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Loan Review - Representative Engagements

Monthly Quality Control Review

A mortgage subsidiary of a regional bank requested that we implement and perform the monthly post-closing quality control review on 10% of their production. The objectives of the quality control review are to:
  • Assess the accuracy and integrity of the data used to underwrite the loan by reverifying borrower information and re-underwriting the loan;
  • Assess whether the loan was underwritten based on established loan policies, prudent underwriting and regulatory compliance practices, and appropriate risk tolerances; and
  • Determine compliance with FNMA/FHLMC, FHA, and VA basic requirements and review the files for fraud, including use of a red flags checklist.
Detailed reports were provided to the client that allowed them to not only correct individual exceptions where possible, but also to identify gaps in their process and implement corrective action to prevent the same errors from recurring.
 

Mortgage Lending Expertise and Research

At the request of a national law firm, we conducted an independent review of the terms and conditions of certain residential mortgage loans to determine whether the interest rates and fees charged on the loans under review were in line with normal lending practices and consistent with the rates and charges offered by lenders at the time the loans were originated. Our review specifically included:
  • An assessment of the mortgage lending market, with a particular focus on rates, fees, and services during the period under review.
  • Detailed evaluation of the original underwriting files to determine the qualifications of the borrowers and adherence to general underwriting standards.
  • Historical perspective of the mortgage lending environment from professional industry experience from the time period in which the loans were originated.
 

Mortgage Fraud Review

The mortgage subsidiary of a major financial institution requested a forensic review of residential mortgage loans acquired from various mortgage lenders and correspondent banks. The focus of the review is to determine the existence of mortgage fraud which would result in a request to repurchase the loan. We assembled a team of mortgage fraud experts, underwriters and internal auditors to determine if each loan reviewed had a material misrepresentation. Imaged files of the loans are uploaded to our system server and reviewed in a secured environment at our corporate offices eliminating expensive travel costs. The cost of the engagement is recouped by the repurchase of a relative few loans.
   

Second Lien Portfolio Repurchase Review

A client who had purchased a portfolio of HELOCs (servicing-retained)  was concerned that the original underwriting was not as represented and was dissatisfied with the servicing. We reviewed the loan origination and servicing contracts to understand the client’s rights (e.g. repurchase, termination of servicing) and performed a review of the loan origination and servicing files. We found that the loans had been underwritten poorly and had not been serviced in accordance with either the contract or industry-standard practices, resulting in a substantial settlement with the seller and the release of servicing rights.
 

Mortgage-backed Security Repurchase Analysis

A national financial institution serving as a trustee on multiple securitizations of subprime mortgages requested repurchase of certain loans by the originator. The trustee required our assistance to determine which loans were eligible for repurchase and what the potential losses were on these loans. We reviewed the files for underwriting, compliance, and fraud. We also obtained updated collateral values as a basis for forecasting ultimate loss. This information was used as the foundation for negotiations with the originator.