Estimate lost income per mortgage condition

[Theherald]

Good morning

I work in Compliance for a mortgage company, and have no real background in statistics. My company closes loans and sells them to other investors. Between the time that we close a loan and an investor buys a loan there are issues with the loans (called conditions) that have to be resolved before investors will buy the loans.

Each day that passes without the investor buying a loan there is a cost (usually substantial) that occurs, calculated as Expected Revenue (minus) Actual Income. This cost represents the loss of income recieved for the loan. We can’t sell the loan until all of the conditions are cleared, so conditions can be tracked based on the number of days they take to clear (see note at the end of email about the relationship between number of days for conditions and loss of income).

For example, let’s say there are 20 loans closed (a Sample) in a month with Conditions A, B, C. Condition A (A) appears on 10 loans for a total of 100 days, an avg of 10 days per loan. In the end I want to find a way to estimate which of the conditions are the most costly, so we can focus training and a portion of bonuses on the performance of the most costly conditions.

I have been trying to calculate several things: 1) find a way to assign an estimated value to each condition even though there may be several conditions per each loan, each lasting a variable number of days before a final condition is satisfied (I’ve attempted applying a weighted metric derived from percentage of loss from total loss of the whole sample but this isn’t quite doing it) 2) if #1 is too complex then just the best way to Estimated Loss per loan by # of days per each condition. Thank you for any assistance you can provide.

A note: while in most cases the # of days that it takes to satisfy all of the conditions, or the final condition, will determine the Loss of Income for each loan, there are circumstances where no investor will buy a loan and we have to sell it at a greatly reduced price that skews our numbers.

I appreciate any direction you can provide.

Best regards

Jim Lyons

 

[staassis]

1. Build a non-linear model where

_ Cost of Loan is the dependent variable,
_ Condition Set, other contractual provisions, other characteristics of the reference entity(ies) and macro-environment are the predictors.

The modeling methods depend on home many loans you have in the data set.

2. Run sensitivity analysis of Cost of Loan on Condition Set using the estimated model. Try two risk management frameworks:

_ 2.1 Changing presence of condition A does not change presence/absence of conditions B and C.
_ 2.2 Changing presence of condition A changes the probability of B and/or C being present, according to the joint distribution implied by the data set.

 

[Theherald]

Thank you. I have no experience with statistics. Could you provide me a very “dumbed-down” version of

_ 2.1 Changing presence of condition A does not change presence/absence of conditions B and C

 

[staassis]

The statement above is equivalent to saying: the decision to include A in a contract is independent of the decisions to include B or C in the contract. There are no relationships among A, B and C in the sense:

- if A is included, B (or C) is redundant,
- A and B (or C) work well / inefficiently together.

In summary, environment 2.1 is idealized. Most likely, environment 2.2 is closer to reality.

 

[Luxorus]

Many countries are experiencing labor shortages during the crisis as foreign workers have returned home because of the pandemic. This affects those borrowers who are renting until their new flat is commissioned. Eliminating the late delivery factor is not easy, but it is possible. Choose properties at the completion stage and buy unfurnished apartments. The main risk for the borrower is the inability to repay the loan. Before deciding on a mortgage, the borrower should adequately assess their capabilities and not commit what they cannot cope with. It is best to consult Mortgage Advice Derby in advance and familiarise yourself with all the risks.

 

[carolnash]

It all depends on the borrower's income, how stable it is, the prospects for maintaining it, and further growth. So it is better to weigh up the pros and cons and then decide. One thing to remember is that it is complicated to save money for a new home on your own. If you have a steady income, it is better to use the services of large and reputable banks. And in doing so, make early payments in large installments to pay off your debt faster. It is better to consult Mortgage Broker Lincoln beforehand on how best to do it. An accelerated mortgage closing scheme will reduce your overpayments and allow you to get your long-awaited home to your complete possession sooner.