Since expanding operations into Ireland and Spain, we have undertaken a number of loan book audits on behalf of purchasers. We have been involved in the assessment of a wide variety of loan book types, including prime rmbs, cmbs, auto financing and unsecured, and a common trend throughout the audits executed is a significant level of data integrity breaches. This problem could be easily overcome by the lender embedding a data integrity focus within their servicing operations long before divestment becomes a reality.
The first step in achieving data quality should be part of the lenders business as usual rhythm – having loan operators cleansing the loan data as part of their normal servicing activity. Step two is independent sampling of the loan book to provide management with a high degree of certainty. It sounds simple and it is, yet we see books being brought to market without these basic preparatory steps being undertaken.
Despite recent trades illustrating apparently high discounts, it is our opinion that a number of the book trades expected to be executed in 2013 will be marketed with higher price expectations. Part of the reason for that is a recognition that pre-sale data cleansing and pre purchase due diligence are critical components of a successful trade. Whilst the exercise can be costly and time consuming, if not planned properly with the right partner, vendors can mitigate their exposure to cost and to price discounting by entering into a pre-sale programme, giving them greater certainty regarding the ultimate sale value and improving the chances of conversion.
Data verification is simply one aspect of a typical due diligence project. Vendors divesting their interest in non-core operations should also prepare themselves for robust interrogation of all aspects of their:
• Policies & Procedures
• Complaints, FSO Rulings & follow through
• Loan Security and Credit Agreements
• Internal & External Audit Performance
• Regulatory Compliance
Rockstead has been operating in Ireland and mainland Europe for over 12 months and has local offices and representation that can help with any aspect of due diligence.