Maximizing Insights with Continuous Loan Portfolio Monitoring

Challenge

A top-10 mortgage servicing rights owner needed a solution to effectively monitor its loan portfolio performance and gain insight into operational execution and potential regulatory compliance issues.

Because the company uses multiple sub-servicers for its loan portfolio, having a consolidated view of portfolio performance and insights into operational execution and compliance risk is critical. Efficiently managing and analyzing data from different sub-servicer systems proved to be a large undertaking.

Solution

Guidehouse was engaged to build a scalable, comprehensive sub-servicer oversight program that featured onsite assessments to interview management, loan-level compliance testing, remediation activity tracking, and complaints monitoring.

Guidehouse deployed its proprietary Continuous Asset Monitoring (CAM) platform as a key enabler of the sub-servicer oversight program. The application provides portfolio transparency by utilizing data analytics to test 100% of loans in a portfolio while centralizing servicing oversight on a single platform. Its automated test suite includes coverage on government-sponsored enterprise (GSE) requirements as well as major federal and state regulations, including Home Mortgage Disclosure Act (HMDA), Fair Credit Reporting Act (FCRA), Servicemembers Civil Relief Act (SCRA), Truth in Lending Act (TILA), and Real Estate Settlement Procedures Act (RESPA).

Using the CAM platform, Guidehouse combined and standardized data for millions of loans from the various servicing systems to run analytics and a suite of more than 750 tests each day to monitor for potential compliance exceptions. As an added service, Guidehouse also provided monthly sample-based manual validation support to confirm findings and track associated remediation efforts.

The CAM platform components deployed for sub-servicer oversight include the following:

• Portfolio metrics dashboard that details loan counts, unpaid principal balances, delinquency rates, roll rates, FICO scores, and interest rate profiles split out by sub-servicer.
• Compliance and regulatory monitoring that provides daily portfolio-wide compliance surveillance (with more than 750 automated tests tied to federal, state, and GSE requirements), reports targeted potential exceptions, and benchmarks sub-servicer compliance.
• Complaints analyzer that summarizes and trends complaint volume by servicer, channel, category, and controllable vs. non-controllable issues, with a heatmap detailing volume by state to identify state-level risks.
  
  

Impact

Guidehouse’s continuous monitoring-enabled sub-servicer oversight framework has effectively scaled compliance testing activities as the client’s loan portfolio has grown rapidly.

By facilitating continuous daily testing of the entire loan portfolio, Guidehouse has helped the company gain real-time portfolio insights, a more complete view of sub-servicer issues, and potential errors for further review on an ongoing basis. A monthly sample-based manual validation service has also been deployed to help confirm findings and track ongoing remediation efforts performed by affected sub-servicers.

This automated approach has allowed the client to re-allocate resources that would normally perform random sample testing while generating a pre-screened list of loans that carry comparatively higher compliance issues. Both the sub-servicer oversight program and CAM platform have been showcased to regulators and have been well-received by federal, state, and GSE examiners.