What is the Value of Your Loan Portfolio?
With so much focus around credit quality and risk management, you might not think much about what your portfolio is actually worth. Its worth, of course, is determined by how much remaining cash flow it will generate—a situation that is constantly changing.
Often, this need becomes more “real” during times of stress (e.g., in times of rising delinquency, in times of rising interest rates—or worse, when both are occurring simultaneously, squeezing profit margins at both ends). This is often when lenders look to sell off segments of their portfolio as a survival strategy, sometimes settling for pennies on the dollar in the process. Still other lenders sell segments of their portfolios as a normal course of business. And there are surely numerous other reasons why lenders can benefit from knowing their estimated portfolio value—which got us thinking…
Wouldn’t it be cool if there was an affordable tool or service where you could import your data, and it automatically spits-out the present valuation of those loans (i.e., forecasted remaining cash flows)? Well, we built that tool and have made it available for commercial use.
Our service delivers monthly updates to you, based on your loan portfolio’s dynamic and ever-changing composition. We require just 2 files each month: (1) your “loan tape” file which has 1 record for each loan with all the important balances and dates associated with each account; and (2) your “payment transactions” file which has 1 record for each payment made with its important amounts and dates.
From there we will extrapolate payment performance data to forecast cumulative net loss performance and future prepay activity. We then apply those estimates to all future cash flows according to each loan’s remaining term, in order to come up with a risk-adjusted valuation for the entire portfolio. We can do this for one portfolio or for individual segments.
Finally a convenient, turnkey solution that brings much needed knowledge and business-critical intelligence to your front door. For more information or if you’d like a demo, please contact us today!