CHALLENGE: An investment bank is re-entering the warehouse lending business. In 2008, many warehouse lenders had no other choice but to take possession of illiquid collateral. Upon further analysis, the collateral was also replete with fraud and origination errors driving credit losses in a business where credit losses are unacceptable. How does a warehouse lender prevent this from happening again?

SOLUTION: After careful consultation with the client, Digital Risk deployed a comprehensive risk mitigation solution designed to identify systematic risk and secondary market illiquidity defects. First, Digital Risk and the warehouse lender jointly performed operational and quality reviews on prospective warehouse clients. Next, Digital Risk integrated its RiskIQ Analytic Tool with the warehouse lender’s funding system allowing real-time screening without disturbing funding timelines. In configuring business rules, Digital Risk tailored RiskIQ to the warehouse lending industry’s systemic risk focus.

RESULTS: Warehouse lender entered the market and new clients have embraced the mutually beneficial quality control program. It is too soon to quantify results, but the warehouse lender’s management team is comfortable knowing that best-in-class controls have been implemented.

SOLUTION: Quality Management

ANALYTICAL TOOL: Risk IQ, Plates

EXPERT SERVICES: Fraud Detection and Prevention, Collateral Advisory Services, Operational Risk Reviews, Regulatory Compliance Reviews