Market Landscape

Industry Challenges

Primatics Solutions

Consulting Focus Areas

Loans/Mortgage Servicing Assets

Credit Risk Analytics and Active Portfolio Management

Pricing/Valuation (Fair Value Services)

Compliance and Disclosures

Mergers and Acquisitions

Pricing/Valuation (Fair Value Services)

Any holder of loans or securities must understand their daily valuations for the purposes of portfolio management and financial reporting. With the industry moving toward a more fair value approach to financial reporting (e.g., with the adoption of FAS 159), the burden of controls and compliance moves from accounting to an accurate, reliable and controlled way to value and price loans and securities.

Primatics Consulting can help you navigate the challenges of accurate compliance with ease.

Challenge number 1: Ensuring consistent usage methodologies that satisfy the timing and accuracy requirements of end users, and are adaptable for the multitude of end users of fair value.

Inaccurate and untimely prices can have a significant impact on economic position and financial reporting. Primatics Consulting will help you understand the current state policies governing pricing methods, including third-party marks, mark-to-model, and manual marks, as well as data availability.

We’ll design a future state business process and architecture that satisfies both policy and end-user requirements, and we’ll identify gaps and implement solutions around organization, data needs, technologies, and governance.

Challenge number 2: Implementing and maintaining pricing governance models in a cost-effective manner.

Given recent re-statements and bankruptcies due to faulty valuations (e.g., residual interests), regulators and auditors are placing greater emphasis on model and pricing governance models, which can be challenging to implement and maintain efficiently. Lack of controls and governance around models used for valuations can decrease management's reliance on the output, impacting key decisions and increasing overall risk.

We’ll work with you to define key tenants of the governance model based on internal processes and external best practices. In addition, we’ll design a governance model, including the data architecture, organizational design, and enabling technologies. Finally, we’ll implement the completed solution.

Challenge number 3: Selecting the right fair value provider for a given set of product, given the availability of multiple fair value sources.

Third-party model providers can miss critical product details leading to incorrect fair values. For example, model providers can neglect to account for prepayment penalties that have a significant impact on prices and a potential misstatement of earnings.

Primatics Consulting has defined processes around validation and identified potential shortcomings of the pricing approach for a wide range of clients. We can define a process for you that validates the reliability and quality of fair values produced by third-party providers. From creation of internal models to hand pricing, we’ll construct a process that is documented and repeatable.

Challenge number 4: Determining whether to adopt the standards set forth in FAS 159, or to retain the accrual method of accounting.

The standards introduced in FAS 159 can bring increased risk of model-related compliance and version management. Any changes in a model need to be documented and controlled, often resulting in increased costs.

We’ll work with you to determine the right model for the right product. And, we’ll ensure the model supports the product completely. Primatics Consulting has validated and priced a variety of securities and loan products for a multi-billion dollar portfolio, and can do the same for you.