“ValueScout’s ability to predict default will enable lenders to not only make better servicing decisions but to make better loans…”
Value Creation Institution, www.valuecreationinstitute.com, announced through its affiliate, Buckley Management Advisors, LLC, that its patent pending system for asset valuation, ValueScout™, was recently tested with actual data and found to be 96 to 98% accurate in prediction of loan default.
The test was conducted to demonstrate the effectiveness of the ValueScout™ modeling technique to predict outcome of residential mortgage loans. Buckley Management Advisors supplied loan servicing data where the outcome is known. Within the data set, 964 loan records were used to define the model while 4338 were used to validate it. Loans were stratified based on location, property type and loan type. Records were then randomly selected within the stratifications so that the sample reflected the entire data set. The model was applied to the reserve data and the results compared to the actual outcome. The results show that ValueScout™ predicted loan repayment outcome with 96 to 98% accuracy.
Historically, the management and evaluation of delinquent and defaulted loans, while important, was not the primary concern of lenders. However, given the current lending environment, a thorough analysis of loan performance has become the priority. Lenders and loan servicers must proactively evaluate portfolios for warning signs of default. “ValueScout’s ability to predict default will enable lenders to not only make better servicing decisions but to make better loans,” says Roger Brown, Senior Director at Buckley Advisors, LLC. “This model greatly reduces the uncertainty in loan underwriting.” ValueScout™ uses a combination of analytical tools to provide the most effective means of predicting loan performance. This patent-pending analytics engine employs regression techniques, Monte Carlo and scenario analysis creating benefits across multiple loan functions.
ValueScout™ allows portfolio purchasers to kick-out loans with high default probability and obtain optimal bid rates while origination teams can make better underwriting decisions. Additional benefits include better information for risk mitigation and clear criteria for determining loan modification decisions. “We provide a unique tool to our clients with precision capabilities not seen in the financial industry today. The tools we have patented and deployed have already proven themselves in the aerospace and medical device industry where accurate reliable predictions for product performance are a mandate for business success,” says Anthony Lemus, Senior Partner at Value Creation Institute LLC.
ABOUT VALUE CREATION INSTITUTE LLC
Value Creation Institute, LLC (VCI) has integrated data analytics, derived from advanced statistics used in applications such as Six Sigma, into a patented prediction tool for economic decisions. VCI models consumer behaviors and the economic influences driving behavior to predict consumer actions. VCI has applied their expertise assisting organizations to understand and predict customer behavior for marketing decisions, risk management, and customer retention. Benefits to the user are increased revenue, reduced costs, and reduced risks. VCI is composed of experienced executives with deep and diverse backgrounds in advanced statistics, marketing, economics, business processes, Six Sigma, engineering, and the physical sciences.