CCAR Data Quality & Remediation - Situs | Evaluate, … · · 2016-10-17over $1 trillion of...

Proprietary & Confidential

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CCAR Data Quality & Remediation


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Since 1985, Situs is the premier third party real estate advisory firm

supporting the financial markets in both the US & Europe.

An Introduction to Situs

• Rated Master, Primary and Special Commercial Loan Servicer

• Since 1985, Situs has reviewed and underwritten over $1 trillion of Commercial Real Estate related transactions

• Data Aggregation and Validation

• M&A Loan Due Diligence

• Loan Underwriting & Valuation

Key Products: Longevity: Prestige:

Technology Project

Consulting Dedicated Platforms

Loan Risk Advisory

Loan Servicing

CRE Advisory


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Regulatory Compliance Advisory

Situs DFAST/CCAR Data Aggregation/Validation projects record:

• 10 million data points populated and validated • Accounting for $75.3 Billion in outstanding

principal • Across 441,141 loan files • With a 99.9998% accuracy rate

Situs market leading status is unique in that we:

• Help design a data integrity program focused on CCAR compliance reporting requirements.

• Substantially reduce or eliminate Fed edit checks.

• Provide a team qualified and experienced data and credit underwriters.

• Assist in the uploading of data to be used for a bank’s CCAR reporting and stress testing.

Situs is market leader in

DFAST/CCAR Data Aggregation

services in the US


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• Internal banking systems frequently are not migrated into one system

• Merged banks have multiple proprietary systems that aren’t always in synch

• Resulting in a loss of data integrity at all levels

Integration, Integration, Integration


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• One-third fewer banks in 35 years

• Few achieved full integration

• Most Community banks are still working with paper files

M&A Activity Creates Stress in Stress Testing

• Where do the source of truth documents reside?

• Document imaging and inputting of data is challenging

1980: 18,000 banks vs. 2015: 6,400 banks


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A financial executive said the Fed’s position was unyielding:

“We have a form. Fill it out.’’ (WSJ 10/14/15)

Stress Testing is Stress Creation


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Paper Files Weighing You Down?


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Banks are Paper Filers

• Any bank merging with a DFAST or CCAR bank, or the merged entity exceeds $10B in assets. Are required to perform annual stress tests

• Data is in bad shape:

o Loan files in paper/PDF format

o Data tapes are incomplete

• Banks created by multiple mergers have multiple systems, but each data element can have only a single source of truth


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Data Element Validation & Calculation

Loan Portfolio Data Element Aggregation, Validation & Calculation Services:

• Data elements are aggregated, validated, updated and integrated into the data tape • Revised loan stratification analysis is performed • Results used to advise client on what risks are inherent in their loan products • Work with client to create and execute a risk mitigation plan

Data Element Validation

• Validation of risks inherent to each loan product

• In-depth review of each data element for accuracy

• Primary and Secondary Source Documents are identified and used

• Data Elements are validated, retrieved and/ or calculated

• Loan File and Document Review


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Imaging and Uploading Challenges

• Imaging technology is not operating at a rapid fire pace and still is not accurate

• Expert level uploading takes more than 2 minutes per data point

o 60 seconds to extract a data point

o 40 seconds for the 2 rounds of quality control

o 40 seconds to upload the data element

• CCAR requires 138 data points per loan

o Approx. 4.5 hours per loan


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FR Y-14 M Required Data Elements – MORM (CCHE)

1 Loan Number M142 36 ARM Periodic Pay Floor M181 71 Interest Rate Reduced M262 106 Exposure at Default – EAD M117

2 Loan Closing Date M143 37 Original Loan/Line Term M184 72 Term modification M263 107 Entity Type M952

3 First Payment Date M144 38 Bankruptcy Flag M194 73 Principal Write-down M229 108 HFI FVO/HFS Flag M953

4 Property State 9200 39 Next Payment Due Date M196 74 Line Re-age M264 109

Origination Credit Bureau Score

Vendor R036

5 Property ZIP Code 9220 40 Original Interest Rate M185 75 Loan Extension M265 110

Origination Credit Bureau Score

Version R037

6 Original Loan Amount Disbursed M147 41 Current Interest Rate M197 76 Current Combined LTV M266 111

Current Credit Bureau Score

Vendor R038

7 Original Loan / Line Commitment M242 42 Interest Type - Current M248 77 Modification Type M215 112


Version R039

8 Original Property Value M148 43

Principal and Interest (P&I) Amount

Current M200 78 Last Modified Date M216 113


Date S382

9 Original Combined LTV M150 44 Unpaid Principal Balance M201 79 Refreshed Property Value M209 114

Escrow Amount at Origination

M942

10 Income Documentation M151 45 Monthly Draw Amount M249 80

Refreshed Property Valuation Method

M210 115 Remodified Flag M943

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Debt to Income (DTI) Back-End at

Origination M152 46 Current Credit Limit M250 81 Refreshed Property Valuation Date M267 116

Mortgage Insurance Company

M944

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Debt to Income (DTI) Front-End at

Origination M153 47 Loan Status (MBA method) M251 82

Escrow Amount Current (Retired March

2013) M268 117

Interest Type at Origination

M244

13 Origination Credit Bureau Score M154 48 Foreclosure Referral Date M203 83 Loan Purpose Coding M161 118 Entity Serviced M945

14 Current Credit Bureau Score M189 49 Foreclosure Sale Date M202 84 Remaining Term M198 119 Loss/Write down Amount M241

15 Occupancy M155 50 Pre-Payment Penalty Flag M187 85 Bankruptcy Chapter M195 120 Loss/Write down Date M947

16 Lien Position at Origination M158 51 Pre-Payment Penalty Term M188 86 Accrual Status M957 121 Sales Price of Property M948

17 Home Equity Line Type M243 52

Paid-in-full Coding (Retired

March 2013) M205 87 Foreclosure Suspended M204 122

Performance of Junior Lien(s)

M949

18 Number of Units M162 53 Foreclosure Status M206 88

Property Valuation Method at Origination

(appraisal method) M940 123

Ever 90+ DPD in the Past 12

months M950

19 Property Type M164 54 Liquidation Status M252 89 Loss Mitigation Performance Status M226 124 Commercial Loan Flag M951

20 Interest Type at Origination M244 55 Troubled Debt Restructure Date N185 90 Other Modification Action Type M958 125

Alternative Home Retention

Loss Mitigation Date M939

21 Interest Only at Origination M168 56

Repayment Plan Performance Status

M219 91

Reason for Default This item has been

removed and should not be reported. 126

Alternative Home Liquidation

Loss Mitigation Date M938

22 Interest Only in Reporting Month M190 57 Capitalization M222 92 Third Party Sale Flag M941 127

Escrow Amount After

Modification M937

23 Loan Source M159 58 Interest Rate Frozen M232 93 Loss/Write down Amount M241 128

Escrow Amount Before

Modification M936

24 Credit Class M156 59 Principal Deferred M227 94 Loss/Write down Date M947 129

Remaining Term After

Modification M935

25 Loan / Line Owner M245 60 SOP 03-3 Status M234 95 Unpaid Principal Balance (Net) M960 130

Remaining Term Before

Modification M934

26 ARM Initial Rate Period M171 A 61 Workout Type Completed M218 96 Performance of First Lien M961 131

Interest Rate After Modification

M933

27 ARM Payment Reset Frequency M246 62 First Mortgage Serviced In House M253 97 Ever 90+ DPD in the Past 12 months M950 132

Interest Rate Before

Modification M932

28 Allowable Draw Period M247 63 Settlement Negotiated Amount M254 98 Entity Serviced M945 133

P&I Amount After Modification

M931

29 ARM Index M173 64 Credit Line Frozen Flag M255 99

Total Debt at Time of any Involuntary

Termination M235 134

P&I Amount Before

Modification M930

30 ARM Margin at Origination M174 A 65

Locked Amount – Amortizing – LOC

M256 100 Net Recovery Amount M236 135 Term Extended M929

31 ARM Periodic Rate Cap M176 66

Locked Amount – Interest Only – LOC

M257 101 Sales Price of Property M948 136 Interest Rate Frozen M232

32 ARM Periodic Rate Floor M177 67 Repayment Plan Start Date M258 102 Commercial Loan Flag M951 137 Interest Rate Reduced M262

33 ARM Lifetime Rate Cap M178 68 Actual Payment Amount M259 103 Probability of Default – PD M114 138

Reported as Bank Owned Flag

M239

34 ARM Lifetime Rate Floor M179 69 Lockout Feature Flag M260 104 Loss Given Default – LGD M115

35 ARM Periodic Pay Cap M180 70 Credit Line Closed Flag M261 105 Expected Loss Given Default – ELGD M116

FR Y-14 M Required Data ElementsMDRM (CCHE)


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Newly Required Data Elements

Additional Required Data

Elements

Origination Credit Bureau Score M154

Origination Credit Bureau Score Vendor

R036


Origination M152


Origination M153

Escrow Amount at Origination M942

First Payment Date M144

Interest Type at Origination M244

Third Party Sale Flag M941

Workout Type Completed M218

Loss/Write down Amount M241

ARM Periodic Pay Floor M181

Allowable Draw Period M247

Foreclosure Sale Date M202

Refreshed Property Value M209


Additional Required Data

Elements

Origination Credit Bureau Score M154

Origination Credit Bureau Score Vendor

R036


Origination M152


Origination M153

Escrow Amount at Origination M942

First Payment Date M144

Interest Type at Origination M244

Third Party Sale Flag M941

Workout Type Completed M218

Loss/Write down Amount M241

ARM Periodic Pay Floor M181

Allowable Draw Period M247

Foreclosure Sale Date M202




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Case Study – Regional Bank passes CCAR with an MRIA…

• CCAR Bank passed the Stress Test but was given an MRIA regarding Data integrity

• Called Situs for advice

• Situs was onsite the next week with the Lead Team to set up all KDEs for Project 1 ~200,000 loan files (SFR, HE, CRE, C&I)

• Project Started 10 days later with 109 onsite Underwriters

• 3 months later the rest of the bank was given a “Hall Pass” and took advantage

• More than 370,000 files completed by year end


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Project 1 Phase I

Validation of 200,000 Comml & Resi Files

15 – 53 Data Elements

Project 1 Phase II


10 –30 Data Elements

Project 1 Phase III



Project 2

Validation of 18,000 Comml & Resi Files 1 – 2 Data Elements

Project 4


1 Data Element

Project 5

Ongoing Remediation and Validation of Commercial Files

Project 6

Validation of 85,000 Residential Files

2 - 5 Data Elements

Project 7

Validation of 30,000 Residential Files 2 Data Elements

Project 20

HMDA Certification of 4,000 Residential Files

Project 21

ECOA Dispositioning of 1,500 Files

Project 23

ECOA Dispositioning of 2,000 Residential Files

Project 24

HMDA Certification of 250 Residential Files

Project 26

HMDA Certification of 325

Residential Files

Project 27

HMDA Certification of 500

Residential Files

Project 30


10 –30 Data Elements

Project 31




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Since 1985, Situs is the premier third party real estate advisory firm

supporting the financial markets in both the US & Europe.

What We Do

• Reviewed files and Data for 30 years

• In 2014, aggregated data for 70% of the CMBS market

• Advised on countless bank M&A deals in past 10 years

• Data Aggregation and Validation

• M&A Loan Due Diligence

• Loan Underwriting & Valuation

Key Products: Data Quality is our DNA:

CCAR Data Quality & Remediation - Situs | Evaluate, … · · 2016-10-17over $1 trillion of...

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Transcript of CCAR Data Quality & Remediation - Situs | Evaluate, … · · 2016-10-17over $1 trillion of...