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"We view this system as allowing us to shape our corporate image as a leader in leveraging technology.”

        - Carl Kim, Senior Enterprise Risk Analyst

Impac Mortgage Holdings, Inc. is a mortgage real estate investment trust (REIT) that acquires, originates, sells, and securitizes various mortgages. With $22 billion in assets covering 323 metropolitan areas in all fifty states, it is among the largest companies active in non-conforming residential mortgage loans in the United States. Impac offers a broad spectrum of lending programs for the non-conforming borrower. For its business partners, the company has established strong relationships based on superior customer service, and maintains its leadership in developing the products, tools and technology clients and consumers demand.

The Problem - FICO Scoring Falls Short in Risk Management

Risk management in the mortgage industry has traditionally been driven by the FICO score, which is a credit score developed by Fair Isaac & Co. Credit scoring determines the likelihood that credit users will pay their bills by using scoring models and mathematical tables to predict future credit performance. Credit scores analyze an individual’s borrowing history by considering factors such as late payments, the amount of time credit has been established, as well as collections, bankruptcies, charge-offs, etc. However, the FICO falls short in factoring location-specific variables such as housing appreciation projections, unemployment, household income and mortgage origination volume into risk models. Impac identified this shortcoming and conceived a decision support system, the Impac Market Analysis Platform (iMAP), that would model and present key risk indexes in multiple dimensions - including geographic location. This was no simple task as the system would have to import data from other Impac systems and external financial data sources. Massive amounts of economic data would need to be integrated in a core data modeling solution. Carl Kim, the Senior Enterprise Risk Analyst who was tasked to lead the project, recognized immediately that iMAP could not be developed within an Excel framework. “If we attempted it in Excel, there would be mistakes and nobody would know about them. It would have required unacceptable labor overheads for maintaining formulas. Also, we were not confident that it would meet our standards for data integrity and transparency”, said Kim. “Furthermore, we needed to link multiple dimensions such as metropolitan area that are critical to our business.”

The Solution - IMAP Risk Modeling Powered by Quantrix

Kim evaluated options and selected Quantrix Modeler as the core data modeling engine of the new iMAP system. Creating iMAP was a collaborative effort by the Risk Management and Business Intelligence teams. They built iMAP in one quarter – an unprecedented accomplishment considering the scope of integration and amount of data to be processed. The Risk Management department provides the data files constructed with Quantrix to the Business Intelligence group for publication in the company website. Impac benefited from Quantrix’s data integration toolkit, DataLink, to readily integrate their numerous data sources. iMAP provides executive management, mortgage brokers, underwriters, the quality control team and lenders with a comprehensive analysis of state and metro markets. iMAP collates and analyzes a variety of delinquency and macro-economic data that contributes to loan-market performance, including the House Price Index, Median Home Price Index, unemployment rate, household income, quarterly mortgage origination data and housing price appreciation. Impac's risk index then summarizes the information for a chosen state or metro area and assigns it a grade point average based on its overall market potential. Users simply enter a zip code and are presented with comprehensive credit risk analysis for each particular mortgage.

The Result - A Leader in Risk Management Technology

The Quantrix-based iMAP solution has had immediate impact on the business. In Excel, Kim would have had to maintain 2,500 formulas linking just the metropolitan areas – in Quantrix, he now maintains just one. Kim performs quarterly updates to the tables – a task that requires about 2 days. In Excel, he estimates this would take at least two and a half weeks – a yearly savings of $60,000. Beyond opportunity costs, Kim can focus on work that adds value to his company, rather than spending time tediously maintaining formula links. Quantrix also allows Impac to do rapid prototyping which is critical to their business. Prior to Quantrix, prototyping would take a month of Kim’s fulltime effort. With Quantrix, he can accomplish this in an hour. This frees him up to work on other high priority projects and issues. Beyond hours, accuracy of the data was a huge factor. Kim could not guarantee accuracy using Excel. Their system and data is published externally to their clients. So their reputation is on the line with clients. The Quantrix solution gives IMPAC the high level of data integrity and transparency they demand.

Impac has big plans for iMAP, including further automation of the prototyping process – a task ideally accomplished within Quantrix. They are also actively marketing their technology infrastructure to clients and have presented at numerous conferences. “Our business is very competitive,” commented Kim. “In addition to providing improved data modeling accuracy and transparency for internal and external customers, we view this system as allowing us to shape our corporate image as a leader in leveraging technology.”

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