Whole Loan Purchases and MBS/CDO Investments
Residential mortgage whole loans and related securities differ from all other credit instruments - even other consumer credit instruments - due to the amount and complexity of consumer protection laws and regulations. Losses from credit and collateral are capped by the investor’s basis - nonperforming loans are worth no less than the value of the underlying home (less some added costs to foreclose).
Violations of consumer protection laws, however, can result in fines, penalties and (both civil and criminal) damages that can exceed the original principal balance of the loan. There are also additional reputational risks associated with charges of predatory and discriminatory lending, and investors - including anyone in the chain of title for whole loans and the securitization trust for securities - can be liable, even though the violator was the broker or originating lender. In other words, the investor can be held liable and suffer damages for actions outside its control and for which it did not have knowledge of.
Mavent offers several solutions that protect investors in whole loans and mortgage-backed securities:
Automated
Compliance Engine (ACE)
Mavent develops and maintains ACE's that review
seller loan data against Mavent's
baseline
compliance rules, as modified by an investor's own
regulatory interpretations and
internal compliance policies.
Investors can select from Mavent's
baseline
reviews (all of which are maintained current by Mavent and its outside
counsel network) which compliance reviews to perform. Applicable substantive law
will be applied based on the
seller's
license or charter authority, enabling investors to purchase loans that have
more attractive cash flow characteristics without incurring greater risk. Mavent
ACE's can be
deployed in
several ways, based upon secondary market workflow and data availability
constraints.
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information.
Correspondent ACE
The Correspondent ACE
program allows secondary market investors to make their ACE available to their
sellers. This improves client relationships, reduces kick-outs rates, and allows
investors to treat their sellers like true partners by enabling them to close
loans eligible for purchase.
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information.
Seller Licensing Verification and Monitoring
Mavent verifies, and monitors on an ongoing basis, an investor's approved
counterparties to make certain that all sellers remain properly licensed or
exempt, and ascertains whether a seller's license or exempt status grant it the
authority to make a subject loan.
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information.
Counterparty Due Diligence
Mavent supports
investors in reviewing new and existing counterparties to ensure that sellers
have adequate controls in place to originate compliant loans.
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information.
Pool Due Diligence
Mavent provides a
comprehensive regulatory compliance risk assessment of a seller's pool or
portfolio. Mavent utilizes the investor's ACE to ensure the analysis meets the
investor's regulatory interpretations and risk tolerances. The analysis can be
made based on the seller's license or charter auhtority and/or the investor's.
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.
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information.
Solutions for Purchases