Technology Reduces Friction Between Lenders, Investors.

New York -- As buybacks continue to rise and investors look more for quality over quantity, technology can play a role in easing the friction between lender and investor to ensure that all loans sold into the secondary market are of a better quality.

"Investors are increasingly more concerned about the quality of the asset," said Lou Pizante, CEO at automated compliance vendor Mavent, Irvine, Calif., as part of a panel at the MBA National Secondary Market Conference here. "Investors are spending more money on technology to perform due diligence functions. Also, they're increasing the sample size that they review as well as the type of reviews conducted. They're more aggressive."

In explaining this shift among investors to check and double-check every loan they buy, Patrick Barber, vice president, business development at due diligence and risk mitigation firm Clayton, Shelton, Conn., noted, "Investors and lenders don't want to make the same mistakes. Everyone wants to discovery the risky loans upfront. Everybody is looking for fraud.

"In terms of own services, we've changed as well. It used to be that due diligence was conducted at the seller's shop, but now 60% of our business is done in a centralized location where the seller either ships us files or provides us with electronic images."

So, technology is filling the void in some cases and making it possible for the transmission and QC of loans more automated and efficient. "We're seeing a switch from bulk platforms to conduit platforms," pointed out John Le, president and CEO of origination vendor Portellus, Irvine. "Investors are looking to purchase loans more on a flow basis now. This approach allows decisioning to be more granular and go loan by loan."

Portellus offers a business rules management engine to offer more granular decisioing based on user-customized rules. Portellus and other rules-based technology vendors tout that their ...