A total bust (2018)
A 2,000-loan bank tape, a pile of credit reports on order, and the servicing notes nobody had read.
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2 min read
At the very beginning of 2018 a 2,000+ asset tape landed on my desk. It came from an institutional-level broker working with a major bank, and one of my clients ordered complete pricing & due diligence on the whole portfolio. I set a budget and got started.
I ordered a first batch of credit reports on a subset of ~200 loans, the ones the bank had marked as high-confidence secured. While I waited, I dug into the servicing records.
Loan after loan was tagged “Lien Released”, “Uncollectible” or “Satisfaction sent to County”. I ran a VLOOKUP against the complete inventory and 90%+ of the portfolio was in the affected population. A total bust!
Fortunately I found it before I spent any more of my client’s money on research. I sent the broker a full report of what I’d found, and they couldn’t believe it. A few days later we got on a call.
“The good news is that you were the first one to figure this out. The bad news - you were right.”
A few weeks later I wrote it up for an investor forum under one heading - institutions don’t know what they’ve got. And one line underneath it: at every level of this industry, independent due diligence is imperative.