First American Sub Rolls Out ARM Analytics Platform
First American Outsourcing and Technology Solutions, a member of The First American Corporation (FAF), said Monday that a new auditing solution designed to reduce the cost and risk of servicing, acquiring and selling ARM portfolios has been rolled out. The platform, in development for the past few months, identifies data issues with existing ARM portfolios, and can “scrub” loan-pool acquisitions during the transfer and boarding process or as pre-sale due diligence. First American executives suggested that the new service goes so far as to fix errors, rather than merely identify them -- specifically, the solution can re-amortize and repair loan files and customer histories, and automatically generate corrected borrower loan statements. This enables millions of dollars in potential servicer savings by avoiding costly fees and penalties, First American said in a statement. The move into ARM auditing and analysis underscores where much of the mortgage business is headed these days: forensics and risk management work, designed to limit losses for servicers and their investors, or prevent unexpected losses in portfolio acquisition or other related investments. "Industry-wide, as much as $350 billion of unsecuritized ARMs are still held in portfolios,” said Scott Brinkley, executive vice president at First American Outsourcing and Technology Solutions. “Whether they are traded or retained by the servicer, there are significant data issues that can result in incorrect rate adjustments, defaults, foreclosures and lawsuits." Much of that work has traditionally been done via on-site auditors who comb over loan files, Brinkley said. The goal behind First American's ARM auditing and repair platform is to reduce the need for on-site audits and manual data scrubbing -- all of which is wonderful, truly. But the fact that the industry is just now getting to a point where a product like this is rolled out underscores both the complexity of the data involved, as well as the relative lack of interest previously given to servicing and other post-origination activities. That said, the fact that First Am's innovation here is coming to market at all suggests that such sentiment is changing -- good news for anyone who cares about seeing the mortgage business ultimately move itself forward. Write to Paul Jackson at email@example.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.