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1.Increase recoveries using advanced analytics by prioritizing accounts based on Net Present Value 2.Optimize expenses by matching the right account with the right effort 3.Deepen portfolio penetration cost effectively 4.Rehab programs increase the payer base and portfolio value Today’s Discussion 3 Leveraging Data into Powerful Action Steps There is Plenty of Data Out There — Just Use It
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2015 NCHER KNOWLEDGE SYMPOSIUM
November 4-6, 2015 San Antonio, TX
Using New Technologies to Drive Efficiencies
Moderator: Tom Cox, Harvard Collection Services, Inc.Presenters: Thomas Glanfield, Boston Portfolio Advisors
Jackie Bohline, Veri-Tax
NCHER Knowledge Symposium
Technology Tools Can Optimize Portfolio Performance
Presented by
Boston Portfolio AdvisorsNovember 2015
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1. Increase recoveries using advanced analytics by prioritizing accounts based on Net Present Value
2. Optimize expenses by matching the right account with the right effort
3. Deepen portfolio penetration cost effectively
4. Rehab programs increase the payer base and portfolio value
Today’s DiscussionLeveraging Data into Powerful Action Steps
There is Plenty of Data Out There — Just Use It
Boston Portfolio Advisors, Inc. (“BPA”) has been providing advisory services for over 30 years and prides itself on delivering the highest quality services that address and solve complex client issues. Highlights that can make a difference:
Focus on portfolio performance for optimal value Sophisticated proprietary analytical tools provide balanced,
productive, cost effective guidance Staffed by industry veterans with extensive experience and deep skill
sets and with PhD practioners in Data Mining Superior portfolio management, finance, operations and data/
analytics capabilities re-designed for the post 2008 environment Understand the new paradigms of consumer credit behavior Years of experience improving portfolio values – we have done it
BPA Introduction
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BPA Technology ToolkitTools that Assist in Portfolio Management
Advanced Analytics embedded in the Gain Model scores and segments accounts based on propensity to repay and estimated total collection
Accounts throughout the entire lifecycle are managed and monitored and the database
Champion/Challenger Approach for improved tactical operations Calls and Contact Data continuously enhance results Valuation Model assesses NPV and potential value of each account Account Level Tactical recommendations for contact approach and
frequency Customizing Settlement Offers based on probability of payment vs.
opportunity cost
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Consumer Behavior – 15 Typical Bills Most People Have
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Integrating Data Points Increases Account Value
Modest Increase in Effort Produces Significant Improvement
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Other Data Points That Enhance Results
Data Collection From multiple sources__________________________________________________________________________
Gain Model Analysis and Methodology Creates Prioritization of borrowers for highly targeted contact strategy
Find correlations across entire field of attributes__________________________________________________________________________
Program Management Collection tactics driven at account level based on Priority Score__________________________________________________________________________
Results Monitored, Scoring Model UpdatedAccount level tactics revised for optimal results and actionable information provided to all parties
OtherCollection Agencies Clients
Other
Collection Agencies
Clients
PROGRAM MANAGEMENT
Loan Info
Borrower Info
Historical Performance
/ Tactics
GAIN MODEL
Feedback Loop
Data Flow and Feedback Process
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Advanced Analytics = BPA’s Gain Model
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In School
Graduation Probability
Life CyclePhase In Grace
Default
In Repayment
Recovery Valuation
Continue Repayment or
Default
Key differentiator is combining Borrower, Loan, and Historical Performance data Data to build models comes from over 200,000 loans in the past few years (no old data) Loans represent over 400 educational institutions – 4 years public and private, 2 years public
and private, career schools, and other Results of the models are used with servicers and collection agencies for specific campaigns
and tactics on specific loans Correlations are measured by categories and numerical results
Gain Model includes data and analytics to serve different aspects of the student lifecycle:
Model Employed
Potential Loan Sale
1. Call Reallocation Produces Recovery Lift2. Portfolio Penetration Improves with
Optimization Effort3. Better Data, Better Results4. Improve Revenue and Probability
Performance at the Same Time5. Rehabilitation Efforts Lead to Higher Values6. Loan Sale Valuation are Based on NPV and
Market Prices
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Student Loan Case Studies
Case 1 – Call Reallocation Produces Recovery LiftHistorical Performance - Produces 5.8% Recovery RateSegment 1 2 3 4 5 6 7 8 TotalHistorical Phone Attempts 295,000 417,000 208,000 278,000 431,000 275,000 317,000 104,000 2,325,000Phone Attempts (% of Historical) 100% 100% 100% 100% 100% 100% 100% 100% 100%Contact Rate 3.2% 2.7% 2.8% 2.3% 1.6% 1.5% 2.5% 3.4% 2.4%Close Rate 18.7% 14.6% 9.8% 8.0% 4.9% 2.6% 18.6% 8.3% 8.9%Realization Rate 80.1% 82.2% 76.0% 79.6% 76.4% 82.7% 83.5% 81.2% 79.4%
Historical Collection Amount Per Phone Attempt ($) $5.61 $3.60 $7.17 $4.54 $0.53 $0.56 $2.87 $7.07 $3.41
Historical Collections $1,656,000 $1,499,000 $1,491,000 $1,261,000 $229,000 $153,000 $908,000 $735,000 $7,932,000% of Total Collections 20.9% 18.9% 18.8% 15.9% 2.9% 1.9% 11.4% 9.3% 100.0%
Historical Placements $10,614,000 $15,389,000 $21,645,000 $28,137,000 $16,999,000 $27,860,000 $7,060,000 $9,053,000 $136,757,000Historical Collection Rate 15.6% 9.7% 6.9% 4.5% 1.3% 0.5% 12.9% 8.1% 5.8%
Improvement by Redistributing Phone Attempts - Increases Recovery Rate by 32%Segment 1 2 3 4 5 6 7 8 TotalPhone Attempts - Redistributed 443,000 521,000 364,000 348,000 154,000 101,000 238,000 156,000 2,325,000Phone Attempts (% of Historical) 150% 125% 175% 125% 36% 37% 75% 150% 100%Contact Rate - No Change 2.4%Close Rate - No Change 8.9%Realization Rate - No Change 79.4%
Projected Collection Amount Per Phone Attempt ($) $5.61 $3.60 $7.17 $4.54 $0.53 $0.56 $2.87 $7.07
Projected Collections $2,487,000 $1,873,000 $2,609,000 $1,579,000 $82,000 $56,000 $682,000 $1,103,000 $10,471,000% of Total Collections 23.8% 17.9% 24.9% 15.1% 0.8% 0.5% 6.5% 10.5% 100.0%
Collection Rate With Redistribution of Phone Attempts 23.4% 12.2% 12.1% 5.6% 0.5% 0.2% 9.7% 12.2% 7.7%
Gain ($) $831,000 $374,000 $1,118,000 $318,000 ($147,000) ($97,000) ($226,000) $368,000 $2,539,000Gain (%) 50% 25% 75% 25% -64% -63% -25% 50% 32%
SAME AS HISTORICAL
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Traditional Industry Approach (Gray bars) use credit bureau recovery scores to direct efforts borrowersGain Model Approach uses enhanced data on the account and prior activity to focus on accounts based on probability of success (Green is highest)
Reallocating Collection Calls Optimizes Effort
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1
2
3
4
5
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1 2 3 4 5 6 7 8
Cont
act E
ffort
Inde
x
Segment
Historical AttemptsNew Attempts - High PriorityNew Attempts - Medium PriorityNew Attempts - Low/No Priority
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Case 2 – Optimizing Improves Portfolio Penetration
High Effectiveness - Focus on highest return accounts
High Opportunity - Different tactics and frequency implemented to focus also on B and C Priorities to enhance results
Decile Priority
% of Total
Balance
% of Total
Recoveries
Recovery
Rate
Lift Factor
Priority % of Total
Recovery
Rate
1 5.4% 55.2% 53.63% 917%
2 A 8.9% 20.0% 11.82% 124% A 75.2% 27.63%
3 10.1% 7.2% 3.77% -29%
4 10.1% 4.5% 2.36% -55%
5 B 10.1% 3.5% 1.81% -66% B 15.2% 2.65%
6 10.6% 3.3% 1.64% -69%
7 10.7% 1.8% 0.88% -83%
8 C 11.1% 1.3% 0.63% -88% C 6.4% 1.04%
9 11.0% 2.3% 1.11% -79%
10 D 12.0% 0.9% 0.40% -92% D 3.2% 0.74%
TOTAL TOTAL 100.0% 100.0% 5.28% TOTAL 100.0% 5.28%
High Opportunity - Incremental lift can be achieved
with B and C accounts
High Effectiveness – 75% of Recoveries from only 14% of
balances
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Traditional Thinking in 2015 can be Misleading
Case 3 – Better Data, Better Results
Prior: Using Limited Attributes
Enhanced Results: Using Additional Attributes
Gain Model identifies 82% of future payers vs. 57% using enhanced attributes when selecting top 20% of borrowers
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Recovery Model – Sample of Numeric Variables
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Recovery Model – Sample of Categorical Variables
DecileCalls
AttemptedContacts
MadeContact Expense
Payment Rate # Payers Revenue Profit/Loss Decile
Calls Attempted
Contacts Made
Contact Expense
Payment Rate # Payers Revenue Profit/Loss GAIN $ GAIN %
1 100,000 3,381 $10,735 23.26% 786 $196,584 $185,849 1 160,000 5,410 $22,314 23.26% 1,258 $314,534 $292,220 $106,371 57.2%2 100,000 3,230 $10,255 9.73% 314 $78,586 $68,331 2 160,000 5,168 $21,318 9.73% 503 $125,738 $104,419 $36,089 52.8%3 100,000 2,787 $8,849 3.50% 97 $24,364 $15,515 3 130,000 3,623 $12,229 3.50% 127 $31,674 $19,445 $3,930 25.3%4 100,000 2,678 $8,504 2.02% 54 $13,517 $5,014 4 130,000 3,482 $11,751 2.02% 70 $17,573 $5,821 $808 16.1%5 100,000 2,549 $8,094 1.71% 44 $10,899 $2,804 5 130,000 3,314 $11,186 1.71% 57 $14,168 $2,983 $178 6.4%6 100,000 2,327 $7,387 1.12% 26 $6,519 ($868) 6 70,000 1,629 $4,071 1.12% 18 $4,563 $492 $1,360 156.6%7 100,000 1,587 $5,039 0.86% 14 $3,422 ($1,617) 7 70,000 1,111 $2,778 0.86% 10 $2,396 ($382) $1,235 76.4%8 100,000 1,518 $4,819 0.53% 8 $2,003 ($2,816) 8 70,000 1,062 $2,656 0.53% 6 $1,402 ($1,254) $1,562 55.5%9 100,000 1,288 $4,088 0.95% 12 $3,064 ($1,024) 9 40,000 515 $1,030 0.95% 5 $1,226 $196 $1,219 119.1%10 100,000 1,016 $3,227 0.51% 5 $1,294 ($1,934) 10 40,000 407 $813 0.51% 2 $517 ($296) $1,638 84.7%
Total 1,000,000 22,362 $70,998 1,361 $340,252 $269,254 55 1,000,000 25,721 $90,147 2,055 $513,791 $423,644 $154,389 57.3%
Results With TargetingResults Without Targeting
Case 4 - Improve Revenue and Profitability Performance
Comparison of Results with and without Gain Model Prioritization
Modest Increase in Expense
Sizable Increase in Results
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Case 5 - Rehabilitation Efforts Lead to Higher Values
Current accounts beginning a streak
Broken streak in Nov 2014, began new streak Dec 2014
Current
30 Days Delinquent
Measures consistency and amount of payments Identifies accounts needing remediationFocuses on rehabilitation process
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Rehabilitation Continuity equals Higher Values
RehabilitationSuccess
Settlement Success
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Case 6 - Loan Valuation and Sale BPA typically recommends keeping the High Value Loans as expected cash
flows are significantly higher than the expected sale price. Sale Pool Loans fall within the range where the expected sale price is higher
than the expected future cash flows Low Value Loans are typically non-performing and would realize the lowest
sale price. Recommendation many times is to hold these loans until they are re-performing so that they can achieve a higher sales price
NPV
Expected Cash Flow Sale Price
Sale Pool Loans
High-Value Loans
Low-Value Loans
Electronic Income Documentation Retrieval
November 5, 2014
Topics for Today
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I. Income Based Repayment
II. Collection of Income Documentation
III. Tax Transcript Retrieval with Veri-Tax
IV. Metrics of Success
Department of Education Repayment Program
As of July 1, 2014, the Department of Education requires income documentation to qualify a borrower for an
Income Based Repayment Plan
Income Based Repayment Criteria
Adjusted Gross Income Filing Status
Taxable Income Poverty Guideline
Family Size Discretionary Income
Collection of income documentation
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Option A
Borrower Experience• Manually intensive • Uncomfortable sharing sensitive
information• Frustration!
Collection Agency Experience• Ask and ask and ask and ask…• Wait and hope• Frustration!
Collection of income documentation
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Option B
Borrower Experience• Convenient• Confident• Secure• Happy!
Collection Agency Experience• Streamlined• Controlled• Authentic• Happy!
Collection of income documentation
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Tax Return Transcript
Adjusted Gross Income, Taxable Income, Family Size, Filing Status, and Discretionary Income are listed on a 1040 Tax Return Transcript
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Tax Transcript Retrieval Process with Veri-Tax
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Creates Order E-signs 4506-T
Receives Results
Sends Results to
Agency
IRS
Sends 4506-T to IRS
Account Management / Customer Happiness Support
Agency Borrower
Receives Results
Veri-Tax Web Portal
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Agent performs 3 Steps to Create a Transcript Order:
1. Enter borrower’s information
2. Select the product type, year(s) requested, and transcript type
3. Confirm the request and submit the order
4506-T E-Signature Ceremony
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4506-T E-Signature Ceremony
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The prefilled 4506-T opens for review and e-signature.
After successfully e-signing, Veri-Tax electronically receives the 4506-T with audit log and sends the order to the IRS.
How to Access the Tax Transcripts
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Veri-Tax provides results through three options of delivery
Web Portal Web Services SFTP Delivery
Veri-Tax Ordering Tracking and Management System
Tax Transcript Results – 1040 or Wage & Income
The 1040 Tax Return Transcript is a summary of the filed 1040 tax return
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The Wage & Income Transcript is a summary of the filed W2s, 1099s, 1098s
What do I do with the tax transcript?
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Tax Return Transcript Summary Coversheet
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In addition to the requested tax transcripts, Veri-Tax will include a summary coversheet that highlights key line items for income analysis and IBR calculation ease
The 15% Income Based Repayment calculation is on the summary sheet for easy analysis
How do we measure success?
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Veri-Sight Performance Report
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Metrics DescriptionNumber of Years: Track order volume trend broken down by number of years
Form Type: Monitor order volume trend broken down by number of form type
Top Ten: Track user volume trends so you can plan for future capacity
Turnaround Time:Monitor order turnaround time trends to ensure they are falling within the SLA thresholds
Volume: Track and monitor order volume trends
Rejection Breakdown: Track order rejections by type over time
Rejection Stats: Track rejection rate over time so you can manage resources effectivelyRejection Rates per User: Monitor user level rejection rate trends so you can improve future performance
IRS Data: Includes the raw order data used for the reports without sensitive consumer data
IRS Downtime: Includes each occurrence of IRS related downtime for the given report period
Reports enhanced turnaround time calculations, rejection rates by user, and overall volume metrics, to deliver the most accurate insight into each account's performance.
VSPR - Turnaround Time Report Sample
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Turnaround Time (Minus Holidays, Non Working Days and IRS Downtime)# of Orders 0 - 8 Hrs 8 - 16 Hrs 16 - 24 Hrs 24 - 32 Hrs 32 - 40 Hrs 40 - 48 Hrs Over 48 Hrs Grand Total
2013 February 294 6 35 226 59 157 58 835March 2360 273 186 1685 4496 1336 3640 13976April 1629 163 176 2212 2826 881 4208 12095May 598 148 37 962 1316 565 1127 4753Grand Total 4881 590 434 5085 8697 2939 9033 31659
2013 February
2013 March
2013 April
2013 May
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Turnaround Time
8 - 16 Hrs16 - 24 Hrs24 - 32 Hrs32 - 40 Hrs40 - 48 HrsOver 48 Hrs(blank)
Turnaround Time Report accurately monitors order turnaround time by excluding holidays, non-working days, and IRS downtime to ensure SLA thresholds are met
Summary
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I. Income Based Repayment July 1, 2014 – ED requires income documentation
II. Collection of Income Documentation Option A – Manual Option B – Electronic
III. Tax Transcript Retrieval with Veri-Tax Receive electronic income documentation directly
from the IRS, typically within 72 hours
IV. Metrics of Success Veri-Sight Performance Report
Veri-Tax Contact Page
Jackie BohlineDirector of Client Services and Customer [email protected]
Customer Happiness [email protected] 8 am – 7 pm Central Time
Veri-Tax, LLC30 Executive Park, Suite 200 Irvine, CA 92614
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2015 NCHER KNOWLEDGE SYMPOSIUM
November 4-6, 2015 San Antonio, TX
Questions
