Securent president Justin Vedder and SitusAMC ceo Michael Franco answer SCI's questions

Q: Securent is a newly formed SitusAMC entity that provides comprehensive risk management and insurance programmes for MBS and mortgage stakeholders (SCI 18 November). Tell us about your vision for the company.
JV: Securent is designed for mortgage lenders, investors, RMBS issuers, warehouse lenders and other market participants. Securent takes a proactive and preventive approach to managing loan risk and pricing it appropriately.

We offer loan defect insurance (LDI), mortgage application fraud insurance and are expanding to offer RMBS pool defect insurance and mortgage servicing rights (MSR) loan defect insurance policies. We offer portable insurance that protects against manufacturing defects, such as miscalculation of income, data corruption, fraud, misrepresentation, appraisal errors and guideline and compliance-related violations.  

MF: This is something that we have contemplated for over five years at SitusAMC. As the leading third-party review firm in the private label securitisation space and a leading provider of valuation services on residential mortgage assets (MSRs and whole loans), being able to offer risk management and loan insurance programmes was a natural extension of our existing offerings.

JV: The launch of Securent is only the first of many steps toward creating a more efficient and profitable origination, purchase and securitisation process for agency and non-agency market participants.

Q: How will the company mitigate MBS risk?
JV: Our goal is to be able to offer an insurance product in the MBS space; however, we’re still working through the various stakeholders, issuers, ratings agencies and review firms on how best to structure our offering. Where we see major benefits is in both establishing a more consistent representations and warranty framework across issuers and shifting the daisy-chain of potential claims on conduit transactions - securitisation to issuer, to loan originator, to a single party with proven claim payment history.

Q: What makes this product unique?
JV: The innovation is in the combination of Securent’s proprietary insurance model and technology, and SitusAMC’s platform, and is something that the industry has not previously seen or experienced. When humans are handling loan files, finding errors occurs by performing quality control on the loan after origination.

Securent combines a unique insurance model and leverages SitusAMC’s dynamic technology tools in a powerful, seamless solution that offers end-to-end risk management for loan manufacturing. We drive increased efficiency, better accuracy and cost-effectiveness in our review process.

We believe our unique product offering and process increases the value of residential mortgage loans, as it brings consistency to the origination and evaluation process and drives surety through comprehensive insurance programmes backed by a proprietary risk-rating model and London single-A rated insurance carriers. 

In addition to our model, technology and deep expertise in the space, our approach to how we serve clients and market segments is also unique. We create custom-tailored policies for clients based on their assets and risk profiles. We also bring flexibility to the table, giving our clients coverage optionality ranging from their entire book of business down to specific pools.

Q: What is in the pipeline for 2022?
JV: We just launched and have already seen strong demand in the market from existing SitusAMC clients, as well as potential new relationships. This includes a strong pipeline of both small and large mortgage bankers and loan purchasers with orientations in non-GSE and GSE execution strategies.

MF: We have a lot in the pipeline for 2022 across our business. We’ve got plans to announce multiple new service business lines that we’ve been incubating internally and releasing several new technologies that we’ve been building and enhancing over the last several years. These offerings will significantly expand our footprint in both the services and technology space.

Q: SitusAMC recently expanded its workforce by 1,500 employees globally (SCI 2 November). Can you talk us through the drivers behind this?
MF: With mortgage production skyrocketing in 2020, the real estate finance industry faced shortages in due diligence capacity - especially in the secondary market, where billions of dollars in private-label mortgage portfolios heading for securitisation are awaiting review, with months-long wait times in some cases. To best support demand in the market for our third-party review services, we ramped up hiring to beef up our capacity and support our clients’ needs and enable a broader pool of market participants to leverage SitusAMC’s solutions, including the review of mortgage portfolios for rated securitisation transactions or for acquisition of loans into investment portfolios. While this sounds like a lot to do in one year, as mentioned above, it’s been only one of many initiatives that we’ve been working on during 2021 in order to best serve our clients and the end markets.

Angela Sharda