Standard & Poor’s Ratings Services is joining federal regulators in reviewing the mortgage securitization operations of a Miami-based mortgage company after it revealed that a top sales employee had allegedly altered data on $100 million in securitized loans.
The Securities and Exchange Commission has launched “an inquiry” into Bayview Financial’s mortgage securitization business.
Bayview President David Quint said in an SEC statement he and CEO David Ertel became aware in March that “a senior salesperson, managing director and limited partner of the firm had, over a period of years, altered credit data.”
“We believe he did this in order to increase his commissions,” Quint said in the statement, adding that the employee has been fired.
The data was for home loans that Bayview had securitized and then sold through bond offerings.
“Approximately 3 percent of the loans included in our outstanding securitizations of residential mortgage loans showed evidence of altered data,” he said.
Bayview said it has repurchased $66 million in loans, which the company said is 2 percent of its $3.3 billion in outstanding collateral.
The commercial mortgage banker did not say if the employee is being prosecuted; an e-mail seeking comment from Bayview was not returned.
In his statement, Quint said the company does not believe the alterations will have any material affect on the mortgage-backed securities. The company said it has also “reviewed and modified our internal controls” and hired a “major accounting firm “to conduct an independent data review of the affected loans.”
Bayview said it received a July 14 letter from the SEC, which requested documents and other information related to the altered loans. The company is cooperating, Quint said.
S&P said in a statement it will also “review the current performance of the affected transactions to determine if any rating actions are warranted.”
“Standard & Poor’s relied on … erroneous information when assigning our ratings to Bayview’s securitizations,” the ratings agency said in a statement, adding it will “conduct a study to review the possible impact of the altered information on our ratings.”
In his statement Quint explained how the alleged theft took place.
Bayview, he said, pays sales people commissions based on the difference between the company’s purchase price and the value of the loans based on Bayview’s pricing model.
“Our internal loan pricing model calculates value using data elements including credit score, loan-to-value ratio, occupancy type, property type and other credit valuables,” Quint said. “The alteration of data in this case primarily involved falsely increasing borrower credit scores, but also included to a lesser extent changes to property type and occupancy code and to an even more limited extent other variables.“
