How Wholesale Lenders can get Ready for the Secondary Market
by Alok Bansal
Wholesale lenders regularly sell their loan portfolios in the secondary market to raise liquidity but dealing with investors and their due diligence vendors is not easy. They have stringent demands in terms of the health of the portfolio. After all, they want to make sure that there are minimal or no bad loans in the portfolio.
Since these are bulk portfolio transactions, the amount involved is very high. Investors need to make absolutely sure that all loans are genuine There have been numerous instances where due to bad loans investors had to incur huge losses. Thus, they typically take the help of due diligence firms to ensure that this can be avoided.
These due diligence firms have their own methodologies and they analyze each and every loan to determine if there is any risk associated with them. Even a single discrepancy can be sufficient for the investor to reject the portfolio and look for better options. If there are no problems and minimum/no risk then investors will go ahead and purchase those loans without hesitation.
If there are funded loans, found with defects, then the wholesaler will be forced to sell at a loss, and his pricing for the overall portfolio will be affected. Depending on the loan pool characteristics, investors will perform due diligence on the wholesale loan pools to ensure accurate pricing
If the wholesale lender wants to get through with this secondary market transaction fast, then they need to have the data available in a format that the investors or due diligence vendors are looking for.. Doing this entire process manually, loan by loan is a very tedious and time-consuming tasks. Also, it is prone to a lot of manual errrors.
Before even approaching the investor, wholesale lenders can perform their own due diligence to ensure predictable pricing. OCR technology can help you index and stack your loans so that investors can go through a large portfolio of loans much more easily and quickly.
While wholesalers do their own due diligence on the portfolio, and if the portfolio meets all the requirements, then the secondary market sale is much faster and you can get the liquidity you need, at the right pricing.
At Visionet, with VisiLoanReview (VLR), wholesalers can quickly index, stack and perform quality control on the entire portfolio of loans in quick time. Thousands of mortgage documents can be quickly made available across all locations of the organization whenever required. If there are any errors, they can be quickly rectified in the digital format itself without having to go back and forth. This saves precious amount of time and efforts.
We recently did a white paper on ‘OCR for bulk processing in Mortgage: Realizing the elusive ROI’ In the whitepaper we have discussed how wholesalers can leverage OCR to accelerate closings in a bulk processing scenario.