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LoanVantage Quality Control Smart Checklists
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HELLO! I am Lisa Osborne You can find me at
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QC Smart Checklists Every single bank has Pre-Closing and Post-Closing checklists that they set up manually and track outside LoanVantage We are adding smart checklists to bring this into LoanVantage and help automate it Ability to set up Checklists that are business rule driven like pre-requisite documents or task flow Business rules will drive appropriate Checklists based upon data in LoanVantage such as Collateral Type, Loan Type, File Status
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Pre-Closing Checklist
Some things LoanVantage knows about already: Compliance flags, Flood Zone (if have flood interface). There will be system available Checklist items that you can assign. Checklists will be smart – HMDA Worksheet completed shows up because HMDA Applicable = Yes. Same business rules used in Task Flow and Pre-requisite Documents 1, 2. 3 – different levels: File, Facility, and Facility/Collateral, Party? 4 – system checklist items – Compliance flags, interface responses, LoanVantage knows this info and will prepopulate it here 5 – If a system item is assigned and the corresponding action has not been completed in LoanVantage, there will be an X, if no data and no X then not a system checklist item 6 – status – sometimes yes is good, sometimes no is. Standardizes the response so we know if 1) it has been responded to and 2) if it means an exception or not 7) Checklist items are business rule driven – HMDA worksheet complete? Shows up as a question because HMDA Applicable? Was YES. Standard business rule logic
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Transparency Move checklist items out of task flow
Users have become very creative with task flow! Transparency Move checklist items out of task flow Easier to report against checklist items More control over who can complete the checklist item Focus of task flow should be on stages of underwriting, notification and routing activities between teams Checklist should be on visibility for things that need to be checked In an attempt to track items, users have become very creative with task flow. Checklists are more appropriate and then we can print out results for transparency If Checklist item is assigned to “Pre-Closing” team, only someone who has that team assigned can update the answer
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Checklists Across the Loan Continuum
Checklists will be available for all file types Officer Loan Reviews WAMS Criticized Asset
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LOAN REVIEW PRODUCT
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FOCUS & COMPETITORS Focus is on adequacy of bank underwriting policies and the effectiveness of bank’s portfolio risk management processes Target = reviews done by bank Internal Loan Review Department Competitors Madison DiCom External Consultants Ability to drill down for additional information.
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Separate Product Will loan review product will be sold independently of LoanVantage If you already have LoanVantage, it will work seamlessly
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FIREWALL Firewall between Loan Review Product and LoanVantage
LoanVantage users do not have access the new loan review data but the new loan review users have access to LoanVantage data Copy spread for independent review Calculate independent review DSCR Calculate independent review Covenants Independent covenant measurements Discuss necessity for independent DSCR and Covenant measurements. Are both required? What happens if Loan Review and line do not agree?
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Loan Review Functions Portfolio Sampling
Ability to generate smart context-sensitive checklists Ability to track exceptions Reports for each relationship/loan reviewed Executive summary for each sample Portfolio level reporting – across samples
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SAMPLING GUIDANCE Loans over a predetermined size
Examiners are pushing relationships over a certain size SAMPLING GUIDANCE Loans over a predetermined size A sufficient sample of small loans Past due, nonaccrual, renewed and restructured Loans previously adversely classified Insider loans Random Sample by Call Code Participations Reviews conducted by loan review should cover all loans that are significant and other loans that meet certain criteria.
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SAMPLING Parameter driven sampling
Track reviews against annual goals SAMPLING Parameter driven sampling Goal is to review X% of loans at least once per year – example: 60% of outstanding portfolio balance LoanVantage will track across samples to measure progress towards completion of overall annual goal Internal audit board decides what % of portfolio should be reviewed - Chief Lender/Credit will also provide guidance on the areas to focus on Loan Review then defines samples to hit those targets using a query builder to define scope parameters
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Today, at most banks without a system, this is a laborious, time consuming process to define the sampling and get the correct loans
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Charts!
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Defining Sample Parameters
Think “Sample” Query Builder
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Exposure and Run Scenario
Think “Sample” Query Builder Exposure and Run Scenario Filter sample by Relationship exposure or Loan Amount Set the sample to run once, on demand, monthly or quarterly Relationship is becoming more and more important. Examiners are pressing banks to look at relationship exposure , not just loan amount. Sample where relationship has 1 Loan Amount > $6,000,000 will not catch a relationship that has six $1MM loans. Although exposure is the same. The Run Scenario is important because as loans become delinquent or relationships now fall into sample because they have increased in size they will be added to the sample. The loan reviewer will have the option to include or exclude these new loans.
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Filtering Sample Samples can be tweaked slightly
Transparency Filtering Sample Samples can be tweaked slightly Ability to add relationships/loans manually Ability to “remove” up to 10% of loans in sample with reason given for each Excluded loans remain documented in sample so loans not reviewed will be documented in sample notes Is 10% reasonable limit?
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Tweak loans in sample Specific Teams Individual Analyst
Define Loan Review Scope Relationships over a predefined amount Past Due/Classified Call Code Random Sample Insider Loans Participations Define Scope Parameters Risk Rating Officer Call Code Accrual Status Delinquency Relationship/Loan List Tweak loans in sample Assign Reviews Specific Teams Individual Analyst
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SAMPLE SUMMARY Think “Sample” Work Queues
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RELATIONSHIP SUMMARY Think “Sample” Work Queues
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Manual Sample A sample can also be created manually by importing list of loans from other source Is importing a list required?
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LOAN REVIEW FILE AUTOMATION
For each relationship represented in the sample we will create a Loan Review file Not same type of review as existing Loan Review which is normally done periodically by officers and/or credit departments
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LOAN REVIEW ACTIVITIES
Perform financial and collateral analysis Monitor adherence to required documents reporting requirements Monitor covenant requirements Complete loan review checklist customized based upon loan type and collateral Determine correct risk rating & compare against initial or current risk rating You still need to do most of the things already being done in LoanVantage. Financial and collateral analysis. Covenant testing. Tracking items. Anything else?
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Business rules will drive Checklists included in Loan Review process
REVIEW CHECKLIST Ability to set up checklists that are business rule driven like pre-requisite documents Business rules will drive appropriate checklists based upon data in LoanVantage Collateral Type Loan Type
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REVIEW CHECKLIST Loan review will fill in each checklist item. Checklists can be combined – questions for all loans vs collateral/loan type specific questions. Status and Completed by are system completed and user cannot set them. Ability to remove or insert a question? Or what if I need to attach a few sentences to a questions, where is that going?
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REPORT FOR EACH REVIEW FILE
Each loan and collateral in sample will be fully documented REPORT FOR EACH REVIEW FILE Loan Review Summary Presentation Report Consolidated Review Checklist with responses Pulled from LoanVantage Financial Reporting Items Documentation of Covenant Exceptions Documentation of Review Policy Exceptions Word Narrative (if applicable) LoanVantage will do as much of the heavy lifting as possible in the Loan Review Summary Presentation Report You input the data into LoanVantage we will pull it out and create the summary report In most cases, summary report may be sufficient for that loan. But have option to expound in a Word narrative if applicable
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Relationship Review Coverpage
LoanVantage will do as much of the heavy lifting as possible in the Loan Review Summary Presentation Report You input the data into LoanVantage we will pull it out and create the summary report In most cases, summary report may be sufficient for that loan. But have option to expound in a Word narrative if applicable
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REVIEW EXECUTIVE SUMMARY
Each sample will have an Executive Summary REVIEW EXECUTIVE SUMMARY Sample details: Name, Date, Asset Quality Date 4 Major Areas of Analysis Summary Risk Rating Accuracy Score on Adherence to Credit Policy Score on Adherence to Underwriting Standards Sample vs Portfolio Quality Trend Analysis Statistical Analysis: Portfolio % Reviewed, # and $ for each major area of analysis
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SAMPLE EXECUTIVE SUMMARY
Again, LoanVantage will do as much of the heavy lifting as possible in the Sample Executive Summary Report You input the data into LoanVantage for each loan and LoanVantage will pull it together and tabulate the results Word Narrative available for exposition.
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SCORING TARGETS Again, LoanVantage will do as much of the heavy lifting as possible in the Sample Executive Summary Report You input the data into LoanVantage for each loan and LoanVantage will pull it together and tabulate the results Word Narrative available for exposition.
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Each area will have Summary info
SAMPLE SUMMARIES Summary and stratification of risk rating change recommendations Summary of Review Policy Exception Items Summary of Review Covenant Items Summary of Review Admin Items Again, LoanVantage will do as much of the heavy lifting as possible in the Sample Executive Summary Report You input the data into LoanVantage for each loan and LoanVantage will pull it together and tabulate the results Word Narrative available for exposition.
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RISK RATING RECOMMENDATIONS
These are recommended risk ratings. Assume discussion occurs and decision is made to take action on most if not all. Risk Rating change tracking will be discussed in a little bit. In a separate chart this could be broken down even further by loan type (i.e. C&I, CRE, Consumer).
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SUMMARY POLICY EXCEPTIONS
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SUMMARY ADMIN EXCEPTIONS
You would also want to drill this down one step further and see officer, loan number, call code, risk rating etc. Information presented needs to be executive level, management level, and loan file level and able to be presented in all levels.
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Sample Loan List Loan List with relevant results
Easy to see which loans have risk rating change recommendations Easy to see which loans have outstanding review items
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Sample Loan List
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Sample Loan List Can see at a glance which loans have RR change requests & status. Double downgrades are shown. Each loan exception category status shown with count.
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RISK RATING CHANGE REQUESTS
Flag RR change violations RISK RATING CHANGE REQUESTS Track Risk Rating Change Requests Generate Change Request Maintenance Requests in bulk Verify Risk Rating change was completed on core Validate risk rating change made on core was what was requested Track requests that have not been completed
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Review Recommended Risk Rating Change Work Queue
Change 6 to 5
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RR CHANGE SUMMARY BY OFFICER
By Officer, Region, Market
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REVIEW PORTFOLIO REPORTING
Slice by: Officer, Analyst, Call Code, Risk Rating, Loan Amount, NAICS, Loans done in last year, Region, Branch, Market REVIEW PORTFOLIO REPORTING Additional reports to show totals across all samples for: # exceptions, exceptions added/removed each month/quarter/year, $ amount of loans with exceptions, % of sample, % of Total Portfolio assigned to Officer Risk Rating Migration Reports
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THANKS! Any questions?
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