Each of the banks, payment service providers, securities brokers, exchanges, and loan brokers constitutes a concentration, or counterparty, risk to us.
- Most of our counterparties are regulated, produce audited financial reports, and have contingency plans to service our loans.
- Our counterparties have good track records at originating profitable loans and at sufficient volumes.
- Our counterparties produce transparent reports and make much of their internal data available to us.
- We avoid counterparties who invest themselves in the assets they originate, or which provide buyback guarantees, since we perceive this as wrong-way risk.
- We interview the management of our counterparties and we reach out to the counterparties of our counterparties for cross-interviews, e.g., the valuation company they used or their lawyer or corporate trust provider.