Predictive Risk Analytics Can Save Lenders in Troubling Times.

New York -- In light of increasing defaults and foreclosures, a new Deloitte & Touche USA LLP report recommends mortgage lenders pay special attention to collection operations based on predictive risk analytics technology strategies "which would enable them to manage the current economic situation and prepare for the troubling times that lie ahead."

The Deloitte capital markets group report analyzed current default and risk in the subprime market on "how adopting a risk-based collections operation can increase efficiency and drive profits" and states these operations are much more important now than they were just one year ago.

According to Deloitte, the proven tools and techniques studied were designed to help organizations reduce the cost of collections by 30%, reduce collection call volumes by 35%-40% and reduce the number of accounts 30 to 60 days past due by 25%.

The report notes benefits of implementing a risk-based collections operation overweigh costs. It suggests investments needed for a risk-based collections operation only require a 12-month payback period.

The subprime mortgage lending industry is a challenging marketplace that can benefit from more cost-efficient collections operations that use highly accurate risk-assessment tools, lower cost, increase amounts of funds collected, secure better reporting capabilities and overall efficiency that makes a lender more competitive.

As of now, the survey found institutions usually focus on the lending process and how to increase origination volume, rather than monitoring the entire lifecycle of the loan. Only 23% of the surveyed executives think "there is a close, cooperative working relationship between credit and collections at their institutions." And only 36% of the survey participants use predictive analysis in managing collections.

The report states, "The investor's focus has shifted to collections and defaults and institutions that are able to weather the current market situation, and should have appropriate collection operations that maximize their processes, technology and resources beyond their basic capabilities."