Credit Risk Framework Using Eligibility Grids
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Current systems for communicating the types of loans acceptable for purchase in the secondary mortgage market are cumbersome and unclear, leading to complex credit risks due to the variety of loan types and borrower/lender criteria.
Innovation Solution
A credit risk framework that determines loan eligibility using a visual representation of eligibility grids based on data elements such as credit scores and loan-to-value ratios, grouping loans by risk and associating each group with exclusion criteria to clearly define eligible and ineligible loans.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of information
If current systems are used to communicate loan eligibility types, then loan types and criteria can be communicated, but the communication becomes cumbersome and unclear leading to complex credit risks
Solution Approach 1:
The patent segments the complex credit risk framework into distinct eligibility grids, each representing specific loan types or risk categories. Each grid divides the credit score range into segments with clear eligibility indicators, transforming the overwhelming plethora of loan types into manageable, visually distinct units that reduce information loss while maintaining comprehensive coverage.
Solution Approach 2:
The patent introduces a visual dimension to loan eligibility communication by using graphical representations with credit score axes and eligibility indicators. This transforms abstract textual criteria into a two-dimensional visual framework where credit risk categories become spatially organized, making complex information easier to comprehend and reducing communication cumbersome-ness.
2Reliability
If detailed criteria are used to determine loan eligibility, then credit risk assessment becomes comprehensive, but the system becomes cumbersome and difficult to operate
Solution Approach 1:
The patent performs preliminary organization of credit risk criteria by pre-establishing eligibility grids with defined credit score ranges and eligibility indicators for different loan types. This preliminary structuring allows users to simply locate the appropriate grid and compare borrower credit scores against pre-defined thresholds, maintaining comprehensive assessment accuracy while dramatically simplifying the operational process.
Solution Approach 2:
The eligibility grids serve as intermediaries between detailed credit risk criteria and end-users. These grids translate complex underwriting guidelines into simplified visual representations with clear eligibility zones, acting as a mediating layer that preserves the sophistication of comprehensive risk assessment while providing an easy-to-use interface for determining loan eligibility.
Data Source
AI summary
A credit risk framework and systems and methods for using the same. The credit risk framework provides information regarding the eligibility of loans to be sold (delivered) to a purchaser, such as in the secondary mortgage market. The credit risk framework includes determining categories of potentially eligible loans. At least one risk segment is determined and an eligibility grid associated therewith. The eligibility grid is organized using two data elements as axes and forming boxes representing ranges of the two data elements. Each box is then further associated with additional information regarding any restrictions on loans that would fall in the box. Each risk segment may have its own level of delegated authority so as to tie risk to a delegation structure.