Operational Classifications: Residential Vendor (Asset Valuation)
R
ankings: Residential Vendor (Asset valuation): MOR RV1 (Affirmed)
For
ecast: Stable
A
nalysts: Monte Bays, monte.bays@dbrsmorningstar.com
, +1 646 560-4536
Rationale
Morningstar Credit Ratings, LLC (DBRS Morningstar) affirms its MOR RV1 residential vendor rankings for Red Bell Real Estate, LLC (Red Bell) as
a residential vendor in the asset-valuation market. The forecast for the ranking is Stable.
Red Bell is a wholly owned subsidiaries of Radian Group Inc. (Radian), a group of companies providing products and services through Mortgage
Insurance and Mortgage and Real Estate Services business lines.
The affirmed ranking reflects DBRS Morningstar’s assessment of Red Bell’s infrastructure and client-driven performance results. The Stable
forecast ranking is indicative of the company’s solid vendor performance, which is derived from an experienced management team, excellent
proprietary technology, solid enterprisewide risk controls, and attention to client-driven performance results. A robust training regimen,
comprehensive policies and procedures, and an effective quality-control environment minimize operational risk and promote best practices
across the enterprise. Management has developed vendor-selection criteria and vendor-rating standards that effectively measure vendor
performance, as reflected in the execution of service-level agreements with their customers. The company has developed a scoring system to
monitor and measure its performance and product quality against service-level agreement goals, enabling senior management to assess
capacity and workflow to meet or exceed client benchmarks.
Red Bell is a national real estate brokerage firm and has developed contractual arrangements with multiple listing services throughout the
United States that provide the company with a robust data set on particular properties. Clients can gain access to Red Bell’s virtual office
website and relevant MLS data to obtain residential real estate information on an individual property basis.
Red Bell continues to integrate best practices with Radian. The combined offerings of Red Bell, as well as other Radian services, represent a full
suite of end-to-end residential real estate services that offers clients a single source of product solutions.
The affirmed rankings are based on the following factors:
Operational Risk Assessments
Red B
ell Real Estate, LLC
April
2020
Operational Risk Assessments: Red Bell Real Estate LLC | April 2020 | www.morningstar.com
2
Morningstar Credit Ratings, LLC is an NRSRO affiliate of DBRS, Inc. DBRS, Inc is registered with the SEC as an NRSRO.
The DBRS group and Morningstar Credit Ratings, LLC are wholly-owned subsidiaries of Morningstar, Inc. For more
information on regulatory registrations, recognitions and approvals of the DBRS group of companies and Morningstar
Credit Ratings, LLC, please see: http://www.dbrsmorningstar.com/research/highlights.pdf.
• Performance Record: Red Bell is led by a long-tenured management team with an average of approximately 25 years of relevant
i
ndustry experience and acceptable organizational turnover rates. Red Bell has a successful record of providing property-valuatio
n
products for a variety of clients. Red Bell has a continuous performance monitoring and reporting infrastructure in place to meet or
ex
ceed client expectations. Red Bell collects extensive data daily and uses score cards to grade and evaluate performance agains
t
n
umerous benchmarks to ensure deliverables for client-based service-level agreements are met or exceeded. A monthly performan
ce
s
ummary is presented to management for review.
• Technology Environment: Red Bell has a scalable technology architecture and systems infrastructure that supports the company’s
products and services. Red Bell's proprietary technology provides the company with the necessary flexibility to develop and effectively
execute new business strategies. Additionally, the technology infrastructure provides the performance-management tools critical t
o
monitoring and delivering performance to clients as outlined in service-level agreements. Red Bell has a comprehensive system for
d
eveloping and prioritizing technology projects, which includes an annual project roadmap and database, project score cards, user
acceptance testing that uses subject-matter experts, a technical writer to update manuals, and a technical trainer to deliver systems
training. System enhancements are deployed in two-week release cycles.
• Risk Management: Red Bell has a sound risk-control environment that includes, but is not limited to, training programs
,
comprehensive procedures, continuous performance monitoring and reviews, internal risk-assessment methodologies, and control
monitoring. Additionally, an external firm annually conducts a Statement on Standards for Attestation Engagements No.16, Reporting
on Controls at a Service Organization. A review of the most recent SSAE report revealed no material findings.
• Effective Training Programs: Red Bell has an effective training regimen for new and existing employees that benefits from a blend of
internal and external training solutions. Educational opportunities offered by Radian have strengthened and deepened knowledge
training available to all Red Bell employees.
The forecast for all rankings is Stable. Red Bell is capable of serving as a residential asset-valuation provider for a variety of financial institution
clients. The forecast acknowledges the continuing technology and process enhancements incorporated since DBRS Morningstar’s last review in
2018 as well as a strong management team and an improved financial outlook. DBRS Morningstar believes Red Bell will maintain organizational
stability, provide high-quality service and performance for clients, and recognize additional performance efficiencies and technology
enhancements as it continues to integrate best practices and leverage synergies and business opportunities with its parent company Radian
Group and its affiliated companies.
Operational Risk Assessments: Red Bell Real Estate LLC | April 2020 | www.morningstar.com
3
Morningstar Credit Ratings, LLC is an NRSRO affiliate of DBRS, Inc. DBRS, Inc is registered with the SEC as an NRSRO.
The DBRS group and Morningstar Credit Ratings, LLC are wholly-owned subsidiaries of Morningstar, Inc. For more
information on regulatory registrations, recognitions and approvals of the DBRS group of companies and Morningstar
Credit Ratings, LLC, please see: http://www.dbrsmorningstar.com/research/highlights.pdf.
Table of Contents Page
Company Profile and Business Overview ...................................................................................................................................................4
Operational Infrastructure ..........................................................................................................................................................................5
Organizational Structure ........................................................................................................................................................................5
Ma
nagement and Staff Experience .......................................................................................................................................................5
Management and Staff Turnover ..........................................................................................................................................................5
Training ...................................................................................................................................................................................................6
Audit, Compliance, and Procedural Completeness ...............................................................................................................................6
Legal Liability and Corporate Insurance ................................................................................................................................................7
Technology, Disaster Recovery, and Cybersecurity ..............................................................................................................................7
Real Estate Brokerage .................................................................................................................................................................................8
Asset Valuation: Vendor Selection and Management ...............................................................................................................................8
Order Intake ............................................................................................................................................................................................8
Order Assignment ..................................................................................................................................................................................9
Order Processing ....................................................................................................................................................................................9
Quality Review .....................................................................................................................................................................................10
A
ccounting and Invoice Management ................................................................................................................................................10
Ranking Definitions ...................................................................................................................................................................................12
Disclaimer ..................................................................................................................................................................................................13
Operational Risk Assessments: Red Bell Real Estate LLC | April 2020 | www.morningstar.com
4
Morningstar Credit Ratings, LLC is an NRSRO affiliate of DBRS, Inc. DBRS, Inc is registered with the SEC as an NRSRO.
The DBRS group and Morningstar Credit Ratings, LLC are wholly-owned subsidiaries of Morningstar, Inc. For more
information on regulatory registrations, recognitions and approvals of the DBRS group of companies and Morningstar
Credit Ratings, LLC, please see: http://www.dbrsmorningstar.com/research/highlights.pdf.
Company Profile and Business Overview
Red Bell Real Estate is a wholly owned subsidiary of Radian Group, Inc. Headquartered in Midvale, Utah, Red Bell was founded in 2007 and
operates from offices in Salt Lake City; Dearborn, Michigan; Independence, Ohio; Denver; Richmond, Texas; Peach Tree Corners, Georgia; Tulsa,
Oklahoma; and Havertown, Pennsylvania. Red Bell also maintains offices in 13 other states. The company's primary business is residential real
estate valuations. Red Bell's competitive edge is its access to extensive in-depth nationwide MLS data.
In March 2015, a subsidiary of Radian acquired Red Bell Real Estate, LLC and its sister company, Pyramid Platform, LLC (now known as Radian
Technology Services LLC, or RTS). Red Bell is a provider of valuation products including automated valuation models and broker price opinions
(BPOs) used by loan servicers, investors, and lenders. In 2019, ownership of Red Bell and RTS was transferred to another subsidiary of Radian.
Red Bell is licensed to sell real estate in all states and the District of Columbia. In October 2015, a subsidiary of Radian acquired a national title
agency, appraisal management company, and technology provider, whose ownership has subsequently been transferred to another Radian
subsidiary. These acquisitions and integrations, together with the services provided by Red Bell and RTS, further strengthen Radian’s industry
position as a provider of complete solutions to the mortgage and real estate industries.
Red Bell offers a variety of real estate valuation products and services. Red Bell's clients or registrants have the ability to search for listed
properties in all 50 states and the District of Columbia on the company's Virtual Office Website. Red Bell has comprehensive access to current
Multiple Listing Service (MLS) property information, and it updates for-sale and rental pricing information nightly, enabling clients to make
accurate decisions when acquiring or disposing of properties. Red Bell products include property inspections, BPOs, restricted appraisal reports
(RARs), appraiser reconciled broker price opinions (ARBPOs), automated valuation estimator (AVE) reports, and valuation risk reviews. Red Bell
property inspection reports provide a verification of the property type and condition, an evaluation of occupancy, an assessment of the overall
security of the property and the neighborhood condition, and a list of any exterior damage or code violations. Red Bell's BPO is an estimate of a
property's price completed by a licensed real estate agent located in the same market as the subject property. Red Bell's RAR product consists
of a property inspection and an AVE that is reconciled by a licensed appraiser within the state the subject property is located. Red Bell's ARBPO
consists of a BPO completed by a licensed real estate agent and an AVE report that is reconciled by a licensed appraiser within the state the
property is located. Red Bell's AVE reports support a value reconciliation by providing an estimated price and supporting comments based on
the criteria defined by the client and in the client's preferred format. Red Bell's Valuation Risk Review product provides a market valuation
based on a quality-control review of another valuation product, usually a BPO or appraisal.
Operational Risk Assessments: Red Bell Real Estate LLC | April 2020 | www.morningstar.com
5
Morningstar Credit Ratings, LLC is an NRSRO affiliate of DBRS, Inc. DBRS, Inc is registered with the SEC as an NRSRO.
The DBRS group and Morningstar Credit Ratings, LLC are wholly-owned subsidiaries of Morningstar, Inc. For more
information on regulatory registrations, recognitions and approvals of the DBRS group of companies and Morningstar
Credit Ratings, LLC, please see: http://www.dbrsmorningstar.com/research/highlights.pdf.
Figure 1: Operational Structure
O
perational Infrastructure and Risk Management
Organizational Structure
Radian has approximately 1,480 full-time employees including resources dedicated to the Red Bell property valuation reports and associated
products, and shared services resources.
Management and Staff Experience
Within the overall organization, the senior executive team has extensive experience, averaging more than 20 years of relevant industry
experience and 10 years of company tenure. The senior management team also averages more than 15 years of industry experience and 10
years of company tenure. The executive and senior management teams did not experience any turnover during the calendar year 2019.
Management and Staff Turnover
The company had zero management turnover during 2019, and employee turnover was low at approximately 11%.
Assessment: Red Bell has a seasoned executive management and professional team within an organizational structure suitably
designed for its current business needs and continued growth in various business lines. Red Bell's organizational structure and ability
to leverage Radian’s infrastructure provide Red Bell with the flexibility to launch new products and services with the real estate
services area.
Operational Risk Assessments: Red Bell Real Estate LLC | April 2020 | www.morningstar.com
6
Morningstar Credit Ratings, LLC is an NRSRO affiliate of DBRS, Inc. DBRS, Inc is registered with the SEC as an NRSRO.
The DBRS group and Morningstar Credit Ratings, LLC are wholly-owned subsidiaries of Morningstar, Inc. For more
information on regulatory registrations, recognitions and approvals of the DBRS group of companies and Morningstar
Credit Ratings, LLC, please see: http://www.dbrsmorningstar.com/research/highlights.pdf.
Training
Red Bell is able to leverage its parent company resources for employee recruiting and training. Red Bell has access to Radian training programs
for various training initiatives and maintains a dedicated training facility onsite.
All new Red Bell employees receive three hours of human-resources training, which includes a corporate overview. Continuing management
education and six sigma “lite” training are also available. Technology training is provided for all new hires, and cross-training is emphasized
because Red Bell’s core businesses encourage an interchangeable skill set among its employees. Some job requirements may be considered
“client-driven” and therefore incorporate more-customized training. The company offers a specific training module to coincide with
developments and regulations issued by the Consumer Financial Protection Bureau to determine that core processes are up-to-date and
compliant with applicable regulations. The company has minimum training credits requirement so all employees have the opportunity to obtain
job skills, knowledge, and career path opportunities. External vendors, including law firms, title companies, and real estate agents, provide
external training. All of the business teams meet at least weekly to talk over best practices and to discuss and implement business process
changes. Daily “standup” meetings are also held among all of the teams to discuss hot topics, training issues, or industry news, and the
company conducts a weekly “learning bites” series consisting of brief educational videos led by supervisors and managers. Red Bell maintains
an incentive compensation plan that is administered quarterly and is reviewed by human resources.
Assessment: Red Bell has an effective training function commensurate with the size of its organization and the scope of its business
products.
Audit, Compliance, and Procedural Completeness
As a vendor, Red Bell undergoes an annual Service Organization Control 1 (SOC 1) report evaluation. A review of the most recent SOC 1 report
did not indicate any systemic control issues. An external accounting firm performs an annual financial audit. Enterprisewide quality control is
embedded throughout various processes and transactions conducted by the company. Radian performed the internal audit of Red Bell’s
business lines in 2019. Red Bell performs extensive quality-control reports as an additional layer of risk-management and quality assurance.
Internal accounting controls are in place and are delineated by segregation of duties, multiple reviews, and sign-offs by Red Bell. Performance
measurement pursuant to service-level agreements is accomplished through various score cards that track internal performance metrics, which
are then rolled up daily, weekly, and monthly and escalated through various management channels. Blank check stock is stored in a room
protected by key card access and video monitors. Red Bell’s proprietary technology environment enables the company to store client-specific
parameters including customized processing and delegated authority levels that help ensure compliance with client guidelines. All employees
must sign a corporate compliance policy document annually. A dedicated security officer from Radian is responsible for overseeing systems and
network security. The business units develop monthly reports encompassing operating performance metrics and financial data and roll them up
to the executive team.
Red Bell maintains documented policies and procedures on its intranet site that encompass its core business practices. The business unit
operations personnel coordinate, write, and distribute policy and procedure updates enterprisewide. Versioning is used to provide a historical
record of policy and procedure updates. Policy and process manuals are customized based on specific client requirements to ensure compliance
with service-level agreements. Monthly meetings are held to discuss and implement policy and procedure updates.
Operational Risk Assessments: Red Bell Real Estate LLC | April 2020 | www.morningstar.com
7
Morningstar Credit Ratings, LLC is an NRSRO affiliate of DBRS, Inc. DBRS, Inc is registered with the SEC as an NRSRO.
The DBRS group and Morningstar Credit Ratings, LLC are wholly-owned subsidiaries of Morningstar, Inc. For more
information on regulatory registrations, recognitions and approvals of the DBRS group of companies and Morningstar
Credit Ratings, LLC, please see: http://www.dbrsmorningstar.com/research/highlights.pdf.
Assessment: Red Bell has sound multilevel auditing and quality-control mechanisms in place to monitor operational controls and
adherence to established procedures. We believe the company’s policies and procedures adequately address core areas of vendor
business processes.
Legal Liability and Corporate Insurance
Red Bell management disclosed it is not a participant in any pending material litigation related to its operations. The company maintains
appropriate business insurance coverage to protect against various liabilities and contingencies.
Assessment: Red Bell effectively addresses its corporate insurance requirements and is not subject to any outstanding material
litigation.
Systems Architecture, Project Management, Network Security, and Disaster Recovery
Red Bell uses a variety of proprietary and off-the-shelf technology applications in its daily business transactions. The systems architecture is
scalable and flexible from a processing and business growth perspective. Red Bell uses a web-based application for BPO and property
inspection ordering and processing.
Red Bell has a comprehensive disaster-recovery and business-continuity plan. A dedicated technical writer is responsible for drafting updates to
the global disaster-recovery manual, which the executive team reviews annually. Quarterly system restores are completed with a full disaster-
recovery test accomplished annually. Tier 1 applications are restored within 36 hours, and nightly digital backup tapes are stored at an off-site
facility. A generator can provide continuous power during an interruption at the main facility. Because Red Bell’s technology is built around
web-based applications, employees can work from home, if necessary, during an interruption at the main work site. Red Bell continues to
engage in joint infrastructure projects with its parent, Radian. The platform-redundancy strategy facilitates business recovery time and provides
more comprehensive testing. The disaster-recovery and business-continuity plan has been updated to reflect the change in ownership from
Clayton to Radian.
Red Bell reports up to a chief information officer at the Radian corporate level. Internal technology projects are coordinated with Radian and
incorporated into an annual roadmap. A project management database is updated daily, and technology projects are prioritized with input by
business leaders. Subject matter experts in the business groups participate in user acceptance testing, and biweekly technology releases are
issued containing system-enhancement information. A dedicated enterprisewide security officer is responsible for ensuring network security
and user password protocols. User passwords are task- and role-specific within the organization, and password changes and deletions are
communicated in real time between human resources and information technology and reviewed monthly and semiannually to minimize
unauthorized system access. The company has comprehensive enterprisewide encryption and firewall policies and methodologies in place to
protect the integrity of confidential data as it is stored or communicated internally or externally. Red Bell’s computer network incorporates
several intrusion prevention systems designed to identify and minimize malicious activity. Active network scanning and security monitoring is
routinely performed to identify system vulnerabilities.
Assessment: Red Bell operates within a highly effective technology architecture designed to meet its data-management
requirements as well as its internal processing needs and external client performance management. Red Bell has comprehensive data
integrity and security protocols and has a robust global disaster-recovery and business-continuity regimen.
Operational Risk Assessments: Red Bell Real Estate LLC | April 2020 | www.morningstar.com
8
Morningstar Credit Ratings, LLC is an NRSRO affiliate of DBRS, Inc. DBRS, Inc is registered with the SEC as an NRSRO.
The DBRS group and Morningstar Credit Ratings, LLC are wholly-owned subsidiaries of Morningstar, Inc. For more
information on regulatory registrations, recognitions and approvals of the DBRS group of companies and Morningstar
Credit Ratings, LLC, please see: http://www.dbrsmorningstar.com/research/highlights.pdf.
Real Estate Brokerage
Red Bell has comprehensive policies and procedures to obtain, monitor, and renew its MLS affiliations. The company is required to join a realtor
board or association to obtain membership in an MLS. Various states may have a specific MLS or multiple MLS providers, and Red Bell
determines the coverage area needed for the company to list and verify properties for its clients. Red Bell must apply for membership with
associations and/or MLS providers and must remain in good standing to maintain membership. Initially, Red Bell will research area MLS and
association affiliations to determine the best coverage area. Subsequently, the company will submit an application and required documentation
and any due diligence required to prepare the necessary paperwork. Upon membership approval, Red Bell must ensure that personnel are
educated in the compliance requirements for any particular MLS. Red Bell's compliance procedures include the following:
• Read the association bylaws and MLS rules and regulations.
• If a new rule or regulation is stricter than others on record, the MLS department is alerted to the new standard and updates th
e
master record.
The company must also maintain accurate and current billing records and membership dues for the associations and MLS providers. Billing
records are maintained and tracked in an MLS proprietary database. Red Bell places membership renewals on a calendar to ensure that
association or MLS memberships remain in force.
Asset Valuation: Vendor Selection and Management
Red Bell maintains a network of about 20,000 licensed real estate agents or brokers. The company recruits for residential real estate agents and
brokers to add to the network of approved agents and brokers while at the same time removing inactive and unsatisfactory agents and brokers.
A prospective agent or broker may go to the company's website and apply to be an approved vendor by completing an application that, in
addition to providing basic identifying personal information, asks for the following:
• License number, state, and expiration da
te
• S
ervice location address(es)
• Errors and omission insurance carrier information
• Number of years of relevant industry experien
ce
• MLS memberships
The applicant must upload a PDF copy of the applicant's real estate license and errors and omission insurance and must also complete an
electronic W-9 form. The complete application and background check is reviewed and either approved or declined. The system is configured to
limit the ability of users to create, modify, and delete brokers so that only system administrators in the information technology group have this
function.
Order Intake
New requests for BPOs are input into the web-based application used by Red Bell via an order template that is 100% automated. Upon receipt
of a new valuation order in the system, the assigning team is tasked with the responsibility of locating vendors willing to complete an order.
Broadcast assigning is used when an order needs to be sent out to all vendors in the system simultaneously and within a certain mile radius.
When an order is not accepted via auto-accept or the broadcast methodology, the order must be manually assigned. The assigning team will
then make calls to vendors in the applicable property area. Manual assignment is performed in rural areas 12 hours after they have been in the
Operational Risk Assessments: Red Bell Real Estate LLC | April 2020 | www.morningstar.com
9
Morningstar Credit Ratings, LLC is an NRSRO affiliate of DBRS, Inc. DBRS, Inc is registered with the SEC as an NRSRO.
The DBRS group and Morningstar Credit Ratings, LLC are wholly-owned subsidiaries of Morningstar, Inc. For more
information on regulatory registrations, recognitions and approvals of the DBRS group of companies and Morningstar
Credit Ratings, LLC, please see: http://www.dbrsmorningstar.com/research/highlights.pdf.
assignment queue and 24 hours for urban and suburban areas. The system employs hundreds of automated quality-control checks as mandated
by each client. The system also uses geo-coding and source photo verification to ensure that the vendor is submitting photos along with the
BPO order. Daily automated score cards and a multitier broadcast system are used to ensure that the most qualified vendors are being used on
every order.
Order Assignment
The company makes calls to active and inactive vendors listed in the system that are in the subject property zip code. If the order is referred to
an inactive vendor, that vendor must first log into the system and update any information and/or documentation needed to reactivate that
vendor, including proof of insurance coverage, license information, and contact information. If all of the necessary documentation has been
provided, the vendor manager will review the information and reactivate the vendor. Once reactivation is complete, the order will be manually
assigned to the vendor. In the event that a vendor cannot be located in the applicable zip code, assignment staff will attempt to locate a vendor
by searching various real estate listing web sites. When a vendor is located outside of the system, that vendor must complete a vendor
application, which is subsequently reviewed by the vendor manager for approval or denial. The company will continue searching for an
applicable vendor if the vendor application is denied. The company will notify the client that all resources have been exhausted if a suitable
vendor is not found to handle the order. When the assignment staff manually assigns an order, the order history is reviewed to ensure that
there was no previous report completed within the past six months by the same agent; otherwise, client approval is required prior to assigning
that order to the same agent. The assignment team will reassign orders when the vendor has not accepted the order within the stated time
frame and is unresponsive to follow-up attempts or when the vendor contacts Red Bell and requests that the order be reassigned. The order will
subsequently be returned to the assigning queue for broadcasting.
Assessment: Red Bell operates within a well-controlled order intake and assignment environment that benefits from well-defined
auto-assignment and manual order processing guidelines. Red Bell's proprietary technology efficiently assigns and tracks the status of
work orders.
Order Processing
When a BPO order is accepted by a vendor, Red Bell follows up on the order to ensure that it is completed with minimal issues or delays in a
timely manner for the client. The system will track the order's due date/time as well as the vendor's access and entries on the order and will
also remove the order from that vendor's queue on all orders that are past due if approved by management.
All orders are system-monitored from the data/time of acceptance by the vendor. System-generated emails are periodically sent to the vendor
as a reminder of the due date. A final system-generated email is sent to the vendor if the order has not been submitted, which advises the
vendor that the order is delinquent and provides the vendor with a four-hour extension before the order is reviewed for removal from the
vendor's queue. Red Bell's internal key performance indicators mandate that an order will not be in the "accepted" category more than 48 hours
and that the vendor turnaround time completion rate must be at least 95%.
Red Bell has a support team to handle telephone calls and emails from vendors and provide any assistance as needed. The support team will
conduct research into the inquiry and respond to the vendor's question. If a resolution to the inquiry is not readily available, the order will
remain on hold until a solution is found by the client relations team.
Operational Risk Assessments: Red Bell Real Estate LLC | April 2020 | www.morningstar.com
10
Morningstar Credit Ratings, LLC is an NRSRO affiliate of DBRS, Inc. DBRS, Inc is registered with the SEC as an NRSRO.
The DBRS group and Morningstar Credit Ratings, LLC are wholly-owned subsidiaries of Morningstar, Inc. For more
information on regulatory registrations, recognitions and approvals of the DBRS group of companies and Morningstar
Credit Ratings, LLC, please see: http://www.dbrsmorningstar.com/research/highlights.pdf.
Assessment: Red Bell has an effective process to ensure that orders are monitored and tracked to completion in accordance with the
company's internal service level indicators.
Quality Review
Red Bell's quality-control team manages the overall quality-control process to ensure that BPO orders are delivered to the client in accordance
with all company and client guidelines. The daily process encompasses working with and assisting vendors, quality-control reviewers, and
account managers to resolve any product, order form, or technology issues. Quality control monitors vendors and quality-control reviewers to
ensure that BPO orders are completed in a timely manner. Red Bell's internal key performance indicators require a 97% accuracy rate on all BPO
orders and a 95% completion time on orders for clients. Orders are in the quality-control queue less than 24 hours on average.
Red Bell reviews vendor performance in several different ways including on-time performance, quality of orders completed, and the overall
cooperation of the vendor. Vendors are rated on a three-tier scale with the highest rating of 1 (high), 2 (satisfactory), and 3 (low). Vendors that
are assigned a 3 rating will not be in the auto-assignment queue.
Red Bell performs an assessment of quality-control reviewers at the end of each month. The company reviews 5% of the total orders completed
by each vendor. Reviews encompass a number of categories including:
• Photos
• Repair
s
• N
eighborhood informatio
n
• M
ap
s
• P
roximity/population densit
y
• Cl
ient-specific guideline
s
• V
alue
:
o A
ge
o Days on market
o Square footage
o Amenities
o Bracketed
All of Red Bell's clients receive either a daily or weekly status report to track BPO order status.
Assessment: Red Bell has an effective automated process to assign ratings to its vendors based on timeliness and work quality as
well as solid methodologies in place to assess the work of its quality-control staff.
Accounting and Invoice Management
Radian's accounting functions are located in the Midvale and Philadelphia locations. The accounting department includes accounts payable and
receivable, billing coordinators, general ledger management, and investor reporting. The invoice management system is used to process
invoices for agent expenses and reimbursements. Client billings may include reimbursable expenses, servicing fees, cancellation fees, and
management fees. Expense reimbursement requests are submitted to the company via the IM system or manually via mail or email. The review
and approval process is performed by a group of billing coordinators who manually enter all approved expense-reimbursement requests into the
Operational Risk Assessments: Red Bell Real Estate LLC | April 2020 | www.morningstar.com
11
Morningstar Credit Ratings, LLC is an NRSRO affiliate of DBRS, Inc. DBRS, Inc is registered with the SEC as an NRSRO.
The DBRS group and Morningstar Credit Ratings, LLC are wholly-owned subsidiaries of Morningstar, Inc. For more
information on regulatory registrations, recognitions and approvals of the DBRS group of companies and Morningstar
Credit Ratings, LLC, please see: http://www.dbrsmorningstar.com/research/highlights.pdf.
system. Automated expense requests received via the IM system are downloaded daily into the system for scrubbing and validation. Billing
coordinators review the expense requests to verify that they meet specific client reimbursement and payment guidelines pursuant to a client-
specific fee matrix. The approved expense data is transferred from the system to the Microsoft Dynamics GP accounting software. The billing
quality-control analysts perform a daily review within the accounting software to verify the alignment of expenses to designated clients and
validate all supporting billing information on manually entered expenses. They also perform a quality review, based on predetermined criteria,
for expenses processed via the IM system. Payment posting batches assembled by the billing coordinators are then submitted for senior level
approval and posted for payment.
Once vendors have been paid, Red Bell must bill clients for reimbursement. The investor reporting analyst prepares an invoice for reimbursable
expenses derived from a cumulative list of up-to-date expenses extracted from the Microsoft Dynamics GP accounting software. Client invoicing
is accomplished by various means, including flat files or remittance summaries via the IM system, use of the IM system to forward a vendor’s
paid invoice to the client for reimbursement, or via final expense reconciliation on the HUD-1 closing form. A senior general ledger accountant
performs a reconciliation of all unbilled expenses to the client and interacts with the accounting and investor-reporting areas to remediate
discrepancies, the results of which are reviewed by the controller.
Incoming payments to Red Bell are reviewed by an accounts payable employee who creates a cash receipts batch within the accounting system
and forwards the checks to an accounts receivable employee who also records electronic payments and wires. A general ledger accountant
performs a daily reconciliation of cash receipts entered into the accounting system with the deposit record reflected on the bank account
website to identify discrepancies and remediate them in a timely manner. All payments that are not immediately applied to an invoice are
classified as unapplied cash and must be researched and processed by the month’s end. The report of unapplied cash is reviewed monthly by
senior staff and management to ensure completeness of the reconciliation process. The accounting and investor reporting areas meet twice
monthly for an accounts receivable “deep dive,” which consists of reviewing aged client receivables, strategizing to collect past-due balances,
correcting misapplied payments, validating client refunds, and referring aged items to an attorney for collection.
Individuals in the accounting department are cross-trained to increase knowledge depth and minimize turnover. Various reconciliation reports
are reviewed monthly by the controller and Clayton’s chief financial officer for approval and sign-off.
Assessment: Red Bell demonstrates solid controls in its accounting practices, supported by an effective technology environment. The
organizational structure of Red Bell’s accounting department provides the requisite segregation of duties among invoicing, billing
review, accounts receivable and payable, and general ledger management. The company has embedded multiple levels of review and
accountability both on the Red Bell level and with oversight by its corporate parent, Radian.
Operational Risk Assessments: Red Bell Real Estate LLC | April 2020 | www.morningstar.com
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Morningstar Credit Ratings, LLC is an NRSRO affiliate of DBRS, Inc. DBRS, Inc is registered with the SEC as an NRSRO.
The DBRS group and Morningstar Credit Ratings, LLC are wholly-owned subsidiaries of Morningstar, Inc. For more
information on regulatory registrations, recognitions and approvals of the DBRS group of companies and Morningstar
Credit Ratings, LLC, please see: http://www.dbrsmorningstar.com/research/highlights.pdf.
Ranking Definitions
The numerical scale of MOR RV/RS1 to MOR RV/RS4 is defined as follows:
1 Exceeds prudent loan servicing standards in key areas of risk
2 Demonstrates proficiency in key areas of risk
3 Demonstrates compliance in key areas of risk
4 Demonstrates lack of compliance in one or more key areas of risk
A servicer assigned a ranking of at least MOR RV3/RS3 is deemed to comply with what we view as the minimum prudent loan servicing/vendor
standards and requirements for the servicer’s/vendor’s operational category and role. For access to DBRS Morningstar’s “Operational Risk
Assessments of Residential Servicers and Vendors: Methodology and Process” and other published reports, please visit
www.dbrsmorningstar.com.
Operational Risk Assessments: Red Bell Real Estate LLC | April 2020 | www.morningstar.com
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Morningstar Credit Ratings, LLC is an NRSRO affiliate of DBRS, Inc. DBRS, Inc is registered with the SEC as an NRSRO.
The DBRS group and Morningstar Credit Ratings, LLC are wholly-owned subsidiaries of Morningstar, Inc. For more
information on regulatory registrations, recognitions and approvals of the DBRS group of companies and Morningstar
Credit Ratings, LLC, please see: http://www.dbrsmorningstar.com/research/highlights.pdf.
Disclaimer
The material contained herein (the “Material”) is being distributed in the United States by Morningstar Credit Ratings, LLC (“DBRS
Morningstar”) and is solely for informational purposes, and should not be considered a solicitation to buy or sell any security. THE MATERIAL
PROVIDED IS “AS IS” AND NOT SUBJECT TO ANY WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES
OF ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. DBRS Morningstar does
not undertake to update any information or opinions contained in the Material. From time to time, DBRS Morningstar and its affiliates and/or or
their officers and employees may perform other services for the company and/or its affiliates mentioned in the Material.
DBRS Morningstar rankings, forecasts, and assessments contained in this Material are evaluations and opinions of non-credit related risks, and
therefore, are not credit ratings within the meaning of Section 3 of the Securities Exchange Act of 1934 (“Exchange Act”) or credit ratings
subject to the Exchange Act requirements and regulations promulgated thereunder with respect to credit ratings issued by nationally
recognized statistical rating organizations.
The past performance of the companies described in this Material is not necessarily indicative of the future performance. While DBRS
Morningstar obtains information for its assessment contained from sources it believes are reliable, DBRS Morningstar does not audit the
information it receives from third-parties in connection with its assessment and rankings contained in these Materials, and it does not and
cannot independently verify that information, nor is such information subject to any warranty, guaranty, or representation. Certain assumptions,
including, but not limited to, an assumption that the information received from third-parties is complete and accurate, in connection with its
assessment, may have been made by DBRS Morningstar in preparing the Material that has resulted in the opinion provided. For more
information about DBRS Morningstar’s assessment methodology, please visit www.dbrsmorningstar.com
.
This Material, and the rankings and forecasts contained herein, represent DBRS Morningstar’s opinion as of the date of this Material, and thus
are subject to change and should not be viewed as providing any guarantee. In no event shall DBRS Morningstar be liable to any party for any
direct, indirect, incidental, punitive, special or consequential damages, costs, expenses, legal fees or losses in connection with any use of the
Material, even if advised of the possibility of such damages. The Material may not be reproduced, modified, or distributed in any form without
the prior written permission of DBRS Morningstar.
