One of the government-sponsored enterprises (GSE) has a loan purchase program (“aggregation” program) in which it buys whole loans, usually one at a time, from its multifamily/commercial loan correspondents.  Each loan must meet the GSE’s underwriting guidelines.  The correspondent represents to the GSE that the loan meets the guidelines and the GSE re-underwrites each loan for compliance with its guidelines.  On behalf of a large insurance company, Boston Portfolio Advisors then re-underwrites each loan and inspects each property for compliance.  The loans are placed into a special risk sharing pool in which the insurance company assumes the loan credit risk first loss exposure via a Mortgage Collateral Replacement Insurance policy.  This cycle repeats on a monthly basis ongoing.

Boston Portfolio Advisor’s role in this arrangement is to support the insurance company by managing the risk sharing loan pool on an ongoing basis and provide ongoing reporting regarding the pool.  BPA’s responsibilities in this project can be characterized as follows:

Product Development and Product Management

·          Risk methodology

·          Risk pricing methodology

·          Risk pricing modeling

·          Underwriting guidelines and parameters

Operating procedures (for all operations external to the insurance company)

·          Development of operating procedures

·          Documenting of operating procedures

·          Implementation of operating procedures

Operations

·          Management of loan portfolio operations

·          Management of risk portfolio

·          Supervision of counter-parties such as the GSE

·          Verification of all premium calculations

Risk Selection / Due Diligence

·          Loan re-underwriting

·          Property inspections

·          Seller and servicer evaluation

·          Data accuracy audit

·          Projection of default frequency, default timing, loss severity, and losses

·          Exception handling

Deal Management

·          Deal structuring

·          Closing support

Post-Closing Surveillance

·          Servicer surveillance and oversight

·          Loan credit and property performance tracking

·          Portfolio tracking and reporting

·          Risk tracking and reporting

·          Premium recalculation and reporting

Claims Support

·          Loss mitigation

·          Claims processing support

Special projects and analyses as requested by the insurance company

Note:    Actual client names have been removed due to confidentiality issues.