Loan selection for pre-closing quality assurance audits is often accomplished through adverse sampling. Many organizations have a set formula to segment high risk characteristics, but those techniques do nothing to address loans that fall outside of those parameters, but in fact have high risk. That is why LoanLogics has partnered with Milliman, one of the largest independent actuarial consulting firms in the world, and MasterServ Financial, Inc., specializing in portfolio management and performance technology and solutions, to offer Default, Repurchase and Appraisal Loan Quality Scores.
The LoanHD® scoring and sampling engine allows lenders to efficiently select and score loans for audit:
Milliman's Mortgage Default Score can help analyze and monitor the credit quality of new production, allocate servicing resources, develop underwriting guidelines and pricing, just to name a few of its uses. It is developed from a dynamic econometric model that combines three important components of mortgage risk: Borrower, Underwriting, and Economic.
Milliman's Repurchase Score used in pre- or post-funding targeted quality control reviews can help estimate lifetime repurchase risk from either Fannie Mae or Freddie Mac at origination. The probability of repurchase for a given mortgage is estimated conditional on default and on non-default.
MasterServ's Appraisal Quality Score helps evaluate vendor performance, keep closings on track and reduce repurchase risk. It is compiled from five appraisal quality index factors:
The score can be used to target loans with a lower score for full review pre-close or for discretionary sampling post-close. The score is also a useful indicator of quality for due diligence and pre-funding quality control.