Register here for our next monthly model update call: Thursday, December 18th at 1:00 ET.
For highlights from our most recent call (October), click here.
Contact us to learn more or to request a free demo of our platform and models.
Register here for next month’s call: Thursday, November 20th, 2025, 1 p.m. ET.
Each month, we host a Models & Markets call to offer our insights into recent model performance, emerging credit risks, and broader economic indicators. This month’s call focused on the impact of the Fed rate cut, key macro indicators and a spotlight on the surging second-lien market.
Here’s a quick recap in case you missed it.
(Click here for the entire 23-minute recording or continue reading for a summary.)
Rates Ease, but Headwinds Persist
October has brought a modest reprieve in mortgage rates, with the 30-year fixed rate having fallen to approximately 6.2%, the lowest level in nearly a year.
Affordability remains constrained, however, and long-term headwinds appear far from resolved. Specifically:
Unemployment remains near 4.2%, and core PCE inflation continues to hover around 2.8%. While steady, this remains above the Fed’s comfort zone.
Home price growth is slowing nationally, with several major metros posting month-over-month declines.
Fed Funds futures suggest rates will stay elevated into 2026, with year-end 2025 expectations still in the 3.5–3.75% range.
Together, these indicators suggest a “higher for longer” policy regime even as the market eyes rate cuts later this year.
HELOC and Second-Lien Insights: Delinquencies on the Rise
Leveraging the Equifax Analytic Dataset, a 10% sample of active U.S. credit borrowers with anonymized tradeline-level detail, enables us to dive deep into Home Equity Loans (HELs) and Home Equity Lines of Credit (HELOCs). These asset classes are gaining renewed investor attention as homeowners tap existing equity rather than selling into a high-rate market.
Delinquency rates are trending upward for both HELs and HELOCs, particularly among lower-credit-score borrowers. Aggregated five-year views on page 11 highlight the steady climb, with 600-score cohorts showing the sharpest deterioration.
These findings echo broader signals of consumer strain visible across other loan products.
Consumer Balance Sheets Under Pressure
The New York Fed’s Q2 2025 Household Debt and Credit Report underscored the strain many consumers face. Total household debt continues to climb, driven by non-housing credit categories—auto loans, student debt, and revolving balances in particular.
Credit card and auto loan delinquencies have risen sharply, while mortgage and HELOC performance, though still comparatively solid, are trending downward. Even with stable macro indicators, consumers remain financially stretched. This dynamic is likely to influence credit performance and securitization trends into 2026.
Prepayment Model Updates
Our prepayment models continue to align well with observed speeds across both Conventional and Ginnie collateral. Lower-coupon collateral (WAC ≤ 5.5%) experienced some deceleration versus forecasts—a function of seasonality and slower housing turnover.
Higher-coupon cohorts (WAC ≥ 6.0%) reflected more volatility, consistent with recent refinance activity at the margins.
We continue to add additional analytics reports on the platform. Please visit www.riskspan.com/request-access to request free access.
Also, please feel free to contact us to discuss or learn more.
Register here for next month’s call: Thursday, October 16th, 2025, 1 p.m. ET.
Each month, we host a Models & Markets call to offer our insights into recent model performance, emerging credit risks, and broader economic indicators. This month’s call focused on the impact of the Fed rate cut, key macro indicators and a spotlight on the surging second-lien market.
Here’s a quick recap in case you missed it.
(Click here to listen to the entire 27-minute recording or continue reading for a summary.)
Market Backdrop: September 2025
Mortgage rates have hit their lowest levels in nearly a year, averaging close to six percent. The Federal Reserve delivered its first rate cut of the current cycle in September 2025, reducing the target range from 400–425 basis points to a projected 350–375 basis points by year-end. Despite this easing, markets continue to anticipate relatively high rates into 2026.
Inflation and unemployment are holding stable, but long-term headwinds persist, including sluggish real wage growth and affordability constraints in the housing market. Longer-dated Treasury yields are the key driver of mortgage rates, making them essential for investors to keep tabs on. As bond yields set the tone for borrowing costs across the economy, their movement will be critical in shaping both origination volumes and prepayment activity in the coming quarters.
Spotlight on Second Liens
The second lien mortgage market continues its emergence as one of the most active areas in structured finance. Issuance and securitization of second lien products have been increasing rapidly, with no signs of slowing. This expansion is driven in part by rising homeowner demand for tapping into the accumulated equity and lenders’ interest in capturing additional credit exposure in a higher-rate environment.
Prepayment behavior in second lien mortgages, however, differs significantly from that of first liens. This divergence makes specialized model calibration critical. RiskSpan’s Prepayment Models, calibrated against actual second lien performance, indicate that the models are capturing observed dynamics effectively. With issuance expected to continue climbing, accurate modeling of second lien prepayment risk will remain an essential tool for market participants seeking to price and manage these assets.
Prepayment Model Updates
Back-testing continues to show that RiskSpan’s prepayment models are tracking well against observed performance across a variety of collateral types. Recent analysis of agency MBS vintages from 2021 and 2022 revealed that higher-coupon pools, particularly those in the 6.5% range, are slowing more than originally anticipated.
FN/FH 2021-2022 6.5s
By contrast, lower- and mid-coupon pools—those ranging from 1.5% through 5.5%—have remained steady and closely aligned with model expectations. This outcome reinforces the robustness of the models across different coupon bands and provides confidence in their ability to capture nuanced prepayment behavior.
FN/FH 2021-2022 1.5s – 3.5s
FN/FH 2021-2022 4s – 5.5s
As we introduced during our August call, consumer credit remains a major focus of RiskSpan’s modeling enhancements. Using the Equifax Analytic Dataset, the team has constructed prepayment aging curves for both auto loans and personal loans. These analyses confirm that borrower credit score bands, measured using VantageScore 4.0, influence prepayment behavior in a manner similar to mortgage loans. For auto loans, the score sensitivity is particularly evident across borrower segments. Personal loan data show similar trends, with one notable difference: the effect of loan term is more pronounced after the first year of loan seasoning. This suggests that term structure plays a more significant role in personal loan prepayment decisions compared to auto loans.
Auto Loan Prepayment Aging Curves
Personal Loan Prepayment Aging Curves
We are in the process of finalizing these consumer loan prepayment models and will release them shortly on the RiskSpan Platform. This will give clients the ability to incorporate a new level of borrower insight into their own portfolio analytics.
Looking Ahead
The integration of Equifax ADS into the construction of prepayment aging curves is just the beginning. We continue to expand our modeling capabilities and data integration in order to provide clients with deeper and more actionable insights. Credit card and student loan models are already in the pipeline, and their release will extend RiskSpan’s modeling coverage across the full spectrum of consumer credit products.
In addition, the team is adding new analytics reports to the Platform, giving clients free access to timely updates and market intelligence. These ongoing enhancements underscore our commitment to equipping the investment management community with the tools and data needed to navigate complex and evolving credit markets.
Contact us to discuss or learn more.
Register here for next month’s call: Thursday, September 18th, 2025, 1 p.m. ET.
Each month, we host a Models & Markets call to offer our insights into recent model performance, emerging credit risks, and broader economic indicators. This month’s call was a wide-ranging update on new model developments, consumer credit insights, and macroeconomic trends shaping structured finance.
Here’s a quick recap in case you missed it.
(Click here to listen to the entire 30-minute recording or continue reading for a summary.)
Market Outlook: August 2025
Stable employment and inflation notwithstanding, the macro backdrop remains dominated by persistent headwinds:
New Equifax Data Integration
We introduced our latest research leveraging the Equifax Analytic Dataset (ADS), a borrower-level anonymized sample representing 10% of the U.S. active credit population. Using tradeline-level detail (credit scores, balances, payments, etc.), we have constructed aging curves for auto loans and personal loans segmented by credit score bands.
Some key takeaways:
The final versions of these datasets will be accessible directly within the RiskSpan platform, allowing clients to benchmark their portfolios against robust national trends.
Model Updates
Prepayment Models (Versions 3.2 & 3.7)
Our prepayment models continue to perform strongly against observed market behavior. The latest back-testing of agency cohorts (Fannie Mae and Freddie Mac 2021/2022 vintages across 1.5%–6.5% coupons) shows that speeds remain broadly consistent with expectations. However, higher coupon pools have recently exhibited slower-than-expected speeds, reflecting both tighter refinancing conditions and borrower credit constraints.
1.5 to 3.5 Coupons
6.5 Coupons
Credit Model 7.0
Our much-anticipated Credit Model v7 is now available in production on the RiskSpan Platform. Key features include:
These enhancements equip investors and risk managers with deeper tools for analyzing loss dynamics across mortgage, GSE, FHA, and VA loan cohorts.
Contact us to learn more.
Register here for next month’s call: Thursday, August 21st, 2025, 1 p.m.
Each month, we host a Models & Markets call to offer our insights into recent model performance, emerging credit risks, and broader economic indicators. This month, as interest rates remain elevated and economic uncertainty persists, we addressed how both conventional and AI-based modeling techniques are shaping decision-making processes across agency, non-QM, and ARM products.
Here’s a quick recap in case you missed it.
(Click here to listen to the entire 30-minute recording, or continue reading for a summary.)
RiskSpan’s prepayment model continues to perform well based on benchmarking against actuals across coupon stacks. The team noted:
An enhanced ARM Prepayment Model (v3.8) is now live in production. It exhibits refined sensitivity to rate shocks and aims to provide improved accuracy for adjustable-rate portfolios in today’s volatile environment.
One of the highlights of the call was a deep dive into how we are testing Claude (Anthropic’s well-known LLM) as a mortgage research assistant.
Using a dataset from RiskSpan’s Snowflake instance, Claude orchestrated an end-to-end analytical workflow, including:
Claude surfaced several noteworthy trends:
Claude correctly reasoned with the provided data but could not identify some features (like “Spread at Origination”). This raises interesting questions about LLMs’ capacity to reason beyond their training corpus.
The macro backdrop continues to weigh on securitization and borrower behavior. Highlights from July’s indicators:
Contact us to learn more.
Register here for next month’s call: Thursday, July 17th, 2025, 1 p.m.
Each month, we host a Models & Markets call to offer our insights into recent model performance, emerging credit risks, and broader economic indicators. This month, we showcased our responsiveness to shifting macroeconomic dynamics and introduced new transparency elements (i.e., back-testing tools) to our prepayment and credit modeling.
Click here to listen to the entire 23-minute recording, or continue reading for a summary.
We are launching a new loan-level prepayment back-testing tool using nearly all agency loans (FN/FH/GN) aged 10 years or less. The tool runs every month through our models with historical home prices and interest rates. Based on this data, we have an interactive dashboard that will allow users to drill down into model performance with far more granularity than currently possible.
A soon to be released version of the prepay model will include:
A redesigned ARM prepayment framework, derived from the fixed-rate model. The new ARM component includes:
These updates give users the ability to more precisely tune model responses under a variety of macroeconomic and borrower scenarios.
The delinquency transition matrix incorporated into our new Credit Model V7 provides users a more nuanced credit risk assessment. This model works in conjunction with the enhanced prepayment model to better simulate the joint dynamics of default and prepay behavior across economic cycles.
We remain cautious in our outlook for the remainder of 2025 and into 2026:
The Fed Funds Rate is expected to remain elevated—currently in the 4.25–4.50% range—with the first rate cut likely in September. By year-end 2025, the market expects it to settle around 3.75–4.00%.
Mortgage rates remain stubbornly high, hovering above 6.5%, putting pressure on origination volumes and reinforcing the value of accurate prepayment modeling.
Home prices and broader macro indicators like unemployment and PCE inflation remain stable, suggesting a “wait-and-see” mode for both consumers and investors.
We continue to expand our Platform with new analytics, model documentation, and client-facing tools. Users can soon access the new back-testing report directly within the Platform, alongside these updated prepayment and credit models. These developments reflect our commitment to model transparency, data-driven innovation, and practical tools for real-time market adaptation.
Contact us to learn more.
Register here for next month’s call: Friday, June 20th, 2025 (pushed back one day on account of Juneteenth).
Each month, we host a Models & Markets call to offer our insights into recent model performance, emerging credit risks, and broader economic indicators. This month, we spotlighted model backtesting updates, macroeconomic conditions, and market analytics that are shaping investment strategies across loans, securities, and private credit.
Click here to listen to the entire 23-minute recording, or continue reading for a summary.
RiskSpan’s prepayment model continues to exhibit strong alignment with observed data across all coupon cohorts. During the call, we showcased updated backtesting results for 2022 FN/FH cohorts across multiple coupon bands (1.5s–3.5s, 4.0s–5.5s, and 6.5s), revealing that projected vs. actual CPRs remain closely correlated, even in volatile rate environments.
Additionally, RiskSpan has introduced a Non-QM-specific prepayment model to address behavioral differences in this segment. This is particularly timely, given elevated delinquency trends discussed later in the session.
Our recently enhanced Credit Model 7, leveraging a delinquency transition matrix, is expected to be released by the end of May and will provide a more granular view of credit migration patterns.
Spread at Origination (SatO), the difference between the borrower’s rate and the prevailing PMMS rate at application, is emerging as a critical predictor of refinance activity. Higher SatO values suppress prepayments even in pools with favorable coupons.
Using MBS loan-level data, we illustrated how SatO dynamics impact investor vs. owner-occupied loans, with notable geographic variation. States like CA, FL, and NY show materially different average rates for investor loans, independent of LLPA effects.
As a forward-looking initiative, we are developing a generalized spread model that isolates residual pricing differences not explained by known borrower or loan characteristics. This could further enhance predictive power by benchmarking loans against peer cohorts defined by origination date, FICO, occupancy, and geography.
The economic backdrop remains mixed:
This persistent high-rate environment will continue to dampen refinance activity and challenge affordability, reinforcing the importance of modeling spread-driven behavior accurately.
The bad news: Delinquencies are surging within the Non-QM sector, particularly for 2022–2023 vintages:
The good news: RiskSpan’s new NonQM credit and prepay models are now live to support more accurate surveillance of these exposures.
Contact us to learn more or to request a free demo of our platform and models.
Register here for our next monthly model update call: Thursday, May 15th at 1:00 ET.
Note: This post contains highlights from our April 2025 monthly modeling call, which delivered insights into the current economic climate, mortgage model enhancements, and borrower behavior trends. You can register here to watch a recording of the full 28-minute call.
Here’s what you missed:
With mortgage rates rebounding to 7%, the panel began by acknowledging the choppy waters ahead, flagging 2025 as a year likely to see persistent rate volatility. As recession risks grow and consumer stress indicators rise, modeling accuracy becomes more important than ever.
Notably, consumers are already strained:
RiskSpan’s newly released Credit Model v7 marks a significant upgrade in loan performance modeling:
This model empowers users with granular delinquency and cash flow forecasting, critical for managing portfolios amid market uncertainty.
Key findings here included:
RiskSpan’s continued focus on benchmarking these data sources helps refine both near-term and long-term modeling strategies.
The panel spotlighted borrowers with FICO scores over 800, revealing some counterintuitive dynamics:
These insights underscore the nonlinear and evolving nature of borrower behavior, especially under fluctuating rate environments.
RiskSpan’s Prepayment Model continues to track closely with actuals, validating its calibration even in today’s turbulent landscape. Combined with Credit Model v7, clients now have powerful tools for capturing credit and prepayment risk with more accuracy than ever.
Be sure to register for next month’s model update call on Thursday, May 15th at 1:00 ET.
Want a deeper dive into the new Credit Model or Prepay insights? Contact me to schedule a session with our modeling experts.
Register here for our next monthly model update call: Thursday, April 17th at 1:00 ET.
Note: This post contains highlights from our March 2025 monthly modeling call. You can register here to watch a recording of the full 28-minute call.
Mortgage and credit markets remain dynamic in early 2025, with macroeconomic conditions driving both volatility and opportunity. In yesterday’s monthly model call, my team and I shared key insights into current market trends, model performance, and what to expect in the coming months.
After trending downward in February, mortgage rates ticked up slightly in early March. Despite the fluctuation, expectations are for rates to remain relatively stable until at least summer 2025. Most mortgage-backed securities (MBS) are still deeply out of the money, making housing turnover—not rate refinancing—the dominant prepayment driver.
Macroeconomic signals remain mixed. While unemployment is still low and wage growth continues, inflation shows signs of persistence. The Fed is expected to hold the Fed Funds Rate steady through mid-year, with a potential first cut projected for June. Credit usage is creeping higher—especially in second liens and credit cards—hinting at growing consumer debt stress.
RiskSpan’s prepayment model continues to track closely with actuals across Fannie Mae, Freddie Mac, and Ginnie Mae collateral. The model shows:
These behavioral insights are informing the next version of our prepayment model, which will incorporate GSE data research to enhance forecast accuracy.
RiskSpan’s new Credit Model v7—now available—is a significant upgrade, built on a delinquency transition matrix framework. This state-transition approach enables monthly projections of:
The model’s core components include:
By modeling the lifecycle of loans and MSRs more explicitly, Credit Model v7 delivers deeper insight into portfolio credit performance, even in volatile markets.
Consumer credit balances—especially HELs and HELOCs—have grown significantly, fueled in part by debt consolidation. Credit card utilization has jumped from 22% in 2020 to nearly 30% as of late 2024, indicating growing financial strain.
Meanwhile, delinquencies in the Non-QM space (2022-2023 vintages) are rising—suggesting that investors need enhanced tools to monitor and manage these risks. RiskSpan’s tools, including the enhanced credit model and daily prepay monitoring, help investors keep pace with these shifting dynamics.
RiskSpan’s modeling team remains focused on:
Be sure to register for next month’s model update call on Thursday, April 17th at 1:00 ET.
Want a deeper dive into the new Credit Model or Prepay insights? Contact me to schedule a session with our modeling experts.
Note: This post contains highlights from our February 2025 monthly modeling call. You can register here to watch a recording of the full call (approx. 25 mins).
As we move further into 2025, key trends are emerging in the mortgage and credit markets, shaping risk management strategies for lenders, investors, and policymakers alike. RiskSpan’s latest model update highlights critical developments in mortgage prepayments, credit performance, and consumer debt trends—offering valuable insights for investors, traders, and portfolio/risk managers in these spaces.
Prepayment speeds have continued to decline in Q1 2025, largely due to a lack of housing turnover and persistently high mortgage rates. While a drop in rates during Q3 2024 temporarily mitigated lock-in effects for borrowers with very low rates, MBS speeds remain low across most cohorts.
Key drivers of observed prepayment behavior include:
The private credit market continues to expand, with increasing Non-QM and second lien originations. However, a concerning delinquency trend has emerged, with delinquencies among 2022-2023 Non-QM vintages now rising faster than among older vintages.
Consumer debt continues to rise rapidly, raising concerns about long-term credit performance:
To address these evolving market conditions, RiskSpan has rolled out key enhancements to its mortgage and credit models:
The evolving mortgage and credit landscape underscores the importance of robust modeling and risk assessment. With prepayments slowing, debt burdens rising, and consumer credit trends shifting, lenders and investors must adapt their strategies accordingly.
