Mortgage Performance Accelerator
Parson Consulting
Overview
The Parson Financial Services Accelerator allows mortgage lenders to create an income and balance sheet that incorporates major mortgage inputs including:
- Yield curve and interest rate fluctuations for Prime, LIBOR, Fed Funds, and other rates.
- Product life and attribute assumptions such as defaults, losses, prepayments, aging, and cures.
- Loan lifecycle assumptions and decisions such as loan origination volumes, spreads, and repurchases.
- Securitization inputs including points and fees, premiums, and costs associated with gains on sales.
- Servicing assumptions such as revenue and retention.
The Accelerator enables the lender to make changes to a business driver and understand its impact on the business. Executives don’t have to understand all the intricacies and calculations behind the results. They only need to know which driver to adjust, and the model does the rest.
As a result, lenders can make timely decisions on what actions to take: such as increase or reduce headcount, emphasize or pull back from a particular product offering, or adjust underwriting standards. They can then model the impact of these actions on their financial statements.
The result: instead of simply reacting to changes, lenders can plan for them head of time and take advantage of market opportunities to drive further shareholder value.
Benefits
- Ability to re-forecast based on a change in interest rates. This allows lenders to understand the business impact if rates increase or decrease across the board.
- Updating of yield curve and interest rate assumptions in the model.
- Based on a change in rates, all other assumptions, such as default and loss for affected products, are updated. Portfolio calculations also change as a result of assumption changes.
Features
- Portfolio Details is the calculation engine that brings together assumptions – such as product life and attributes, originations, yield curve, and rates – to drive the financial model.
- Based on interest rate changes, key line items in the Portfolio Details worksheet are updated such as interest income, expense, and Net Interest Income (NII).
- Changes in Portfolio Details also cascade further through the model. For example, it updates Gain on Sale items such as executed premium, points and fees, and cap cost.
- Changes flow through to the Income Statement and Balance Sheet: the key destination for calculations. They show how a change in interest rate (or other business scenarios) will affect the profitability of the lending business.
- The solution includes pre-configured planning models that are purpose-built for the mortgage industry, as well as a robust data warehouse, reporting and analytics solutions, and web-based portal interfaces.
Architecture
The Accelerator solution leverages performance management products from Cognos. It is built using IBM Cognos 8 Business Intelligence and Enterprise Planning.
Availability
For more details, contact Parson Consulting, 1 Technology Drive Suite I-821, Irvine, CA 92618. Ph: 949-609-0123. Fax: 949-609-0128.You can also find information on our website: www.parsonconsultingna.com
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