CLFP EXAM - Portfolio Management Questions With Correct Answers Already Passed!!

What is Portfolio Management? - The continuous process of evaluating the nature and performance of the portfolio of leases in order to allow management to determine future underwriting adjustments, current reserves and strategic planning What are the different categories of risk factors? - 1.) credit risk 2.) financial risk 3.) business risk What are common Credit Risk Indicators? - 1.) frequency of delinquency or default 2.) 30-60-90 day receivable aging 3.) Amount charge off/default 4.) Timing of default relative to origination 5.) Collection/recovery costs on defaulted leases 6.) Amount of recovery dollars net of cost What are some Financial Risk Indicators? - 1.) Gross interest yield (gross interest per asset) 2.) Net Interest yield (less IDC) 3) Interest Margin (Gross Yield - Cost of Debt) 4.) Interest rate risk (risk due to variable funding vs fixed payments) 5.) Weighed average yields 6.) Term and rate or runoff 7.) Residual value performance 8) Early payoffs or roll ups to other lease 9) servicing cost 10) Amount and type of fee income What are some Business Risk factors? - 1) Market competition2.) Concentration by lessee, industry, equipment or geography 3.) Economic trends impacting origination volume or credit performance 4.) Availability and cost of capital and debt 5.) Availability and expertise of personnel to underwrite, fund, service and collect leases 6.) State specific legal remedies 7). Documentation thoroughness How are performance indicators used? - 1.) each is calculated as a number derived from statistics readily available from database; 2.) Can be stated as a specific amount, percentage or as a ratio 3.) Indicators need to be compared recent and extended historical results 4.) can also be compared to industry peers What are common Characteristics used to segment the portfolio? - 1.) Concentration per lessee/guarantor 2.) Concentration in industry 3.) Concentration in equipment 4.) Concentration in lessee location 5) Source of origiantion 6.) Credit evaluation method (app only vs. fin) 7) Special credit programs (start ups) 8) type of lease 9 Term What is the benefit of Portfolio Segmentation? - Allows management to evaluate the characteristics of its divers mix if leases to determine which offer the greatest opportunity How should managers make decision on portfolio performance? - 1.) continuously review 2.) avoid trends of unacceptable performance 3.) dig into negative trends4.) Review each segment for performance