Beware of these 6 data gaps in your lending

by: David Gilbert

Managing a loan portfolio is no easy task. To properly manage any loan portfolio in today’s economy, you need your data to be solid. Over the years, having worked with thousands of different data sets, we see the same issues occur over and over again. Here are 6 of the most common problems we see with guidance on how to avoid these headaches yourself.

1. Not recording original collateral value

Many times when initiating a loan the loan officer fails to store the appraised value, or AVM, in the database. This is a common issue we see with many financial companies, which in turn affects their ability to get thorough analysis for loan portfolio analysis. Having the original value helps calculate migrations, values, probability of default and delinquency, and in calculating portfolio ratios. To fix this, make sure you have an original value field available to your loan officers in your L.O.S. and database. If you already have this field available, make sure you educate your lending staff to ensure this field does not get left blank.

2. Failing to require senior lien balances for second position loans

Raise your hand if it is a policy at your institution to always capture the balance, term, and rate of all senior liens at the application level of a second position loan. My guess is many of you put your hands down half way through the sentence. This is a complex problem that the industry at large is always trying to solve. Pulling this data from title liens or credit bureau are different methods to capture this value after the loan is made, however these methods are not always accurate. A better approach can easily be made by adjusting your processes on your front lines. Make sure you make senior lien information a requirement when your loan officers are taking any type of secondary loan application. Doing this will save you time, money, and make your analytics more accurate.

continue reading »