Loan Valuation

It's important to determine why a portfolio valuation is being done and what the results will be used for.  The work can be as simple or comprehensive as needed.  Typically valuations are done for acquisition analysis or mark-to-market pricing.  

A simple portfolio analysis can consist of:

•       Tape cracking
•       Portfolio stratification with attention paid to high risk aspects
•       Cash flow model
•       Loss assumptions
•       Loss mitigation/refinance options

 Comprehensive valuation work can involve some or all of the below:

•      Property value changes since origination based on either Case Shiller, LoanPerformance, or FHFA data
•      Delinquency probabilities based on critical loan elements like LTV, FICO, occupancy, employment trends in the area, delinquency roll rates
•      Foreclosure frequency for like loans
•      Loss severities for like loans in that geographic area

What should be considered in a large acquisition is the use of an experienced eye to spot issues and know when to dig deeper to uncover value or performance issues.