Docstoc

315WED-PrivateLoanRehab

Document Sample
315WED-PrivateLoanRehab Powered By Docstoc
					Private Loan Rehabilitation
         Programs
   Doug St. Peters – Sallie Mae
 Tom Glanfield – Boston Portfolio
             Advisors
 Larry Chiavaro – First Associates
       Loan Servicing, LLC
       Private Loans Overview
• Total Student loan indebtedness made
  headlines this year as it approached $1
  trillion
• Source of funds for college
    – Awards – financial gov. support –
      scholarships
    – Savings
    – Parents/relatives
    – Loans
      • Government
2     • Private      Navigating the Sea of Change
                  2012 NCHER Knowledge Symposium
    How a typical family pays for
              college          Student income &
                                 savings, 12%
                                                                  Student Borrowing, 18%


            Relatives/friends, 4%




                                                                                  Parent Borrowing, 9%




     Grants & scholarships,
              29%




                                                                  Parent Income & Savings,
                                                                             28%




3                                        Navigating the Sea of Change
                                      2012 NCHER Knowledge Symposium
    Private student – new loans
• Growth has slowed:                        +2% last year (SLM)

• SLM New products – SMART Option
    – Pay while in school
       •   Shorten loan term
       •   Save interest
       •   Increase student connectivity
       •   Borrower can choose and choices result in interest
           options


• Interest rate - Fixed rate private loans in
  market, competitive      against non-
4 subsidized government rates
                          Navigating the Sea of Change
                       2012 NCHER Knowledge Symposium
              Private student loans
                   underwriting
• Underwriting guidelines increase quality
  focus
• Co-borrowers
      • 64% of portfolio (+3% vs. prior year)
      • 94% of SMART Option

• Loan/School mix changing
    – Less for profit schools loans down -2% of the
      mix last year


5                           Navigating the Sea of Change
                         2012 NCHER Knowledge Symposium
        Private loan - defaults
• Protected form bankruptcy
• Characteristics require different work
  effort/strategy
    – Average balances are increasing
    – More co-borrowers 37% vs. 34% py
    – Pre-default more aggressive worked
      • Settlement, repayment programs, less use of
        forbearance, pre-default     pre-litigation talk
        offs

6                     Navigating the Sea of Change
                   2012 NCHER Knowledge Symposium
             Private Loans
     Default profile Top 5 Reasons
•   Overextended      44%
•   Unemployed        29%
•   Under employed    10%
•   Medical        7%
•   Unaware           4%



7               Navigating the Sea of Change
             2012 NCHER Knowledge Symposium
              Private Loans
              Default Profile
•   46% withdrew from School
•   40% graduated
•   59% have a FICO score under 600
•   9% never used forbearance vs. 21% PY
•   54% made between 25-60 months of
    payments



8                 Navigating the Sea of Change
               2012 NCHER Knowledge Symposium
              Private loans
            Default collections
• Volume - monthly defaults are
  dropping - under $100MM in
  September
• Larger balances = less settlements
• More co-borrowers
    – Work both borrowers
    – More skip work
    – Co-borrower release programs
9                   Navigating the Sea of Change
                 2012 NCHER Knowledge Symposium
                  Private loans
                Default collections
• More collection programs
     – Settlement campaign
     – Reduced interest pay
        • 0% interest
        • Report to Credit Bureau – paying as agreed
     – Litigation (pre-default and post default)
     – Segmentation of inventory
        • Contingency fee rate impact
        • Competition
        • Contests
• Collection agency – Collect it fast, Collect it
10
  right                 Navigating the Sea of Change
                     2012 NCHER Knowledge Symposium
         Private loans future
• Demand
• College costs more
• Government not raising loan limits
• Direct loans adds to national debt
• Competitive interest rate vs. other
  government backed loans
• Flexible – ability to provide GAP financing
  as well as other supporting products
11                Navigating the Sea of Change
               2012 NCHER Knowledge Symposium
      A Successful Rehabilitation
                Story
•    The Problem
•    Analysis and Approach
•    Servicing
•    Overall Solution




12                 Navigating the Sea of Change
                2012 NCHER Knowledge Symposium
     The Problem is Multifaceted
1. No Payments – Following the economic crisis,
    many private student loan borrowers stopped
    paying loans altogether or reduced the monthly
    payments.
2. Loan Share of wallet – Average person has about
    15 monthly payments to make (car, housing,
    insurance, etc). Student loans have dropped from
    about 9th in priority of the 15 to almost dead last.
3. Increased transiency – Moved home, to other
    states, etc., becoming harder to track.
4. Servicing operations were not prepared for the
    volume of delinquencies and defaults. Many
    similarities to the mortgage business.
                       drops the Sea of Changestudents left the
                        Navigating – Some
5. Increasing % of2012 NCHER Knowledge Symposium
 13
     Boston Portfolio Analyzed the
              Situation
     Numerous pieces to the problem were
     analyzed and then modeled into a
     comprehensive contact and settlement
     strategy:
      ØHistorical payment performance

      ØEconomic conditions and credit migration

      ØPortfolio segmentation by numerous categories

      ØServicing effectiveness vs. cost of service

      ØEstimate rehab success levels

14
     Based on the above, BPA selected the optimal
                         Navigating the Sea of Change
                      2012 NCHER Knowledge Symposium
     pool that addressed the issues. First
     First Associates Servicing




15             Navigating the Sea of Change
            2012 NCHER Knowledge Symposium
Rehabilitation Results Prior to BPA Strategy
               Implementation

                                                •Sporadic
                                                 Payments


                                                •Inconsistent
                                                 Cash Flow


                                                •Lower
                                                 Overall Loan
                                                 Value


16               Navigating the Sea of Change
              2012 NCHER Knowledge Symposium
Successful Rehabilitation Program Results

                                               •Payment
                                                Continuity


                                               •Increased
                                                Overall Cash
                                                flow


                                               •Higher Loan
                                                Values



17              Navigating the Sea of Change
             2012 NCHER Knowledge Symposium
     Overall Solution and Results
Result: Loan owners have a portfolio of paying borrowers
with strong cash flows and long term value.

Boston Portfolio and First Associates teamed for a highly successful
outcome:

     ØExcellent monthly cash flow

     ØLong term value for sale

     ØHigh borrower satisfaction levels

     ØCost effective

     ØNow expanding the program
18                         Navigating the Sea of Change
                        2012 NCHER Knowledge Symposium
Co- Signers- Loan Rehabilitation


 Number of
 Loans



                                                                             ACH
                                                                             Settlements




                                                                             Other
                                                                             Rehabilitated
                                                                             Loans


             Sep-11   Oct-11    Nov-11   Dec-11   Jan-12   Feb-12   Mar-12




  19                              Navigating the Sea of Change
                               2012 NCHER Knowledge Symposium
 Activities for “Rehabbed” Loans
                                    Send out “Welcome
                               • Analyze portfolio to
                                    Letter” package
                                    determine fields to co-
                                    captured at
                                    borrowers
                               • origination or
                                    Text message
                                    servicing to co-
                                    campaigns
                                    borrowers using
                               • Skip Traceand
                                    credit bureau data
                                    borrowers
                                    Voice alerts to defaults,
                               • Review cohort co-
                                    borrowers and
                                    % of co’s, cell #’s,
                                    school info, emails
                                    borrowers
20                             • Explanation of
              Navigating the Sea of Develop campaign
                                    Change
           2012 NCHER Knowledge Symposium
  Technologies to Reduce Student Loan Defaults
                                                                                     Delinquent
                    Grace                        Current                                                                    Default
                                                                                    (1-180 days)

Physical   •   Congratulations     •   Statements                        •   Statements                        •   Statements
Mail       •   Reminders                                                 •   Collection Letters with ACH       •   Collection Letters with
                                                                             promo                                 ACH promo
                                                                         •   Outreach Letters                  •   Outreach Letters
                                                                         •   Demand Letters                    •   Demand Letters
Email      •   Reminders           •   Statements                        •   Reminders                         •   Reminders
           •   Educational                                               •   Educational Materials             •   Educational Materials
               materials
Phone      •   Alerts and                                                •   Voice Alerts                      •   Voice Alerts
               Reminders                                                 •   Outbound IVR                      •   Outbound IVR
                                                                         •   Predictive Dialing                •   Predictive Dialing
                                                                         •   Preview Calls                     •   Preview Calls

Text       •   Alerts and                                                •   Texting campaigns                 •   Texting campaigns
               Reminders

Door                                                                     •   “Knock n Talk”                    •   “Knock n Talk”
Knocks                                                                   •   Field Investigation               •   Field Investigation

Legal                                                                                                          •   As requested
Action
Skip       •   At boarding         •   At boarding                       •   At boarding                       •   At boarding
Tracing    •   Active monitoring   •   Active monitoring                 •   Active monitoring                 •   Active monitoring
                                                                         •   Individual Trace                  •   Individual Trace
                                                                         •   Social Media Trace                •   Social Media Trace


Ongoing                            •   Cloud Monitoring for utilities,   •   Cloud Monitoring for utilities,   •   Cloud Monitoring for utilities,
                                       purchases, income, credit             purchases, income, credit             purchases, income, credit
                                       changes                               changes                               changes
                                             Navigating the Sea of Change
                                          2012 NCHER Knowledge Symposium
Reducing Defaults and Increasing Recoveries
            for Student Loans


       Enhanced Portfolio
  Performance Program (“EP3”)


            Developed and Managed by
           Boston Portfolio Advisors
          Program has Two Main Components
    Program
    Management                                 Gain Model



•    Allocate placements among        •   Leverage data from various
     multiple agencies to create a        sources
     competitive champion/            •   Score borrowers, prioritize and
     challenger program                   calculate NPV
•    Manage all placements, close     •   Forecast probability and
     and returns, status updates          amount of repayment
•    Analyze agency performance       •   Match accounts to agencies
     and direct new placements to         that perform best in a particular
     top performers                       segment
•    Provide agencies with specific   •   Focus on the right accounts
     settlement levels and                with the right tactics in
     operating tactics at the             collection cycle
     borrower level

23
                         Gain Model Linkages
       Sources of Data                                Tactical
Originato   • Demographics                           Execution
r/ School   • Field of study                  Focu   • Borrower
            • % Completion/ GPA               s        Prioritization
Servicer    • Payment history                        • High Value
            • Contact history                          Segments
Agency      • Payment history                 Effort • Frequency of Calls/
                                              Level    letters
            • Type/ number of calls   Gain           • Call type
            • Settlement strategy
              and results             Model          • Contact rate
                                                     • Settlement
Borrower    • Credit data                              parameters
            • Income/ Employment                     • Texting/ social media
Loan        • Balance size                             utilization
            • Vintage
                                              Loan • Liquidation curves
School      • Public/ Private                 Value • NPV of account
Profile     • Proprietary


  24
                                  Data Flows
                                                   Collectio
Data Collection
                                   Servicers           n        School
From multiple sources
                                                   Agencies

______________________
__                                         GAIN MODEL
Gain Model analysis
and scoring                           Historical               Borrowe
Creates Segmentation and             Performanc                 r Info
Prioritization of borrowers for       e/ Tactics
targeted contact strategy                              Loan
based on predictive analytics                          Info




                                                                         Feedback Loop
______________________
__
Program Management                              PROGRAM
Servicing and collection                       MANAGEMENT
tactics driven at borrower
level based on Priority Score

______________________                             Collectio
__                                 Servicers           n        School
Results monitored,                                 Agencies
scoring model updated
25
Account level tactics revised
for optimal results and
                Servicing Phase Impact
Segmenting and Prioritizing borrowers from origination
through all repayment phases leads to lower cumulative
defaults     (sample results illustrated below)




26
         Default Phase Collection Tactics Increase
                       Recoveries
Segmenting and Prioritizing borrowers for more effective
collection strategies leads to higher recoveries in
Collections (actual results below)




27
               Reallocate Effort based on Scoring and
                            Prioritization
•    Traditional Industry Approach (Gray bars) used credit bureau recovery score
     to target borrowers
•    Gain Model Approach uses enhanced Segmentation and Prioritization to
     rank order each borrower based on probability of payment (Green is highest,
     Red is lowest)
•    Improvement using Gain Model Approach can range upwards of 30%-50%
     higher




28
     Sample Collection Results Comparison




29
     Sample Collection Results Comparison




30
                Gain Model Results: Number of Future Payers
                             Cumulative Gain
Advanced Analytics Model with additional attributes identifies 82% of all future payers vs. 57% for
the existing attributes (y-axis) when selecting top 20% of borrowers identified by model (x-axis)
Previous Results: Using
Limited Segmentation                                  Improved Results: Analytics
Attributes                                            Using Additional Attributes
      Segmentation and Prioritization Improves
                   Profitability
     High Response Segment: Comparison of results with and
     without Segmentation and Prioritization




32
      Segmentation and Prioritization Improves
                   Profitability
     Low Response Segment: Comparison of results with and
     without Segmentation and Prioritization




33
       Sample Gain Model Effort and Performance
                      Results
Collection Agency effort and performance is tracked by
BPA Priority Score to ensure Gain Model tactics are
consistent with BPA recommendations (color coded results at bottom)




  34
     Champion/ Challenger Performance Heat Map




35
            Improvement In Servicing and Collection
                           Phases
Improvements are Realized in Both Phases of Loan
Lifecycle
Pre-Default Servicing Phase
•    Segmentation and Prioritization of loans focuses on accounts with
     higher probabilities of payment
•    Special call and letter campaigns targeted at specific borrowers
•    Selective forbearance or modification options implemented

Post-Default Collection Phase
•    Segmentation and Prioritization of loans focuses on accounts with
     higher probabilities of payment
•    Specialized tactics are implemented within each segment to ensure
     greatest performance
•    Improved call strategies to increase contact rates and payments
•    Settlement offers customized to each borrower based on probability
     of payment, contact rates, close rates, and various student attributes
36
           Gain Model information can be harnessed for other
                               purposes

                                  Information Uses


                                                              Private Loan                   Student
                        Admissions                                                           Success
                                                              Collections
                          • Probability of                    Management                     Monitoring
                            graduation                                                       • Tactical solutions
                                                               • Maximize value of cash
                          • Probability of payment                                             to improve
Finance                                                          receivables
                          • Co-borrower                                                        persistence rates
• Cash flow and funding                                        • Loss mitigation tactics
                            alternatives                                                     • Student payment
  requirement projections                                      • Optimize settlement
                                                                 offers                        behavior
• NPV valuations by loan
                                              Federal Loan     • Identification of optimal   • Performance by
  and student
                                           Cohort Management for sale
                                                                 loans                         Segment
                                           • Minimize losses                                 • Probability of
                                                                                               graduation
                                           • Forecast default rates
                                             for potential action
                                             steps




    37

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:10
posted:10/23/2013
language:Latin
pages:37
yan tingting yan tingting
About