System Determines 'Predatory' Status

ComplianceEase said at the RMBS 2004 Annual Strategy Meeting here that PredatorAnalyzer, its industry-standard automated compliance system, has been upgraded to allow mortgage originators and residential mortgage-backed securities issuers to instantly obtain the anti-predatory lending loan categorization required by Standard & Poor's.

ComplianceEase said it responded to recent S&P policies that effective July 1, require that loans subject to certain anti-predatory lending legislation and sold into rated securities must be identified as "home loans," "covered loans" or "high-cost loans" in the data submitted to S&P's risk analysis system: LEVELS. This in addition to the proliferation of anti-predatory lending laws that can potentially lead to noncompliance penalties.

S&P's director, Scott Mason, commented that S&P is pleased to see the implementation of its guidelines within the PA systems, which identifies anti-predatory loan classifications and flags violations, because "it makes sense to use available technology to help streamline the process of preparing pool submissions."

According to ComplianceEase CEO, John Vong, the upgrade was facilitated by PA's flexible rule engine.

"The incorporation of these new guidelines is a natural and straightforward next step to further enhance our industry-standard compliance risk assessment tool, as we have previously done with other secondary market anti-predatory lending requirements, such as those issued by Fannie Mae and Freddie Mac," he said.

ComplianceEase vice president, Jason Roth, explained that PA "enables lenders and RMBS issuers to have an overall picture of the required classifications of their pools before delivery to Wall Street," flagging loans that do not comply with S&P ratings, or require additional credit enhancement.

Mr. Roth stressed that the quantity of high-cost, anti-predatory legislation at state and municipal levels has increased steadily since 2000.

"With a growing list of anti-predatory lending legislation, the rating agencies will continue to refine their policies to address the additional risk," he said.

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