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Subprime Lending Analysis
The collapse of the subprime mortgage market has had profound effects on the economy and the litigation landscape.
Lenders, mortgage brokers, loan servicers, investment banks, and other stakeholders who contributed to both the
rise and the fall of this market will inevitably be faced with significant liabilities. Measuring losses, determining
who should be held responsible for them, and distinguishing between bad luck and bad faith will be recurring themes
in subprime-related litigation.
Understanding the potential financial impacts of this recent development and the associated economic implications
require financial, economic, and statistical expertise to quantify the impacts. Our knowledge about the subprime
market, as well as the fundamentals of the surrounding litigation environment, allows us to properly measure these
impacts and provide clients with clear and precise answers, whether the issues arise in dispute resolution, public
investigation, policy-making, or compliance.
We offer the following services and analyses:
Mortgage Pool Analysis
Determine the risk level of a pool of loans, and the change in risk level over time Measure the contribution of different loan characteristics to the pool’s risk profile Evaluate the performance of the pool over time under alternative scenarios; estimating default rates and probable losses econometrically Assess reasonableness of the pool’s original valuation and risk assessment, in light of known market conditions and other available data
Structured Finance
Assess the value, risks, or other characteristics of structured finance products, including mortgage-backed securities and collaterized debt obligations Analyze the role of lenders, borrowers, and other market participants in structured transactions
Loss Causation, Measurement, and Allocation
Identify the various forces and factors contributing to a given loss Quantify the contribution of each causal factor contributing to the loss (such as pool quality versus servicing quality) Allocate damages fairly and defensibly between multiple entities, even those involved with different stages or aspects of a transaction
Policy Analysis
Anticipate the magnitude and distribution of the costs and benefits of new regulations Describe and quantify the likely impact of changes to the incentives and economic interests of major stakeholders Forecast the consequences of a proposed policy under alternative scenarios
Compliance
Assess the quality of a lender's compliance to underwriting, pricing and verification policies Assess lender's underwriting and pricing system for impact on various demographical groups
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on selected subprime lending analysis experience.
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