Loan Servicer vs. Career School
Loan Servicer vs. Career School
Situation
- A national career school that originated student loans contracted with a large student loan servicer to implement a new program to take over the underwriting, servicing and ownership of newly originated loans. The school provided a recourse arrangement under certain circumstances. During the 2011 to 2013 timeframe, many loans defaulted and the parties entered litigation. BPA was engaged as the defendant’s expert witness to examine origination and servicing practices and opine on the root cause of defaults and estimate damages.
Our Role
- Analyzed data to determine the root cause of defaults
- Selected statistically significant samples and conducted loan level reviews of hundreds of loans to assess whether underwriting and servicing guidelines were appropriately performed
- Assessed the effectiveness of the servicer’s adherence to policies and procedures of the loan origination function including:
- Examined loan applications to ensure proper completion of information
- Conducted a Note audit
- Examined credit approval process to confirm that credit score and associated pricing was accurately assigned
- Exception coded and risk rated the loans using a proprietary risk rating scale
- Conducted a detailed servicing review to identify any servicing practice exceptions including:
- Determined whether servicing and collection efforts were sufficient to meet collection strategies and timelines in accordance with established policies and procedures and/or industry convention in the absence of guidelines
- Assessed proper collection tools as well as call and letter frequency and such other strategies as skip tracing, dialer programming and manual calling strategies
- Reviewed servicer comments for proper servicing practices such as deferments, forbearance, grace period counseling and loss mitigation tools
- Exception coded and risk rated the loans using a proprietary risk rating scale
- Quantified the damages created by the servicer’s improper underwriting and non-compliant servicing
- Produced an expert report outlining findings and damages
Outcome
- BPA’s client settled with the servicer for an amount significantly less than the amount claimed