Interthinx Analysis of Retail Lending Portfolio Performance Reveals Future Losses Can Be Predicted

— Study of financial crisis uncovers improved approach to forecasting and stress testing portfolios —

AGOURA HILLS, Calif.--(BUSINESS WIRE)--Interthinx, a leading provider of comprehensive risk mitigation solutions for the financial services industry, announced the availability of its new industry paper entitled “Understanding the Financial Crisis through Decomposition of Retail Lending Portfolio Performance.” The study, produced by the Interthinx Predictive Analytics group, notes that an improved approach to forecasting and stress testing portfolios against separate origination strategies and economic factors will help lenders determine what percentage of risk is within their control and what is not. The use of time-series decomposition when analyzing retail lending portfolio performance can predict how much future loss will come from the quality of underwriting, age of loans, and economic environmental impacts.

“Our findings reveal the importance of distinguishing between origination quality and exogenous environment trends, of measuring loan quality directly rather than using proxies such as traditional estimates of creditworthiness, and of accounting for maturation lag when evaluating origination strategies.”

Shane De Zilwa, PhD, director of analytics for Interthinx, explains, “Understanding the development and progression of the financial crisis through the lens of time-series decomposition of retail lending portfolio performance is crucial to implementing effective regulatory requirements and management practices that may help prevent similar occurrences in the future.” He further noted, “Our findings reveal the importance of distinguishing between origination quality and exogenous environment trends, of measuring loan quality directly rather than using proxies such as traditional estimates of creditworthiness, and of accounting for maturation lag when evaluating origination strategies.”

“More accurate forecasting models that benchmark performance against industry data and stress test under different economic scenarios will help guard against future financial crises,” stated Michael Smith, chief technology officer and chief architect at Interthinx. He continued, “Our study quantifies short-term and long-term factors that contributed to the last consumer credit crisis in the U.S. As the nation embarks on a slow recovery, it’s important to understand the development and progression of the crisis so that we may take the necessary steps to avert similar disruptions in consumer lending in the future. We believe our study supports new and positive business practices for effective consumer lending portfolio management.”

The Interthinx industry paper “Understanding the Financial Crisis through Decomposition of Retail Lending Portfolio Performance” is available for download at http://www.strategicanalytics.com/pdf/12_PA_IndustryDataPaper_082312.PDF. For more information on Predictive Analytics, visit www.interthinx.com/PredictiveAnalytics.

About Interthinx

Interthinx, a Verisk Analytics (Nasdaq:VRSK) subsidiary, is a leading national provider of comprehensive risk mitigation solutions focusing on mortgage fraud, collateral risk and valuation, regulatory compliance, forensic loan audit services, loss mitigation, and loss forecasting. With more than 20 years of experience in customizable risk evaluation technology, Interthinx offers proven and effective predictive analytics to the residential mortgage industry through its experience with millions of loan applications and fraud incident data from thousands of monthly loan reviews. Throughout the mortgage life cycle, the Interthinx suite of services can increase the value of client portfolios with its comprehensive and holistic approach to loan quality and compliance. Winner of multiple awards for technology, Interthinx helps clients reduce risk, increase operational efficiencies, satisfy regulator demands, manage data verification, remain compliant,and mitigate loan buybacks. The Interthinx quarterly Mortgage Fraud Risk Report is a standard for the financial services industry. For more information, visit www.interthinx.com or call 1-800-333-4510.