LTV, Low and Slow — RS Edge Analysis

In agency MBS, the specified pool market prices high-LTV loans at a pay-up over TBA for the prepayment protection they offer. This relationship has been well established for both high-LTV purchase loans as well as MHA (Making Home Affordable–i.e., modification and refi programs for troubled loans) production. But what about low-LTV loans? In this post,… ShareTweetShare

An Introduction to RiskSpan’s Benchmarking Tool

RiskSpan’s Benchmarking Tool includes the most recent monthly loan-level issuance data released by Fannie Mae and Freddie Mac (the GSEs), providing insights into the characteristics of mortgage loans made throughout the U.S. Each month, we collect, normalize, and store the GSE data in our proprietary database. This allows our issuance Benchmarking Tool to generate a seller-specific… ShareTweetShare

FHFA Prepayment and Issuance Reports–Powered by RiskSpan

Last month, the Federal Housing Finance Agency’s (FHFA) Division of Conservatorship published An Update on the Single Security Initiative and the Common Securitization Platform.  This report features several vintage and prepayment reports generated by RiskSpan’s RS Edge platform. Each month RiskSpan uses this platform to generate a wide range of prepayment and issuance reports for the...ShareTweetShare

How Buyouts Drive Ginnie Mae Prepayment Speeds

Because Ginnie Mae mortgage-backed securities are backed by the full faith and credit of the U.S. government, investors are not subject to credit losses. However, the potential for non-performing loan buyouts creates an additional layer of prepayment risk. As with any prepayment, investors receive the unpaid principal balance of the loan that goes through buyout....ShareTweetShare

Back-Testing: Using RS Edge to Validate a Prepayment Model

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...ShareTweetShare

Loans Under $200K Prepay Slowly—But Not in Every State

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… ShareTweetShare

What is an “S-Curve” and Does it Matter if it Varies by Servicer?

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. ShareTweetShare