Mortgage executives are under immense pressure, particularly in trying to manage the existing customer portfolio. Prepayment risk and impairment risk are now equal threats to a mortgage lender’s business and are resulting in higher than expected losses.

• The Risk of Prepayment Has Increased
  Despite the fact that prepayment, as a percentage of overall gross lending, is lower than it was two years ago, a number of increases in the bank base rate means that the average rate shock for a fixed rate product at rate reset is almost twice as high. This results in a significant rise in remortgaging.
• The Risk of Impairment Has Increased
  Impairment risk, a combination of higher risk of delinquency and default and the decreasing value of the underlying assets in lenders’ existing customer portfolio is a significant concern and is increasing provision requirements for prime and specialist mortgage lenders.
  

If not managed properly, these factors may leave mortgage lenders’ books with higher losses than anticipated. These risks are negatively impacting big banks and building societies. However, the situation is even worse for smaller players where the proportion of fixed costs to total volume is greater.

Unlike point solutions such as customer-to-offer matching tools and direct marketing decision tools, the Nomis Customer Portfolio Optimizer™ provides a comprehensive customer portfolio optimization process that incorporates individual customer preferences, product profitability and cost of capital to drive decision-making.

Many executives in the mortgage industry are asking themselves key questions, such as the following:

In order to achieve my income and asset goals:
1. Which customers are at risk for prepayment?
2. Which customers are at risk for impairment?
3. What impact does this have on my portfolio?
4. Should I be proactively contacting my customers?
5. To whom should I reach out and whom should I let reset to SVR?
6. If I reach out, what product and price combination should I offer to whom?
7. What’s the best outreach strategy?

Most mortgage executives do not have access to the information they need or the capabilities required to accurately answer these questions and profitably manage through this extremely difficult time.

Nomis Solutions’ Customer Portfolio Optimizer™ (CPO) for Mortgages is a business solution that enables mortgage P&L owners in banks and building societies to more profitably and efficiently manage impairment risk, prepayment risk, and cross-sell opportunities in their existing customer portfolio. The Customer Portfolio Optimizer offers a more tailored approach to managing the business through a better understanding of your customers. It helps to:

• develop actionable customer segments and identify the optimal contact strategy.
• tailor offers for each customer segment, including product features and optimal rates and fees, and
• create the most effective outreach strategy in order to achieve business objectives and performance goals.
  Unlike point solutions such as customer-to-offer matching tools and direct marketing decision tools, CPO provides a comprehensive customer portfolio optimization process that incorporates individual customer preferences, product profitability and cost of capital to drive decision-making.

Some of the largest Building Societies in the UK are realizing benefits from the CPO solution, including:

• Financial Results: generating 5 – 10 basis points of incremental income for assets at risk,
• Customer Insight: leveraging actionable customer insights to drive business strategy and improve performance, and
• Process Improvements: fortifying customer management by using a more structured, efficient and compliant process.

To learn more, read the press release Skipton Building Society Enhances Mortgage Portfolio Performance with
Nomis Solutions’ Customer Portfolio Optimizer.

Contact us to learn how we can help your Mortgages business achieve similar results.