Loan portfolio investors need unbiased estimates of current market value. Independent valuations provide market insight, increase transparency of the pricing process, and reduce reporting risk. PHOENIX is uniquely positioned to provide the combination of rigorous fundamental analytics and market-based perspective.
PHOENIX provides valuation services for a variety of clients for many different purposes, some of which are highlighted below.
Fair Value for Financial Statement Reporting
Loans held for sale are marked at the lower of amortized cost or fair value. Changes in the value flow through earnings, making accurate valuation an immensely important consideration.
Loans held for investment are usually measured at amortized cost, but as of January 2018, public entities must also include a footnote disclosing the fair value of loans (Topic ASC 825-10: Recognition and Measurement of Financial Assets and Financial Liabilities). The guidance eliminates the previous option allowing public entities to declare that it was not “practicable” to calculate fair value. This new rule requires fair value to use “EXIT” pricing, reiterating that fair value is the price one could sell to a willing buyer in an arms-length transaction.
Hedge Funds and other asset managers need to value their loan portfolio to calculate net asset value (NAV), which is reported to investors on a recurring basis. As many loan portfolios are illiquid level 3 investments, there is a significant amount of judgment involved in the evaluation. Many funds choose to use a third-party valuation provider to eliminate any conflict of interest or bias between the reporting and asset management functions of the fund. Fund investors also appreciate the added governance over the pricing process.
Purchase Decision Making and M&A
Before a bank acquisition or a loan portfolio trade, some buyers seek a third-party valuation opinion of the target portfolio. This valuation serves to ensure the client produces a bid that is in line with market expectations.
After a merger, the acquirer must calculate the fair value of the acquired loan portfolio for acquisition accounting, regardless of if the loans are held for sale or held for investment (ASC 805 – Business Combinations). The fair value is used in the calculation of total net assets for the company. The difference in purchase price over net assets acquired is recorded on the financial statements as goodwill.
We provide recurring and one-time valuations for banks, funds, and other entities for the following asset types:
Residential Whole Loan Portfolios
• HELOC/2nd Lien
• Scratch & Dent
• Fix & Flip
• Proprietary Reverse
Other Consumer Loan Portfolios
• Student Loans
• Auto Loans
• Marketplace Loans
With our 20+ years of providing third party valuations, PHOENIX has the expertise and experience to manage these valuations for our clients and buyers. We use a proprietary cash flow model with industry-standard prepay and default assumptions. Our reporting is fully customizable and can include aggregated or loan-level pricing, detailed cash flows, and stratification analysis.
Our active whole loan trading desk provides valuable market insight and trade activity, and we have a broad perspective of buyer and seller risk appetites, as well as price and yield expectations. PHOENIX will work with you to provide a robust market-based deliverable that meets your reporting needs.
PHOENIX will work with you to provide a robust deliverable that meets your reporting needs.
Our active whole loan trading desk provides valuable market insight and trade activity, and we have a broad perspective of buyer and seller risk appetites, as well as price and yield expectations. To learn more about PHOENIX’s Whole Loan Analytics and Valuation Services, enter your name and email below to schedule a meeting with one of our trusted advisors.