Key decision factors FileNet fiscal strength Pyramid Solutions’ project management skills FileNet & Pyramid Solutions’ local support framework Software’s scalability • FileNet advice Provide examples of others using solution to accomplish similar objectives Strongly support partners if used Provide information on support infrastructure

23. Enterprise next steps • Forms Recognition Eliminate document indexing with third-party forms recognition • Enhanced Electronic Document Submission Upload documents via web to provide for immediate underwriting Live Underwriting – now live • Loan Origination System Integration Create one interface for back-office loan processing that integrates images, documents and process

24. Investigate all Areas for Possible Integration Find the walk-throughs and eliminate them! Administration Banking Operations Back Office Processes • Enhanced Electronic Document Submission Upload documents via web to provide for immediate underwriting Live Underwriting – now live

25. Lessons Learned • Start Small Integrate in Phases for functional areas. • Enhanced Electronic Document Submission Upload documents via web to provide for immediate underwriting Live Underwriting – now live • Loan Origination System Integration Create one interface for back-office loan processing that integrates images, documents and process • Web Content Management Manage published web content – put procedures in place