Loan Review Practice

Over the years, regulatory authorities have reduced the frequency and scope of their examinations to control escalating costs. While authorities are reducing the depth of their examinations, they are stressing the need for banks, lenders, investors and insurance companies to utilize a comprehensive risk management program.

We have witnessed record levels of delinquencies, foreclosures, mortgage fraud, ethical issues, imprudent underwriting and breaches of contractual representations and warranties which precipitated the outbreak of the current economic recession. The spate and magnitude of recently witnessed putbacks has accelerated the need and created a sense of urgency to forensically review the loan files to establish the documents’ adequacy, consistency and authenticity.

Quatrro, with its suite of varied financial services, is fully equipped to match the needs of Banks, Lenders, Investors, Monoline Insurers, Mortgage Insurance Companies, Trustees, Certificate holders, Federal Home Loan Banks, and Law Firms to accomplish their loan review requirements. In addition, the bank’s regulators and internal/external auditors will gain the benefit of Quatrro’s findings and recommendations through periodic reviews on delinquent as well as newly-booked loans.

Quatrro, through its loan-by-loan review and operational compliance analysis, provides its clients with the following benefits:

  • In-depth, loan-level quality control with a 100% re-review of input data
  • Accurate and discernable reporting
  • Access to superior compliance consultation
  • Current tests and tolerances for all federal, state and local regulations
  • Support for Expert Witness Analysis and cross-examination

Service Offering

Our highly specialized loan review and recovery services are of particular value under current market conditions. Quatrro offers a variety of loan review services as well as recovery support as listed below:

Loan Review Process

Establishing the actual amout of putbacks will require loan-by-loan review after uploading the files into a common workflow platform and then indexing any disorganized loan files. Quatrro tailors each loan review to its client’s specific requirements. Our global loan review analysts will review each document from end-to-end to provide the required analysis. Highlighted below is a general outline of how Quatrro assesses overall loan portfolio quality.

Loan Review Process

Review Scope

  • Reviewing each loan against applicable rules and regulations as well as against loan policies of banks and lenders (vintage guidelines with credit overlays)
  • Evaluation of credit quality of selected loans, leases and letters of credit
  • Determination of adequate documentation in selected credit and collateral files

Credit Underwriting

  • Brief summary highlighting quality of underwriting information
  • Appropriateness of risk rating for new, renewed or modified credit
  • Reduce duplications check to validate background, nature of business, history with the bank, credit reports, D&B reports, etc.
  • Balance sheet, cash flow and collateral analysis to ensure credit worthiness and repayment capacity of the borrower
  • Setup of loan structure including amortizations and maturities schedules
  • Determination of sources of repayment including primary and secondary sources
  • Finalization of loan agreements/surviving commitment letters
  • Proper identification and mitigation of policy exceptions

Document Preparation / Loan Closing

  • Validation of checklists to ensure there is no mismatch
  • Information gathering and matching including quality and appropriateness of documents, accuracy of documents versus loan approvals, timeliness of recordation and receipt of documents to ensure data integrity has been maintained

Portfolio Monitoring

  • Collateral Tickler system to track credit and collateral expirations – prints letters on given dates when a document has either not been received or has expired
  • Policy exception reporting to monitor individual officer trends and exception trends within overall portfolio
  • Credit relationship reviews to document annual reviews, including validation of risk ratings
  • Marketable securities margin maintenance including monthly reports with resulting over/under margin calculations, documentation/approval of unresolved margin calls beyond existing stated cure periods to ensure proper monitoring
  • Risk rating integrity to ensure timeliness in loan officer assessment of necessary risk rating changes and maintaining accuracy of risk ratings on loan system

Regulatory Compliance

  • Quarterly reporting to Board of Directors to highlight and detect exceptions
  • Adherence and reporting compliance with various government oversight regulations

Credit File Management

  • Cross-referencing services to ensure that all files are referenced and information is not lost
  • Placing of files in chronological order and separation of each guarantor’s financial information