Loan portfolio analysis gets better and better. That is fact and it is computer driven. Smarter software enables much better loan portfolio analysis which, in turn, should yield a keener understanding of credit risks and portfolio concentration issues.
And yet there remain persistent problems and bottlenecks that combine to produce lesser results than we might wish in portfolio analysis. A step towards eradicating these issues is to fully understand them. In knowledge there is the power to streamline the analytical process in ways that produce better results for the credit union.
A root issue that produces bad results: Bad data. A lot of what went wrong in the mortgage meltdown of the prior decade is just that loans were issued on the basis of bad data—facts that just weren’t facts. You can’t issue a loan intelligently without knowing the real facts. That mess is behind us but bad data is a perennial. The corrective step is to do a lot of validation and verification. That’s becoming standard operating procedure at many, many institutions and it is a good step in a right direction.continue reading »