Retained by Sullivan Cromwell
Vega’s expert was retained by a RMBS sponsor, through its counsel Sullivan Cromwell, to examine the effect of the macroeconomic environment on loan defaults. Vega’s expert assessed whether actual defaults in the relevant loan pools differed significantly from the defaults that would have been predicted by a multinomial logit model that incorporated unexpected changes in the macroeconomic variables. This analysis supports the expert’s opinion that, to a reasonable degree of statistical certainty, the defaults experienced by the relevant loan pools were driven by macroeconomic changes rather than loan characteristics (or misrepresentations about such characteristics).
The expert also performed an additional analysis to determine if the average loss severity of loans in the relevant loan pools alleged by plaintiff’s experts to have deviated from underwriting guidelines, have non-credible appraisals, or have original appraisal values higher than the upper bound of the range associated with the AVM estimate, was significantly different from loans not alleged to be misrepresented. The expert concluded that the average loss severity of the allegedly misrepresented loans was statistically indistinguishable from the average loss severity of loans not subject to alleged misrepresentations for the relevant loan pools. This confirms that there is no statistical evidence that alleged misrepresentations made any losses more severe.