Register here for our next monthly model update call: Thursday, February 19th at 1:00 ET.
For highlights from our most recent call (December), click here.
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, 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.
Webinar: Tuesday, March 25th | 1:00 ET
MSR Bulk Trading Insights
Join us for an update from MBA’s Chief Economist, Michael Fratantoni, on the current state of the MSR market.
Then, stick around for actionable strategies from RiskSpan’s Chris Kennedy and Dan Fleishman on how to gain a competitive edge, including:
– How to effectively leverage strategic bidding to maximize outcomes.
– The importance of on-the-fly, ad hoc analysis in responding to market dynamics.
– Best practices for MSR valuations and trading analytics to ensure precise decision-making.
Whether you’re scaling your MSR portfolio or seeking to optimize your trading processes, this webinar will equip you with the tools and insights to stay ahead in a competitive landscape.
Panelists
Michael Fratantoni, Chief Economist, Mortgage Bankers Association
Chris Kennedy, Director, RiskSpan
Dan Fleishman, Head of Client Success, RiskSpan
We are delighted to announce the release of RiskSpan’s series of Private Credit Primers aimed at providing investors with essential knowledge about the diverse and growing landscape of the loan types that private credit investors are buying. These primers offer at-a-glance insights into the mechanics, performance expectations, and unique features of various asset classes, enabling investors to make informed decisions in this dynamic market.
The first three primers in the series are available now: They focus on Residential Transition Loans (RTLs), Personal Loans, and HELOCs — loan types that are becoming increasingly popular in the private credit space.
RTLs are short-term loans designed to help borrowers bridge financial gaps during transitional periods in residential real estate. Often used for construction, bridge, and relocation purposes, RTLs typically have terms ranging from 6 to 36 months and feature higher interest rates than traditional long-term financing. These loans play a crucial role for both homeowners and real estate investors, especially in markets where property values fluctuate or where short-term liquidity is needed.
Personal loans can be secured or unsecured and are used for a variety of purposes, including debt consolidation, medical expenses, and large purchases. They are repaid in fixed monthly installments over a predetermined period.
The complexity of modeling HELOCs stems from their sharing characteristics of both a mortgage and a credit card. Reliable assumptions about borrower behavior both during the draw period (when balances can move in either direction at any time) and during the post-draw, repayment-only period are crucial to forecasting correct cash flows.
Each primer in the series will not only break down the mechanics of the loan type but also provide performance insights and modeling considerations. With the ongoing volatility in the financial markets, these primers will explore how various asset classes perform under different economic conditions, such as rising interest rates, declining home prices, or increasing unemployment.
By offering practical, data-driven insights, the Private Credit Primer series will serve as an invaluable resource for private credit investors who are looking to deepen their understanding of these asset classes and navigate potential risks effectively.
Stay tuned for more primers in this series, as we continues to expand RiskSpan’s library of resources for private credit investors!
