New Tool Screens Consumer Debt Portfolio Risk

Financial Crossing Inc. has launched Liability Health Check, a new tool that offers customized financial risk advice based on sophisticated analyzes of mortgage and liability data.

Since adjustable-rate loans became so popular in the 1990s, there still is an information gap related to ARMs. "Clients felt that financial institutions and advisors could help with assets in a very comprehensive way, but when it came to liabilities, nothing was there, they were just telling you the rates," Adrian Nazari, president and CEO of Financial Crossing, told MSN.

Financial Crossing was built to bring some efficiency in matching clients with debt products, credit products that meet their financial goals similarly to the assistance they receive in the asset building area. As products started proliferating, new layers of long-term risk have been added to an increasingly complicated mortgage marketplace, so LHC was created to help consumers understand their mortgage, home equity and other debts, ARM rate changes, or debt workout options that fit their specific situation and risk level.

It identifies areas that can be improved, new options to be implemented and most importantly a consultative, multiple option solution customized to client's specific needs. LHC also aims to improve the quality of loan transactions and "proactively help" ARM and option ARM customers improve their debt structure before interest rate resets and/or negative amortization.

It provides three layers of analytics of liability information, the executive said, including risk profile and risk adversity potential, intelligence on product data that allows for an apples-to-apples comparison, and debt consolidation options that are generated from up to 5,000 possible case scenarios before it determines for what a customer qualifies.

"We do not give you just a loan, we give you a plan -- like a financial plan," he said, based on customer suitability relative to risk, benefit, potential payment changes and so on.

LHC allows lender users an analytical view of liabilities, including mortgages, credit card debt and other consumer loans and, most importantly, "determines if there is a risk in suitability of the loans or an opportunity for improvement," the company said, and then provides "actionable advice" on how to reduce monthly debt payments by rearranging and reallocating debt and ensuring the client has the most competitive loan products.

"In today's increasingly challenging credit and mortgage environment, clients need objective advice on their mortgages and liabilities. With the Liability Health Check, financial institutions and professionals now have an effective tool with which to communicate the associated risks and benefits of an individual's debt situation," Mr. Nazari said. "In addition, the Liability Health Check enables our customers to further strengthen their client relationships. Clients can feel confident knowing that they have the most appropriate portfolio of loan products available and that their portfolio is continuously being monitored by their financial advisor."

LHC is integrated with Liability Manager, Financial Crossing's flagship product. Financial Crossing's goal, Mr. Nazari said, is to provide objective institutional quality analytics that generate individual solutions while looking at the bigger picture. These tools are provided to lenders as a software installed behind the user's firewall and managed by the supplier.

The end product results from analyzing data from lender users and the marketplace at large. As lenders change their data, he said, such as interest rates and guidelines, "it is all changed in our system so they input current information, a few seconds later they get the response, present it to their client, or their can e-mail it to their client." This way the client chooses the option that best fits them, while the lender stores all client-related information in their database.

The product is very effective with clients interested in loan modifications or refinancing options, yet it serves well especially borrowers who are either going through foreclosure or are high default risk. Judging from the steady increase in foreclosure rates nationwide, these clients represent a sizeable market demand throughout 2008.

"It is the current subprime market meltdown that highlighted the need for these types of tools. The argument is that customers, whether they are ARM holders or subprime loan holders, when they were making their loan choices, if better matching or selection was done at that point, a lot would have been saved."

"Users like the new tool for its rigorous data analysis capabilities and that it is behind the scenes," he said. "Customers do not see it, they just provide the information, they push a button and few seconds later you got this wealth of information coming to you after crunching million of files."

Lender users may use the tool through their website, branches or call centers. The company provides the software as a service to lenders so they can install it behind their firewall, he said, or receive the benefits while FCI provides third-party data management services, which includes both direct lender data and information from the market at large. FCI updates lender-customer information in cooperation with the lender to ensure data accuracy at any point in time.

Most importantly, customers are presented with several loan choices. It serves well both those interested in homeownership now and those who are struggling to survive foreclosure risk.

Joe Atab, CEO and president of 1st City Bancorp, a market-test user of LHC, noted in a company release he appreciates the new tool for the "simple and powerful approach to helping consumers on their debt portfolio," as much as its timing, since it allows lenders and borrowers not only to build consumer confidence and loyalty but "to quickly identify relative risk and opportunities for new loans and refinancing options."

Financial Crossing sells LHC as a point-of-sale solution to lenders and offers it free to customers in need of a financial health check.

"It tells you what the risks are, what the opportunities are and also shows you whether to take the option now or not." Imagine traffic lights, Mr. Nazari said, for instance, "yellow shows where you stand with your debt, mortgages, and chances you have with the overall credit, while red shows that borrower is in trouble." Customers who wonder about where they stand with their debt portfolio and risk level can find out if they have the right types of products, even if it's a matter of improving loan rates or other types of interventions. If all lights are green, the customer and the lender can get peace of mind. When one's mortgage health check shows "red" LHC helps improve the situation.

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