Validation of Additional Financial Models

Financial institutions use models to help identify and evaluate risk across the spectrum of their organizations. The methodologies we employ to perform our model validations can be customized and applied to evaluate most of your critical risk assessment needs.

Model Validation Scope and Process Overview

MountainView's model validation scope encompasses a number of standardized processes. Typically, the scope of our model validation is comprised of five primary components, including a conceptual assessment to confirm general framework and methodology, a technical validation which encompasses the technical and statistical adequacy of the model, a forecast validation, an outcomes analysis, if applicable, and a governance review. Our model validation expertise includes assessments of a wide variety of models employed in the financial industry.

Allowance for Loan and Lease Losses (ALLL) and Current Expected Credit Loss (CECL) Model Validations

MountainView’s ALLL model validation service provides an industry leading solution for confirming the accuracy and integrity of your ALLL model and estimation processes supporting your accounting, stress testing and your eventual adoption of FASB's current expected credit loss (CECL) standard. Our reports are designed to meet your specific business and regulatory needs. We customize every report to match the specific model being assessed, the underlying loan portfolios involved and any other unique elements. Additionally, we verify compliance with regulatory and accounting guidance, such as supervisory guidance on ALLL methodologies and documentation and frequently asked questions on ALLL, as well as ASC 310 (formerly known as FAS 114) and ASC 450 (formerly known as FAS 5).

We use peer diagnostics as part of a historical ratio analysis to identify divergent trends (compared with an institution’s peer group and its own historical experience) in the relationship of the ALLL to adversely classified or graded loans, past due and nonaccrual loans, total loans, and historical gross and net charge-offs.

Mortgage Servicing Rights (MSR) and Secondary Mortgage Pipeline (Pipeline) Model Validations

Our mortgage model validations empower institutions with the advanced level of confidence needed to fully utilize their MSR and pipeline models. Our model validations effectively challenge all aspects of your mortgage model implementation. We verify technical elements of model construction, including data footing and category level specifications, behavioral assumptions and valuation methodology. Diagnostic validations of model-produced present value outcomes are confirmed for general consistency with underlying contract terms and assumptions for both loans and hedging derivatives, if applicable. All of the fundamental components of mortgage present values are comprehensively reviewed in the model’s design and technical specifications. We confirm whether your model’s governance solution is sufficient to provide adequate support and meet regulatory mandates.