Retail Lending Examination Procedures

Roll Rates

Roll and flow models are the most accurate short-term forecast technique. The name is derived from the practice of measuring the percentage of delinquent loans that migrate or “roll” from early delinquency to late stage delinquency buckets, or “flow” to charge-off. The most common method is the delinquency roll rate model, in which dollars outstanding are stratified by delinquency status, typically current, 30-59 days past due, 60-89 days past due, and so on through charge-off. The rates at which loans migrate or “roll” through delinquency levels are then used to project losses for the current portfolio. The table below describes the mechanics of using roll rate analysis to track the migration of balances over a four-month period (120-day charge-off period).

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