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PayNet Unveils New Loss Database for Equipment Finance Industry

June 06, 2016, 07:07 AM
Filed Under: Industry News

A new loss database by PayNet, the leaders providing risk management solutions and market insight to the commercial credit industry, shows the types of equipment defaults that result in a loss. PayNet studied the economic cycle, with loss outcomes on almost half a million defaulted transactions totaling over $17 billion.
“Default and loss are closely related, but very different,” says Thomas Ware, Senior Vice President, Analytics & Product Development, PayNet. PayNet developed very specialized, and predictive, loss models from the largest proprietary database of $1.4 trillion commercial loan/lease loss models in the U.S. “While defaults are important as they are a precursor to loss, at the end of the day it is truly loss that lenders really care about.”
Highlights of New Loss Database Shows:

  • Half of all defaults are “Nuisance” defaults, conceivably 150 days past due or more, so these defaults have a 0% loss experience. , These are most common in a few major borrower types: Hospitals, Government, Universities/Schools, and Utilities.
  •  Financial institutions with specific expertise in an asset class have 25% lower losses because of their asset expertise.
  •  Equipment type, transaction size and how soon after origination a transaction defaults determine the likelihood and magnitude of a loss. The stage of the economic cycle is a big driver as losses in a recession can run 100 – 200% higher than during expansions.

The new loss database will help equipment finance lenders manage credit provisions through the economic cycle. It is also expected to assist in complying with the new Current Expected Credit Loss (CECL) requirements from FASB as well as regulations such as stress testing.
PayNet is unveiling this new loss database at the Equipment Leasing Finance Association (ELFA) Credit & Collections Conference in Denver June 5-7, 2016. Thomas Ware, PayNet’s Senior Vice President, Analytics & Product Development will be presenting this information to industry executives Monday June 6 at 3:00pm Using Analytics to Boost Your Bottom Line.
PayNet Inc. is the premier provider of risk management tools and market insight to the commercial credit industry, collecting real-time loan and lease information from leading U.S. lenders and turning it into actionable intelligence. The company's proprietary database -- updated weekly -- is the richest and largest collection of commercial loans and leases, encompassing nearly 24 million current and historic contracts worth over $1.4 trillion. Using state-of-the-art analytics, PayNet converts raw data into real-time market intelligence and predictive information that subscribing lenders use to manage risk, lower operating costs, originate more, and improve their business strategy.

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