360° Risk Analytics
Only Digital Risk provides end-to-end, comprehensive solutions that
uniquely meet your needs. We integrate next-generation Predictive Modeling
Analytics with expert Forensic Loan Review to pinpoint sources of fraud and
error make recommendations consistent with your company’s business rules.
Predictive Modeling Tools
Industry Leading Algorithms. Our proprietary data analysis
algorithms are second-to-none when it comes to assessing loan quality. They
allow us to cross-reference and to verify credit, income and collateral
information. These sophisticated algorithms project loan defaults and losses
more accurately than prior systems. Moreover, they take a qualitative view
of such items as income and collateral overstatements. Finally, since market
conditions, competition, and regulations are always changing, we constantly
update our algorithms.
Multiple Data Sources Produce Superior Verifications. Digital Risk
goes beyond the conventional data sources used to verify credit income and
collateral. We access special public and private credit, government and
marketing databases to acquire qualitative and quantitative information with
which to verify representations and warranties. For instance, we may look at
utility and telecom accounts; mortgage loans, property occupancy, ownership,
titles and liens; IRS and Social Security data; Federal Watch lists (e.g.,
OFAC and FBI) death master lists from hospitals, insurance carriers and
funeral homes in order to provide more precise verifications. Our objective
is to verify information, especially when inconsistencies appear.
Business Rule Enabled Decision Support. Digital Risk customizes
decision support management solutions to reflect each client’s unique
business rules, workflow and risk tolerance levels. The result is
easy-to-read, action-oriented reports with evidence to support the
conclusion. Using your firm’s definitions as to what constitutes
non-performing mortgage assets (e.g., Early Payment Default (EPD),
“delinquency” and “default.”). Digital Risk’s scorecards deliver
results-oriented decisions, often in real time, for immediate actions.
Our proprietary Predictive Modeling Tools include PortfolioReview and
RiskIQ. RiskIQ is a powerful, comprehensive loan level due
diligence tool that analyzes all facets of even the most complex loans,
analyzing factors related to the loan’s credit, income, collateral and
participants to determine whether the transaction is sound or likely to
result in a costly default. It provides an optional feature for enhanced
identity verification through escalation to the Social Security
Administration’s databases, as well as a direct link to the IRS to
facilitate fast and reliable income verification. It can be tailored to
offer both Correspondent and Retail loan application data verification.
RiskIQ modules include:
- IdentityIQ
- IncomeIQ
- PropertyIQ
- RiskAnalytics
PortfolioReview is a set of decision support tools that use
predictive modeling algorithms to analyze loan pool data from a wide variety
of sources to recommend “intelligent” decisions based on clients’ business
rules to mitigate risk in the mortgage industry. It allows MBS security
firms, portfolio traders and investors to determine a loan’s “right price,”
based on projected future performance. As a comprehensive decision support
solution, it also enables investment banks to design proper credit
enhancement and support structure of their MBS based on projected loan
performance.
PortfolioReview consists of a real-time data gateway, a sophisticated
business rules engine, and an artificial intelligence engine that
self-learns from its experience with fraud patterns. It uses proprietary
algorithms to predict income yield. It also enhances negative convexity
algorithms with loan specific default rate projections to predict yields
since, in markets of increasing interest rates, prepayment rates slow down.
Each client’s tailored algorithms generate a custom Loan Risk Scorecard,
which predicts each loan’s default probability based on quantifying loan
exposures, borrower’s stability factors, the client’s business rules,
seller’s representations and warranties and risk-tolerance levels. Data from
traditional data sources and special public and private databases are
comprehensively analyzed to measure risk and identify potential
misrepresentations. Having a reliable risk score allows Trading Desks to
properly price the loan and better select due diligence samples.
As a part of the verification process, PortfolioReview validates loan data
at the time of origination/loan acquisition, and then compares it to
currently validated data. Collateral validations include verification of
current value and value at origination, and an estimate of the collateral
value exposure. For example, was the value decrease a function of
misrepresentation at origination, a decrease of market conditions, or an
error by non-qualified appraisal? Owner verification focuses on current
occupancy and at origination, and checking the validity of borrower’s phone
numbers, addresses, undisclosed properties, etc. For instance, high rates of
property acquisitions may suggest fraud, while high debt-to-income ratios
indicate greater probability of payment defaults. Verification of income
representations involve comparisons with leading government and industry
compensation data, offering the most accurate salary ranges available per
borrower occupation and residence data.
Finally, additional analyses are performed concerning all parties involved
in a loan process. For instance, to uncover evidence of collusions by
originators, realtors, appraisers, loan officers or settlement agents,
PortfolioReview makes comparisons between their performance and benchmarks,
and their appearance on “Watch Lists.”
Clients can purchase PortfolioReview’s Modules individually or as a
whole. They include:
- Triage PortfolioReview
- Trading Desk PortfolioReview
- PortfolioMonitor.
PortfolioReview’s decision support reports are accessible on a real-time
basis through a web portal, or can be integrated directly into client LOS
and underwriting systems. Reports are available in HTML, Excel, PDF and XML
formats – to help you generate more loans, with less risk.
Forensic Loan Reviews
At the granular level, there is no substitute for Digital Risk’s forensic
review services. Our team of expert underwriters is armed with powerful
system tools and years of fraud prevention and underwriting experience. Our
due diligence services build upon the findings of our PortfolioReview risk
analysis reports to pinpoint the major exposure areas. Some of the key
services offered:
- Seller loan qualification and submission
- Loan eligibility, pricing and locking
- Credit underwriting and regulatory compliance reviews
- Property valuation services and fraud reviews
- Quality control
- Custodial file creation & management
- Servicing data collection and file upload
- Servicing transfer and custodial coordination
- Tracking and trending analysis of sellers
- Imaging
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