Most asset-liability management (ALM) models contain an embedded prepayment model for residential mortgage loans. To gauge their accuracy, prepayment modelers typically run a back-test comparing model projections to the actual prepayment rates observed. A standard test is to run a portfolio of loans as of a year ago using the actual interest rates experienced during...
In agency pools, loans with balances below $200,000 offer prepayment protection (i.e., they prepay more slowly) relative to loans with higher balances. Servicers typically segregate these loans into specified pools that trade at a premium over TBA-deliverable pools. But the prepayment protection isn’t homogenous and varies significantly by state.1 The following chart compares the S-curve…
In light of recent news stories1 concerning efforts to stem aggressive solicitations that steer VA mortgage refinances that are not necessarily in their best interest, we thought it fitting to take a look at some of the data underlying this trend. At issue are claims that VA borrowers are being persuaded to refinance their mortgages ostensibly…
Interestingly, the shape of a deal’s S-curve tends to vary depending on who is servicing the deal. Many things contribute to this difference, including how actively servicers market refinance opportunities. How important is it to be able to evaluate and analyze the S-curves for the servicers specific to a given deal? It depends, but it could be imperative.
Last year the Federal Housing Finance Agency (FHFA)—Fannie Mae’s and Freddie Mac’s regulator—announced a streamlined version of the federal government’s popular Home Affordable Refinance Program (HARP). The streamlined program will expand HARP eligibility to include mortgages originated on or after October 1, 2017.
There are literally thousands of different servicers of Fannie Mae and Freddie Mac pools. Does the servicer make any material difference in the prepayment speed?
An instrument’s terms and conditions lie at the heart of cash flow generation and valuation. Not surprisingly, errors in terms and conditions can drive errors in valuation. Fortunately, fixing these errors is often straightforward, provided the terms and conditions data is readily available, which is not always the case for private placement instruments.
Are there differences in the prepayment speeds of various Freddie Mac specified pools?
Watch the short video to find out the answer and to see just how easy this can be done with RS Edge.
In an article published last year, the Harvard Business Review quotes IBM research that estimates that bad data costs US business $3 Trillion per year. Although it is difficult to identify the specific cost associated with bad data in market-risk management, it is obvious that managing data has never been more important.
The success of a market-risk management implementation is largely dependent on a validated, scalable, and well-governed data management process.
Are there performance differences between FHA insured loans and those guaranteed by the VA?
Watch the short video for insights and to see just how easy this can be done with RS Edge.