Provided a Government Agency ​ with a Technology and Diligence Solution to Optimize Execution and Pricing on a Large Loan Portfolio

Between 2008 and 2012, a government agency negotiated modification agreements for tens of thousands of borrowers, converting delinquent and defaulted residential mortgage loans to reperforming loans (RPLs) on its balance sheet. In 2016, after new regulations were implemented, seasoned loans became less risky and more attractive to investors, providing an opportunity for the agency to sell the assets. The agency had never marketed RPLs before, so it decided to perform pre-bid diligence on the pool to ensure the loans were compliant and performing to the terms of the modification agreements. This would allow for the removal of any unappealing or risky assets that might depress pricing. To accomplish this, the agency needed a partner with deep expertise in auditing credit, regulatory compliance, title defects, pay histories, servicer comments, and a range of other risk factors – and a partner with the experience necessary to evaluate 50,000 loans in a 120-day time frame.

SitusAMC used its Acuity software platform, a proprietary document recognition program with advanced OCR capability. Acuity recognizes forms and document types in loan files, and then indexes and stacks the documents so the most important items appear at the front of the file (note, title, loan app, etc.). As SitusAMC received the loan files, it ran them through Acuity and created a report to immediately identify which loans were missing critical documents and flagged these to the agency, bank and servicers in the first three to five weeks on upward of 50,000 loan files. SitusAMC then put these loans on hold without reviewing them until the missing documents came in and prioritized review of the files with the most complete documents. This gave servicers time to respond and provide missing documents on the deficient files, while the SitusAMC team moved forward on the complete files.

SitusAMC was able to execute the due diligence faster and more efficiently than anyone in the industry had ever attempted to do, without sacrificing accuracy. The technology used offered benefits for downstream parties as well. Winning bidders received a hard drive or direct file transfer with all the loan reports, images and a reliance letter, so they could close on a loan pool and sell or securitize the assets immediately. Through the Reliance Letter, results are provided instantaneously with no need to re-diligence the loans and these results are provided to loan buyers at a fraction of the cost if they had performed their own diligence. Ultimately, SitusAMC completed the project ahead of the deadline, and the agency was so satisfied with the pull-through rate and pricing achieved on the reperforming loans, it awarded SitusAMC its marketplace loan sales in hopes of enhancing those outcomes.