Technology Firm Employs Behavioral Modeling.(Special Report)

Scottsdale, AZ-Multifunctional tools that help determine the net present value of a distressed mortgage portfolio are highly attractive in a market where liquidity is scarce.

The recent wave of redefaults has shown the "one-size-fits-all" approach to loan modifications often fails to both maximize cash flow and remain manageable for the borrower.

The challenge for technology providers is to minimize default and maximize returns from buy/sell transactions and portfolio servicing.

New methods, such as a solution introduced by optimization technology provider Response Analytics here, "use behavioral, servicing and other data to customize a loan modification, and aggregates that with similar data from thousands of other loans in the portfolio, providing a more accurate valuation based on expected cash flow over a hold-to-maturity period." It allows users to value and improve the performance of distressed mortgage portfolios and has the potential to expand its usage into the mortgage-backed securities market, according to Response Analytics CEO Brent Lippman.

The company said the solution will help end two of the key uncertainties standing between investors and distressed mortgage portfolios, "forecasting value based on expected cash flow, and reworking the loans so that they can once again perform, rather than allowing them to go into default." Furthermore, mortgage portfolio defaults involve additional ramifications in the ...