Twin Cities Area SAS Users Group

Abstract: Recent events in the mortgage market have raised questions about the way the lending process works. This alk describes a framework (CCAF) that combines judgmental factors with analytical methods to achieve a more complete and accurate credit assessment. CCAF ensures that all relevant considerations and business contexts are brought into play early on in the process so that lenders can quickly evaluate risk and render sound decisions. CCAF effectively narrows the gap, which enables users to qualify more creditworthy consumers, while helping to avoid financial market crises. CCAF applies to both developing markets, where data may be scarce, and also to mature markets, where certain data may be over-emphasized, while other data is ignored. In the latter case, risk may be overstated using typical lending approaches, which increases the number of undeserved credit denials and instances where the borrower is overcharged. Conversely, risk may be understated, which increases the likelihood of loan default and loss for the consumer, lender, and any purchaser of the loan, including investors and other capital market participants. A dozen important features of any credit granting system are identified and the notion of an underwriting “gap” is explained. Concepts are illustrated by means of a “generic mortgage lending” example.

Bio: Clark Abrahams is Chief Financial Architect at SAS where he leads business and product development for solutions in the financial services vertical. He has over 35 years of experience in the financial services industry. Prior to joining SAS in 2003, Abrahams was the Chief Risk Officer for Fidelity National Corporation. A former Senior Vice President with Bank of America (responsibilities included asset/liability management, credit policy, compliance, and information technology), Mr. Abrahams also served in various management and research roles with Fair Isaac & Co., Standard Oil of Indiana, The Bank of California, and Barclays Bank. He is a frequent speaker at events sponsored by the American Banking Association, served from 2007-2008 on the Urban Markets Initiative Advisory Board at the Brookings Institution, and currently serves on the Board of Directors of The Social Compact, a Washington, DC-based non-profit specializing in information-led community development. Mr. Abrahams graduated from UC Berkeley and earned an MS in Engineering from Stanford University, and is a member of CFA Institute.