Risk Management: Standards, Audit & Certified Quality Management Systems

For Investor-Lenders: when compared to other investment opportunities, investment in private equity mortgage transactions (PEM)TM are comparatively simple and low risk. It is for this reason PEM transactions are not subject to offering memorandum or prospectus requirements. 

For Borrowers: when compared to traditional mortgage solutions, private equity mortgage transactions are appreciated because they normally offer a degree of customization and flexibility than what traditional underwriting standards permit. This benefit is often associated with a premium paid in the overall cost of borrowing. 

PEMI® Risk Categories

This does not make PEM transactions without risk. The  main sources of risk in the private equity mortgage sector are:

Governance Risk
Stewardship Risk
Compliance Risk
Complexity Risk
Operations & Process Risk
Peer-to-Peer Lending (P2PL) & Non-Authenticated Private Lender Risk

PEMI® Risk Mitigation Processes

To manage the risk, PEMI® has world-class Rules, Standards, Audit programs and certifiable Quality Management Systems that all members are required to adhere with.


 Standards + Audit = Certified Quality Management System = Risk Reduction

What is Risk? 

The chances of something that you have planned going wrong. The possibility that you lose something. The probability that something bad will happen to you, like you die, or lose money or something or someone of value to you.

What are Standards? 

According to the Switzerland-based International Organization for Standardization (ISO.org): "Standards make things work. They give world-class specifications for products, services and systems, to ensure quality, safety and efficiency."  According to Merriam-Webster dictionary, a Standard is "a level of quality, achievement. At PEMI, the use of standards may be voluntary or required.

What are Regulatory Rules?

A government enforced Standard. Also known as "regulations"; according to Oxford dictionaries, "A rule or directive made and maintained by an authority". Adherence to Regulations are mandatory by way of  legislation.


What is Audit? 

According to the Oxford dictionaries: "A systematic review or assessment of something". Audit process validates that the operations of a business system are Compliant with the Standards that the business works within.

What is Compliance? 

According to the Oxford dictionaries: "The state or fact of according with or meeting rules or standards".

PEMI® establishes regulatory rules and standards programs to ensure the highest level of professional is achieved and maintained by its credentialed members. "Compliance Risk" is the failure to adhere to regulatory rules and standards; which may lead to material financial loss, loss of reputation or other loss. Compliance is enforced by the use of "audits".

What is a Certified Quality Management System? 

Namely an ISO 9001 Family of Quality Management Standards. 

ISO 9001:2015 specifies requirements for a quality management system when an organization:

a) needs to demonstrate its ability to consistently provide products and services that meet customer and applicable statutory and regulatory requirements, and

b) aims to enhance customer satisfaction through the effective application of the system, including processes for improvement of the system and the assurance of conformity to customer and applicable statutory and regulatory requirements.

All the requirements of ISO 9001:2015 are generic and are intended to be applicable to any organization, regardless of its type or size, or the products and services it provides. 

Certification to ISO 9001:2015

Checking that the system works is a vital part of ISO 9001:2015. Certification can be a useful tool to add credibility, by demonstrating that your product or service meets the expectations of your customers. For some industries, certification is a legal or contractual requirement. Source: ISO.org.

PEMI® Audit