Since its primary customers are trust companies, VeriComply acts as a sub-verification agent or document custodian. Basically, on getting the loan documents, it extracts data and compares it with loan/data tapes. Outcomes are then discussed with originators and trust company partners to remove any discrepancies. The report is then sent to the client notifying approval status. Loans are verified on various parameters and cover all characteristics of a loan: term, rates, state of origination, APR, etc. It also incorporates the borrower’s information for better analysis.
Considering this is an important cog in the selling of loans in secondary markets and securitization, automating the process gives credibility as well as integrity to the entire portfolio when it sells.
The state-of-art technology used to build the platform means it can quickly configure for multiple originators, loan types, documents, and various field verifications. Fees are charged for the configuration set up, per loan process, and for monthly storage.
Marketplace lending is transforming many aspects of the lending industry. The technology platforms on which these marketplaces operate affect both the origination and the secondary market into which these loans are sold and increasingly securitized. Intuitive webpages collect borrower data, algorithms automate underwriting, providing borrowers with lower rates, better user experience and faster closings. Investors can select digital assets with filters and apply their own algorithms to earn higher returns than other asset classes.
While this first wave of Fin Tech has accelerated asset velocity, it has not created trust in the accuracy of these financial assets. The traditional approach to this challenge is to verify the accuracy of the key loan data tape elements and loan file completeness. This service is typically performed by the Document Custodian who when onboarding the documents into its system acts as the Verification Agent. The Verification Agent Certificate is issued to the warehouse lender, securitization trustee or other “economic buyer” and attests to the accuracy of the loan pool.
While this approach worked well in the paper world, several trends require a new approach which can deal with each of the following:
Velocity. Marketplace asset velocity requires an automated solution that can keep pace.
Flexibility. Investors want to diversify their portfolio across multiple Marketplace Lenders and asset classes, so the solution must be flexible.
Downstream Reliance. As these assets move from warehouse lender to securitization or sale, each economic buyer needs certainty of their ownership in the asset and the accuracy of each asset.
Cost. The costs of verifying the assets adversely impacts expense ratios of investment funds and securitization expenses.
In response to these trends, VeriComply has developed a solution that achieves these four objectives. As depicted in the diagram, here is how it works:
Multiple Marketplace Lending Platforms Connected– VeriComply automatically pulls the data and document package from the platform
Multiple Asset Classes Configured– VeriComply configures a Process Flow for each asset type
Automated Processing– loan file is auto classified, validated, data compared and then QA as needed
Certificate Issued– Certificate issued with schedules validating loan data accuracy and file completeness
Benefits. This solution offers benefits to the entire marketplace ecosphere:
Marketplace Platforms– greater demand for assets as investors have increased trust
Warehouse Lenders– easy integration with operations for rapid execution and reduced risk
Investors– reduced risk, reduced costs and greater liquidity for the assets
Underwriters– reduced diligence risks and costs and accelerated closings of deals
Rating Agencies– reduced compliance risks and costs for reviewing assets
Regulators– complete audit history of each asset in a securitization pool
VeriComply launched the VeriComply FileVault and VeriCompliance Process, the most comprehensive solution for managing portfolios of complex commercial real estate loan files. The VeriCompliance Process starts with a sophisticated classification and extraction engine that recognizes documents, extracts key data fields, automatically files the documents in the correct folder, and watermarks each document with a unique ID and the Loan ID for authentication, whether in digital or paper. The FileVault allows users to drill down to key data for each asset. The system connects the data tape to the source documents and provides a complete audit history, eliminating risk and reducing costs of validating the accuracy of important loan data.
“As a former real estate and capital markets attorney who completed over $10 Billion in complex deals, I know what it takes to move a loan into the secondary market and get through a regulatory audit,” said Roger Cohen, VeriComply founder and CEO. “VeriComply solves a fundamental problem of performing due diligence on loan files by assembling transparent, reliable assets with greater liquidity and value. In essence, we capture the value of ‘upstream’ due diligence and embed it into the loan file for the benefit of ‘downstream’ users, providing an ROI on expensive professional services fees.”