Mortgage Lender Takes Proactive Approach to Buyback Risk: 'This tool rates the risk of the borrower on a scale of one to four.'.

IRVINE, CA -- Given the issues around loan quality and the spate of buybacks lenders are facing, Impac Mortgage Holdings has decided to be proactive about the situation by rolling out risk mitigation technology to its correspondents.

"While we buy business through our correspondents with reps and warrants attached, their network is impacted," said Andy Chawla, senior vice president of enterprise risk management for Impac. "Investors ask us to buy back loans so we go back to our correspondents as well. This technology initiative is a pre-emptive way to get rid of that problem.

"If the correspondent has a net worth of $5 million and they have to repurchase only two or three loans, they're going to be hurt. So, this method allows them and us to catch this early. If they find discrepancies we can require a full-doc loan for example. So, it's good for the long-time viability of the seller."

Specifically, Impac has integrated First American CoreLogic's LoanSafe Risk Decision System collateral risk assessment tool and IncomePro income authentication tool into iDASL (Impac Direct Access System for Lending), Impac's proprietary Web-based automated underwriting engine.

Since late 2006, Impac's wholesale subsidiary has been using these tools to assess property, borrower, third-party broker/correspondent and stated-income risk. The LoanSafe and IncomePro tools were tested on a three-year wholesale platform history before their implementation. The success of these tools has allowed Impac to better manage the layered risk in alt-A residential mortgage lending, especially when high loan-to-value ratios, identity risk, fraud and property flipping are present in stated-income-type loans. The addition of these new tools may also enable Impac to provide more information about the loans in its securitizations for investors.

Through LoanSafe RDS, brokers and correspondent lenders can analyze the loan through full property assessment along with borrower, agent and credit characteristic assessment to help classify loans for decisioning based on low, medium and high risk. The combination of collateral and character risk for integrated loan level risk assessment has been achieved by ...