Calculating Risk in Your Mortgage Portfolio


acquisitionMortgage portfolios, by their nature, bring risks and opportunities. Risks include everything from risk of default and prepayment to collateral risk, geographic risk, concentration risk, and more. While the loan origination and underwriting process does its part to identify and account for risk at the origination stage, it doesn’t necessarily address future risks. (Source: Even the most qualified borrowers with spotless credit histories can become risky. For example, a previously creditworthy borrower may receive a windfall and prepay the loan or get laid off and fall behind on mortgage payments. In either case, the lender takes a financial hit.
In order to calculate risk in a mortgage portfolio, you’ll need to look at historical trends, real-time data, geographic data, market data, and other sources of information with a critical, analytical eye and then create forecasts based on the insights you glean from this harvested data.
Fortunately, it’s no longer necessary to pour over stacks of computer printouts and byte after byte of spreadsheet data. Portfolio management software can find the data you need and present it in a visual manner, allowing you to quickly identify and calculate risk in your mortgage portfolio.
Loan portfolio management software can help you to:

  • Identify risks related to prepayments, defaults, delinquencies, losses, and cash flows
  • Forecast the probability of default
  • Forecast the probability of prepayment
  • Forecast the probability of loss given default
  • Identify changes in mortgage status

In addition to calculating loan risks, loan portfolio management software helps to identify opportunities. For example, you can use loan portfolio management software to identify borrowers who could benefit from refinancing.
Loan portfolio management software features vary depending on the vendor. One desirable feature for portfolio managers involves data visualization. Being able to see actionable information in a visual format makes it easier to understand than viewing row after row of incomprehensible data. Loan management software delivers the insight you need to calculate and manage risk in a loan portfolio.


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