Method for mortgage and closed end loan portfolio management
First Claim
1. A process for analyzing a loan portfolio using a computer program, wherein the loan portfolio comprises a plurality of loan units, the process including the steps of:
- separating the loan portfolio into a plurality of loan groups in a manner such that a date of origination of each of the loan units included in a loan group are all within a first time interval;
assigning a date of origination to each of the loan groups;
selecting an analysis time interval;
selecting a plurality of analysis points in time within the analysis time interval;
counting a bad rate of the loan units in each loan group at each analysis point in time, the bad rates being determined by counting the loan units in each loan group on which payments are in arrears, at the particular analysis point in time, for a time period greater than a second time interval;
determining an age of each of the loan groups at each of the analysis points in time, the age being measured from the date or origination of the loan group to the analysis point in time;
averaging the counted bad rates for each of the loan groups that are the same age; and
providing a comparison of the averaged bad rates for a plurality of different ages on a visually perceivable output medium, to allow comparing the bad rates of the different loan groups.
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Abstract
A method for mortgage and closed end loan portfolio management in the form of an analytic tool designed to improve analysis of past and future performance of loan portfolios. In accordance with one aspect thereof, the invention aggregates loan units into loan vintages, wherein the loans in each vintage originate within a predetermined time interval of one another. The invention compares different vintages to one another in a manner such that the ages of the loans in the different vintages are comparable to one another. An early warning component of the system predicts delinquency rates expected for a portfolio of loans during a forward looking time window. A matrix link component of the invention combines the loan vintage analysis with the early warning component of the invention and predicts the default rate of the loan portfolios at a selected future point in time. The results of the analysis are graphically depicted and/or automatically fedback to provide “yes” or “no” decisions regarding investments in various loan portfolios.
207 Citations
32 Claims
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1. A process for analyzing a loan portfolio using a computer program, wherein the loan portfolio comprises a plurality of loan units, the process including the steps of:
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separating the loan portfolio into a plurality of loan groups in a manner such that a date of origination of each of the loan units included in a loan group are all within a first time interval;
assigning a date of origination to each of the loan groups;
selecting an analysis time interval;
selecting a plurality of analysis points in time within the analysis time interval;
counting a bad rate of the loan units in each loan group at each analysis point in time, the bad rates being determined by counting the loan units in each loan group on which payments are in arrears, at the particular analysis point in time, for a time period greater than a second time interval;
determining an age of each of the loan groups at each of the analysis points in time, the age being measured from the date or origination of the loan group to the analysis point in time;
averaging the counted bad rates for each of the loan groups that are the same age; and
providing a comparison of the averaged bad rates for a plurality of different ages on a visually perceivable output medium, to allow comparing the bad rates of the different loan groups. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32)
allowing an operator to set the durations of one or more of the first, second and analysis time intervals;
deploying a general purpose computer for enabling the computer to automatically provide “
yes”
or “
no”
comparisons as to whether a given financial institution should choose to invest in a particularly identified loan group.
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9. The process of claim 1, including:
developing a projection of bad rates for a plurality of said loan groups by calculating probabilistic bad rates for said plurality of loan groups during a forward looking window extending over a third time interval, the projected bad rates comprising an early warning system whose results are depictable on the output medium.
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10. The process of claim 9, in which the step of calculating the probabilistic bad rates for said loan groups is carried out by using a logistic regression formula.
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11. The process of claim 10, in which the logistic regression formula is
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12. The process of claim 11, wherein the value C0 is assigned a value of one if the loan is current at the beginning of the analysis time interval and zero otherwise, the variable D1 equals one if the loan is one month past due at the beginning of analysis time interval and is zero otherwise, D2 is assigned a value of one if the loan is two months past due at the beginning of the analysis time interval and zero otherwise, and NO SCORE equals one if the loan has no credit score available at the beginning of the analysis time interval and zero otherwise.
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13. The process of claim 10, wherein the third time interval is of the same duration as the analysis time interval.
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14. The process of claim 1, wherein the loan units are closed loan units.
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15. The process of claim 14, wherein the loans are mortgage loans.
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16. The process of claim 1, including separating all loan units into different groups based on type and thereafter carrying out said separation of said loan portfolios into separate loan groups based on each type of loan.
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17. The process of claim 16, wherein the types include conventional loans, jumbo loans and government originated loans.
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18. The process of claim 9, including separating all loan units into different sets based on type and thereafter carrying out said separation of said loan portfolio into separate loan group based on each type of loan.
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19. The process of claim 18, wherein the types include conventional loans, jumbo loans and government originated loans.
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20. The process of claim 1, in which the output medium is a graphical chart.
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21. The process of claim 9, wherein the output medium is a graphical chart.
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22. The process of claim 20, which includes creating the graphical chart by plotting a difference between the bad rates calculated for a preselected pair of loan groups and including on the graphical chart an area of uncertainty.
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23. The process of claim 22, wherein the area of uncertainty is selected as a +1 and −
- 1 standard deviation of the difference in the bad rates for the preselected pair of loan groups.
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24. The process of claim 21, including plotting on the graphical chart the probabilistic bad rates in the form of a first curve.
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25. The process of claim 9, including developing a matrix link by calculating a bad rate of a preselected loan group as of a definite time within the fourth time interval.
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26. The process of claim 25, including developing delinquency transition figures for selected ones of said loan groups.
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27. The process of claim 26, including developing the delinquency transition figures by counting the numbers of loans which have transitioned from (a) good to bad state;
- (b) bad to good state; and
(c) a status as a loan.
- (b) bad to good state; and
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28. The process of claim 27, further including counting the number of loans which have remained in a bad state and counting loans which have remained in a good state.
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29. The process of claim 25, including calculating for at least one of the loan groups matrix link results comprising a ratio of a predicted number of bad loans divided by a predicted number of new loans.
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30. The process of claim 29, including plotting the ratio on the output medium.
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31. The process of claim 9, including automatically providing yes/no decisions whether to invest in selected loan groups using the early warning system.
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32. The process of claim 25, including automatically providing yes/no decisions using the matrix link system.
Specification