A CLOSE-UP LOOK AT BHG’S EYE-OPENING LOAN GENEALOGY I’ve spent the past two decades analyzing and developing predictive credit models for decision-making in loan originations. While it’s a passion of mine, I don’t expect everyone to spend as much time considering BHG Financial’s loan origination process as I do. Nonetheless, it’s a fascinating exercise when one considers all the science, technology, data, and human ingenuity that are deeply ingrained in the origination of each loan. In fact, our process is surprisingly like that of another item people may take for granted — a pencil. I have long been inspired by “I, Pencil,” an essay published by economist Leonard Reed in 1958.There is also a children’s book adaptation by Connor Boyack that my three children adore. In Reed’s essay, he speaks from the perspective of a pencil and says, “Think about the world of activity that goes intomakingme. All the raw materials.The wood that was sawed and transported.The engineering that went into the logging truck. All the people and knowledge needed tomine graphite for the pencil lead and harvest rubber for erasers. All tomake a pencil you can easily buy in any store.” In that same respect, it takes a conflux of raw materials and human expertise from all over the world to make a high-performing loan that banks can easily buy on BHG’s Loan Hub. Allow me to narrate the genealogy of a BHG loan. Likelihood to Respond, Borrow, and Pay Every month, BHG reviews over 300 million records and analyzes the data of approximately 100 million potential prospects who might fit our profile. In addition to our own 21 years of loan data, we also buy data from 50+ external data providers. Ultimately, our discovery process seeks to answer the following questions with a high level of confidence: 1. What is a consumer’s likelihood to respond to our marketing? 2. Once they respond, what’s their likelihood of navigating the process and take a loan? 3. Once funded, what is their propensity to pay? Continuing with the pencil metaphor, I will walk through the “manufacturing” process of BHG loans to highlight the thousands of data points and the human ingenuity we leverage to optimize our lending decision strategies. Data — Our Raw Material BHG tends to target higher-income, more creditworthy individuals. Many of the borrowers we target are licensed professionals, doctors, engineers, CPAs, and attorneys with approximately 18-20 years of experience in their industries. We proactively reach out to those with whomwe wish to transact, using marketing data frommultiple By Dan Richard, VP, Predictive Analytics, BHG Financial 34 | The Show-Me Banker Magazine
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