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HOW TO SUCCEED IN TIMES OF risk

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HOW TO SUCCEED IN TIMES OF. risk. missing. Know what you’re. Know what you’re. missing. 1. Do I understand the credit and collateral risk drivers and composition of my portfolios? Can I properly assess the value and risk potential of distressed loans? - PowerPoint PPT Presentation

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Page 1: HOW TO SUCCEED IN TIMES OF

HOW TO SUCCEED IN TIMES OF

risk

Page 2: HOW TO SUCCEED IN TIMES OF

KNOW WHAT YOU’RE missing

Page 3: HOW TO SUCCEED IN TIMES OF

Do I understand the credit and collateral risk drivers and composition of my portfolios?

Can I properly assess the value and risk potential of distressed loans?

What happens to my capital position if my Balance Sheet composition or broader market deteriorates even further?

Do I have the capability to estimate loss reserves adequately?

Am I comfortable answering all of the regulators questions?

KNOW WHAT YOU’RE missing1

54

2

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Page 4: HOW TO SUCCEED IN TIMES OF

Primatics Financial’s Evolv Risk

platform has the tools to answer

your key risk questions—so

you can make business

decisions that lead beyond

survival, to success.

KNOW WHAT YOU’RE missing

Page 5: HOW TO SUCCEED IN TIMES OF

KNOW YOU NEED answers

Page 6: HOW TO SUCCEED IN TIMES OF

Evolv Risk is ideal for:•banks•mortgage insurers•securities investors•hedge funds and•private equity firms

KNOW YOU NEED answers

Page 7: HOW TO SUCCEED IN TIMES OF

Use Evolv Risk to:•balance the risk and rewards for valuing acquired and existing consumer and commercial loans

•determine securities investors alternative pricing

•determine risk management and segmentation strategies for best execution purposes

KNOW YOU NEED answers

Page 8: HOW TO SUCCEED IN TIMES OF

ASK THE HARD questions

Page 9: HOW TO SUCCEED IN TIMES OF

How do I generate cash flows on a toxic portfolio?1Evolv Risk is integrated with complex credit, prepayment and roll rate models using monte-carlo simulations and recent performance for cash flow generation and model based valuation.

ASK THE HARD questions

Page 10: HOW TO SUCCEED IN TIMES OF

How is the performance of the portfolio affected over time?2Evolv Risk creates comparative and trending reports that provide deeper insights you need. The continuous assessment of your expectations of performance to actual is critical for success.

ASK THE HARD questions

Page 11: HOW TO SUCCEED IN TIMES OF

How can I identify toxic loans for modifications?3Evolv Risk uses models that identify loans on the verge of delinquency and default, giving you an opportunity to modify them and reduce chances of foreclosure or decline in ROI.

ASK THE HARD questions

Page 12: HOW TO SUCCEED IN TIMES OF

How did the portfolio get where it is?4Evolv Risk conducts thorough portfolio inspection, providing a comprehensive view of causes and effects.

ASK THE HARD questions

How prepared is my organization for the portfolio risk?5Evolv Risk can run a variety of execution scenarios to approximate both losses and associated capital requirements.

Page 13: HOW TO SUCCEED IN TIMES OF

What would happen if HPI falls drastically, etc.?6Evolv Risk performs scenario analysis to stress your assumptions, giving you an informed look into the future.

ASK THE HARD questions

Page 14: HOW TO SUCCEED IN TIMES OF

GET INFORMATION YOU needIN A FORMAT YOU CAN use

Page 15: HOW TO SUCCEED IN TIMES OF

Meet the Challenges of Distressed Portfolios

Evolv Risk:

GET INFORMATION YOU needIN A FORMAT YOU CAN use

• Is market tested with a variety of distressed consumer portfolios.

• Processes complex cashflow schedules, including support for negative amortizing products with payment recasts.

Page 16: HOW TO SUCCEED IN TIMES OF

Meet the Challenges of Distressed Portfolios

Evolv Risk:

GET INFORMATION YOU needIN A FORMAT YOU CAN use

• Utilizes three home price indices: Case-Shiller, OFHEO and National Association of Realtors.

• Incorporates credit, prepayment and loss curve models.

• Applies custom index-rate forecasts.

Page 17: HOW TO SUCCEED IN TIMES OF

Meet the Challenges of Distressed Portfolios

Evolv Risk:

GET INFORMATION YOU needIN A FORMAT YOU CAN use

• Supports a broad range of loan products, including fixed-rate, hybrid ARM, interest-only, option ARM, balloon, construction, and home equity line of credit.

• Is integrated with proprietary and user based roll rate models for enhanced risk assessment and reporting

Page 18: HOW TO SUCCEED IN TIMES OF

Generate Customized Analysis and Reports

Evolv Risk:

GET INFORMATION YOU needIN A FORMAT YOU CAN use

• Enables you to define scenarios and models, adjust HPI and rate forecasts, navigate cash flows, and inspect loan-level scenario outcome.

• Generates web-based displays of information, with dynamic drill-down capabilities.

Page 19: HOW TO SUCCEED IN TIMES OF

Generate Customized Analysis and Reports

Evolv Risk:

GET INFORMATION YOU needIN A FORMAT YOU CAN use

• Provides dashboard snapshots of results for management review.

• Easily integrates with data repositories and export capabilities.

Page 20: HOW TO SUCCEED IN TIMES OF

TARGET KEY PROCESS issues

Page 21: HOW TO SUCCEED IN TIMES OF

Now you can quickly and decisively target

the key issues your organization faces

around credit and interest rate risk for both

residential and commercial loan portfolios.

TARGET KEY PROCESS issues

Page 22: HOW TO SUCCEED IN TIMES OF

Challenges• Managing complex data rules

to transform source system data into model-ready data can be an arduous and frustrating task.

• Maintenance of rules often requires complex system enhancements.

• Managing audit and controls around data is inefficient and impractical.

TARGET KEY PROCESS issuesThe Evolv Risk Solution:Proprietary Loan Data Import Rule Engine

Page 23: HOW TO SUCCEED IN TIMES OF

Your Advantages• The Excel-style interface easily

transforms source data into model-ready data.

• Embedded validation rules are maintained by the user, with no system enhancement required.

• Complete audit and controls work with original and transformed source data.

TARGET KEY PROCESS issues

Page 24: HOW TO SUCCEED IN TIMES OF

Challenges• Inflexible platforms do not

allow you to plug in custom programmatic or non-programmatic models.

• Internal limitations, such as hardware cost or maintenance, constrain performance.

TARGET KEY PROCESS issuesThe Evolv Risk Solution:Loan Risk Model Rule Engine, Cloud Computing, open interface architecture

Page 25: HOW TO SUCCEED IN TIMES OF

Your Advantages• Built-in support for non-programmatic models

lets you define your own models in an Excel-type interface, and even upload programmatic models directly into the system.

• An on-demand computing environment means you pay hardware costs only for usage. The cost-effective approach is also highly secure. Your data is processed and destroyed, never stored.

TARGET KEY PROCESS issues

Page 26: HOW TO SUCCEED IN TIMES OF

Challenges• Reports are canned and not

ad-hoc.

• It can be difficult to drill down into problem areas for more detail.

TARGET KEY PROCESS issuesThe Evolv Risk Solution:Loan Analytics and Reporting Tool

Page 27: HOW TO SUCCEED IN TIMES OF

Your Advantages• Embedded OLAP (online analytical processing)

functionality delivers vital flexibility.

• Drill-down capabilities provide the level of insight you need.

TARGET KEY PROCESS issues

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USE WHAT works

Page 29: HOW TO SUCCEED IN TIMES OF

1 Get Lowest Level Data

• Asset Detail

• Deal Info

• Tranche Info

• Historical Payment Information

USE WHAT works

Page 30: HOW TO SUCCEED IN TIMES OF

2 Determine Market Assumptions

• Interest Rate Projections

• HPI Projections (National, State or MSA Level)

• Foreclosure Timelines

• Organize Assumptions into Scenarios (Likely vs. Toxic)

USE WHAT works

Page 31: HOW TO SUCCEED IN TIMES OF

3 Generate Future Cashflows

• Scheduled Cash Flows

• Unscheduled Prepayments

• Defaults / Recoveries

• Deterministic vs. Stochastic Scenarios

• Roll Rate migration matrices

USE WHAT works

Page 32: HOW TO SUCCEED IN TIMES OF

4 Generate Risk Metrics / Intrinsic Value

• Conditional Default Rates (CDR)

• Loss Severity Rates (LSR)

• Loss Coverage Multiple

• Unrealized Loss %

USE WHAT works

Page 33: HOW TO SUCCEED IN TIMES OF

5 Roll Up Metrics to Holding Level

• CDR / LSR at the Tranche Level

• Account for Credit Protection

USE WHAT works

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6 Perform Stress Test / Drill-down Analysis

• Results Across Vintage, Products, MSA, FICO, Issuer, etc.

• Run Detailed Analytics on Specific Sub-Set

• Loan Level Cash Flows and Fair Value

USE WHAT works

Page 35: HOW TO SUCCEED IN TIMES OF
Page 36: HOW TO SUCCEED IN TIMES OF

MODEL WITH confidence

Page 37: HOW TO SUCCEED IN TIMES OF

Supported Products• Adjustable Rate Products

• Option ARMs

• Home Equity Lines of Credit

• Support for both first and second Liens

• Support for Prime, Sub Prime, ALT-A

• Construction Mortgages

MODEL WITH confidence

Page 38: HOW TO SUCCEED IN TIMES OF

Key Model Drivers• FICO

• Equity in the House

• Coupon (Refi Incentive)

• Market Loan to Value (Adjusted for HPI changes)

• Product Type, Seasonality, and more

MODEL WITH confidence

Page 39: HOW TO SUCCEED IN TIMES OF

Roll Rate Matrices• Develop cohort curve estimations by delinquency

buckets

• Track historical and current loan status transitions

• Record and track Charge-off information

• Generate loan loss estimations

MODEL WITH confidence

Page 40: HOW TO SUCCEED IN TIMES OF

TAKE CHARGE OF successEvolv Risk—the first and only web-based risk management

platform—delivers the flexibility and computing power of an enterprise analysis solution at an impressive cost savings.