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Lending Analysis Turns Data into Knowledge
Thursday, February 25, 2016 6:20 AM

Lending Analysis Turns Data into Knowledge

When you analyze 21 million loans, valuable information is bound to emerge. Visible Equity, Catalyst Corporate Federal Credit Union Strategic Solutions’ data analytics partner, has been collecting national credit union loan data since 2009: from 21 million loans worth $340 billion, from 20 million borrowers, from 400 credit unions. Visible Equity and Catalyst Strategic Solutions hosted an October 2015 webinar to share some of their findings.

“Analyzing loan data teaches us more about borrowing behavior," said Dr. Taylor Nadauld, chief economist at Visible Equity. "Understanding borrowing behavior enables credit unions to respond to changing conditions, whether favorable or unfavorable, more quickly and confidently.”

Nadauld, along with Porter Jenkins, data scientist at Visible Equity, explained how effective lending analysis can help credit unions anticipate opportunities and potential risk in their loan portfolios. Insights offered by the two include:

  • Borrowers who already have a residential real estate loan are four times more likely to originate an auto loan with the same lender.
  • Residential real estate portfolios have two times as many loan balances attributable to borrowers with credit scores greater than 750 compared to consumer loan portfolios.
  • A credit score decline of greater than 50 points in new auto loans predicts a 50 percent higher likelihood of default compared to a similar decline in real estate credit scores.
  • Variations in credit scores have a 4.5 times larger impact on default than variation in local unemployment rates.
  • Variance in loan pricing doubles as the probability of default doubles.
  • Big data analytics allow lenders to identify the attributes of borrowers that are correlated with the most profitable loan types.
  • A better understanding of trends in the marketplace through peer-to-peer analysis of portfolio composition can be the impetus for an institution to shift gears or identify intriguing opportunities.
  • Understanding the real-time warning signs in a portfolio can support proactive loan servicing and increase recovery rates.
  • Developing a portfolio performance scorecard—finely tuned estimates of expected loan performance as a function of specific loan attributes—can facilitate effective risk management.
  • Big data analytics drives more informed loan pricing and origination decisions.

Handouts and an audio recording of the Lending Analysis Best Practices Webinar are available on the Catalyst Corporate Federal Credit Union web site under Learning Center > Financial Management Training.

Catalyst Corporate Federal Credit Union ( is a wholesale cooperative financial institution serving more than 1,400 member and client credit unions throughout the country. Catalyst Corporate provides its members with core financial services and back-office support, including payment solutions, liquidity, investment options and balance sheet management assistance.