Forensic securitisation services is one of our fastest growing business lines. As the market for securitisation increases in both size and complexity, the unresolved issues it leaves in its wakes have increased accordingly. Forensic securitisation is the term used to describe the methods used in determining the course of events relating to the actual securitisation issue and its currency thereafter. More often than not, forensic securitisations relate to losses incurred by investors and the reasons behind them. The reasons may inlcude:


This is the most common reason for investor losses and thus one that is cited in most disputes as the cause for complaint. However, the validity of a case may rest on the reason why assets/portfolios have sub-performed. This is an area Creative Capital Partners can assist in our clients.


If investors have made a judgement call on 'normalised' or 'steady-state' historical data, and the validity of that data is 'suspect', there is a high chance that when defaults and delinquencies are stressed to rated levels through multiples or standard deviations, the credit enhancements levels will underestimate the level of losses capital structures can withstand.


Poor delinquencies and resulting defaults are not simply a direct result of lower underwriting standards. Very often, the level of losses can be exaggerated through poor or incorrect servicing. In general, most servicers are bound to 'peer' standards ("prudent servicer of loans") or to standards as outlined in the debt documentation or procedures manuals.


In recent years, both investors and rating agencies have come to realise that different portfolio performances are related as much to expertise of the portfolio manager than to portfolio composition. Many portfolio managers are exposed to inherent 'conflict of interests' in the documentation  For instance, certain balance sheet CLOs, the originating bank may be in possession or market sensitive data relating to the credits in the portfolio. Alternatively, there may be a link, however faint, between a bank's syndication desk and its portfolio management.


Most securitisations have at least three levels of documentation. At its most basic there will be a term sheet or summary terms that will be included in any structuring material. On a secondary level, there will be listing particulars such as the selling document - this will be a condensation of the third level, that is  underlying documentation, showing what is believed to be relevant for investors.

Not surprising, this three tier approach can lead to discrepancies or conflict between the different levels. These discrepancies may lead to servicers/trustees/cash administrators undertaking tasks in an incorrect manner. Moreover, it is not unheard for documentation to be ambiguous in its interpretation.


Straight of the bat 'no financial model is perfect'. Most financial models are constructed with one eye on 'reasonable levels of accuracy' and one eye on 'cost and time employed'. Nonetheless, investors can, and should, expect financial models to operate within certain limits commensurate with the rating/risk of the investment. If these limits are not adhered to, this can lead to incorrect levels of credit enhancement being incorporated on closing.


Creative Capital Partners, have in the past and continue to, offer both claimants and defendants its services in the field of forensic securitization on a confidential basis. These services include expertise in the following areas:


Securitisation structures are usually far from simple in their execution. Creative Capital Partners can assist in the process of unbundling structures into their component parts so that they are far more transparent. This unbundling can either be through the use of a written analysis or through complex cash flow analysis that provides a “mark to model” approach to risk.


We offer our services in the field of expert witness testimonials. Within this area our clients can expect: quick decisions regarding conflict of interest and qualifications in area of dispute; detailed and thorough analysis of case material in timely manner; preliminary oral reports on likely case outcome together conclusive written reports on case material


As a consultancy with no outside shareholders our clients can rely on our independent point of view.


Creative Capital Partners can assist law practices in their preparation of securitisation related disputes. Our forensic skills cross a number of different areas including documentation, cash flow model analysis and email evaluation as well as review of originator/servicer procedures manuals.