Executive Sees Opportunity In Tough Times

Todd Whittemore, the newly appointed executive vice president of master risk management of Digital Risk LLC, Maitland, Fla., attended the Mortgage Bankers Association’s National Mortgage Servicing Conference in Dallas to stay current on market issues and trends in servicing demand.

The main take away? A reassurance that there are not enough reasons to be optimistic about the near future of the housing market, so like most of his peers in the servicing market Whittemore is bracing up for another tough year—which nonetheless holds a lot of promise within his line of business.

Whittemore spent the past 12 years with Aurora Loan Services’ master servicing division in Colorado that serviced over $200 billion in residential mortgage loans. Now he is in charge of Master Risk Management, Digital Risk’s trademark software solution that currently operates about $1.15 trillion in assets.

The executive, whose experience in the mortgage market expands almost three decades and includes loan servicing oversight, credit risk management and residential mortgage-backed securities, sees new opportunity for secondary market risk management solutions.

Digital Risk is in the process of expanding the business implementation capabilities of its flagship solution MRM designed to serve the asset-based securities market including mortgage-backed securities.

And that makes for another reason to inquire about potential clients interested in acquiring digital risk control core competencies. He would not disclose the specifics of his encounters but says he spent most of his time in Dallas networking with industry peers and meeting with nonperforming whole loan investors and servicers.

According to Digital Risk chairman and CEO Peter Kassabov, it has been obvious and for some time now that “investors do not have adequate representation in the resolution of the mortgage-backed securities industry problems.”

And as investors pursue their right to full transparency, independent third-party reviews and accountability, they also are generating demand for insight and tools that would further promote these investor rights.

Following that demand potential Digital Risk’s business model is evolving beyond the loss recovery model and expanding into strategic management of loss modeling, bond targeting, master servicing and surveillance.

The firm’s stated goal is to converge master servicing with credit risk management using a unique combination of collateral and servicing risk management technologies, processes and a team of 700 capital markets, quantitative and advisory experts.

Plus, executives say in today’s market it is important to base business strategies on hands-on understanding of the market that help deliver hindsight on the unintended consequences of regulatory reform changes.

Credit risk management market growth derives from a natural market need to review what went wrong not only during the current crisis but in the past decades as well. It is becoming clearer what needs to change, Whittemore says, since master credit risk management strategies of the past have proven to be wrong in both the collateral and the servicing side.

In his view, highly effective risk management is an ongoing endeavor that requires many-sided and complex data analytics capable to the attention into the most problematic parts of the mortgage transaction.

As he continues to help develop the firm’s future strategy Whittemore is also working with the newly created Digital Risk structured finance department. Investor litigation issues also are a topic of interest given that lack of mortgage process transparency and data gaps make litigation an investor’s only recourse, he says.

The firm operates as a master servicer and a credit risk management solutions provider using MRM to maximize loss recovery for existing RMBS and CMBS investors and other clients with new asset acquisitions. Company president and managing director Alex Santos says the goal is to focus on “the highly anticipated rebirth of the whole loan and portfolio securities marketplace.”