EuroCatalyst

EUROCATALYST 2007: BURNING DOWN THE HOUSE* / QUEMANDO LA CASA

5 OCTOBER 2007 (FRIDAY) / ME MADRID HOTEL

PROGRAMME CONTENT AND AUTHORSHIP EuroCatalyst is a strategic advisory firm based in the Netherlands. For the past seven years it has specialised in accelerating cross-border and new market entry to firms operating across the value chain of European markets. Since 2002 this event has served the purpose of providing a very high-level insider’s view of European mortgage markets and their developments in the context of globalisation so that those working in the markets are better able to understand and navigate its obstacles and opportunities. The EuroCatalyst event is not sponsored or endorsed by any trade organization and does not hold any political affiliation for its ongoing support. We are focused on the commercial realities of the markets. All programme content for EuroCatalyst events are generated by EuroCatalyst. Event hosts, speakers, panellists and participants, who are appearing in a personal private capacity, do not necessarily share these views. * “BURNING DOWN THE HOUSE” For the past five years EuroCatalyst has entertained, editorialised and themed sessions using musical interludes before and after sessions. Every year we open the event with the popular song, “Burning Down the House” by the Talking Heads. (It is a conference after all). We use the title as the theme of the event not as direct reference to current market conditions, but consistent with this being the last entirely independent and neutral conference as EuroCatalyst. DRAFT PROGRAM (AS OF 28 SEPT 2007) / for the final version of the programme in PDF format, please click on this link. We will update the HTML text version of the programme below shortly. Thanks!

0900-0930	SESSION 1 APRÈS LE DÉLUGE (AFTER THE DELUGE): FROM SUBPRIME TO THE RIDICULOUS / DESPUÉS DEL DILUVIO Pat Butler, Head of Global Financial Services Practice, McKinsey & Co. Whether you are currently in a state of mild fear, full-blown panic, anger, blame, denial, blissful ignorance or stoic acceptance, life and lending continue. In this session Pat Butler addresses the current crisis and prognosis (you will find Prozac underneath your chair at the event) and more importantly brings our focus to the activities that lenders will need to get right once the crisis has passed. For those of you who are serious about proactive recovery efforts, Pat will discuss new product opportunities, distribution management and the emergence of cross-border platforms and infrastructure taking precedence over financial engineering (it’s about time). The recovery will be a return to a genuine customer orientation - and not a banker’s mentality. Considering the wide range of blame attributed to all sectors of the lending and capital markets industry we’re confident that everyone will gain value from the discussion.

0930-1030	SESSION 2 BREAKTHROUGH OR BREAKOUT? THE GROWTH OF SUBPRIME AND NONCONFORMING LENDING ACROSS EUROPE AND ITS IMPACT ACROSS THE VALUE CHAIN \| ¿AVANCE O RUPTURA? EL CRECIMIENTO DE LOS PRÉSTAMOS DE ALTO RIESGO EN EUROPA Y SU IMPACTO EN LA CADENA DE VALOR When the EuroCatalyst 2002 agenda was released five years ago, we received concerned calls from structured finance bankers in London who asked, “What’s a covered bond?” Since January of this year we’ve had calls ranging from concern to panic from investors and others asking for clear definitions of prime, sub-prime and non-conforming lending in the European context. The truth is, there are no distinct definitions because they vary in underwriting guidelines from lender to lender and in practice from country to country. Defi¬nitions of prime lending in Europe are simple – prime loans are those which fit the criteria of covered bond legislation in each national market. Sub-prime and non-conforming are differentiated by proprietary loan marketing risk pricing. Clearly much more non-conforming lending occurs than any national market statistics will ever show, or non-specialised lenders will ever specify. Why? Because commercial realities dictate that organic growth in market share means moving up the LTV curve, down the credit curve or extending the dura¬tion of the loan to attract more customers. This ses¬sion also looks at the re¬lated sectors impacted by product expansion including risk-based pricing, the value of mortgage and title insurance, packaging, property valuation and most importantly, the need for special servicing and the current lack of it. Featured in the session are four of the most important entrepreneurs in European markets who provide crucial insight on how they continue to forge ahead balancing the chaos of current market conditions while keeping a strong hand on operational performance. Rounding out the session is Michael Lea, who is currently authoring a new study on sub-prime and non-conforming lending in Europe and Eddie Register, who will address the symbiotic relationship between specialised lending and special servicing.
	RECOMMENDED READING	EuroCatalyst 2005, Session 7: The Wine Wars (US vs. Europe): Europe Rides Shotgun down the credit curve while the US pulls in the reins, EuroCatalyst BV, Toni Moss EuropeServicing 2006 Conference Programme, Day 2, “Tomorrow Never Dies”, EuroCatalyst BV, Toni Moss
	HOSTS	TONI MOSS, CEO, EUROCATALYST TREVOR POTHECARY, Chief Executive, MORTGAGES PLC
	PANELLISTS	MIKE CULHANE, Chairman and Chief Executive Officer, OAKWOOD FINANCIAL DR. MICHAEL LEA, Principal, CARDIFF CONSULTING, and Professor, SAN DIEGO STATE UNIV. EDDIE REGISTER, Senior Director, European Structured Finance, FITCHRATINGS RON ROARK, Chairman, CROWN MORTGAGE MANAGEMENT DAVID RYAN, Chairman and CEO, STATEFIRST GROUP IRELAND DENNIS SHEEHAN, Senior Managing Director, Continental Europe, GMAC-RFC

1030-1045	BREAK

1045-1330	SESSION 3 THE GLOBALISATION OF MORTGAGE MARKETS, RISK DISPERSION, HOUSING PRICES AND THE SUB-PRIME CRISIS / LA GLOBALIZACIÓN DE LOS MERCADOS HIPOTECARIOS, LA DISPERSIÓN DEL RIESGO, LOS PRECIOS DE LA VIVIENDA Y LA CRISIS DE LOS CRÉDITOS DE ALTO RIESGO The mortgage and housing finance industry will always be a tug of war between the governmental imperative and social commitment to expand homeownership and the financial industry seeking to extract the most profit from it. This three-part session discusses how mortgage markets have globalised which has in large part led to the current situation. Which European markets show similar underlying features and vulnerabilities, which market fundamentals are victims of the process and what mortgage markets will look like moving forward? In what appears to be a drowning world, our purpose is not to describe the water. This session looks for profitable exits among diminished returns, survival strategies in the new order and the surprising opportunities that always present themselves in times of chaos. In this case, as we seek to reopen the dialogue between important market players to look for internal solutions to industry-wide problems, we also point out some remaining opportunities across the value chain and across European markets. RECOMMENDED READING: "Global Financial Stability Report / Financial Market Turbulence: Causes, Consequences, and Policies" IMF, September 2007
	SESSION 3A	THE SHADOW BANKING SYSTEM AND FINANCIAL DISLOCATION OF THE NEW NON-BANK WORLD / EL SISTEMA BANCARIO EN LA SOMBRA Y LA DESARTICULACIÓN DEL NUEVO MUNDO DE LOS NO-BANCOS The opening segment of this three-part session addresses the shift from the traditional banking world in which most regulatory policies were developed to a new world dominated by a rapidly evolving "shadow" banking system which operates beyond the reach of regulators. This “non-bank” world is comprised of alpha-hungry investors driving highly complex and levered investment conduits, vehicles and structures that have risen in conjunction with the global housing boom. The return/yield formula has led to an appetite for risk that the traditional financial system cannot digest. As we have seen recently, the result is a gradual loss of control over monetary policy by central banks and panic-driven chaos that started a run on funds by investors and more recently a parallel run on two banks by consumers. The speed at which the contagion has spread equally shocked market participants and the official sector, proving once again that the new world of financial innovation is no more than grand experiments of trial and error that lead to uncertain and severe consequences on a global scale. This session attempts to bring these extraordinarily sensitive and difficult issues to the forefront to discuss possibilities for redress or adaptation. If evolution provides no other options than to evolve or die, the choice is clear. The question is, what are we evolving toward?
	RECOMMENDED READING	"Mark-to-Market Accounting and Liquidity Pricing", Franklin Allen and Elena Carletti, July 20, 2006, Wharton School Financial Institutions Center. “Where’s Waldo? Where’s W?”, PIMCO Investment Outlook, Bill Gross, September 2007 The New Bogeyman of Financial Capitalism, Nouriel Roubini, Project Syndicate, August 2007
	HOSTS	TONI MOSS, CEO, EUROCATALYST TIM SKEET, Managing Director, Head of Covered Bonds, MERRILL LYNCH
	PANELLISTS	ALEXANDER BATCHVAROV, Head of International Structured Finance Research, MERRILL LYNCH FANNY BORGSTRÖM, Head of Group Funding, NORDEA TREASURY JULIAN CALLOW, Chief European Economist, BARCLAYS CAPITAL PAUL DUDOUIT Managing Director, Head of Funding, CRÉDIT FONCIER GROUP TODD GROOME, Advisor, Monetary and Capital Markets Department, IMF JACK GUTTENTAG, Professor of Finance Emeritus, WHARTON SCHOOL OF THE UNIVERSITY OF PENNSYLVANIA PETER JEFFREY, Head of European Securitisation Group, PRICEWATERHOUSECOOPERS DOMINIC SWAN, Head-Structured Investment Vehicles, HSBC BANK PLC
	SESSION 3B	THE DRY FOREST: WILL REGULATORS SPARK THE FLAME OR END THE DROUGHT? / EL BOSQUE SECO: ¿ACABARÁN LOS REGULADORES CON LA SEQUÍA O ATIZARAN EL FUEGO? As capital market innovation is a series of human trial and error, so is regulation. Each day that passes reveals a new hand in the high-stakes poker game being played out among central banks and financiers on a €122 trillion global playing field. Although the financial innovation of securitisation has Despite the benefits of securitisation, misperceptions of the Enron scandal launched a vigorous debate that has been renewed by the sub-prime crisis. Those who question the virtue of securitisation argue that its benefits are gained from shifting uncompensated risk onto third-parties. The argument implies that these third-parties (primarily investors) are ignorant of the full extent of those risks. It is true that all mortgage market participants from consumers to investors need greater transparency than banks, funds and almost all mortgage market players are currently providing. and perhaps more than market “natural selection” should be levied against those who do not comply with market standards. However, should public sector regulators be in the business of preventing losses? Part 3 captures the drama of what lies in the fragile balance of markets today. No doubt all regulators are on top of the issues and many feel compelled to act. The tension is rising with attention-grabbing headlines and an increasingly panicked public. As behavioural finance has shown, market dynamics are heavily driven by the erratic nature of individual human behaviour. What lies in the balance is consumer confidence and the threat of a global recession.
	RECOMMENDED READING	America’s Day of Reckoning, Joesph E. Stiglitz, Project Syndicate, August 2007 The Asian Crisis Ten Years After, Joseph E. Stiglitz, Project Syndicate, July 2007
	HOSTS	TONI MOSS, CEO, EUROCATALYST TIM SKEET, Managing Director, Head of Covered Bonds, MERRILL LYNCH
	PANELLISTS	RICK WATSON, Managing Director, EUROPEAN SECURITISATION FORUM MICHAEL COOGAN, Director General, COUNCIL OF MORTGAGE LENDERS ACHIM DÜBEL, Financial Sector Economist, FINPOLCONSULT (GLOBAL) SAM THEODORE, Managing Director, European Financial Institutions, DBRS TODD GROOME, Advisor, Monetary and Capital Markets Department, IMF
	SESSION 3C	CHICKEN “LITTLE” MEETS THE EGG: WHICH CAME FIRST, THE LIQUIDITY CRISIS OR THE CREDIT CRUNCH? SCRAMBLING FOR EXITS / EL HUEVO O LA GALLINA ¿QUE VA ANTES? ¿LA CRISIS DE LIQUIDEZ O LA RESTRICCIÓN DEL CRÉDITO? BUSCANDO UNA SALIDA With panic driving pricing and a severe lack of overall confidence in the market, there is currently no standard for market pricing. Worse, in some cases even strong collateral cannot be sold or financed at any price that nears its true value. This session is focused on liquidity and exits. LIQUIDITY – How can targeted liquidity be injected into the markets? – What resources can originators turn to for funding? – Who is currently supplying warehouse lines? COVERED BONDS: Where do covered bonds stand on the sub-prime crisis? While these instruments appeared to have escaped the subprime contagion, in recent days, they, too, have been touched by overall market concerns. Their spreads are changing dramatically from day to day, with primary issuances pricing ahead of secondary paper. Covered bonds are now considered so small bid/offer spread that you don’t want to pay someone to trade them. How well are diversified funding platforms working in the current climate? WAREHOUSE FUNDING: – How has the current environment impacted the availability/accessibility of warehouse funding? – Have the criteria been tightened on the warehouse level, making new originations more challenging? – Are the warehouse lines providing a form of regulation for lenders? If so, is it rightfully the role of a warehouse lender to regulate originations? SECURITISATION AND WHOLE LOAN SALES AND TRADES: – When securitisation are no longer the preferred exit...how has the whole loan sales & trade market grown as a result? – From an issuer standpoint, what factors are taken into consideration as to whether securitisation or whole loan trades are a more viable exit? – How does the growth of whole loan sales & trades impact the lender-borrower relationship? – What view do investors take on multi-originator pools - i.e. are they preferable or discounted from the perspective of diversifying risk? SERVICING: – How are the new servicers impacted by the decelerated pace of loan sales for securitisation? – How are servicers managing portfolios which can no longer be sold at any price? – How well prepared are servicers to defend against large rises in arrears and prevent portfolio losses? – How are new servicers entering the market coping with the distress of new originators? Managing overcapacity in some markets and undercapacity in others – Special servicing: Are European servicers prepared for an increase in arrears should housing prices drop and/or contagion spread to their markets? Looking at the UK, Irish, Dutch and Spanish markets
	HOSTS	TODD GROOME, Advisor, Monetary and Capital Markets Department, IMF TONI MOSS, CEO, EUROCATALYST
	PANELLISTS	STUART JENNINGS, Managing Director, European Structured Finance, FITCHRATINGS CRAIG BERESFORD, Director of Asset Sales - Capital Markets, GMAC-RFC ALAIN CARRON, Head of Securitisation, CRÉDIT FONCIER LIAM COLEMAN, Head of Treasury and Funding, NATIONWIDE TED LORD, Managing Director, BARCLAYS CAPITAL

1330-1415	LUNCH

1415-1530	SESSION 4 TESTING THE STRENGTH AND RESILIENCE OF THE SPANISH MORTGAGE MARKET / PONIENDO A PRUEBA LA CAPACIDAD Y RESISTENCIA DEL MERCADO HIPOTECARIO ESPAÑOL EuroCatalyst 2002 was held in Madrid to point out the need for convergence of structured finance and covered bonds as complementary funding tools that comprise a funding spectrum. The best way to illustrate that point (which was quite unpopular back then) was to hold the discussion in Spain, which was the most progressive funding market in Europe that year. Since then the Spanish market has grown from strength to strength with some of the most progressive funding innovations in any country. According to the Asociación Hipotecaria Española, the annual volume of new Spanish mortgage credit in 2006 grew 13.2% in comparison to 2005. In 2006 RMBS issuance across 32 transactions was €38.8 billion, an increase of over 42% in 2005. However, with residential mortgages and cédulas hipotecarias accounting for slightly more than 70% of Spanish structured finance collateral, concern has increased regarding risk in the market. Specifically, the inclusion of low equity and self-employed borrowers, the increase in higher LTV and debt-to-income ratios of securitised pools and the proportion of second home exposure has led many to view the remainder of 2007 and 2008 as a period of testing for the resilience of the Spanish RMBS market. Furthermore, the Spanish property market presents an oversupply of housing stock which has negatively impacted property developments already in the pipeline. In addition, late-2007 or early-2008 will see the publication of a new mortgage law and implementation of Basel II guidelines which increase the stakes of how the market will play out. With high reliance on the RMBS market to fund the growth of higher risk mortgage books and a growing preference for the flexibility of RMBS over covered bonds, current global market conditions pose an interesting challenge for Spanish issuers in the near term. How are they rising to the challenge?
	HOST	JUAN PABLO SORIANO, Team Managing Director, Structured Finance – Europe, MOODY’S INVESTORS SERVICE
	PANELLISTS	ANTONIO BONÉ, Risk and Compliance, AIG UNITED GUARANTY FERNANDO CUESTA, Head of Funding, CAJA MADRID ALVARO GIL, Associate Director, FITCHRATINGS GLORIA HERNANDEZ, Chief Financial Officer, BANCO PASTOR LUIS LEIRADO, Director General, TINSA TASACIONES INMOBILIARIAS S.A. ANGEL MAS, President, European MI operations, GENWORTH FINANCIAL LORENA MULLOR, Chief Economist, ASOCIACIÓN HIPOTECARIA ESPAÑOLA

1530-1600	SESSION 5 PASS THE PARCEL: SPECULATING ON HOUSE PRICE PERFORMANCE / PASA LA BOLA: REFLEXIONANDO SOBRE EL COMPORTAMIENTO DE LOS PRECIOS DE LA VIVIENDA Just as DNA contains the genetic information that allows all living things to function, grow and reproduce, housing prices are the DNA of the global housing finance ecosystem. Any discussion on housing prices is without a doubt the most highly charged topic of discussion among governments, economists, lenders and the public in general because so much is at stake. Whether you are bullish or bearish on house-price performance, there will never be consensus over whether prices will go up or down because the industry does not have the historic data and tools to measure them accurately enough. EuroCatalyst 2005 Rome featured four of the top house price economists to discuss a session entitled, “Holding Our Breath: High Anxiety Over Housing Prices”. At that time, the value of residential property had increased the equivalent to 100% of the combined GDP in developed countries. Back then The Economist argued that it was the most massive capital markets bubble in history - and still housing prices continued to increase. What we learned from that session was a disturbing pattern in the synchronicity of housing prices across the world. In short, a fall in one market tends to precipitate a fall in others. It is far too early to credibly discuss “lessons learned” from the US subprime debacle because its impact continues to worsen. What is clear is the trigger – which was the halt in house price appreciation – and the extent to which mortgage product design was entirely dependent upon housing prices continuing to rise. As Warren Buffet once observed, “You don’t who’s swimming naked until the tide goes out.” Today we see housing prices in many European countries in varied stages of “cooling off” since 2006, with a few exceptions in the geographically smallest countries. This session provides an up-to-date assessment of European housing prices and the related implications on portfolio performance and mortgage product development. We feature Julian Callow, who returns to address the fragile balance between housing prices and interest rates, and Michael Lea on the impact of house price considerations on underwriting and product development. The session is co-hosted by Todd Groome, who will comment on the challenges of regulatory intervention to control the irrational exuberance that sometimes drives speculative investments and speculative lending.
	RECOMMENDED READING	Understanding Recent Trends in House Prices and Home Ownership, 2007 Jackson Hole Symposium, Kansas City Fed, “Housing, Housing Finance, and Monetary Policy”, Robert J. Shiller Irrational Exuberance, Robert J. Shiller
	HOSTS	TODD GROOME Advisor, Monetary and Capital Markets Department, IMF TONI MOSS, CEO, EUROCATALYST
	PANELLISTS	JULIAN CALLOW, Chief European Economist, BARCLAYS CAPITAL MICHAEL LEA, Principal, CARDIFF CONSULTING and Professor, SAN DIEGO STATE UNIVERSITY

1600-1615	BREAK

1615-1730	SESSION 6 SHIFTING POWER, IMPACTING PROFIT: THE RISE OF THIRD-PARTY DISTRIBUTION IN CONTINENTAL EUROPE / CAMBIO EN EL PODER, IMPACTO EN LOS BENEFICIOS: LA APARICIÓN DE UN TERCER ACTOR EN EL NEGOCIO HIPOTECARIO EN LA EUROPA CONTINENTAL “Brokers? You can’t live without them and you can’t kill them,” is the most frequent comment expressed by lenders across the globe. Learn to live with them. According to a recent MOW/EFMA/Fortis report (European mortgage distribution: Changing channel choices) today over 40% of mortgage lending in Europe (more than €500 billion a year) is intermediated through third-party distribution, with no direct regulation over intermediary activities in the majority of countries in their study. In the UK and Netherlands, which are the most developed intermediary markets in Europe, over 60% of mortgages are now distributed through indirect channels. By far the most necessary development in Continental European markets has been the need for alternative distribution channels and third-party brokers. With the race across borders well under way, market incumbents and new market entrants find themselves engaged in buyout and bidding wars over access to distribution in most markets. This session features a formidable panel of the most rapidly growing and successful broker models across Europe. For any lender who doubts the power of intermediaries, consider John Malone whose Premiere Mortgage Services originates more than £40 billion annually in the UK. Consider HypoPort, whose proprietary EUROPACE platform is the largest transaction platform for credit products in Europe. Or Marco Pescarmona, the entrepreneur behind MutuiOnline, Italy’s most successful online broker and perhaps one of the only truly independent brokers in the Italian market. We also introduce American David Lykken, who specialises in helping the most successful brokers transition to becoming bankers. Not to mention Jack Guttentag, who has introduced and promoted the concept of UpFront Mortgage Brokers (UMBs) to provide pricing transparency for consumers and restore integrity to the US broker market. We also feature Achim Düebel, Europe’s leading independent economist and author of the economics section of the above-mentioned distribution study. Finally, we introduce the UK’s Michael Bolton as session host, who will inevitably struggle to ask questions as opposed to his traditional role of answering them.
	HOSTS	TONI MOSS, CEO, EUROCATALYST MICHAEL BOLTON, CEO, EDEUS
	PANELLISTS	JACK GUTTENTAG, Professor of Finance Emeritus, WHARTON SCHOOL (USA) JOHN MALONE, Managing Director, PREMIER MORTGAGE SERVICES (UK) MARCO PESCARMONA, Chairman and CEO, MUTUIONLINE (ITALY) MARTIN DAMASKE, Managing Director / Member of the Board, HYPOPORT AG (GERMANY, NL) ACHIM DÜBEL, Principal, FINPOLCONSULT (GLOBAL) DAVID LYKKEN, Founder and CEO, MORTGAGE BANKING SERVICES DIRECT (USA)

TENTATIVE SESSION 1730-1830	SESSION 7 SHOOT FIRST, AIM LATER? EMERGING MARKETS AS THE “NEW FRONTIERS” FOR CROSS-BORDER AND ORGANIC GROWTH / ¿PRIMERO DISPARA Y LUEGO APUNTA? LOS MERCADO EMERGENTES COMO “NUEVAS FRONTERAS” PARA EL CRECIMIENTO ORGÁNICO Y TRANSFRONTERIZO Although we are as interested and intrigued as everyone by the potential in CEE and Russian markets, we title this session “Shoot first, aim later” as a response to the numerous headlines calling CEE mortgage markets “safe havens” at a time when the most transparent markets are suffering investor backlash for the lack of clarity on transactions. Profit and potential are a given in these emerging economies and our session features some of the best entrepreneurs in those markets – however, we question the early stages of required infrastructure for market stability in the long term. This session is a candid overview of how CEE markets are really performing, focusing on the commercial realities that fully encompass geopolitical implications which cannot be ignored. If mortgage markets vary in form but not function – as we have always argued – CEE countries will be one of the greatest tests of that theory.
	RECOMMENDED READING	"Merrill Lynch Guide to Emerging Mortgage and Consumer Credit Markets, Volume 2: CEEMEA," Alexander Batchvarov, July 2007
	HOST	YARON ERNST, Head of Business Development, MOODY’S INVESTORS SERVICE (TBC)
	PANELLISTS	IGOR KOUZIN, Chairman, DELTA CREDIT BANK (RUSSIA) CARMEN RETEGAN, CEO, GE MONEY BANK (ROMANIA) ACHIM DÜBEL, Principal, FINPOLCONSULT (GLOBAL) OTHERS TO BE ANNOUNCED

UPDATED: 17:36 GMT 22 SEPT 2007 \| © eurocatalyst bv 2007