We can provide you with all the tools for performing servicing due diligence – faster and more cost effectively than it can be done using your internal resources. More importantly, our proven methods and state-of-the-art analysis capabilities have saved our clients tens of thousands of dollars by uncovering critical issues. Using our proprietary software system, we can stratify each portfolio by investor, product type, servicing type, delinquencies and other key characteristics – and point out potential areas of concern with a clear, easy-to-understand report. Our analysts are experienced with all the major service bureaus, and we can help you avoid costly surprises.
Portfolio tape analysis is the starting point, providing:
Offering Package Comparison –Before going onsite to evaluate the loans in a portfolio, we perform “pre-site” analysis, comparing offering package data to the portfolio data obtained directly from the seller's servicing system tape. This provides early notice of important discrepancies, such as mistakes in identifying loans with recourse, escrow balances, remittance types, servicing fees, etc. We also verify the loan-level data used to bid, comparing to the loan-level servicing data to identify issues that might be hidden in the weighted average totals. The offering package comparison and loan-level comparison are critical pieces in determining portfolio price adjustments.
Data Exception Analysis – Portfolio data is run through more than 200 edits to identify loans with missing or questionable data such as discrepancies in amortization, P&I payments, ARM parameters, capitalization, guarantee fees and other areas. Results are used to assist in the process of selecting sample loans for the on-site analysis, as well as negotiating the purchase and sale agreement, and clean up and correction of data issues.
Underwriting Exception Analysis – Through our underwriting exception analysis, portfolio data is subjected to 280 additional edits to identify high-risk loans and loans that may not meet agency eligibility requirements. This review helps determine if the portfolio contains loans with higher-than-average risk of default or agency putbacks and also aids in sample selection.
Sample Selection –The two analyses outlined above provide the basis for selection of an appropriate sample of loans for on-site file due diligence. The sample selection can be tailored to meet specific statistical sampling confidence levels, or it can be a mix of randomly and adversely selected loans to create a certain sample percentage. Additionally, loans with servicing issues uncovered in the data exception analysis can be selected. Loan pull lists are provided to the seller to ensure that loan files will be available when the review team arrives.
On-site Underwriting, Compliance Review, Legal Documentation and Database Verification – Once pre-site work has been completed, an MDMC due diligence team of experienced underwriters equipped with our laptop review system, visits the site where loan files are kept. Here we perform a review of the loans in the selected sample, verifying legal documents, performing a credit underwriting analysis and compliance review, and confirming that the data on the servicing tape matches the loan files. This is a critical evaluation where we might find that a seller's servicing tapes do not accurately reflect the information that exists in the actual loan files, or that legal documentation or credit quality may not be as represented.
Reports – We have the flexibility to provide our analysis and findings in both a loan-level and summary basis. Custom and ad hoc reporting is available upon request.
We look forward to sharing our expertise and insight with you as we partner together to create customized solutions to your business needs. Contact us to find out more about how we can meet your servicing due diligence needs.