Kristin R. MoyerLoan portfolio management is an emerging technology solution that provides analytics, modeling and optimization – ideally (though not yet) across lending instruments (mortgage, HELOC, syndicated loan). Loan portfolio management leverages not only borrower attributes, but also macro-economic factors such as real estate attributes by geography, unemployment data, projected interest rates and other factors. Loan portfolio management executes analyses at both the portfolio and individual customer from origination through servicing, including:
- New loan application risk: the risk of default for loan mortgage applications
- Prepayment risk: individual loan-level propensity for prepayment risk and exposure estimates
- Pricing analytics: value-based pricing for new loans and securities that includes risk factors such as default risk, interest rate exposure and prepayment risk
- Portfolio stress testing: analysis of loan portfolio and securities as macroeconomic parameters change
- Fraud modeling: predictive modeling to identify fraud
- Optimization: mathematical formulas and science-based decision modeling applied against each individual loan to determine its most-appropriate value in the face of uncertain conditions and risk factors
- Behavior modeling: adaptive recovery rate modeling (to predict the success of a loan modification) that changes over time as market conditions fluctuate (similar to predicting the risk of prepayment)
- Customer service support: real-time decisioning and workout support integrated with collection systems.
End-users of loan portfolio management solutions include banks and servicers, distressed asset investors, mortgage insurers, brokerdealers, money managers, and insurance firms.
The technology vendor community has only recently begun providing portfolio management solutions for lending, and to date most solutions have been focused on mainly mortgage or commercial lending. However, the financial crisis has accelerated interest in portfolio management solutions in order to reduce loss and execute loan modification more proactively, particularly in the area of mortgage loans (and advanced mortgage analytics) given they have been in the most distress to date. We suggest evaluating your existing analytics capabilities against loan portfolio management solutions – clearly, it’s never been more important to address business opportunities and challenges quickly in order to maintain liquidity and drive new revenue
Category: Uncategorized operations Tags: lending, loan portfolio management
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