## MSR Valuation

The value mortgage servicing rights, “MSR”, is a present value of the future income stream attained from all mortgage servicing related cash flows. The value is the sum of the present value of these future income streams, which is impacted by assumptions on prepayment speeds, mortgage age and type, and the rate as which these cash flows are discounted. Under FASB 157 guidelines, GLS determines the net present value of the portfolio’s expected stream of future cash flows through a loan-by-loan analysis utilizing assumptions that would be used by other market participants. Additionally, we provide ten different, distinct stress tests for each loan, as well as the entire portfolio.GLS incorporates a six step process is to determine the value of our client's mortgage servicing rights portfolio:

1.

**Servicing Value**: We generate future cash flows for each loan’s servicing asset, based

on their unique characteristics and our market-based assumptions for prepayment

speeds. The present value of the cash flows, expressed as a servicing multiple, is then

calculated for each loan utilizing our market-based discount rate assumptions.

2.

**Remittance Value**: Subsequently, we calculate the present value of the remittance

delay for each loan based on the product type, expressed as a percentage of the current

balance.

3.

**T&I Float**: We calculate the value of the Tax & Insurance float, based on each loans

State location, payment schedule and escrow interest rate, if any. This value is also

expressed as a percentage of the current balance.

4.

**Additional Income**: The value of any additional income, expressed as a dollar amount

per loan, is valued and expressed as a percentage of the current balance. An

assumption for future inflation is included in the calculation.

5.

**Servicing Cost**: Finally, the servicing cost, also expressed as a dollar amount per loan,

is valued and expressed as a percentage of the current balance. The same

assumption for future inflation is utilized as in the above step.

6.

**Net Servicing Value**: The servicing cost is subtracted from the sum of the four other

values to calculate the Net Servicing Valuation for each loan.

GLS offers is a customized approach to providing a timely and accurate valuation of our client's mortgage servicing rights. Our model is tailored to work seemlessly with our client's loan system output, eliminating the need for the client to rework databases or write custom queries. This allows our clients to focus on core revenue opportunities rather than spend countless hours creating output for use in the valuation itself. Our MSR service not only saves our client's time, but also provides them with the tools needed to gauge portfolio risk characteristics and make well informed decisions on managing such. By using a reputable and independent thrid party, such as GLS, our clients have the the peace of mind in knowing that an accurate, consistent, and compliant valuation is being performed each and every time.