Posts Tagged ‘shelf model’

December 12. 2012

Altair Customer Intelligence is an industry leader in understanding and interpreting data to drive business decisions. Our proven analytical process can help answer tough customer and prospect questions, identify untapped markets, increase up-sells, and improve your understanding of what motivates your customers to buy.

Altair has prepared a shelf model focused on the refinance of prime loans with a 15 year term.  Using our proprietary multi-sourced mortgage and consumer databases along with summarized credit information the model predicts the likelihood of a homeowner refinancing into a prime loan with a 15 year term.

Using known refinanced homes as the source data for the build, at the third decile Altair’s model provides 260% lift over using traditional selection criteria.  Lenders can use additional mortgage information to supplement their underwriting criteria, such as home value, current loan amount, estimated interest rate and loan date.

Lenders can use this in conjunction with the prime refinance shelf model for 30 year term to build the best campaign possible.

“Homeowners are taking advantage of historically low interest rates.  Rates are so low that more people are finding the option of a 15 year term more appealing.  This product helps marketers put offers in the hands of homeowners who would be most interested,” said Troy Blackman, VP of Sales and Marketing at Altair Customer Intelligence.

Altair Customer Intelligence
Headquartered in Franklin, Tennessee, Altair Customer Intelligence is an industry leader specializing in data management, analytics and reporting to allow businesses to make informed decisions faster and with greater insight.  Our unique data compilation process, cutting-edge reporting solutions and strong analytical aptitude provides business leaders the tools they need to make their companies more profitable. For more than 10 years, Fortune 1000 companies have partnered with Altair to maximize their performance.

If you are like many of Altair’s customers then you are using statistical models as part of your strategy – to improve response, to reduce churn, and maximize profit.  Even off-the-shelf statistical models can give you the edge that manual selections can’t provide.

But perhaps you can do even better. Building a custom model can provide much more lift than a shelf model – but only if you have the data and the resources needed.  Custom models can perform much better because they are tailored to your specific offering, customers, and geography.  Performance lift for recent upgrade from shelf to custom seen below.

Comparing Shelf Model and Custom Model Performance

The biggest hurdle to building a custom response model is having enough data.  You need to have mail files and enough responders to both build and test the model. We find that about 2,000 responders is the minimum needed to build a strong model.  The data used for building the model should not be biased, so if you are already using a model as part of your list selections then you may need to mail to some randomly selected records in order to build an unbiased sample.

The cost of building a custom marketing model does not have to be prohibitive.  At Altair we can either charge an upfront fee for the model or we can build the cost into the per-record data charges if you are buying data from us.   The lead time to build a model can also be quite short.  Altair does all of our model development in-house, so once we have your data we typically turn around our custom model projects within 2 weeks.

We will be happy to talk with you about your modeling needs to find the right solution for you – whether it is one of our off-the-shelf models or developing a new custom model. One of Altair’s analysts can help you get the best results possible for you marketing dollars.

With Wells Fargo and Bank of America pulling out of the reverse mortgage business there is opportunity for smaller players to gain market share. This gain can help in two ways. First, the Reverse Mortgage/HECM market is likely to consolidate further. If you have a great marketing engine for market share gain, this could pay off. Second, is the natural growth of your existing business or the extension of your business into a new product line.

Even though overall endorsements are down, many of the remaining lenders are seeing increased business as they compete for the customers no longer being picked up by the former market leaders. Two things are happening: lenders who formerly only marketed to current clients or affinity prospects are growing their business by moving into the pure prospecting realm, as well as new lenders entering the fray. In either case, to hit the ground running, prospecting is now an even more important component for Reverse Mortgage lenders.

In order to help take advantage of this opportunity, Altair has updated its reverse mortgage model that helps target households likely to respond to an offer for a reverse mortgage. This model was rebuilt using homeowners that opened up new reverse mortgage accounts between January and August of 2011 in order to reflect the most current market conditions. At our standard score cut, the model can more than double the response rate for offers mailed. For more information about this, and other mortgage models from Altair, please contact:

The Wall Street Journal’s September 30^th headline screamed “Fixed Mortgage Rates Hit Record Low”. The WSJ article (http://online.wsj.com/article/) went on to say:

“Fixed mortgage rates sank to record lows over the past week following the Federal Reserve’s decision to buy longer-term Treasuries, according to Freddie Mac’s weekly survey. The 30-year fixed-rate mortgage averaged 4.01% for the week ended Thursday, down from 4.09% the previous week and 4.32% last year. Rates on 15-year fixed-rate mortgages averaged 3.28%, down from 3.29% last week and 3.75% a year earlier.”

With rates this low, we are recommending to mortgage marketers our newly updated Prime Refinance Model. This is an in the market model that accurately predicts those homeowners who have an above market interest rate and are likely to respond to a rate/term refinance offer. The Prime Refinance Model is a non-FCRA product, so actual credit data is not used. However, there are credit and behavioral indicators in the model that identify customers that will have higher credit scores. Several large mortgage mailers have already tested the newest model release and are having outstanding results.

What ties these three things together? Economics! I was recently at a conference where John Silva the Chief Economist for Wells Fargo spoke. His main goal was to show you that even the slightest discussion of economics when doing planning for your company will go a long way.

Let’s link them up. Sovereign debt is the debt by the government of a sovereign state. The debt crisis is the fear that the debt will not be paid back, which in turn causes the interest rates on that nation’s debt to go up.

Now, mortgage interest rates here in the US have dipped down again. Why would this happen? As the Wall Street Journal tells us, all the investors with money to park somewhere are avoiding the instability in the Eurozone and are coming to the U.S.  The availability of funds is lowering our rates.

Finally, lower rates are creating a surge in applications yet again. This surge is mainly in refinance but purchase lending has gone up as well. In order to effectively lend you need to be targeting who you will lend to when you communicate with your customers and your prospects. These quick changes don’t give you time to build up a custom model for your targeting. You will need to use models that are already in place to ride this wave. You don’t know how long it will last and you can’t take the time to build custom.

What Altair has done successfully for many lenders is use a shelf model while gathering the data to either tweak the shelf model to perform optimally for your product or build custom. You won’t lose out on the burst in potential lending while you prepare for a sustained marketing effort.