The way RMBS dealers communicate loan-level details to prospective investors today leaves a lot to be desired.
Any investor who has ever had to work with pre-issue Intex CDI files can attest to the problematic nature of the loan data they contain. Some are better than others, but virtually all of them lack information about any number of important loan features.
Investors can typically glean enough basic information about balances and average note rates from preliminary CDI files to run simple, static CPR/CDR scenarios. But information needed to run complex models — FICO scores, property characteristics and geography, and LTV ratios to name a few — is typically lacking. MBS investors who want to run to run more sophisticated prepayment and credit models – models that rely on more comprehensive loan-level datasets to run deeper analytics and scenarios – can be left holding the bag when these details are missing from the CDI file.
The loan-level detail exists – it’s just not in the CDI file. Loan-level detail often accompanies the CDI file in a separate spreadsheet (still quaintly referred to in the 21st Century as a “loan tape”). Having this data separate from the CDI file requires investors to run the loan tape through their various credit and prepayment models and then manually feed those results back into the Intex CDI file to fully visualize the deal structure and expected cash flows.
This convoluted, multi-step workaround adds both time and the potential for error to the pre-trade analytics process.
A Better Way
Investors using RiskSpan’s Edge Platform can streamline the process of evaluating a deal’s structure alongside the expected performance of its underlying mortgage loans into a single step.
Here is how it works.
As illustrated above, when investors set up their analytical runs on Edge, RiskSpan’s proprietary credit and prepayment models automatically extract all the required loan-level data from the tape and then connect the modeling results to the appropriate corresponding deal tranche in the CDI file. This seamlessness reduces all the elements of the pre-trade analytics process down to a matter of just a few clicks.
Making all this possible is the Edge Platform’s Smart Mapper ETL solution, which allows it to read and process loan tapes in virtually any format. Using AI, the Platform recognizes every data element it needs to run the underlying analytics regardless of the order in which the data elements are arranged and irrespective of how (or even whether) column headers are used.
Contact us to learn more about how RMBS investors are reaping the benefits of consolidating all of their data analytics on a single cloud-native platform.
