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statistics question..please help

Six Sigma – iSixSigma Forums Old Forums Finance statistics question..please help

This topic contains 4 replies, has 5 voices, and was last updated by  lin 11 years, 11 months ago.

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  • #24699

    sree
    Member

    Hello:
    First of all, Thank you so much for taking the time to guide me.
    I work for a financial services corporation and I am  trying to analyze some data. I am trying to figure out the root causes that lead to foreclosure of a property. One of the main attributes that can lead to foreclosure is insufficient contact with the borrower. The more the number of contacts, the better it is.
     I divided my data into 2 sets (one month’s worth of data).
     The first set is the loans that did not end in foreclosure (Success). The second set is the loans that ended in foreclosure (Failures).
     I have 5000 loans in first set and 1000 loans in the second set.
     I did a Chi-square test to see if there is a statistically significant difference in the number of contacts between success and failures. The Chi-square test showed that there is a difference.
     Now, my question is:
     What is the tool that I can use that tells me the cut off point. What I mean is: How do I get a number “X” where I can say, if the number of contacts is less than “X” the probability of failure is higher.
     Thanks

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    #59202

    Ward
    Participant

    Binary logistic regression can help answer the question. Minitab makes it pretty easy for this type of anlaysis/model.

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    #59203

    Brandon
    Participant

    Very interesting project – and about 50 years overdue. I started my career XX+ years ago in lending. I served some time in collections then origination. In origination, of course, we did credit check, income check etc. I always wondered if any of the data we collected and analyzed and based an approval on had anything to do with the probabilty of non-payment in the future.
    I believe NOBODY in the lending industry ever tried to find a correlation between underwriting data and causal factors for default. Same approach year after year.
    I love it – would like to hear the results.
    However, before you dive too deep into the presumption that “staying in touch” is the Critical X – you should study your 1000 defaults for causal factors. Group them, pareto them and start studying any relationships you can identify. Then see if any of those causal factors could be assessed at underwriting – maybe and maybe not – things change that can’t be identified at underwriting. However, if you could identify some that could you could revolutionize how a loan is underwritten.

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    #59206

    Cohen
    Participant

    In order to achieve a meaningful number, please compare the gross debt to income ratio to the contact rates using the most current information you have available.

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    #59207

    lin
    Participant

    What are you refering to when you say “contact rates”?

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