The mortgage secondary market has seen an increase in regulation and required due diligence. In recent times there have been servicing transfers, particularly with seasoned and re-performing loans, with buybacks as high as 70%- 80% due to errors found by the buyer. The main risks evaluated by the ratings agencies relate to borrower credit, property valuation and regulatory compliance. But are those all the risks?
The solution is full due diligence and remediation of exceptions taken before pools are even brought to market.
Full due diligence includes a review of the collateral file, which is not required by most rating agencies. However, faults in the collateral file and clouded title that may jeopardize the buyers beneficial rights, present significant risk for both parties in a transfer, as well as for investors in a securitization.
Instead of waiting for the problems to be found before taking curative action, a proactive approach to audit and resolve all points of risk, including collateral risk, needs to be taken. This can result in higher pool valuation, lower buybacks and more certainty with reps and warrants. It is an investment that can get a very fast return.
Presented in partnership with:
» Richard Bitner
» Michael O’Connell
COO, Nationwide Title Clearing
» Myron Finley
CLO & General Counsel, Nationwide Title Clearing
» Paul Marchese
Date: November 13, 2014