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RMBS Litigation Analysis

Based on a strong reputation for delivering complex data and analytics projects in the Financial Services and Regulatory industry, Oakleaf Group has been retained by Korein Tillery and Wollmuth Maher and Deutsch, 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 2005, plaintiffs had invested over $4 billion in these certificates and have lost approximately $1.6 billion as of August 31, 2016.  The project entails providing data, analytics and subject matter expertise for end-to-end litigation expert services that includes performing loss analysis, understanding the Pooling and Servicing Agreements (PSAs).  PSAs are essentially a contract that governs the rights and obligations of multiple parties, including Plaintiffs and the 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, authoritative declarations on subject matter and expert testimony at trial.


Oakleaf Group invested in a strategic plan to support potential legal outcomes from the nation's 2007 housing crisis.  This plan required accumulating SME Knowledge for financial markets and RMBS securities by understanding PSAs, analyzing RMBS Trustee Remittance Reports and RMBS Collateral Performance Data.  As part of this process, using its Financial Data and Analytics Execution Framework and Agile methodology, Oakleaf Group developed over 350 complex cashflow models per terms of the Pooling and Servicing Agreement. Once developed and validated, these models were used to simulate alternate scenarios using statistical modeling.


These models were developed in adherence with its internal IT policies and standards, including the security policy and SDLC standards.  The cashflow models automated the cashflow business rules from the Pooling and Servicing Agreements and were tailored to support different types of deal structures, loan groups and number of bonds in a securitization.  These models also support unlimited number of permutations of deal characteristics.


In additional to building models to simulate alternate scenarios and perform data analytics, Oakleaf Group developed graphics and visual displays as part of the expert report and demonstratives in support of trial and legal pleadings.  Oakleaf Group achieved the mandatory requirement to convey the impact of the sensitivity analysis in less than 5 minutes.


Overall, Oakleaf Group responded to a void in the legal industry for rapid calculation of damages and sensitivity analysis to meet short court deadlines and changing legal strategies.  This allowed the law firms to run and present multiple damages scenarios, which previously were unattainable. 


Oakleaf Group customer engagement surfaced that the client needed models that could be rapidly executed using changing assumptions.  Oakleaf Group identified all cashflow model assumptions that could be changed and made them configurable.  This allowed Oakleaf Group to quickly execute various sensitivity analysis upon client's request and to deliver results based on strict court deadlines. 


The litigation effort consists of continual changing requirements (i.e. legal strategy).  This necessitated Oakleaf Group using its Financial Data and Analytics Execution Framework to ensure that model results are accurate, complete and court trial worthy.  All models that Oakleaf has built were designed to and have withstood rebuttal during court proceedings. 


Once the models were developed Oakleaf Group performed end-to-end SIT and UAT for each model by loading input (collateral) data, executing the model, and finally validating the Oakleaf Group model output with industry standard INTEX models.  This development and testing of models was performed an in-house model development, testing and production environment to manage version control.