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Category: Featured Webinar

RiskSpan’s May 2025 Models & Market Call

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:

Market Overview: A Climate of Volatility

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:

  • Rising consumer debt burdens
  • Increased use of personal loans and second liens for debt consolidation
  • Spikes in HEL/HELOC originations and securitizations
  • Climbing Non-QM delinquencies, particularly among 2022–2023 vintages

Model Update: Credit Model v. 7.0

RiskSpan’s newly released Credit Model v7 marks a significant upgrade in loan performance modeling:

  • Delinquency Transition Matrix core structure
  • The model projects:
    • Monthly CDR, CPR, and delinquency balances (0 through REO)
    • Loss severities, liquidated balances, and P&I flows
  • Modular components include:
    • State Transition Model
    • Severity and Liquidation Timeline Modules
  • The model is fully integrated within RiskSpan’s platform, enabling custom inputs for whole loans and securities

This model empowers users with granular delinquency and cash flow forecasting, critical for managing portfolios amid market uncertainty.


Key findings here included:

  • Daily prepay data showing extreme volatility, but offering early trend visibility
  • Trend lines derived from daily data offering good proxies for future behavior
  • Notable discrepancies within MBS-level data, especially among higher-coupon pools

RiskSpan’s continued focus on benchmarking these data sources helps refine both near-term and long-term modeling strategies.


Prepayment Behavior of Top-Tier Borrowers

The panel spotlighted borrowers with FICO scores over 800, revealing some counterintuitive dynamics:

  • Initial refinance activity is higher in the 800+ cohort—”fastest out of the gate”
  • But post-seasoning, refinance rates fall below those of the 700–750 FICO group
  • This “crossover pattern” reflects a phenomenon the team called “Accelerated Burnout”
  • Assumed strategic behavior, like exploiting lender credits, may amplify early refinance intensity

These insights underscore the nonlinear and evolving nature of borrower behavior, especially under fluctuating rate environments.


Model Performance: Staying on Track

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.



Mortgage Prepayment and Credit Trends to Watch

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.

Market Snapshot: A Mixed Bag

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.


Model Performance and Updates

Prepayment Model

RiskSpan’s prepayment model continues to track closely with actuals across Fannie Mae, Freddie Mac, and Ginnie Mae collateral. The model shows:

  • Prepayments rising slightly, particularly among 2023 vintage loans in response to rate moves.
  • Delinquent loan behavior providing rich insights: For “out of the money” (OTM) collateral, delinquent loans are showing higher turnover speeds than performing ones, as borrowers try to avoid foreclosure.
  • Turnover sensitivity to borrower FICO scores is especially pronounced for delinquent loans—highlighting the need for granular credit analytics.

These behavioral insights are informing the next version of our prepayment model, which will incorporate GSE data research to enhance forecast accuracy.

Credit Model v7: A Leap Forward

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:

  • Conditional Default Rates (CDR)
  • Conditional Prepayment Rates (CPR)
  • Loss severity and liquidated balances
  • Scheduled and total principal & interest (P&I)

The model’s core components include:

  • A vector-based severity model
  • A robust liquidation timeline module
  • Loan-level outputs by delinquency state (including foreclosure and REO)

By modeling the lifecycle of loans and MSRs more explicitly, Credit Model v7 delivers deeper insight into portfolio credit performance, even in volatile markets.


Emerging Risks and Opportunities

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.


Looking Ahead

RiskSpan’s modeling team remains focused on:

  • Continuing to improve prepayment modeling with newly available GSE data
  • Rolling out and enhancing Credit Model v7 for broader use cases
  • Providing clients with forward-looking analytics to anticipate credit stress and capitalize on market dislocations

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.



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