GCAT 2022-NQM5 ABS-15G
Exhibit 99.20
EXECUTIVE
SUMMARY
Third Party Due Diligence Review
Overview
Digital
Risk, LLC (“Digital Risk”), a third party due diligence provider, performed the review described below on behalf of
its client, Blue River Mortgage III LLC. The review included a total of 25 newly originated, QM/ATR Exempt and Non QM residential
mortgage loans, in connection with the securitization identified as GCAT 2022-NQM5 (the “Securitization”). The review
began on January 17, 2019, and concluded on September 23, 2022.
Scope
of Review
Credit
Review
Digital
Risk performed a “Credit Review” to verify compliance with guidelines in effect at the time of loan origination, or
other guidelines provided by Client prior to review, and ensure the characteristics used by the underwriter are supported by the
file documentation; and determine whether any loans outside of those guidelines contain legitimate and approved exceptions with
compensating factors.
The
Credit Review attempted to confirm the following:
| ● | Validate
borrower(s) monthly gross income |
| ● | Validate
funds required to close, required reserves |
| ● | Review
file documentation for required level of income and asset verifications |
| ● | Review
file documentation for required level of employment |
| iii. | Monthly
Mortgage Payment |
| ● | Confirm
program, qualifying rate, terms |
| ● | Validate
all concurrent loans are included in the DTI |
| v. | Mortgage
Related Obligations: PITI, HOA, PMI, etc. |
| ● | Validate
subject loan monthly payment (PITI) and associated obligations |
| ● | Validate
monthly recurring liabilities |
| vii. | DTI
and/or Residual Income |
| ● | Validate
debt-to-income ratio (DTI) based upon income and debt documentation provided in the file |
| ● | Review
credit report for credit history and required credit depth including any / all inquiries |
| ● | Determine
representative credit score from credit report |
| b. | Validate
loan-to-value (LTV) and combined loan-to-value |
| c. | Review
borrower’s occupancy |
| d. | Validation
through third party resource of the subject properties most recent twelve (12) month
sales history |
| e. | Confirm
sufficient evidence in loan file, by reviewing the underwriter’s decision to approve
the loan based upon the borrows income, debt, and credit history, to support borrower’s
willingness and ability to repay the debt |
| f. | Confirm
that Final 1003 is sufficiently completed |
| g. | Provide
Audit 1008 with accurate data based on file documentation |
| h. | Confirm
Loan Approval conditions were met |
| i. | Review
condominium questionnaire to verify all information is complete, prepared by an authorized
representative, and address any red flags that may deem condominium project ineligible |
| j. | QM
or ATR Validation / Review of 8 Key Underwriting Factors (If applicable) |
| ● | Validate
borrower(s) monthly gross income |
| ● | Validate
funds required to close, required reserves |
| ● | Review
file documentation for required level of income and asset verifications |
| ● | Review
file documentation for required level of employment |
| iii. | Monthly
Mortgage Payment |
| ● | Confirm
program, qualifying rate, terms |
| ● | Validate
all concurrent loans are included in the DTI to properly assess the ability to repay |
| v. | Mortgage
Related Obligations: PITI, HOA, PMI, etc. |
| ● | Validate
subject loan monthly payment (PITI) and associated obligations |
| ● | Validate
monthly recurring liabilities |
| vii. | DTI
and/or Residual Income |
| ● | Validate
debt-to-income ratio (DTI) based upon income and debt documentation provided in the file |
| ● | Documentation
meets Appendix Q requirements for QM Loans |
| ● | Review
credit report for credit history and required credit depth including any / all inquiries |
| ● | Determine
representative credit score from credit report |
| k. | Validate
loan-to-value (LTV) and combined loan-to-value |
| l. | Review
borrower’s occupancy |
| m. | Validation
through third party resource of the subject properties most recent twelve (12) month
sales history |
| n. | Confirm
sufficient evidence in loan file, by reviewing the underwriter’s decision to approve
the loan based upon the borrows income, debt, and credit history, to support borrower’s
willingness and ability to repay the debt |
| o. | Confirm
that Final 1003 is sufficiently completed |
| p. | Provide
Audit 1008 with accurate data based on file documentation |
| q. | Confirm
Loan Approval conditions were met |
| r. | Review
condominium questionnaire to verify all information is complete, prepared by an authorized
representative, and address any red flags that may deem condominium project ineligible |
| s. | General
QM for any loans originated under the GQM Rule.(If applicable) |
| a. | Pricing
for First Lien Loans: |
| i. | 2.25%
for a first-lien covered transaction with a loan amount greater than or equal to $110,260; |
| ii. | 3.5%
for a first-lien covered transaction with a loan amount greater than or equal to $66,156
but less than $110,260; and |
| iii. | 6.5%
for a first-lien covered transaction with a loan amount less than $66,156. |
| b. | Pricing
for Subordinate Lien Loans: |
| i. | 3.5%
for a subordinate-lien covered transaction with a loan amount greater than or equal to
$66,156; and |
| ii. | 6.5%
for a subordinate-lien covered transaction with a loan amount less than $66,156. |
| c. | Pricing
for Manufactured Homes: |
| i. | 2.25%
for a first-lien covered transaction secured by a manufactured home1 with a loan amount
equal to or greater than $110,260; and |
| ii. | 6.5%
for a covered transaction secured by a manufactured home with a loan amount less than
$110,260. |
| ii. | Consider
Income and Assets: |
| o | Consumer’s
current or reasonably expected income or assets (other than the value of the dwelling
that secures the loan; |
| o | The
consumer’s debt obligations, alimony, child support; and |
| o | The
monthly DTI or residual income. |
| iii. | Verification
of Income and Assets: |
| a. | Verification
in compliance with one of the “safe harbor” guidelines will meet the QM verification
requirement. A creditor is allowed to “mix and match” provisions of the different
guidelines rather than only apply one guideline per loan. |
The
specific guidelines that the CFPB is designating for the safe harbor are: The GQM Rule provides that if the creditor verifies
the consumer’s income or assets, debt obligations, alimony, child support, and monthly DTI or residual income by meeting
the standards of certain specified third-party underwriting manuals, then a creditor is presumed to have complied with the verification
requirement. These specified manuals are:
| i. | Chapters
B3-3 through B3-6 of the Fannie Mae Single Family Selling Guide, published June 3, 2020; |
| ii. | Sections
5102 through 5500 of the Freddie Mac Single-Family Seller/Servicer Guide, published June
10, 2020; |
| iii. | Sections
II.A.1 and II.A.4-5 of the Federal Housing Administration’s Single Family Housing
Policy Handbook, issued October 24, 2019; |
| iv. | Chapter
4 of the U.S. Department of Veterans Affairs’ Lenders Handbook, revised February
22, 2019; |
| v. | Chapter
4 of the U.S. Department of Agriculture’s Field Office Handbook for the Direct
Single Family Housing Program, revised March 15, 2019; and |
| vi. | Chapters
9 through 11 of the U.S. Department of Agriculture’s Handbook for the Single Family
Guaranteed Loan Program, revised March 19, 2020. |
Compliance
Review
Digital
Risk performed a “Compliance Review” to determine, as applicable, to the extent possible and subject to the caveats
below, whether the loan complies with applicable regulatory requirements as noted below, each as amended, restated and/or replaced
from time to time. The Compliance Review included the following:
| a. | Test
Loan Estimate(s) for accuracy and completeness as well as timing requirements as required
by TRID Regulations |
| b. | Test
Closing Disclosure(s) for accuracy and completeness as well as timing requirements as
required by TRID Regulations |
| i. | Compare
Loan Estimate and Closing Disclosures |
| ii. | Identify
Tolerance Violations and applicable cost to cure |
| d. | Comprehensive
review of Closing Disclosure to determine transaction accuracy |
| e. | Recalculation
of APR and Finance Charge |
| i. | Federal
High Cost Mortgage provisions |
| ii. | Federal
Higher Priced Mortgage Loans provisions |
| iii. | Local
and/or State Anti-predatory and High Cost provisions |
| g. | Determine
whether specified federal disclosures were provided timely based upon comparison of the
application date to the dates on such disclosures |
| ii. | Home
Ownership Counselling Disclosure |
| h. | Compliance
with QM as it relates to: |
| iii. | Prepayment
Penalty Test |
| iv. | Product
Eligibility Testing |
| i. | Notice
of Right to Cancel (Rescission) Review |
| i. | Confirm
transaction date, expiration date, and disbursement date |
| ii. | Confirm
document is properly executed by all required parties to the transaction |
| iii. | Confirm
the correct Right of Rescission document was executed for the transaction type |
| j. | Confirm
through NMLS the loan originator and originating firm’s license status was active
and properly disclosed on appropriate loan documents |
| k. | Check
the Loan participants against the exclusionary list provided by Client or by the purchaser
of the Loan(s) |
| l. | Review
closing documents to ensure that the Mortgage Loan information is complete, accurate,
and consistent with other documents; Confirm collateral documents have been recorded
or sent for recording |
The
Compliance Review did not include any federal, state or local laws, constitutional provisions, regulations or ordinances that
are not expressly enumerated above. Furthermore, the findings reached by Digital Risk are dependent upon its receiving complete
and accurate data regarding the loans from loan originators and other third parties upon which Digital Risk is relying in reaching
such findings.
Valuation
Review
Digital
Risk performed a “Valuation Review,” which included the following:
| a. | Review
original appraisal, determination that property is in “average” condition
or better, or property requires cosmetic improvements (as defined by the appraiser) that
do not affect habitability. Should an area of concern be identified with the condition
of the property, Digital Risk will alert Client. |
| b. | Review
appraisal, determination that property is completely constructed and appraisal is on
an “as is basis,” or property is identified as not completely constructed
by originating appraiser. |
| c. | Review
and determine if the appraisal report was performed on appropriate GSE forms and if the
appraiser indicated in the body of the subject appraisal that the appraisal conforms
to USPAP standards. |
| d. | Review
and determine the relevance of the comparable properties and ensure that a rational and
reliable value was provided and supported as of the effective date of the Origination
Appraisal. |
| e. | Review
adjustments (line item, net and gross adjustments) to ensure they are reasonable. |
| f. | Ensure
that the appraisal conforms to the guidelines provided from the Client. |
| g. | Review
appraisal to ensure all required documents were included. |
| h. | Review
location map provided within the appraisal for external obsolescence. |
| i. | Ensure
highest and best use and zoning complies with guidelines. |
| j. | Confirm
there are no marketability issues that affect the subject property. |
| k. | Ensure
subject property does not suffer any functional obsolescence. |
| l. | Where
applicable, determine if the file did not contain the appraisal or other valuation method
and a review could not be performed. |
| m. | Additional
valuation products (AVM’s, CDA’s and Field reviews) were obtained to confirm
the value was supported within 10% tolerance. This population was obtained by the client
and ordered by Digital Risk. |
Digital
Risk applied a cascade methodology to determine if the original appraised value was reasonably supported when compared to an independent
third party valuation product.
Data
Discrepancy
As
part of the Credit and Compliance Reviews, Digital Risk captured data from the source documents and compared it to a data tape
provided by Client. Digital Risk provided Client a Data Discrepancy Report which shows the differences between the tape data and
the data captured by Digital Risk during the diligence process.
| Fields
Reviewed |
Discrepancy
Count |
Percentage
|
| **AUDIT
TLTV** [UW] |
1 |
4.00% |
| Amortization
Term in Months - (M) |
1 |
4.00% |
| Gross
Margin (M) [CP] |
2 |
8.00% |
| Note
Date |
10 |
40.00% |
| Original
LTV |
1 |
4.00% |
Summary
of Results
| Overall
Loan Results: |
| Event
Grade |
Loan
Count |
Original
Principal Balance |
Percent
of Sample |
| Event
Grade A |
18 |
$11,649,350.00
|
72.00% |
| Event
Grade B |
7 |
$4,237,500.00
|
28.00% |
| Event
Grade C |
0 |
$0.00
|
0.00% |
| Event
Grade D |
0 |
$0.00
|
0.00% |
| Total
Sample |
25 |
$15,886,850.00
|
100.00% |
| Credit
Results: |
| Event
Grade |
Loan
Count |
Original
Principal Balance |
Percent
of Sample |
| Event
Grade A |
21 |
$14,087,850.00
|
84.00% |
| Event
Grade B |
4 |
$1,799,000.00
|
16.00% |
| Event
Grade C |
0 |
$0.00
|
0.00% |
| Event
Grade D |
0 |
$0.00
|
0.00% |
| Total
Sample |
25 |
$15,886,850.00
|
100.00% |
| Compliance
Results: |
| Event
Grade |
Loan
Count |
Original
Principal Balance |
Percent
of Sample |
| Event
Grade A |
20 |
$12,045,850.00
|
80.00% |
| Event
Grade B |
5 |
$3,841,000.00
|
20.00% |
| Event
Grade C |
0 |
$0.00
|
0.00% |
| Event
Grade D |
0 |
$0.00
|
0.00% |
| Total
Sample |
25 |
$15,886,850.00
|
100.00% |
| Valuation
Results: |
| Event
Grade |
Loan
Count |
Original
Principal Balance |
Percent
of Sample |
| Event
Grade A |
25 |
$15,886,850.00
|
100.00% |
| Event
Grade B |
0 |
$0.00
|
0.00% |
| Event
Grade C |
0 |
$0.00
|
0.00% |
| Event
Grade D |
0 |
$0.00
|
0.00% |
| Total
Sample |
25 |
$15,886,850.00
|
100.00% |
Event
Grade Definitions:
| Final
Loan Grade |
| A |
Loan
meets Credit, Compliance, and Valuation Guidelines |
| B |
The
loan substantially meets published Client/Seller guidelines and/or eligibility in the validation of income, assets, or credit,
is in material compliance with all applicable laws and regulations, and the value and valuation methodology is supported and
substantially meets published guidelines. |
| C |
The
loan does not meet the published guidelines and/or violates one material law or regulation, and/or the value and valuation
methodology is not supported or did not meet published guidelines. |
| D |
Loan
is missing documentation to perform a sufficient review. |
| Credit
Event Grades |
| A |
The
loan meets the published guidelines without any exceptions. The employment, income, assets and occupancy are supported and
justifiable. The borrower’s willingness and ability to repay the loan is documented and reasonable. |
| B |
The
loan substantially meets the published guidelines but reasonable compensating factors were considered and documented for exceeding
published guidelines. The employment, income, assets and occupancy are supported and justifiable. The borrower’s willingness
and ability to repay the loan is documented and reasonable. |
| C |
The
loan does not substantially meet the published guidelines. There are not sufficient compensating factors that justify exceeding
the published guidelines. The employment, income, assets or occupancy are not supported and justifiable. The borrower’s
willingness and ability to repay the loan were not documented or are unreasonable. |
| D |
There
was not sufficient documentation to perform a review or the credit file was not furnished. |
| Compliance
Event Grades |
| A |
The
loan is in compliance with all applicable laws and regulations. The legal documents accurately reflect the agreed upon loan
terms and are executed by all applicable parties. |
| B |
The
loan is in material compliance with all applicable laws and regulations. The legal documents accurately reflect the agreed
upon loan terms and are executed by all applicable parties. Client review required. |
| C |
The
loan violates one material law or regulation. The material disclosures are absent or the legal documents do not accurately
reflect the agreed upon loan terms or all required applicants did not execute the documents. |
| D |
There
was not sufficient documentation to perform a review or the required legal documents were not furnished. |
| Valuation
Event Grades |
| A |
The
value is supported within 10% of the original appraisal by the AVM or there are other supporting documents in the originators
loan file package (CDA, Field Review or Second Appraisal). The appraisal was performed on an “as-is” basis and the
property is complete and |
| Valuation
Event Grades |
| |
habitable at origination. The appraiser was appropriately licensed and used GSE approved forms. |
| B |
The
value is not supported within 10% of the original appraisal by the AVM and there are no other valuation support documents
in the loan file provided by the Seller. The valuation methodology substantially meets the published guidelines but reasonable
compensating factors were considered and documented for exceeding guidelines. The appraisal was performed on an “as-is”
basis and the property is complete and habitable. The appraiser was appropriately licensed and used GSE approved forms. |
| C |
The
value is not supported within 10% of the original appraisal. The valuation methodology did not meet the published guidelines
and there were not sufficient compensating factors for exceeding published guidelines. The property is in below “average”
condition or the property is not complete or requires significant repairs. The appraisal was not performed on an “as
is” basis. The appraiser was not appropriately licensed or did not use GSE approved forms. |
| D |
The
file was missing the appraisal or there was not sufficient valuation documentation to perform a review. |