Case Study

RMBS Litigation Support

Due to Oakleaf ’s strong reputation for delivering complex data and analytics projects in the Financial Services and Regulatory industry, the company has been retained by counsel for various plaintiffs to offer an opinion regarding losses incurred by the Plaintiffs in connection with their purchase of Residential Mortgage-Backed Securities (RMBS) certificates.

Starting in 2005, the plaintiffs had invested over $4 billion in RMBS certificates and had lost approximately $1.6 billion as of August 31, 2016. The project entailed providing data, analytics, and subject matter expertise for end-to-end litigation expert services, including performing loss analysis and understanding the Pooling and Servicing Agreements (PSAs). PSAs are essentially a contract that governs the rights and obligations of multiple parties, including the plaintiffs and defendants involved in the transaction. This effort included: building a “unique-to-each” transaction cashflow model per the PSA; collecting monthly collateral performance and bond administration data for the past 12 years; building a Monte Carlo Alternate Scenario Simulation Engine; responding to interrogatories; formulating depositions, and providing expert affidavits and authoritative declarations on subject matter and expert testimony at trial.

Approach

Oakleaf invested in a strategic plan to support potential legal outcomes from the nation’s 2007 housing crisis. This plan required an accumulation of  expertise for financial markets and RMBS securities by understanding PSAs, analyzing RMBS Trustee Remittance Reports, and RMBS Collateral Performance Data. To be successful and compliant with court deadlines, Oakleaf developed a process to respond within court mandated reporting deadlines (typically 3 to 21 days). The analytics and reporting process involves downloading and parsing terabytes of data, performing data analytics, and developing models with 100% accuracy. 

As part of this process, Oakleaf developed complex cashflow models incorporating up to 20 variables and up to 200 data fields based on the terms of the Pooling and Servicing Agreement. Once developed, Oakleaf performed cashflow model validations against industry standard models (INTEX). Oakleaf also developed a tool that monikered the “MC1000 Tool” that would execute 1,000 Monte Carlo simulations and apply statistical methods to affect alternate scenarios for the cashflow models.

In serving as the damages expert, Oakleaf advised clients on meaning and applicability on RMBS Securities and Collateral Performance data for 746 securitizations (including monthly trustee bond administration and collateral performance data for over 13 years). This required transforming trustee reported bond administration and collateral data into relational databases to allow for more efficient analytics and modeling. 

Result

  • Based on the successful execution of this process for our clients, Oakleaf has become the go-to firm for trustee litigation expert services. Oakleaf has served as a testifying expert in court trials providing expertise on damages assessment based on quantitative and statistical analysis that involves terabytes of data from multiple sources and formats, and building and executing complex cashflow models.
  • Oakleaf expects the data to have its strengths and weaknesses and is able to give an accurate assessment of data quality within a week and provide analysis results with assumptions.
  • Over the past ten years, Oakleaf has invested time and resources in supporting financial services data analytics evolution and participating in regulatory industry conferences and sponsoring research to help address issues related to market structure, regulations, technology innovations, and trends that will impact the RMBS Securities Markets and Financial Services.

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