BOSTON, March 3, 2016 /PRNewswire/ -- DebtX, the largest marketplace for loans, today announced the availability of DXScore, a new credit rating system for commercial real estate whole loans that enables financial institutions to make better risk and pricing decisions.
DXScore is a numerical rating from 120 (most creditworthy) to zero (least creditworthy) that allows institutions to easily compare different CRE loans. DXScore factors in loan characteristics such as collateral type, geography, performance level, and loan structure, and produces a common benchmark for comparison. With that insight, banks, insurance companies, warehouse lenders and other institutions can determine whether to buy, hold, originate, monitor, or sell a CRE loan as part of an active portfolio management strategy.
DXScore is based on more than 15 years of trade and origination data from tens of thousands of loans offered at DebtX, the world's largest marketplace for CRE loans.
"DXScore is a cost-effective solution for managing credit risk and pricing CRE loans better during origination," said Kingsley Greenland, CEO of DebtX. "DXScore distills the characteristics of different CRE loans into a single number, so credit risk can be measured accurately across the various CRE loan types. Only DebtX has the data and pricing experience to provide a rating system that institutions have long needed."
To see a brief video of DXScore, click here.
The Problem Today
Financial institutions typically focus on a loan's premium or discount to par, but par pricing doesn't express the inherit credit risk in a loan. Similar to junk bonds, a riskier loan can price at par if the coupon is high enough. DXScore takes into consideration a broader set of factors other than the loan's desired yield. As a result, it can identify strengths and weakness that are often undetected at origination or during the life of the loan.
DXScore can complement internal risk rating systems currently used by institutions to evaluate the key CRE loan categories – office, retail, industrial, and multi-family. DXScore differs from more expensive and time-consuming loan risk analyses performed by the major credit rating agencies because it can be produced faster and at lower cost.
DXScore is designed for a wide range of financial institutions that manage CRE whole loans and want to accomplish the following:
Facilitate Active Portfolio Management. Using DXScore, financial institutions can evaluate their portfolio on a quarterly or monthly basis, and determine whether to hold or sell loans.
Improve Loan Origination Pricing. Loan originators often misprice risk during the origination process. By using DXScore to understand the risk in new credit, lenders can price a loan more aggressively to win the business or raise the interest rate to accommodate increased risk.
Support M&A activity. Both before and after the transaction, DXScore can be used to perform a strategic evaluation of a portfolio to determine which loans need to be sold or retained.
Assist with CCAR, DFAST testing. For banks subject to CCAR and DFAST testing, DXScore can provide an independent credit rating to help regulators understand an institution's overall credit risk.
"Fifteen years in the making, DXScore is a breakthrough for the CRE industry," said Greenland. "DXScore uncovers credit strengths and weaknesses that otherwise may go unnoticed when originating new loans or monitoring existing loan portfolios."
To learn more about DebtX's suite of valuation, data and analytics products, call 617.531.3429. For information about loan sale advisory services, call 617.531.3400.
DebtX operates the world's most liquid marketplace for loans. Through its loan sale advisory services, DebtX maximizes loan sale proceeds for financial institutions and government agencies. DebtX also provides loan valuation, analytics and market data for regulatory and audit purposes. For syndication, agency, and loan sale professionals, DebtX provides a suite of web-based deal management solutions. DebtX is based in Boston, with offices across the U.S., South America, Europe and Asia. Call 617.531.3400 or visit www.debtx.com. Follow DebtX on Facebook, Twitter and LinkedIn.