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Decision
system construction, validation and regulatory review. |
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Behavioral prepayment scores
are examined simultaneously with behavioral
default scores to determine if prepayment
“really” is a bad result for the lender.
The
technology necessary to construct Behavioral prepayment scores differs from
other mortgage scoring solutions as do predictive variables and the stability
of variable impact measured over time.
Rank ordering should be accomplished separately from prepayment speed
estimates. Pricing and valuation of mortgages is
fundamental to investment, purchase or sale of loans. A “silo” approach to dealing with credit,
interest rate risk in the form of prepayment, and operational risk from
safety / fair lending will lead to less than optimal results. MDT can help. |
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Management Consulting Services |
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Mortgage Decision Technologies, Inc. |
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To contact us: |
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MDT Consulting: |
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Estimates of Loan level prepayment probability are fundamental to
any portfolio management effort for mortgages. Since Wall Street publishes its prepayment
expectations by coupon range and tends to ignore factors other than coupon,
arbitrage possibilities abound. Those
armed with the most reliable
information on which to estimate future prepayment in a particular pool or
portfolio have the advantage. This
technology must be utilized when purchasing whole loans or servicing rights
to prevent adverse selection. MSR
hedging and purchase price allocation on pools should be driven by loan
level prepayment expectations. Behavioral Prepayment scores
drive customer retention and continuous relationship marketing (CRM)
programs. Scores improve customer targeting by “not waking the dead!”. They improve direct mail response rates, and
drive call queues in call centers.
Some incoming calls should be routed to an automated system while
others should be directed to a marketing representative. . . |
