Retained by Sullivan & Cromwell
Vega was retained by several RMBS depositor and underwriter defendants, though their counsel Sullivan & Cromwell, to support an economic expert in a case brought by investors.
Plaintiffs' experts used the results of an AVM from DataQuick Information Systems that was run on the loans backing the at-issue certificates to support the position that the LTV ratios were understated in the relevant offering materials relative to AVM-based LTV ratios. However, Vega's expert found that the experts' conclusions were unreliable because they narrowly focused on the mean estimate of the AVM generated value and ignored the range of values provided by the AVM.
Specifically, the DataQuick AVM used by Plaintiffs' experts quantified its AVM error ranges in forecast standard deviations (“FSDs”). An FSD of 10 (stated as a percent of the mean value) for an AVM value of $150,000 indicates a probability of 68% that the most likely price is between $135,000 and $165,000, 10% below and above the estimate. However, the AVM did not distinguish between the likelihood that the property is worth $135,000 and the likelihood that it is worth $165,000.
Nevertheless, Plaintiffs' experts concluded that appraisal values were overstated when the original appraisal value was above the point estimate of the AVM, and did not properly account for the range of possible values indicated by the AVM. Vega's expert opined that the use a single value in this range to the exclusion of others was improper.
The case settled.