Behavioral Performance Modeling

Effectively modeling your performance and reducing the risk of unforeseen performance exposures requires a deep understanding of the underlying behavior and value information. MountainView provides you with a detailed and sophisticated analysis based on the historical experience of your portfolio to enable you to more precisely model your expected performance.

Loan Prepayment Model Calibration

In order to provide you with a more consistent assessment of expected future cash flows for your consumer and commercial loans, MountainView offers a loan prepayment model assessment service. Our service includes the calibration of modeled prepayment speeds using the empirical evidence of your portfolio’s prepayment performance. We will assess your actual prepayment speeds relative to the projections based on a custom-tuned model expected performance and your actual portfolio’s performance.

MountainView’s custom tuning recommendations will minimize model projection error across major product types with particular attention to loans that are both significantly in the money and out of the money from a potential refinance perspective. We will then utilize the resulting calibration of the prepayment model to assess the current position of value/return as well as the value across various rate environments (parallel shocks). We will assess your resulting risk profile for reasonableness against industry benchmarks. As part of our services, we will provide you with the tuning settings of the model calibration and any necessary assistance in implementing these settings.

The results of our analysis will be an asset profile that aligns with your actual portfolio experience and simultaneously achieves a resulting risk profile that is reasonable relative to industry standards. Our report will include a summary of the results of (i) our assessment of your historical actual speeds by major portfolio stratifications and significant prepayment drivers; (ii) calibration tests on the prepayment model to align projected CPRs with actual CPRs; and (iii) asset risk analysis, which is designed to verify impact on fair value levels and/or returns and risk measures.

Credit Model Calibration

MountainView can assist you with your compliance with FASB’s current expected credit loss (CECL) standard released last year. While the new standard will be phased in over the next few years, we can help you implement a new CECL model which must incorporate historical information, current conditions and reasonable forecasts to estimate expected losses over the life of your loan. In order for you to transition to the CECL required model, you will need to comply with significantly greater data requirements and fairly substantial changes to the current expected loss methodologies that you presently use.

As part of this service, MountainView delivers to you a streamlined report that provides core deposit liquidity information plus income and equity at risk IRR core deposit term and value inputs. Our report presents accurate and defensible information on core deposit balances supplied behaviors and repricing, plus average lives, durations and premiums across multiple rate shock scenarios.

We will direct you through an efficient CECL model implementation centered on the following four key considerations:

Methodology

We will help you evaluate and establish the model methodology you should employ in calculating expected losses. CECL does not mandate a specific methodology and your methodology will be designed to produce sound and defensible results.

Data Requirements

Industry experts are expecting that you will be required to use historical, transactional, loan-level data for a period of five years or more. MountainView will perform a gap assessment between the level and depth of internal and external data that will be needed, and your existing, readily available data. If the currently available data is insufficient, we will help you assess whether to build, buy or rent the required data.

Policies and Procedures

MountainView will review your existing policies and procedures and help you draft or update them to reflect CECL’s impact on your operations.

Documentation

Given the longer forecast horizon, it is likely that that every assumption used for your loss estimates will be questioned by your auditors and regulators. As such, MountainView’s services emphasize that proper documentation be created during implementation.

Loan Prepayment Analytics


Loan Prepayment Forecasting Analytics

MountainView can provide you with precise model-ready prepayment and pay-down forecasts. We quantify these forecasts by using a simultaneous system of statistical equations that produce accurate behavior estimates by category across rate scenarios and among categories. Our standard deliverables include an easy to use executive summary, detailed forecast data tables, model ready prepayment and pay-down forecasts, and complete documentation.

Loan Prepayment Tracking Analytics

We have developed proprietary residential loan prepayment tracking analytics, which include loan-level historical data with respect to your portfolio's loan prepayments, including curtailments. Using these analytics, we can provide you with a customized report based upon any attribute that can be identified within your portfolio, such as pre- and post MIP changes, production channels, unique product codes and branch numbers.