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Mortgage Finance & Securitization

The Brattle Group’s principals have been retained as experts for and worked with mortgage finance industry professionals in cases involving banks, hedge funds, insurance companies, and regulators and federal agencies. The Brattle Group has worked closely with world-renowned experts on topics related to mortgage finance and securitization, like Nobel Laureates Joseph Stiglitz and Daniel McFadden. Our experts and consultants have also worked with leading financial economists like Gary Gorton, and Dwight Jaffee. The Brattle Group’s experience includes a range of topics such as:

  • Statistical sampling of loan pools and assessment of compliance with prospectuses
  • Analysis of mortgage underwriting and loan characteristics on loan performance
  • Investigation of alleged discrimination in mortgage lending
  • Evaluation of put-back liabilities of mortgage-back securities (MBS) issuers and Trustee responsibilities
  • Analysis of risk management and mortgage accounting practices
  • Mark-to-market pricing of thinly traded MBS
  • Investigation of potential abuses in trading practice and reporting
  • Evaluation of residential mortgage-backed securities (RMBS) sponsor and underwriter due diligence
  • Evaluation of mortgage servicing
  • Economic analysis of RMBS securities price declines and investor claims
  • Evaluation of CDO structure/tranches collateralized by RMBS securities
  • Marks to market, margin calls, and collateral auctions

Engagements
REPRESENTATIVE ENGAGEMENTS

Below is a list of representative engagements for our Mortgage Finance & Securitization practice.

Loan pool sampling and analysis
The Brattle Group has significant experience in the sampling and analysis of large and complex loan datasets. We have evaluated the characteristics of loans underlying the mortgage pools to understand the extent to which loan pools have been concentrated in certain geographic areas, among certain types of borrowers, and with specific types of loans. These loan attributes include: the geographic distribution of collateral; seniority (e.g., first or second lien); LTVs or CLTVs; amortization schedule (e.g., fixed rate, ARM, Option ARM); and borrower creditworthiness.
Underwriting loss causation
In the case of Syncora Guarantee Inc. v Countrywide Home Loans Inc., The Brattle Group was retained by bond insurer Syncora to calculate the losses accrued as a result of securitized home equity loan defaults in MBS securitized by Countrywide. Our experts assessed whether the defaults were primarily a result of housing market conditions or of loan defects that went undetected due to a failure by Countrywide to adhere to published mortgage underwriting guidelines. The case settled for $375 million during expert discovery.
Liability issues in put-back litigation
The Brattle Group was retained by outside counsel representing the Federal Deposit Insurance Corporation (FDIC) in litigation against several financial institutions over the issuance of faulty MBS to a bank’s assets now acquired by the FDIC. We assessed whether the FDIC or the issuing bank should be liable for the mortgage put-back obligations from the originator, and whether and how the transfer of the originator to the bank by the FDIC was affected by contingent put-back liabilities.
Due diligence in securitization and underwriting
The Brattle Group was retained by outside counsel representing the National Credit Union Association (NCUA) to evaluate the due diligence performed by RMBS sponsors and underwriters. In numerous matters, we evaluated the sampling used in due diligence, the results of that sampling, and the post-diligence quality control. These cases settled before trial for, collectively, over $4 billion dollars.
RMBS Trustee liability
The Brattle Group was retained by outside counsel representing investors in RMBS to support academic and industry experts to evaluate the performance of RMBS Trustees and the mortgage servicers reporting to them. Our experts selected statistically valid loan samples for re-underwriting; identified loans with documentation problems that triggered the put-back provisions of PSAs; and evaluated servicer adherence to foreclosure timelines and PSA provisions regarding modifications.
Marks to market, margin call, and collateral auction
For a major international bank in litigation between it and its former customer, The Brattle Group conducted an analysis of a series of contentious MBS marks to market and margin calls. The disputed margin calls led to the bank selling the MBS collateral through a type of auction called a ‘bids wanted in competition’ or BWIC. Statistical analysis of winning bids in the BWIC showed the auction generated competitive prices for the collateral although the entire bidding process lasted only a few hours.
Experts
Academic Advisor & Other Outside Experts
Stuart Gabriel
Academic Advisor
University of California, Los Angeles
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Publications
News & Knowledge