LPS Applied Analytics
offers OptiMod, a sophisticated analytics tool that provides optimal loan modification recommendations at the loan level that can be processed in bulk.
To do less than the optimal loan modification is to position the borrower for re-default; to do more than the optimal loan modification is to give away value.
LPS determines the optimal loan modification parameters by applying our Credit Model to existing loan characteristics and sampled modification options. The parameters that maximize the Net Present Value of future mortgage cash flows also consistently minimize projected re-default rates.
Optimal Payment Reduction
LPS Applied Analytics research shows that payment reduction is the key ingredient to successful loan modifications. Payment reduction can be achieved in one or a combination of the following:
- Reduce the borrower’s interest rate, at least temporarily
- Extend the term of the mortgage
- Reduce the principal
Borrower sensitivity to these payment-reducing factors varies depending on many loan, borrower and property characteristics along with house price impact. LPS Applied Analytics
’ data and proven analytics show that, frequently, the best modification is a combination of factors – rate reduction, term extension and possible principal forgiveness. Only LPS Applied Analytics
’ OptiMod provides a decisive recommendation based on years of experience modeling default risk for non-agency securities.