Empowered an Investment Bank to Confidently Ramp Up Trading Volume in Residential Whole Loan Pools While Effectively Mitigating Risk
•Implemented transaction and collateral management, curative asset management, pre-sale risk identification, trade settlement and post-ownership risk mitigation technologies
•Over 18 months, identified 19,000 exceptions and cleared an average of 99%
When a large investment bank began growing its trading volume in residential whole loan pools they needed clear and accurate reporting to make decisions on whether to drop high-risk loans from the bid; or put exceptions into the purchase agreement requiring the seller to remedy collateral issues during post-close management. They relied on a third-party vendor to identify collateral defects that could impede a clean assignment chain - but the vendor used manual spreadsheets to track files, did not provide a high level of forensic detail, and lacked systems to present data in a format that could be easily understood by the bank. This made it difficult to track the tasks required from a document deficiency perspective and intensified the bank’s risk of buying loans that had liabilities caused by origination defects. The vendor often had capacity constraints and would miss deadlines. When the bank successfully bid and won several whole loan portfolios, it needed to quickly find a new partner with the technology and expertise to identify issues during the pre-sale process.
The bank needed a firm that could provide transaction and collateral management to minimize risk, get the deals to the finish line and scale with demand. SitusAMC introduced the client to its client services professionals, reporting process and proprietary collateral management system, CAM (Complete Asset Management). The system contains logic to automatically generate and update collateral exceptions using data imports as opposed to relying solely on manual input, and grades the curability as high, medium or low effort. SitusAMC integrated key documents, data files and links to begin assessing the loans. Transaction coordinators provided weekly reporting, rolling up loan-level and exception-level review into a consolidated diligence report. This allowed the client to see exactly where the risk was, along with the level of difficulty for curative action. SitusAMC also provided the bank with a dashboard, enabling its professionals to dive into exceptions at a loan-level and get immediate feedback on materiality and curability.
SitusAMC’s scalable staffing model, state-of-the-art collateral management system, and comprehensive diligence reporting empowered the client to significantly expand trading volume. SitusAMC onboarded the client in 2017. Over the next 18 months, the bank executed 24 trades, nearly doubling its volume. SitusAMC identified 19,000 exceptions and cleared an average of 99%.