Kristin Moyer

We’ve previously posted on use cases for loan portfolio management.  We know extend this list.  Loan portfolio management can reduce credit loss in the following ways:

• Distressed portfolio management – ability to determine the optimal treatment strategy:
  • Loan modification
  • Short sale
  • Third party sale
  • Foreclosure
• Loan modification risk – ability to analyze the risk of re-default on modified loans and determine the optimal course of action that minimizes lender, investor and insurer loss
• Pricing analytics for securities and insurance – value-based pricing for securities and insurance that includes risk factors such as default risk, interest rate exposure and prepayment risk
• Pricing analytics for real estate owned (REO) property – value-based pricing for properties in REO
• Mortgage/loan asset management – acquisition, due diligence, service and surveillance, loss mitigation, asset disposition, portfolio performance analysis
• Lending portfolio stress testing – analysis of loan portfolio and securities as macroeconomic parameters change

Loan portfolio management also supports other functions (beyond reducing credit loss) within the lending lifecycle:

• Credit scoring and risk evaluation – the risk of default for loans in the origination process
• Prepayment risk – individual loan-level propensity for prepayment risk and exposure estimates
• Fraud modeling – predictive modeling to identify fraud
• Reengineering credit card profitability – regulatory change, falling balances (-11% as of Q12009 (source:  FICO)), record delinquencies and general recessionary stress require a new approach to credit cards; loan portfolio management can help issuers rebuild portfolio profitability
• Customer service support – real-time decisioning and support integrated with collections systems (for example, workout support decisioning).

I’m sure there are more use cases I’m missing.  What others have you seen?