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Foreclosure Property Valuation

3AI August 17, 2020

Largest Global Bank

Problem Statement

  • Need to assess value of foreclosed properties
  • Need to decide between DAVM (Distressed Asset Valuation Model) modeling or to go with the internal BPO (Broker Pricing Opinion) prices

Analytics Led Approach

  • Collateral Valuation using DAVM and the haircut values generated on basis of local economic and housing conditions
  • Spread test based on a control group
  • Created a dashboard to track following metrics:
    • Productivity
    • Sensitivity
    • Accuracy

Business Impact

  • 8% increase in overall realization rate using DAVM model as compared to BPO (Broker Pricing Opinion) model
  • Helped optimize price for sales realization

Critical Success Factors

  • Understanding of various methods of collateral valuation
  • Ability to quantify the impact on property valuation

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