Loan Portfolio Stress Testing

Our teams are able to assist institutions with analysis of their loan portfolio or sub-portfolio stress testing – such as Option Arms, Interest Only, Investor Properties, Home Equity and HELOCs and others.

Loan Portfolio Stress Testing

We isolate known and potential problem areas as well as provide support for high quality portfolios by pointing to the mitigating risk factors.

Our service evaluates portfolios and sub-portfolios on a loan level basis by utilizing a proprietary loan risk model that dissects historical curves (S&P, Moody’s, public securitizations and servicing disclosures) and incorporates up to 65 variables from that loan to add or subtract risk and establish unique curves (pre-payment and default) for each individual loan. The model applies historic and forward looking HPI factors to each loan. Gateway evaluates the risk of servicing and determines +/- risk vs. average servicer. Gateway evaluates underwriting and appraisal quality consistency and adjusts default and/or frequency based on due diligence.

Gateway identifies and isolates higher risk segments buried within the homogeneous population like fraud, specific broker or referral risk, previously deferred or modified loans, geographic and micro address (i.e. one Condo complex) concentrations. Base case outputs (Economic stress scenarios ) will be stressed nationally or by state, zip code, product type, property type, basically any sub population identified as higher risk during due diligence.

Base case results can be stressed to include both economic stress scenarios and interest rate change scenarios. Multiple output scenarios will be provided with detailed output with layered stratifications to illustrate, risk separation, expected frequency of default, severity and lifetime loss on individual layered loan populations.