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HECM Loan Data, Smart Assumptions, and Cross-Sector Trade Impact Headline New Edge Platform Functionality

ARLINGTON, Va., December 8, 2022 — RiskSpan, a leading technology company and the most comprehensive source for data management and analytics for residential mortgage and structured products, has announced a flurry of new functionality on its award-winning Edge Platform.

GNMA HECM Datasets and Involuntary Prepayment Breakdown: The GNMA HECM dataset is now available to subscribers in Edge’s Historical Performance module, allowing market participants to find performance differentials within FHA reverse mortgage data. As with conventional datasets available on Edge, users slice and dice by any loan attribute to create S-curves, aging curves, time series and other decision-useful analytics.

Edge users also can now parse GNMA buyout metrics by reason, based on whether individual loans were in delinquency, loss mitigation, or foreclosure when they were removed from the security.

Smart Assumptions: Rather than relying on static assumptions to back-fill missing credit scores, DTIs, LTVs and other data on loan acquisition tapes, the Edge Platform has begun employing a smart, dynamic approach to creating more educated estimates of missing assumptions based on other loan characteristics. Users have the option of accepting these assumptions or substituting their own.

Cross-Sector Trade Impact: As a provider of loan and securities analytics, RiskSpan is making it easier to forecast the combined performance of loan and securities portfolios together in a single view. This allows traders and analysts tools to evaluate the risk and return impact of not only different loan selections or bond selections but also cross-sector reallocation.

These new enhancements all further the Edge Platform’s purpose of providing frictionless insight, knocking down barriers to efficient, clear and data-driven valuation and risk assessment.

Comprehensive details of this and other new capabilities are available by requesting a no-obligation live demo at riskspan.com.

This new functionality is the latest in a series of enhancements that is making the Edge Platform increasingly indispensable for Agency MBS traders and investors.

Get a Demo

 About RiskSpan, Inc. 

RiskSpan offers cloud-native SaaS analytics for on-demand market risk, credit risk, pricing and trading. With our data science experts and technologists, we are the leader in data as a service and end-to-end solutions for loan-level data management and analytics.

Our mission is to be the most trusted and comprehensive source of data and analytics for loans and structured finance investments.

Rethink loan and structured finance data. Rethink your analytics. Learn more at www.riskspan.com.

Media contact: Timothy Willis

RiskSpan Wins Risk as a Service Category for Third Consecutive Year, Rises 6 Places in RiskTech100® 2023 Ranking

ARLINGTON, Va., December 6, 2022 –RiskSpan’s Edge Platform, the only single solution to include data management, models, and analytics on fully scalable, cloud-native architecture, wins “Risk as a Service” category for a third consecutive year in Chartis Research’s vaunted RiskTech100® ranking of the world’s 100 top risk technology companies.

RiskSpan was also called out as a most significant mover, climbing 6 places in the overall ranking and improving its position for the fourth year in a row.

“RiskSpan’s strong innovation in data management helped drive its six-place rise in the rankings this year,’ said Sid Dash, Research Director at Chartis. ‘The company has won the RaaS award for three consecutive years, reflecting its tech-centric and pragmatic approach in a key area of the risk management space.”

Licensed by some of the largest asset managers, broker/dealers, hedge funds, mortgage REITs and insurance companies in the U.S., the Edge Platform is a fully managed risk solution across all asset classes with specialization in residential mortgage and structured products.

“This year’s award reflects the Edge Platform’s unique ability to help users find alpha, execute transactions with ease, and effectively manage portfolio risks,” noted Bernadette Kogler, RiskSpan’s co-founder and CEO. It is satisfying to be recognized for our continued efforts to help clients transform their business with modern workflows and operations to optimize productivity, cost, and resilience.”

About RiskSpan, Inc.

Our mission is to be the most trusted and comprehensive source of data and analytics for loans and structured finance investments.

Rethink loan and structured finance data. Rethink your analytics. Learn more at www.riskspan.com.

About Chartis Research:

Chartis Research is the leading provider of research and analysis on the global market for risk technology. It is part of Infopro Digital, which owns market-leading brands such as Risk and WatersTechnology. Chartis’ goal is to support enterprises as they drive business performance through improved risk management, corporate governance and compliance, and to help clients make informed technology and business decisions by providing in-depth analysis and actionable advice on virtually all aspects of risk technology.

Media contact: Timothy Willis

Incorporating Covid-Era Mortgage Data Without Skewing Your Models

What we observed during Covid represents a radical departure from what we observed pre-Covid. To what extent do these observations impact long-term trends observed for mortgage performance? Should these data fundamentally impact the way in which we think about the effects borrower, loan and macroeconomic characteristics have on mortgage performance? Or do we need to simply account for them as a short-term blip?

The process of modeling mortgage defaults and prepayments typically begins with identifying long-term trends and reference values. These aid in creating the baseline forecasts that undergird the model in its most simplistic form. Modelers then begin looking for deviations from this baseline created by specific loan, borrower, and property characteristics, as well as by key macroeconomic variables.

Identifying these relationships enables modelers to begin quantifying the extent to which micro factors like income, credit score, and loan-to-value ratios interact with macro indicators like the unemployment rate to cause prepayments and defaults to depart from their baseline. Data observations aggregated over extended periods give a comprehensive picture possible of these relationships.

In practice, the human behavior underlying these and virtually all economic models tends to change over time. Modelers account for this by making short-term corrections based on observations from the most recent time periods. This approach of tweaking long-term trends based on recent performance works reasonably well under most circumstances. One could reasonably argue, however, that tweaking existing models using performance data collected during the Covid-19 era presents a unique set of challenges.

What was observed during Covid represents a radical departure from what was observed pre-Covid. To what extent do these observations impact long-term trends and reference values. Should these data fundamentally impact the way in which we think about the effects borrower, loan and macroeconomic characteristics have on mortgage performance? Or do we need to simply account for them as a short-term blip?

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How Covid-era mortgage data differs

When it comes to modeling mortgage performance, we generally think of three sets of factors: 1) macroeconomic conditions, 2) loan and borrower characteristics, and 3) property characteristics. In determining how to account for Covid-era data in our modeling, we first must attempt to evaluate its impact on these factors. Three macroeconomic factors have played an especially significant role recently. First, as reflected in the chart below, we experienced a significant home-price decline during the 2008 financial crisis but a steady increase since then.

Second, mortgage rates continued to decline for the most part during the crisis and beyond. There were brief periods when they increased, but they remained low by and large.

The third piece is the unemployment rate. Unemployment spiked to around 10 percent during the financial crisis and then slowly declined.

When home prices declined in the past, we typically saw the government attempt to respond to it by reducing interest rates. This created something of a correlation between home prices and mortgage rates. Looking at this from a purely statistical viewpoint, the only thing the historical data shows is that falling home prices bring about a decline in mortgage rates. (And rising home prices bring about higher interest rates, though to a far lesser degree.) We see something similar with unemployment. Falling unemployment is correlated with rising home prices.

But then Covid arrives and with it some things we had not observed previously. All the “known” correlations among these macroeconomic variables broke down. For example, the unemployment rate spikes to 15 percent within just a couple of months and yet has no negative impact at all on home prices. Home prices, in fact, continue to rise, supported by the very generous unemployment benefits provided during Covid pandemic.

This greatly complicates the modeling. Here we had these variable relationships that appeared steady over a period of decades, and all of our modeling was being done (knowingly or unknowingly) relying on these correlations, and suddenly all these correlations are breaking down.

What does this mean for forecasting prepayments? The following chart shows prepayments over time by vintage. We see extremely high prepayment rates between early 2020 (the start of the pandemic) and early 2022 (when rates started rising). This makes sense.

Look at what happens to our forecasts, however, when rates begin to increase. The following chart reflects the models predicting a much steeper drop-off in prepayments than what was actually observed for a July 2021 issuance Fannie Mae major of coupon 2.0. These mortgage loans with no refinance incentive are prepaying faster than what would be expected based on the historical data.

What is causing this departure?

The most plausible explanation relates to an observed increase in cash-out refinances caused by the recent run-up in home prices and resulting in many homeowners suddenly finding themselves with a lot of home equity to tap into. Pre-Covid , cash-outs accounted for between a third and a quarter of refinances. Now, with virtually no one in the money for a rate-and-term refinance, cash-outs are accounting for over 80 percent of them.

We learn from this that we need to incorporate the amount of home equity gained by borrowers into our prepayment modeling.

Modeling Credit Performance

Of course, Covid’s impacts were felt even more acutely in delinquency rates than in prepays. As the following chart shows, a borrower that was 1-month delinquent during Covid had a 75 percent probability of being 2-months delinquent the following month.

This is clearly way outside the norm of what was observed historically and compels us to ask some hard questions when attempting to fit a model to this data.

The long-term average of “two to worse” transitions (the percentage of 60-day delinquencies that become 90-day delinquencies (or worse) the following month) is around 40 percent. But we’re now observing something closer to 50 percent. Do we expect this to continue in the future, or do we expect it to revert back to the longer-term average. We observe a similar issue in other transitions, as illustrated below. The rates appear to be stabilizing at higher levels now relative to where they were pre-Covid. This is especially true of more serious delinquencies.

How do we respond to this? What is the best way to go about combining this pre-Covid and post-Covid data?

Principles for handling Covid-era mortgage data

One approach would be to think about Covid data as outliers that should be ignored. At the other extreme, we could simply accept the observed data and incorporate it without any special considerations. A split-the-difference third approach would have us incorporate the new data with some sort of weighting factor for use in future stress scenarios without completely casting aside the long-term reference values that had stood the test of time prior to the pandemic.

This third approach requires us to apply the following guiding principles:

Assess assumed correlations between driving macro variables: For example, don’t allow the model to assume that increasing unemployment will lead to higher home prices just because it happened once during a pandemic.
Choose short-term calibrations carefully. Do not allow models to be unduly influenced by blindly giving too much weight to what has happened in the past two years.
Determine whether the new data in fact reflects a regime shift. How long will the new regime last?
Avoid creating a model that will break down during future unusual periods.

Prepare for other extremes. Incorporate what was learned into future stress testing

Build models that allow sensitivity analyses and are easy to change/tune. Models need to be sufficiently flexible that they can be tuned in response to macroeconomic events in a matter of weeks, rather than taking months or years to design and build an entirely new model.

Covid-era mortgage data presents modelers with a unique challenge. How to appropriately consider it without overweighting it. These general guidelines are a good place to start. For ideas specific to your portfolio, contact a RiskSpan representative.

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man looking at a financial analytics platform

RiskSpan Unveils New “Reverse ETL” Mortgage Data Mapping and Extract Functionality

ARLINGTON, Va., October 19, 2022 – Subscribers to RiskSpan’s Mortgage Data Management product can now not only leverage machine learning to streamline the intake of loan data from any format, but also define any target format for data extraction and sharing.

A recent enhancement to RiskSpan’s award-winning Edge Platform enables users to take in unformatted datasets from mortgage servicers, sellers and other counterparties and convert them into their preferred data format on the fly for sharing with accounting, client, and other downstream systems.

Analysts, traders, and portfolio managers have long used Edge to take in and store datasets, enabling them to analyze historical performance of custom cohorts using limitless combinations of mortgage loan characteristics and run predictive analytics on segments defined on the fly. With Edge’s novel “Reverse ETL” data extract functionality, these Platform users can now also easily and fully design an export format for exporting their data, creating the functional equivalent of a full integration node for sharing data with literally any system on or off the Edge Platform.

Market participants tout the revolutionary technology as the end of having to share cumbersome and unformatted CSV files with counterparties. Now, the same smart mapping technology that for years has facilitated the ingestion of mortgage data onto the Edge Platform makes extracting and sharing mortgage data with downstream users just as easy.

Comprehensive details of this and other new capabilities using RiskSpan’s Edge Platform are available by requesting a no-obligation live demo at riskspan.com.

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This new functionality is the latest in a series of enhancements that is making the Edge Platform’s Data as a Service increasingly indispensable for mortgage loan and MSR traders and investors.

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About RiskSpan, Inc.

RiskSpan is a leading technology company and the most comprehensive source for data management and analytics for residential mortgage and structured products. The company offers cloud-native SaaS analytics for on-demand market risk, credit risk, pricing and trading. With our data science experts and technologists, we are the leader in data as a service and end-to-end solutions for loan-level data management and analytics.

Our mission is to be the most trusted and comprehensive source of data and analytics for loans and structured finance investments.

Rethink loan and structured finance data. Rethink your analytics. Learn more at www.riskspan.com.

Media contact: Timothy Willis

New Refinance Lag Functionality Affords RiskSpan Users Flexibility in Higher Rate Environments

ARLINGTON, Va., September 29, 2022 — RiskSpan, a leading technology company and the most comprehensive source for data management and analytics for residential mortgage and structured products, has announced that users of its award-winning Edge Platform can now fine-tune the assumed time lag between a rate-incentivized borrower’s decision to refinance and ultimate payoff. Getting this time lag right unveils a more accurate understanding of the rate incentive that borrowers responded to and thus better predictions of coming prepayments.

The recent run-up in interest rates has caused the number of rate-incentivized mortgage refinancings to fall precipitously. Newfound operational capacity at many lenders, created by this drop in volume, means that new mortgages can now be closed in fewer days than were necessary at the height of the refi boom. This “lag time” between when a mortgage borrower becomes in-the-money to refinance and when the loan actually closes is an important consideration for MBS traders and analysts seeking to model and predict prepayment performance.

Rather than confining MBS traders to a single, pre-set lag time assumption of 42 days, users of the Edge Platform’s Historical Performance module can now adjust the lag assumption when building their S-curves to better reflect their view of current market conditions. Using the module’s new Input section for Agency datasets, traders and analysts can further refine their approach to computing refi incentive by selecting the prevailing mortgage rate measure for any given sector (e.g., FH 30Y PMMS, MBA FH 30Y, FH 15Y PMMS and FH 5/1 PMMS) and adjusting the lag time to anywhere from zero to 99 days.

Comprehensive details of this and other new capabilities are available by requesting a no-obligation live demo below or at riskspan.com.

GET A FREE DEMO

This new functionality is the latest in a series of enhancements that is making the Edge Platform increasingly indispensable for Agency MBS traders and investors.

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About RiskSpan, Inc. 

Our mission is to be the most trusted and comprehensive source of data and analytics for loans and structured finance investments.

Rethink loan and structured finance data. Rethink your analytics. Learn more at www.riskspan.com.

Media contact: Timothy Willis

Industry Veteran Patricia Black Named RiskSpan Chief Client Officer

ARLINGTON, Va., Sept. 19, 2022 — RiskSpan, a leading technology company and the most comprehensive source for data management and analytics for residential mortgage and structured products, has appointed Patricia Black as its Chief Client Officer.

Black takes over responsibility for managing client success across the full array of RiskSpan’s Edge Platform and services offerings. She brings more than twenty years of diversified experience as a senior financial services executive. Her expertise ranges from enterprise risk management, compliance, finance, program management, audit and controls to operations and technology, regulatory requirements, and corporate governance

As a senior leader at Fannie Mae between 2005 and 2016, Black served in a number of key roles, including as Chief Audit Executive in the aftermath of the 2008 financial crisis, Head of Strategic Initiatives, and Head of Financial Controls and SOX while the firm underwent an extensive earnings restatement process.

More recently, Black headed operations at SoFi Home Loans where she expanded the company’s partner relationships, technological capabilities, and risk management practices. Prior to SoFi, as Chief of Staff at Caliber Home Loans, she was an enterprise leader focusing on transformation, strategy, technology and operations.

“Tricia’s reputation throughout the mortgage industry for building collaborative relationships in challenging environments and working across organizational boundaries to achieve targeted outcomes is second to none,” said Bernadette Kogler, CEO of RiskSpan. “Her astounding breadth of expertise will contribute to the success of our clients by helping ensure we are optimally structured to serve them.”

“I feel it a privilege to be able to serve RiskSpan’s impressive and growing clientele in this new capacity,” said Black. “I look forward to helping these forward-thinking institutions rethink their mortgage and structured finance data and analytics and fully maximize their investment in RiskSpan’s award-winning platform and services.”

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About RiskSpan, Inc. 

RiskSpan offers cloud-native SaaS analytics for on-demand market risk, credit risk, pricing and trading. With our data science experts and technologists, we are the leader in data as a service and end-to-end solutions for loan-level data management and analytics.

Our mission is to be the most trusted and comprehensive source of data and analytics for loans and structured finance investments.

Rethink loan and structured finance data. Rethink your analytics. Learn more at www.riskspan.com.

RiskSpan Introduces Multi-Scenario Yield Table

ARLINGTON, Va., August 4, 2022

RiskSpan, a leading provider of residential mortgage and structured product data and analytics, has announced a new Multi-Scenario Yield Table feature within its award-winning Edge Platform.

REITs and other mortgage loan and MSR investors leverage the Multi-Scenario Yield Table to instantaneously run and compare multiple scenario analyses on any individual asset in their portfolio.

An interactive, self-guided demo of this new functionality can be viewed here. 

Comprehensive details of this and other new capabilities are available by requesting a no-obligation live demo at riskspan.com.

Request a No-Obligation Live Demo

With a single click from the portfolio screen, Edge users can now simultaneously view the impact of as many as 20 different scenarios on outputs including price, yield, WAL, dv01, OAS, discount margin, modified duration, weighted average CRR and CDR, severity and projected losses. The ability to view these and other model outputs across multiple scenarios in a single table eliminates the tedious and time-consuming process of running scenarios individually and having to manually juxtapose the resulting analytics.

Entering scenarios is easy. Users can make changes to scenarios right on the screen to facilitate quick, ad hoc analyses. Once these scenarios are loaded and assumptions are set, the impacts of each scenario on price and other risk metrics are lined up in a single, easily analyzed data table.

Analysts who determine that one of the scenarios is producing more reasonable results than the defined base case can overwrite and replace the base case with the preferred scenario in just two clicks.

The Multi-Scenario Yield Table is the latest in a series of enhancements that is making the Edge Platform increasingly indispensable for mortgage loan and MSR portfolio managers.

About RiskSpan, Inc. 

RiskSpan offers cloud-native SaaS analytics for on-demand market risk, credit risk, pricing and trading. With our data science experts and technologists, we are the leader in data as a service and end-to-end solutions for loan-level data management and analytics.

Our mission is to be the most trusted and comprehensive source of data and analytics for loans and structured finance investments.

Rethink loan and structured finance data. Rethink your analytics. Learn more at www.riskspan.com.

Media contact: Timothy Willis

RiskSpan Introduces Media Effect Measure for Prepayment Analysis, Predictive Analytics for Managed Data

ARLINGTON, Va., July 14, 2022

RiskSpan, a leading provider of residential mortgage and structured product data and analytics, has announced a series of new enhancements in the latest release of its award-winning Edge Platform.

Comprehensive details of these new capabilities are available byrequesting a no-obligation demo at riskspan.com.

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Media Effect – It has long been accepted that prepayment speeds see an extra boost as media coverage alerts borrowers to refinancing opportunities. Now, Edge lets traders and modelers measure the media effect present in any active pool of Agency loans—highlighting borrowers most prone to refinance in response to news coverage—and plot the empirical impact on any cohort of loans. Developed in collaboration with practitioners, it measures rate novelty by comparing rate environment at a given time to rates over the trailing five years. Mortgage portfolio managers and traders who subscribe to Edge have always been able to easily stratify mortgage portfolios by refinance incentive. With the new Media Effect filter/bucket, market participants fine tune expectations by analyzing cohorts with like media effects.

Predictive Analytics for Managed Data – Edge subscribers who leverage RiskSpan’s Data Management service to aggregate and prep monthly loan and MSR data can now kick off predictive analytics for any filtered snapshot of that data. Leveraging RiskSpan’s universe of forward-looking analytics, subscribers can generate valuations, market risk metrics to inform hedging, credit loss accounting estimates and credit stress test outputs, and more. Sharing portfolio snapshots and analytics results across teams has never been easier.

These capabilities and other recently released Edge Platform functionality will be on display at next week’s SFVegas 2022 conference, where RiskSpan is a sponsor. RiskSpan will be featured at Booth 38 in the main exhibition hall. RiskSpan professionals will also be available to respond to questions on July 19th following their panels, “Market Beat: Mortgage Servicing Rights” and “Technology Trends in Securitization.”

About RiskSpan, Inc.

Our mission is to be the most trusted and comprehensive source of data and analytics for loans and structured finance investments.

Rethink loan and structured finance data. Rethink your analytics. Learn more at www.riskspan.com.

RiskSpan Introduces Proprietary Measure for Plotting Burnout Effect on Prepays, Adds RPL/NPL Forecasting

ARLINGTON, Va., June 22, 2022 —

Comprehensive details of these new capabilities are available by requesting a no-obligation demo at riskspan.com.

Burnout Metrics – MBS traders and investors can now look up a proprietary, cumulative burnout metric that quantifies the extent to which a defined pool of mortgages has continued to pay coupons above refinance rates over time. The metric goes beyond simple comparisons of note rates to historic prevailing rates by also tracking the number of times borrowers have ignored the “media effect” of repeatedly seeing rates reach record lows. Edge users can plot empirical prepay speeds as a function of burnout to help project performance of pools with various degrees of burnout. A virtual walk-through of this functionality is available here.
Reperforming Loans – Investors in nonperforming and reperforming loans – particularly RPLs that have recently emerged from covid forbearance – can now project performance and cash flows of loans with deferred balances. Edge reads in the total debt owed (TDO) recovery method and has added key output fields like prepaid principal percent reduction and total debt owed to its cash flow report.
Hedge Ratios – The Edge Platform now enables traders and portfolio managers to easily compute, in one single step, the quantity of 2yr, 5yr, 10yr, or 30yr treasuries (or any combination of these or other hedges) that must be sold to offset the effective duration of assets in a given portfolio. Swaps, swaptions and other hedges are also supported. Clearly efficient and useful for any portfolio of interest-rate-sensitive assets, the functionality is proving particularly valuable to commercial banks with MSR holdings and others who require daily transparency to hedging ratios.

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About RiskSpan, Inc.

RiskSpan offers end-to-end solutions for data management, historical performance, predictive analytics and portfolio risk management on a secure, fast, and scalable platform that has earned the trust of the industry’s largest firms. Combining the strength of subject matter experts, quantitative analysts, and technologists, RiskSpan’s Edge platform integrates a range of datasets – structured and unstructured – and off-the-shelf analytical tools to provide you with powerful insights and a competitive advantage. Learn more at www.riskspan.com.

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Recent Edge Platform Updates

Edge Platform Updates

MSR Engine

The Platform’s extensive library of available MSR analytic outputs has been expanded to include Effective Recapture Rate and other Income and Expense fields.

Base servicing cost inputs for MSR assumptions have also been enhanced.

LOANS

The ETL tool for loan onboarding has been further enhanced with machine learning capabilities.

New fields for querying options and enhanced segmentation have been added. And SOFRWalSpread and SOFRSpotSpread are now captured in static analysis output.

Loans

HISTORICAL PERFORMANCE

Special Eligibility Program fields have been added to Fannie and Freddie pool data outputs along with a complementing SpecialProgram100 filter

Fannie and Freddie datasets now include CBR and CPR metrics (previously only available for Ginnies).

New support has been added for saving CoreLogic LLD queries with complement filters.

Enhanced historical date-based queries in Edge Perspective (e.g., option to run and save queries with relative factor dates rather than specifically coded date.

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HECM Loan Data, Smart Assumptions, and Cross-Sector Trade Impact Headline New Edge Platform Functionality

RiskSpan Wins Risk as a Service Category for Third Consecutive Year, Rises 6 Places in RiskTech100® 2023 Ranking

Incorporating Covid-Era Mortgage Data Without Skewing Your Models

How Covid-era mortgage data differs

Modeling Credit Performance

Principles for handling Covid-era mortgage data

RiskSpan Unveils New “Reverse ETL” Mortgage Data Mapping and Extract Functionality

New Refinance Lag Functionality Affords RiskSpan Users Flexibility in Higher Rate Environments

Industry Veteran Patricia Black Named RiskSpan Chief Client Officer

RiskSpan Introduces Multi-Scenario Yield Table

RiskSpan Introduces Media Effect Measure for Prepayment Analysis, Predictive Analytics for Managed Data

RiskSpan Introduces Proprietary Measure for Plotting Burnout Effect on Prepays, Adds RPL/NPL Forecasting

Recent Edge Platform Updates

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Products

Security & Compliance