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Mavent Inc.
 Services / Due Diligence
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Due Diligence

Investors in mortgage portfolios or pools and acquirer of mortgage institutions need to be concerned about regulatory compliance risk:

  • Investors in Whole Loans, Pools or Portfolio's - A growing number of federal and state laws hold investors (as assignees) liable for compliance violations of the originating lender. Even where the investor purchases loans from a counterparty that was not the originating lender, the investor may be liable.
  • Acquirers of Mortgage Institutions - Acquirers of mortgage companies need to be concerned about regulatory compliance risk. In the event of a takeover, an acquiring company typically assumes the responsibility to address pending and future litigation. But acquirers can take steps to size and limit the risks associated with regulatory actions and litigation.

Regulatory non-compliance can result in both civil and criminal fines and penalties, which on a loan-level basis can be multiples of the original principal balance. Regulatory non-compliance can also subject an institution to reputational and operational problems, which can result in significant financial cost.

Mavent’s Due Diligence practice assists potential parties to a strategic transaction, or to a whole loan or portfolio sale, to size and limit regulatory compliance risk exposure. Mavent utilizes an ACE customized according to its clients’ unique regulatory interpretations and risk tolerance to evaluate a representative sample of loans for compliance with applicable laws. The result is a precise and consistent analysis of a larger sample of loans at a cost that is impossible for traditional, labor-intensive diligence firms to replicate.

What is the scope of the due diligence review?

Mavent will review individual loans in a loan portfolio, pool or active pipeline for compliance with the following Baseline Compliance Reviews or a client ACE:

  • Truth in Lending
  • HOEPA, state and local high cost
  • Broker & lender licensing verification and applicability
  • State consumer credit laws to include over 300 statutes and regulations
  • Fannie Mae approved requirements
  • Custom Rules

Mavent will provide its analysis in accordance with the laws and regulations applicable to the seller and each unique loan transaction. Mavent can also run the loans against the investor’s/acquirer’s regulatory authority (which may differ from the seller’s), as well as against the investor’s internal compliance policies.

What does this require?

A loan portfolio, pool or active pipeline of loans is provided to Mavent by the selling institution in a batch file extracted from the seller’s production system. Mavent will work with the seller to prepare the file. The data required is found in the 1003 (loan application), note, and HUD-1 (settlement statement), and is generally stored in the seller’s system of record.

What are the deliverables?

Mavent will provide a presentation of the results, including the following deliverables:

  • Summary Analysis Report - Mavent will provide discussion of reviews performed and summary findings, histograms showing exceptions for various types of compliance requirements on a jurisdiction and/or branch basis, and a frequency report of each type of regulatory exception identified.
  • Loan-Detail Reports - Mavent will provide a comprehensive analysis for each loan in the sample. The loan-level analysis includes regulatory non-compliance findings, as well as all calculations, derivations and fee classifications.
  • Web-Based Reporting - Mavent’s flexible reporting module provides clients with the ability to quickly and easily access and format loan-level data into custom reports.