Commercial Mortgage Loan

1
Commercial Mortgage Loan Quality Rating Expert
System
By Stephen Thompson
Design Review CSIS 636T October 28, 2003
2
Overview
Purpose
To implement an expert system to rate the quality
of commercial mortgage loans 1. Convert
expert knowledge from an intellectual to a
structural asset. 2. Delegate the task of
rating loans to others in the department.
3. Improve productivity of the expert employee.
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Context
Manage Invested Assets for Client a. Competitive
Return b. Predetermined Risk Profile
1. Advantus Strategic Goals
Competitive Return
Safety Quality
Predictable Cash Flow
Diversification
2. Portfolio Manager Goals
Administering Mortgage Investments
Closing New Mortgage Investments
Managing Business Partners
Resolve Under-Performing Mtg Assets
3. Commercial Mortgage Servicing Department
Services
Quality Rating
4
Quality Rating Components
5
Software Architecture
6
GUI Example
7
Database Structure
Inspection MultiFamily
Inspection Commercial
Rent Roll MultiFamily
Rent Roll Commercial
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Knowledge Base Structure
Decision Tree
Small sub-set of rules
Short-Cut Method
Qual_Building
Qual_DS
Qual_Tenantcy
Complete Data Method
support rules
Qual_Refi
Qual_Pymts
Assumed Rating Rules
support rules
Incomplete Data Method
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Rules Structure
(a) Reasoning about the Reasoning Process
Rule
(b) Reasoning about Loan Quality
Fact
True or False
Action
Update a Value
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Knowledge Base Examples
Rules
(a) Reasoning about the Reasoning Process
If Short-Cut Method or
Complete-Data Method or
Incomplete-Data Method Then Quality Rating is
Assigned
(b) Reasoning about Loan Quality
If Quality Building is Excellent or
Quality Building is Good or
Quality Building is Fair or
Quality Building is Poor Then Rate Quality
Building is Assigned
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Knowledge Base Examples
Fact
If Debt_Service_Coverage_Ratio gt 1.25 Then
Quality Debt_Service is Good
Action
Weighted_Quality_Building AssignValueOf
(Quality_Building Building_Weight)
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Rule Examples
Conjunction (AND)
Kb(Rate Each Component, rule(Rate_Each_Comp
onent), rule(Rate_Quality_Building)
, rule(Rate_Quality_Debt_Service),
rule(Rate_Quality_Tenantcy),
rule(Rate_Quality_Refinance),
rule(Rate_Quality_Payment_History) ).
Disjunction (OR)
Kb(Rule_Name, rule(Loan_SF_Medium),
rule(Loan_SF_Med_Apt) ).
Kb(Rule_Name, rule(Loan_SF_Medium),
rule(Loan_SF_Med_Office) ).
Kb(Rule_Name, rule(Loan_SF_Medium),
rule(Loan_SF_Med_Retail) ).
Kb(Rule_Name, rule(Loan_SF_Medium),
rule(Loan_SF_Med_Industrial) ).
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Inference Engine Module
Process()
Inference()
Process_Rule()
Process_Facts()
aRule
AnAction
aFact
Calculate a Formula
True or False
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Memory
RAM
(a) Loan Data (one loan)
(b) Knowledge Base (sub-set)
(c) Temporary Variables
DISK
(a) Loan Database
(b) Knowledge Base
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Processing Steps
1. Open Program 2. Open Database 3. Open
Knowledge Base 4. Select a Loan 5. Rate
Quality 6. View Results