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Case Study: Custom Home Equity Solution to Reduce Delinquencies and Improve Portfolio Quality

 

Recent increases in delinquent accounts are a significant problem for many home equity lenders. Controlling dollars at risk before the account becomes delinquent is a common initiative. Potential liabilities from inactive accounts are a serious concern. Collateral values have fallen causing many lines to be partially unsecured. More home equity accounts are in collections than ever before and it has been difficult to predict the volume of accounts entering collections for the next month. Improved prioritization of collection resources and actions is achieved when accounts are prioritized using scoring technology.

Because home equity losses were almost non-existent until 2008, some lenders rely on scorecards, including those available at large third party processors, which were built for other products. This can be a costly decision given the size of the dollars at risk, the difference in the products and the staggering shrinkage in home values.

 
A Scoring Solutions™ client experienced a surge in delinquencies and losses in their home equity business. The lender used generic behavior scores at a large, third party processor that were developed by a well-known scoring company.  But the scores were designed for other products; they weren’t specific to home equity accounts.
 

Scoring Solutions™ developed custom behavior models including one for non delinquent, active accounts. In one possible strategy, using the custom score to eliminate the available credit for the highest risk 10% of current active accounts, the lender would rescind 3% of the total available lines. This strategy would impact 64% of all bad accounts. The custom model score had a maximum good-bad K-S that was 69% more predictive than that of the generic score.  

 

To find out more information about the home equity case study results, contact Scoring Solutions™.

 
Scoring SolutionsTM Provides Expert Model to Clarity Services, Inc.
 

Scoring Solutions™ recently developed for Clarity Services, Inc. an expert risk score for their Clear Tradeline™ product. Clarity Services, Inc. is a Consumer Reporting Agency that provides information to lenders which help them make better decisions.

 

Clear Tradeline™ is designed to fill the blind spot left by traditional bureaus' lack of coverage on products used by under-banked and near prime consumers. The risk score leverages Scoring Solutions™ experience in developing similar models. Clarity's Clear Tradeline™ displays inquiries, extensions of credit, bill payments, and collection attempts made by their reporting partners.  The risk score uses attributes tailored specifically for the Clarity tradeline report. The risk score is available from Clarity via Score360™, a scoring engine developed by Scoring Solutions™ and GDS Link, LLC.

 
Recent Webinars Presented by Scoring SolutionsTM 
 
Scoring Solutions™ recently joined two of their partners, GDS Link, LLC and Cypress Software Systems for the following webinars: “Improve Credit Risk and Portfolio Management Utilizing Customer-Centric Data” and “Proven Methods to Strengthen Your Portfolio.”
 

Steve Darsie, a Principal of Scoring Solutions™, co-presented with GDS Link and Tower Group on September 1 on key points for organizations to consider as they evaluate their risk management road map.

 

On September 16, Elina Rodriguez, a Principal of Scoring Solutions™, joined Cypress Software Systems to discuss how community banks can leverage the predictive power of scoring models to mitigate risk and increase profitability during this economic downturn.  The presentation included an overview of the models available in the marketplace and actual case study results for two community banks showing how they used models to drive more effective new account strategies. 

 
New Scoring SolutionsTM Business
· Scoring Solutions™ recently signed with a regional bank to update their small business origination scorecards.  The scorecards will be enhanced with a set of analytically proven decision rules that will complement the scoring decision.
 
· A regional bank signed with Scoring Solutions™ for two Expert Models to assist in making decisions for indirect and direct loan applicants.  Ongoing consulting and analytical assistance are included as a part of the scoring program. This includes: initial approval strategies, on-going model validation, portfolio performance evaluation, and eventual upgrade to a fully customized scorecard.
 
· Two additional new signings involve developing scorecards for large financial institutions.  For these clients, the scorecard attributes and the scoring models will be programmed into Score360™, a scoring engine and web services software product developed in conjunction with GDS Link, LLC. Scorecards implemented in Score360™ can be brought to production in less than one month after scorecard delivery.  Scoring Solutions™ provides periodic reviews of monitoring reports and updates to the models to ensure on-going predictive performance through time.
 
 

Visit www.scoringsolutions.com for white papers published
by Scoring Solutions™
.

 

 
   
To learn more about how we can bring value to your organization, call us at 678-672-5450, ext. 362 or e-mail us at score.info@scoringsolutions.com.