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Abstract Red Lines

STRUCTURED FINANCE
CMBS, RMBS, CLOs, CDOs

STRUCTURED FINANCE CMBS, RMBS, CLOs, CDOs

Expertise

The financial crisis of 2008-2009 exposed significant weaknesses and fraudulent activities within the financial markets, particularly in the realm of structured products. These products, including Commercial Mortgage-Backed Securities (CMBS), Residential Mortgage-Backed Securities (RMBS), Collateralized Debt Obligations (CDOs), Single Loan Obligations (SLOs), Collateralized Mortgage Obligations (CMOs), and their derivatives, were at the heart of the crisis. The fraudulent misrepresentation of loan characteristics, inflated appraisals, and compromised credit ratings were central to the catastrophic collapse that ensued. Integra has played a crucial role in uncovering and analyzing fraud within these markets, providing invaluable support to litigation efforts and aiding in the recovery of damages for affected parties.

Integra FEC Structured Finance CMBS, RMBS, CLOs, CDOs Fraud Investigation Firm

Integra FEC’s Approach to Investigating Fraud in Structured Finance

Integra specializes in uncovering and analyzing fraud in the structured products market. Our approach involves a comprehensive and meticulous forensic analysis, employing a range of methods to ensure thorough investigation and accurate findings, such as: 

  1. Data Retrieval and Analysis: We leverage advanced data mining techniques to collect vast amounts of data from various sources, including loan-level data, appraisal records, and transaction histories. Our team utilizes statistical models and forensic accounting methods to identify discrepancies and patterns indicative of fraudulent activities. This includes comparing reported loan characteristics with independent data sources to detect misreporting.

  2. Document Examination: We conduct a detailed review of prospectuses, offering documents, and internal communications to uncover any misrepresentations or omissions. Our team scrutinizes underwriting guidelines, due diligence reports, and internal audits to identify any deviations from standard practices.

  3. Market and Transaction Analysis: We analyze market trends and transaction data to identify unusual patterns or anomalies that may suggest fraudulent behavior. By examining the timing and pricing of transactions, we can uncover evidence of market manipulation or collusion.

  4. Loan Misrepresentations: We identify and quantify common types of misreporting, such as appraisal inflation, second-lien misreporting, and owner occupancy fraud. These patterns are often indicative of broader fraudulent practices within the securitization chain.

  5. Underwriting Malpractice: We conduct thorough reviews of internal and external due diligence reports obtained during the securitization process. This helps us understand the extent to which underwriting banks were aware of the misrepresentations and whether they chose to overlook or waive these deficiencies.

  6. Damage Valuations: We assess the economic impact of identified fraud on investors and the broader financial markets. This includes quantifying losses, evaluating the performance of misrepresented securities, and analyzing the knock-on effects on housing markets and financial stability.

  7. Interest Rate and Residential Default Models: We develop advanced Interest Rate and Residential Default models to complete counterfactual analysis and price and evaluate damages. These models allow us to accurately estimate the true economic value of structured products and assess the impact of misrepresented loan characteristics on their performance. By simulating interest rate scenarios and default probabilities, we can precisely calculate the losses incurred due to fraudulent practices, providing robust evidence to support litigation and damage recovery efforts.

Integra FEC’s Work in Structured Finance

Integra has established itself as a leading authority in forensic analysis within the structured products market. Our work spans several key areas, each contributing to the identification and prosecution of fraudulent activities and the recovery of damages for affected parties.

  1. Supporting Litigation: We assist the Securities and Exchange Commission (SEC), the Department of Justice (DOJ), and other regulatory bodies in investigating and prosecuting cases of fraud in the structured products market. Our analyses have been instrumental in numerous high-profile cases, providing the evidence needed to hold perpetrators accountable and secure substantial settlements.

  2. Recovering Damages: We have successfully aided in the recovery of significant damages for funds and investors whose bonds defaulted due to fraudulent activities. Our forensic analyses help quantify the extent of the fraud and the resulting financial losses.Our work has led to substantial settlements and judgments, compensating victims and deterring future fraudulent behavior in the market.

  3. Academic Collaboration: We collaborate with leading academics to conduct in-depth research and analysis on fraud in the structured products market. This collaboration enhances the robustness and credibility of our findings. Our partnerships with academic institutions also ensure that our methodologies are at the forefront of forensic analysis, incorporating the latest research and technological advancements.

  4. Data and Analytics: We provide academics with access to comprehensive data sets and analytical tools, enabling them to conduct their own research on structured products and related fraud.Our data retrieval and analysis capabilities are unmatched, offering a valuable resource for academic studies and publications.

  5. Expert Testimony: Our team of academic experts is available to provide testimony in court, drawing on their extensive research and industry knowledge to explain complex financial concepts and fraudulent schemes. Their testimony has been pivotal in securing favorable outcomes in litigation, helping to clarify the mechanisms of fraud and the resulting financial impact.

 

Integra’s expertise in uncovering and analyzing fraud in the structured products market has made a significant impact on the industry. Our rigorous methodologies, combined with our collaboration with academic experts and regulatory bodies, have led to the successful prosecution of fraudsters and the recovery of substantial damages for victims. As we continue to develop and refine our techniques, we remain committed to maintaining the highest standards of forensic analysis and contributing to a more transparent and accountable financial market.

Need to investigate Structured Finance CMBS, RMBS, CLOs, CDOs? Contact Integra FEC
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