Outsourced Analytics Helps Lenders Survive

High default and foreclosure rates are raising demand for more accurate loan data analyses that allow lenders to screen out lower-risk customers as they preserve and even increase loan volume and mitigate loss.

Adventity Inc. CEO Niket Patankar believes his company success in the marketplace so far derives from an integrated approach to lender services.

Helping mortgage lenders originate more loans is just part of what the company does, Mr. Patankar said, the other part is loss mitigation and loan risk analytics.

Current market conditions are pressing lenders to rethink their business strategies in favor of downsizing their business operations, he said, but if they are purely in the mortgage origination business, many lenders have been badly hit by the subprime crisis in the primary and the secondary markets.

"Everybody is affected by that. The trend in the market right now is that of lenders getting out of the marketplace. Large lenders who are going to survive are heavily cutting back on their in house operations. External factors include a home price appreciation that is not in line with what people had seen in the past ... so right now the mortgage market is in a state of loss," Mr. Patankar said.

"In this environment we work with lenders to help them regain their market share at a fraction of the cost, since many have cut back on their head count and core business."

He sees higher lender demand for tools that help maintain or increase loan volume without increasing cost.

On the other side of the market, Adventity assists hedge funds engaged in extensive activity in the mortgage-backed securities market.

"If you look at the value chain, the only institution that really understands the value of the end-line asset is the institution that sold the loan," he said.

"Once you package and resell these loans in the wholesale market a lot of data is lost and the pool level data that is captured is only good for pool analysis. If you start taking it all the way to where it becomes a derivative instrument based on a CDO, the ultimate credit collateral is kind of lost."

Because companies like Adventity serve and understand both sides of the market, their value proposition is highly accurate loan data analysis that translates into screening, selecting, serving and retaining lower-risk customers.

Since its inception two years ago, the company has worked exclusively with mortgage originators. It provides products based on specific lender underwriting criteria.

Adventity loan officers fill out loan applications and sell the mortgage products. Call centers, processing and underwriting are operated on an offshore basis between the U.S. and India. A Houston-based operation center handles the U.S. side of the business. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/