Investors considering the purchase of toxic loan portfolios have been stymied by the low amount of data about the underlying assets.

But several technology companies are offering tools and services that they say can evaluate the debt and help prospective buyers determine how much to pay.

Determining the value of these assets is critical, experts said, not only because it will help banks clean up their balance sheets, but also because the securitization market cannot function properly until these portfolios can be traded freely.

"The key to trading loans profitably is good analytics, and good analytics start at valuation," said Kevin Kanouff, a founder of Statebridge Co., a Denver servicer of alternative-A and subprime loans. "If you cannot get the valuation right, your trade is doomed."

Statebridge began using data last year from another Denver firm, IntelliReal LLC, which compiles pricing information on 77 million properties.

With housing prices still declining in most markets, mortgage servicers are using updated sales and property listings at the neighborhood level to determine a property's net present value.

Kanouff said the IntelliReal information allows Statebridge to catch "gamed appraisals." IntelliReal also offers a "score" on the volatility of each loan; the score helps his company "look into the future a bit" to predict performance and estimate value.

Dave Hurt, the senior vice president of business development at LoanPerformance, an analytics and data unit of First American Corp. of Santa Ana, Calif., said investors have been asking for ways to "dig deep into the data" to help them understand the probability of default.

"Investors absolutely have to know three things about a property: whether there is negative equity, undisclosed debt and fraud," said Hurt, whose company maintains a database of 2 trillion nonagency mortgage-backed and asset-backed securities. "Then you have a sense of where the assets should be valued, and you can project what the discounted cash flows could be and differentiate on a loan-by-loan basis."

Hurt also said that his customer base has changed dramatically this year — investment banks had long been the main users of LoanPerformance's securities and property record databases, but they are being replaced by private-equity firms and hedge funds that are considering purchasing troubled portfolios from banks.

"A little more than three years ago we had no clients from this space, and now it's well over 200," he said.

The starting point for understanding default risk is servicing data, which includes borrowers' current payment status and unpaid principal balances.

Kyle Lundstedt, managing director at Lender Processing Services Inc., said investors have to calculate a current loan-to-value ratio that is "updated to the present day" with any liens on a property.

Both his company and First American collect records from county recorder and assessor offices to identify liens. Investors also may run automated valuation models on an entire portfolio or get broker price opinions or actual appraisals to check the current loan-to-value ratio for properties that show the greatest distress, Lundstedt said.

Other companies that have come out with valuation and due diligence products in the past few months include the Denver default manager Integrated Asset Services LLC, along with NIR Credit Partners LLC, a Charlotte asset manager created by two former Wachovia Securities executives, and the Chicago credit bureau TransUnion LLC, which has created various scores to determine recovery and liquidation rates on debt portfolios.

Securitized mortgages are another trouble spot, because investors typically are given access only to a borrower's FICO score at origination; Social Security numbers typically are withheld to protect the borrower's privacy.

Last year 1010data Inc., a New York provider of data analysis services, developed an algorithm that matches borrowers to their specific securitized loan. The company has partnered with the Atlanta credit bureau Equifax Inc. to provide updated credit information on individual borrowers, so investors can determine whether a borrower's risk profile has changed since the loan was originated.

"This is a way to bring more transparency to the market," said Greg Munves, a vice president at 1010data. "Once you link the right borrower with the right loan, you can get updated information on the loan, where previously investors in securitized deals rarely got access to anything but an old FICO score. The updated credit health of the borrower" allows investors "to identify trouble earlier than they could before."

Frank Bria, a senior vice president and the co-founder of Response Analytics Inc., a Scottsdale, Ariz., maker of distressed portfolio management software, said the equity position of a borrower is driving much of the current behavior.

"Many borrowers don't have an incentive to pay their mortgage, and that is an element that often is not taken into consideration," he said. "Distressed assets behave very differently than new, at-origination borrowers, so very detailed behavioral information becomes more important to distressed investors."

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