Every Credit Union establishes certain assumptions based on their loan policy and risk tolerance. Most credit unions don’t check to see if their actual revenue matches the original revenue expected for loans in their portfolio. While the credit union may be able to say that they are ‘profitable’ at a high level they are not able to drill into specific parts of the portfolio or specific loans to see if their loan policy is performing as expected.
The CFS Loan Projection model evaluates collateralized loans by assessing three primary components:
- The monthly revenue that each loan was expected to generate based on the original.
- The actual revenue generated since the loan funded.
- The projected future payment based upon the payment history and behavior.
The above information is combined to create a real time view of the loan revenue in comparison to its origination. This can be aggregated up to different levels like the portfolio, collateral type, risk rating, loan officer, etc.