Certification of Loans and Investment Pools

Growing concerns have been reported that our mortgage industry and securitization markets are clearly behind the curve regarding certification, which could negatively impact investment in mortgage-backed securities. The current trend in business worldwide is greater accountability, due diligence, quality assurance and certification of both products and services. The International Organization for Standardization’s ISO 9000 series, new AICPA (American Institute of Certified Public Accountants) standards, government agencies, manufacturers, and other professionals are seeking and expecting new ways to increase the level of confidence for investors, customers and regulatory agencies. In the financial arena, oversight agencies including FASB and the SEC have been applying pressure for higher standards of accountability. OFHEO (the Office of Federal Housing Enterprise Oversight) and Congress are raising similar issues for the Government Sponsored Enterprises, Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
As loan servicing operations consolidate, their fiduciary responsibility and liability for a greater market share of securitizations increase dramatically. It’s apparent and understandable why investors, borrowers and oversight agencies will expect ever-stricter quality assurance and accountability. Dramatic breakthroughs in technology are now providing the means to meet and exceed many of these expectations both efficiently and cost effectively
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Only an independent third party can issue valid certification in compliance with recognized certification standards, and certification cannot be issued by government agencies. Thus, HUD, Fannie Mae, Freddie Mac, the SEC and other government related organizations cannot assume a certification role but will expect it from their suppliers.

Mortgage Analysis Computer Corporation (MACC-TRAC^© ) has a tight grasp on the issues, criteria and technology of mortgage servicing and has been providing branded certification of loan pools to its clients as part of its outsource service. The firm’s technology is now available for others to use to implement consistent and reliable certification testing and reporting.
The MACC-TRAC Vision Pro System^© provides the means to achieve the highest level of data integrity, electronically integrate all posting activity, recognize and identify all discrepancies and reconcile information to produce correct results and analytical reports. Once loans are boarded on to the system, a complete update on any loan or pool of loans can be generated at any time. This concept is consistent with a new emerging accounting standard referred to as Continuous Audit.
The MACC-TRAC Vision Pro System^© design permits inclusion of additional data fields that the user may deem appropriate to expand certification criteria. This is why we invite your participation.

MACC-TRAC^© branded certification drills down with D3, Dynamic Data Discrepancy™, to assure that servicing system data are correct and reflect exactly the terms of loan documents. Every loan is then recomputed using the corrected data and the actual pay history, which has been electronically integrated. The system reconciles any differences that may exist in the allocation of principal, interest, and curtailments. The cascade effect of errors caused by incorrect data, incorrect payment allocation and erroneous computations is a source of significant risk for loan servicing enterprises and can have substantial financial consequences for both investors and borrowers.
A complete and thorough certification program must also include due diligence examination of documentation, compliance with state and federal rules and regulations, fraud review, and other standards.
A loan pool could, for example, be certified under MACC’s branded data and computational standards but not be certified with respect to missing compliance documents or other audit criteria.

Since 1989, Mortgage Analysis Computer Corporation (MACC-TRAC^©) has been serving investment bankers, financial institutions, federal agencies, accounting firms and others who have been ahead of the curve in seeking MACC-TRAC^© loan servicing certification. Consequently, criteria and technology solutions and systems developed by MACC-TRAC^© have positioned the firm to lead the industry in establishing standards for certification of loans, loan investment pools and loan servicing operations.

The following web sites provide resources regarding the trend for certification.