Profitability Case Study: Mortgage Portfolio Operation Leverages JWL to Assess the Ongoing Profitability of its Business

Client’s Challenge

  • A mortgage portfolio lender was interested in upgrading its P&L process by leveraging the Javelin Whole Loan (JWL) Platform.
  • The solution required integration with the existing profitability system used by the firm but tying in the JWL’s suite of analytic models that accurately assess the competing risks of credit and interest rate risk simultaneously across the bank’s varied mortgage products.

Our Solution

  • JWL provided a comprehensive evaluation of the bank’s loan portfolio across all of its product types.
  • JWL has the ability to incorporate returns based on regulatory required estimates of capital for loans as well as comparisons to estimates of riskadjusted return utilizing JWL estimates of economic capital.
  • JWL allows users to import key assumptions and estimates used in calculating mortgage profitability including servicing fees, funding costs,along with JWL’s estimates of credit and option costs associated with prepayment.
  • Along with its robust analytics, JWL has a flexible reporting engine that can produce standard and customizable profitability reports stratified along multiple attribute dimensions.

Outcome

  • The lender deployed JWL into its regular profitability reporting process which has enabled the business to effectively adjust its production toward more high value products than before.
  • Use of JWL’s riskadjusted return measurement capability has improved the lender’s ability to optimize capital allocation across products and channels.