Digital Risk Shares Its Loss Recovery Expertise With the American Securitization Forum

Company Addresses Forum’s Model Representations and Warranties

Maitland, FL (September 8, 2009) - In an effort to restore investor confidence in residential mortgage-backed securities, Digital Risk, LLC, has advised the American Securitization Forum on the need to prohibit the use of “knowledge qualifiers” by originators, sponsors and issuers of RMBS.

Knowledge qualifiers are often used in representations and warranties to limit responsibility to situations where the counterparty is aware of misrepresentations. Knowledge qualifiers create a reason not to know and act as a disincentive to issuers keeping them from implementing robust risk mitigation policies and procedures. The utilization of knowledge qualifiers shifts the burden to investors who are completely defenseless. Until this inequity is remedied, Digital Risk fears that investors will continue to sit on the sidelines.

The company provided its expertise to the ASF via the association’s Project RESTART, which aims to rebuild investor confidence in mortgage and asset-backed securities by developing commonly accepted and detailed standards for transparency, disclosure and diligence. Key to this effort is the development of model representations and warranties which can be used to appropriately allocate the risk of “defective” mortgage loans between the issuers of the securities and the investors who purchase them.

As the leading provider of integrated predictive analytics and expert advisory services helping the nation's largest and best-known mortgage originators, Conduits and RMBS investors manage risk and recover RMBS losses, Digital Risk is eager to share its expertise with ASF. With the knowledge accumulated from the forensic review of more than 200,000 seriously delinquent residential mortgages annually for representation and warranty violations, Digital Risk is an advocate for stronger representations and warranties that will protect RMBS investors. In today’s volatile economy, many Residential Mortgage Backed Securities (RMBS) investors have reduced or stopped their RMBS participation because of the undisclosed risks and lack of accountability.

In announcing Digital Risk’s participation, Managing Director Jeff Taylor said, “We commend ASF for its leadership with Project RESTART. Every day we strive to protect our investor clients from unwarranted risks and losses. We strongly agree that stronger representations and warranties will drive improved securitization demand going forward”

Bruce Miller, Digital Risk Executive Vice President, Structured Finance Group Head commented, “This is a great first step in restoring investors’ confidence in the secondary mortgage market by delivering on the promise of greater transparency and accountability. Additionally, we look forward to working with the ASF to help protect RMBS investor rights”.

ASF is a broadly-based professional forum through which participants in the U.S. securitization market can advocate their common interests on important legal, regulatory and market practice issues.

About Digital Risk

With offices in New York, Dallas, and Orlando, Digital Risk, LLC is a leading next-generation integrated portfolio management solutions provider to the $4.2 trillion residential mortgage industry. Digital Risk is the only company in the market that combines proprietary predictive modeling analytics with expert forensic underwriting services, thus providing its clients an integrated 360° portfolio management solution to maximize returns and minimize losses. The Company’s predictive analytics, when integrated with its asset management services, delivers an effective set of solutions that minimize credit risk, pinpoint and prevent fraud, identify and execute loss mitigation and asset recovery opportunities, execute loan repurchase and loss indemnification, ensure regulatory compliance, assure quality, and maximize portfolio returns, among others.

For additional information contact MORSE COMMUNICATIONS at 203-313-1464.

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