Regulatory attention to focus on property valuations, mortgage issuance and other consumer issues

Toronto/London/New York - November 30, 2007 -

Just as the insider trading scandals associated with initial public offerings caused a revolutionary shake-up in the regulatory environment facing financial institutions, it seems as if manipulated real estate valuations, uncovered in the wake of the subprime crisis, may be about to cause a shake-up in the regulatory environment facing institutions operating in the property and mortgage lending sectors.

That's the focus of this month's Algo FIRST newsletter, released today.

Penny Cagan, a Managing Director at Algorithmics, said, 'Regulatory focus is now on market practices associated with the issuance of mortgages, valuation of properties and suitability of certain payment protection policies. This provides another instance of how operational risk events come to light in times of market volatility and illiquidity and how they impact each other."

Most noticeably, in early November, Andrew Cuomo, New York State Attorney General, announced he is investigating the relationship between a large property appraisal company based in Long Island, New York and a retail bank in Washington State.

Cuomo has alleged that real estate appraisal companies found it necessary to bring in property valuations at certain predetermined levels, as determined by mortgage providers, in order to secure their business. If proven true, it means that real estate values could have been inflated as a result of arrangements between lenders and appraisal companies.

Cuomo says such inflated property appraisals were a catalyst for the mortgage crisis and he has already said his office will be investigating additional companies.

Already Triad Guaranty Insurance Corp has withheld claims associated with defaulted mortgages at American Home Mortgage Investment Corp, on the ground that there were 'irregularities' in the loan approval process, including inflated property appraisals, instances of misrepresentation of applicants' income and incomplete loan documents.

In the UK, attention has recently focused on payment protection insurance, (PPI) and how it is sold, marketed and pitched to consumers. These policies have been criticized for a number of years by consumer groups for being expensive and aggressively sold, while not always providing the protection promised. The UK's Competition Commission has agreed to undertake an investigation into the PPI sector, which was worth an estimated £4.4 billion in premiums paid in 2006, and is expected to release its findings in May 2008.

These and other such cases are covered in full within the Algo FIRST database, a web-based tool, offering easy subscription access via the internet. Subscription packages are available for both Algo FIRST and the Monthly Algo FIRST newsletter. For additional information on how to subscribe to either offering, please contact sales@algorithmics.com

Notes to Editors:

Algorithmics is the world's leading provider of enterprise risk solutions. Financial organizations from around the world use Algorithmics' software, analytics and advisory services to help them make risk-aware business decisions, maximize shareholder value, and meet regulatory requirements. Supported by a global team of risk experts based in all major financial centers, Algorithmics offers proven, award-winning solutions for market, credit and operational risk, as well as collateral and capital management. Algorithmics is a member of the Fitch Group.

Algo FIRST, utilizing a unique real-life case study approach, is designed to assist institutions with their analysis of external operational risk events. The Algo FIRST database is used as a qualitative tool, providing information on control breakdowns, event triggers, insight into why the losses occurred and lessons learned. Algo FIRST contains case studies on almost 7,500 operational risk loss events and is unrivalled in its depth of analysis and coverage of the industry.

Fitch Group is the parent company of Fitch Ratings, a global rating agency dedicated to providing the world's credit markets with independent and prospective credit opinions, research and data. The Fitch Group also includes Derivative Fitch, an independent provider of a suite of ratings and comprehensive services for the credit derivatives market; Algorithmics, the world's leading provider of enterprise risk solutions; and Fitch Training, which offers high-quality analytical training for financial professionals. The Fitch Group is a majority-owned subsidiary of Fimalac, S.A., headquartered in Paris, France. For additional information, please visit www.fitchratings.com; www.algorithmics.com; www.fitchtraining.com; and www.fimalac.com.

© 2007 Algorithmics Software LLC. All rights reserved. ALGO, ALGORITHMICS, Ai & design, ALGORITHMICS & Ai & design, KNOW YOUR RISK, MARK-TO-FUTURE, RISKWATCH, ALGO RISK SERVICE, ALGO CAPITAL, ALGO COLLATERAL, ALGO CREDIT, ALGO MARKET, ALGO OPVANTAGE, ALGO OPVANTAGE FIRST, ALGO RISK and ALGO SUITE are trademarks of Algorithmics Trademarks LLC.

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