CoreLogic Advisory Services

The Right Team with the Right Tools

A New Approach | Our Consulting Services

End-to-End Expertise—A New Approach to Mortgage-Industry Consulting

CoreLogic Advisory Services offer task-focused consulting solutions that target current challenges in the recovering mortgage marketplace—quickly, intelligently, effectively.

Our tools and talents make us different. Our people uniquely combine securities-trading-desk levels of expertise with comprehensive on-the-ground experience in mortgage origination and servicing. Our tools feature the unmatched authority of CoreLogic^® data and analytics, which can target, with amazing precision, any challenge you face.

Our Advisory Services teams bring true end-to-end expertise to your project. They develop custom insights into the challenges you face, work closely with you to identify the key issues, help formulate ongoing strategies and operations, and implement necessary workflow solutions.

Our Consulting Services

CoreLogic Advisory Services teams help you deal with the often daunting challenges companies now face in transitioning from post-crisis defense strategies to recovery-focused offense. Here are some client challenges we’ve recently addressed:

• Mortgage Servicing Rights Valuation
• ALLL Regulations Compliance
• REO-to-Rental Portfolio Analytics
• Basel III Portfolio Analysis

With each new recovery-focused engagement, we generate a new set of real-world solutions that becomes part of our knowledgebase. When additional challenges then appear, we draw upon that knowledge to refine our approaches and streamline our solutions.

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We Consult—But Differently

CoreLogic Advisory Services consultants have the real-world, on-the-ground experience to recognize and solve problems quickly.

Traditional consultancies often feature business generalists with impressive academic credentials but little on-the-ground experience. To offset any doubts this might engender, they may follow rigorous, multi-step roadmaps in executing their engagements. We approach consulting differently. We have the academic credentials—but we also have broad and deep real-world experience. This experience lets us recognize business patterns early and find an appropriate solution quickly. We concentrate our efforts on realizing this end solution rather than on checking off the boxes of a text-book process.

Our engagements target actual solutions early, leaving time to review our results, assess their implications, and implement workflow enhancements—without losing your competitive advantage.

MSR Valuation

Trading MSRs is a huge and growing industry with potentially extremely thin profit margins. Getting valuations right is critical to MSR profitability.

Buying and selling mortgage servicing rights (MSRs) is a multi-billion dollar industry, with MSRs heavily traded among mortgage servicers. But MSR profit margins may be extremely thin. Incorrect valuation of a single mortgage in a pool can sink all the profits from its MSR deal. Although your company may have an existing valuation process in place, without CoreLogic data and analytics you may not be able to assess the accuracy of an MSR valuation correctly.

Mortgage Servicing Rights Valuation puts the full force of CoreLogic data and analytics at your fingertips. Our team works with you to analyze, model, and evaluate all the mortgages in the pool covered by your proposed MSR agreement—then produces a Portfolio Analysis of Mortgage Servicing Rights Report that includes:

• Collateral Projections
  The result of multiple simulations, data and graphs showing projected collateral CPR (Prepayments), CDR (Defaults), Severities (Loss-Given-Defaults), Cumulative Losses, Cumulative Loss Percentages, and Cumulative 60+ Days Delinquent Percentages
  
• Home Prices & Interest Rates
  Sample model inputs for future home prices (CBSA & state levels) and interest rates showing likely future market influences on a collateral property’s valuation
  
• Model Transitions & Value Distributions
  Ten-year graph showing likely future transitions in collateral loan status (Current, 30 Days DQ, 60 DQ, 90+ DQ, Foreclosure, Short Sale, REO)
  
• Mortgage Servicing Rights Analysis
  Comprehensive analysis of MSR’s valuation includes:

1. Projections of future servicing fee income, ancillary income (late fees, etc.), loan-level servicing cost, PITI advances, advance reimbursement, float paid on advances
2. Projections of future servicing net cashflow, cumulative servicing net cashflow, cashflow net present value (NPV) at multiple discount rates, and net present value divided by unpaid balance (UPB) at multiple discount rates.
3. Servicing cashflow net present value divided by portfolio UPB, servicing multiples

These data can give you a precise sense of the accuracy of an MSR valuation prior to making a bid. With MSR margins as thin as they are, overpaying may be worse than losing a bid.

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Complying with New ALLL Regulations

New Allowance for Loan & Lease Losses (ALLL) regulations include assessment of portfolio lien credit exposures at the loan level.

Banks and other regulated institutions holding residential mortgage loans secured by junior liens are subject to new Allowance for Loan & Lease Losses (ALLL) regulations covering the calculation of expected credit losses. To comply with the new rules, affected institutions must understand not only existing junior liens on properties but any other liens associated with them.

Our Advisory Services team analyzes the lien status of the properties in your portfolio, designs a strategy to guide your ALLL compliance, and deploys CoreLogic data and analytics to evaluate your junior-lien credit exposure. We then deliver a comprehensive report that:

• Examines senior liens on the same properties as junior liens—even when you no longer own/service senior lien (includes senior lien amount verification, credit performance, etc.)
• Determines how collectability may be influenced by CLTV and current property value
• Validates the status and property type of each junior and senior lien

The Advisory team can continue to deliver periodic refreshes and updates to the original report quarterly or semi-annually.

In addition to giving you a template for ongoing ALLL compliance, our results improve your accuracy in calculating the financial impact of compliance and setting appropriate loss reserves.

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REO-to-Rental Portfolio Analytics

Understanding potential returns of an REO-to-Rental portfolio is the key to making the investment in the first place.

One-third of the U.S. population now rents—over 89 million renters in all. With bottomed-out home prices, discounted REO sales, increasing SFR rents, and a current REO inventory of 400,000 to 500,000 properties (plus another 1.6 million in the shadows), investors are increasingly tempted by portfolios of single-family residential rental properties.

Since this new market is awash in variables, however, valuation is a significant challenge. Our REO-to-Rental Portfolio Analytics give you the reliable information you need to assess REO rental opportunities and judge your likely success if you decide to take part. We do this by combining data and analytics from many CoreLogic sources into a single comprehensive view of potential current and future REO-to-rental portfolio returns.

Our REO-to-Rental Analytics:

• Evaluate properties by coupling optimized GeoAVM^® valuations with CoreLogic HPI^® and HPI Forecasts data to determine current prices and where they are projected to be headed
• Project potential rental cash flows by matching targeted REO properties to comparable rental properties in the neighborhood (or Zip code or state)
• Assess the influence of context on an investment using MarketTrends Zip code-level influencer data (total REO count, 90+ delinquencies, negative-equity percentages)

Our Advisory Services team delivers an evaluation of the rental potential of REO properties in the provided portfolio that includes:

• Property valuation analytics
• Two-year Zip code-level home-price forecasts
• Local market statistics (NODs, 90+ delinquencies, REO counts, negative equities)
• Local market rental statistics (average rents, vacancy rates, market saturation)
• Mortgage performance trends per roll-rate analysis
• Property rental analytics with cash flow estimates

In the future, the Advisory team can update this data monthly, quarterly, or annually.

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Basel III Portfolio Analysis

Designed to improve banks’ ability to withstand financial stress, the Basel III reforms require maintenance of proper leverage ratios and capital reserves.

The Basel III guidelines include a heavy focus on residential mortgages and related balance sheet assets, emphasizing capital reserve requirements for specific loan types and mortgage servicing rights valuations.   Our Basel III Portfolio Analysis services provide turnkey analytics to assess your portfolio’s current LTVs, its overall risk, and its current MSR valuation (our MSR model lets you include your own interest rate, market forecast, and delinquency assumptions).

Our Advisory Services team delivers results in four categories that together support a comprehensive strategy for successful adherence to the new guidelines:

• Portfolio valuation and assessment data:

1. Current property valuations as determined by CoreLogic AVMs
2. Current property LTVs for assignment to Category 1 and Category 2 residential mortgage risk categories when they are finalized—and suggested capital reserves compliant with Basel III capital reserve requirements
   

• Portfolio Risk Report summarizing bank portfolio risk by geography, origination date, and additional criteria that support comprehensive risk analysis of the portfolio
  
  
• Mortgage Servicing Rights (MSR) Analysis that includes:

1. Projections of future servicing fee income, ancillary income (late fees, etc.), loan-level servicing costs, PITI advances, advance reimbursements, float paid on advances
2. Projections of future servicing net cashflow, cumulative servicing net cashflow, cashflow net present value (NPV) at multiple discount rates, and NPV divided by unpaid balance (UPB) at multiple discount rates
3. Projected servicing cashflow NPV divided by portfolio UPB and servicing multiples
   

• Custom Compliance Strategy developed by industry-expert Advisory consultants with specific experience valuing mortgages and related assets—including non-standard mortgage vehicles, mortgage servicing rights (MSRs), and portfolio risk assessment

Most banks have established internal methodologies for assessing mortgage risk and valuing MSRs—but bank regulators increasingly request verification from a third-party perspective. The potential costs of a negative regulator compliance assessment can be much greater than investing in a comprehensive “outside” view of your mortgage-related portfolio.

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Custom Solutions

We can help you define your project and realistic metrics to track its progress—before you commit to an engagement.

The Advisory Services approach—targeting post-crisis challenges, teams composed of accomplished experts, assisting from end-to-end, using industry-leading CoreLogic data/ analytics/modeling tools—can adapt easily to your unique challenge, no matter how unprecedented it is. Give us a call or send us an email—we’ll be happy to help you think your project through, determine what you want to do, and decide whether you need outside help to do it:

Scott Sambucci
Vice President
Advisory & Valuation Services
Direct 916-431-2117
Mobile 916-903-3208

Brett Benson
Vice President
Advisory Services
Direct 817-699-4156