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Articles Tagged with: Prepayment Analytics

RiskSpan, Dominium Advisors Announce Market Color Dashboard for Mortgage Loan Investors

ARLINGTON, Va., January 24, 2024 – RiskSpan, the leading tech provider of data management and analytics services for loans and structured products, has partnered with tech-enabled asset manager Dominium Advisors to introduce a new whole loan market color dashboard to RiskSpan’s Edge Platform.

This new dashboard combines loan-level market pricing and trading data with risk analytics for GSE-eligible and non-QM loans. It enables loan investors unprecedented visibility into where loans are currently trading and insight on how investors can currently achieve excess risk-adjusted yields.

The dashboard highlights Dominium’s proprietary loan investment and allocation approach, which allows investors to evaluate any set of residential loans available for bid. Leveraging RiskSpan’s collateral models and risk analytics, Dominium’s software helps investors maximize yield or spread subject to investment constraints, such as a risk budget, or management constraints, such as concentration limits.

“Our strategic partnership with RiskSpan is a key component of our residential loan asset management operating platform ,” said Peter A. Simon, Founder and CEO of Dominium Advisors. “It has enabled us to provide clients with powerful risk analytics and data management capabilities in unprecedented ways.”

“The dashboard is a perfect complement to our suite of analytical tools,” noted Janet Jozwik, Senior Managing Director and Head of Product for RiskSpan’s Edge Platform. “We are excited to be a conduit for delivering this level of market color to our mortgage investor clients.”

The market color dashboard (and other RiskSpan reporting) can be accessed by registering for a free Edge Platform login at


About RiskSpan, Inc. 

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

Its mission is to be the most trusted and comprehensive source of data and analytics for loans and structured finance investments. Learn more at

About Dominium Advisors Dominium Advisors is a tech-enabled asset manager specializing in the acquisition and management of residential mortgage loans for insurance companies and other institutional investors. The firm focuses on newly originated residential mortgage loans made to high quality borrowers – GSE eligible, jumbo and non-QM. Its proprietary loan-level software makes possible the construction of loan portfolios that achieve investor defined objectives such as higher risk-adjusted yields and spreads or limited exposure to tail risk events. Learn more at

Connect with us at SFVegas 2024

Click Here to book a time to connect

RiskSpan is delighted to be sponsoring SFVegas 2024!

Connect with our team there to learn how we can help you move off your legacy systems, streamline workflows and transform your data.

Click Here to book a time to connect

Don’t miss these RiskSpan presenters at SFVegas 2024

Bernadette Kogler

Housing Policy:
What’s Ahead
Mon, Feb 26th, 1:00 PM

Tom Pappalardo

Future of Fintech
Wed, Feb 28th, 9:15 AM

Divas Sanwal

Big Data & Machine Learning: Impacts on Origination
Wed, Feb 28th, 11:05 AM

Can’t make the panels?

Click here to make an appointment to connect. Or just stop by Booth 13 in the exhibit hall!

Impact of Mr. Cooper’s Cyber Security Incident on Agency Prepayment Reporting

Amid the fallout of the cyberattack against Mr. Cooper on October 31st was an inability on the large servicer’s part to report prepayment activity to investors.

According to Freddie Mac, the incident “resulted in [Mr. Cooper’s] shutting down certain systems as a precautionary measure. As a result, Freddie Mac did not receive loan activity reporting, which includes loan payoffs and payment corrections, from Mr. Cooper during the last few days of the reporting period related to October loan activity.”

Owing to Mr. Cooper’s size, were curious to measure what (if any) impact its missing days of reporting might have on overall agency speeds.

Not a whole lot, it turns out.

This came as little surprise given the very low prepayment environment in which we find ourselves, but we wanted to run the numbers to be sure. Here is what we found.

We do not know precisely how much reporting was missed and assumed “the last few days of the reporting period” to mean 3 days.

Assuming 3 days means that Mr. Cooper’s reported speeds of 4.5 CPR to Freddie and 4.6 CPR to Fannie likely should have been 5.2 CPR and 5.4 CPR, respectively. While these differences are relatively small for to Mr. Cooper’s portfolio (less than 1 CPR) the impact on overall Agency speeds is downright trivial — less than 0.05 CPR.

Fannie MBSFreddie MBS
Sch. Bal.195,221,550,383168,711,346,228
CPR (reported)4.64.5
CPR (estimated*)5.45.2
*assumes three days of unreported loan activity and constant daily prepayments for the month

Fannie Mae and Freddie Mac will distribute scheduled principal and interest when servicers do not report the loan activity. Prepayments that were not reported “will be distributed to MBS certificateholders on the first distribution date that follows our receipt and reconciliation of the required prepayment information from Mr. Cooper.”

Snowflake Tutorial Series: Episode 3

Using External Tables Inside Snowflake to work with Freddie Mac public data (13 million loans across 116 fields)

Using Freddie Mac public loan data as an example, this five-minute tutorial succinctly demonstrates how to:

  1. Create a storage integration
  2. Create an external stage
  3. Grant access to stage to other roles in Snowflake
  4. List objects in a stage
  5. Create a format file
  6. Read/Query data from external stage without having to create a table
  7. Create and use an external table in Snowflake

This is the third in a 10-part tutorial series demonstrating how RiskSpan’s Snowflake integration makes mortgage and structured finance analytics easier than ever before.

Episode 1, Setting Up a Database and Uploading 28 Million Mortgage Loans, is available here.

Episode 2, Using Python User-Defined Functions in Snowflake SQL, is available here.

Future topics will include:

  • OLAP vs OLTP and hybrid tables in Snowflake
  • Time Travel functionality, clone and data replication
  • Normalizing data and creating a single materialized view
  • Dynamic tables data concepts in Snowflake
  • Data share
  • Data masking
  • Snowpark: Data analysis (pandas) functionality in Snowflake

RiskSpan’s Snowflake Tutorial Series: Ep. 2

Learn how to use Python User-Defined Functions in Snowflake SQL

Using CPR computation for a pool of mortgage loans as an example, this six-minute tutorial succinctly demonstrates how to:

  1. Query Snowflake data using SQL
  2. Write and execute Python user-defined functions inside Snowflake
  3. Compute CDR using Python UDF inside Snowflake SQL

This is this second in a 10-part tutorial series demonstrating how RiskSpan’s Snowflake integration makes mortgage and structured finance analytics easier than ever before.

Episode 1, Setting Up a Database and Uploading 28 Million Mortgage Loans, is available here.

Future topics will include:

  • External Tables (accessing data without a database)
  • OLAP vs OLTP and hybrid tables in Snowflake
  • Time Travel functionality, clone and data replication
  • Normalizing data and creating a single materialized view
  • Dynamic tables data concepts in Snowflake
  • Data share
  • Data masking
  • Snowpark: Data analysis (pandas) functionality in Snowflake

Prepayment Modeling: Today’s Housing Turnover Conundrum


Alex Fishbein

Director, TD Securities

Divas Sanwal

Head of Modeling, RiskSpan

Raj Dosaj

Chief Revenue Officer, RiskSpan

Recorded: Thursday, June 22

Accurately modeling the lock-in effect on housing turnover presents some unique challenges.

Join TD’s Alex Fishbein and RiskSpan’s Divas Sanwal as they discuss various approaches available to modelers for tackling these challenges.

What Do 2023 Origination Trends Mean for MSRs?

When it comes to forecasting MSR performance and valuations, much is made of the interest rate environment, and rightly so. But other loan characteristics also play a role, particularly when it comes to predicting involuntary prepayments.

So let’s take a look at what 2023 mortgage originations might be telling us.

Average credit scores, which were markedly higher than normal during the pandemic years, have returned during the first part of 2023 to averages observed during the latter half of the 2010s.

The most credible explanation for this most recent reversion to the mean is the fact that the Covid years were accompanied by an historically strong refinance market. Refis traditionally have higher FICO scores than purchase mortgages, and this is apparent in the recent trend.

Purchase markets are also associated with higher average LTV ratios than are refi markets, which accounts for their sharp rise during the same period

Consequently, in 2023, with high home prices persisting despite extremely high interest rates, new first-time homebuyers with good credit continue to be approved for loans, but with higher LTV and DTI ratios.

Between rates and home prices,​​borrowers simply need to borrow more now than they would have just a few years ago to buy a comparable house. This is reflected not just in the average DTI and LTV, but also the average loan size (below) which, unsurprisingly, is trending higher as well.

Recent large increases to the conforming loan limit are clearly also contributing to the higher average loan size.

What, then, do these origination trends mean for the MSR market?

The very high rates associated with newer originations clearly translate to higher risk of prepayments. We have seen significant spikes in actual speeds when rates have taken a leg down — even though the loans are still very new. FICO/LTV/DTI trends also potentially portend higher delinquencies down the line, which would negatively impact MSR valuations.

Nevertheless, today’s MSR trading market remains healthy, and demand is starting to catch up with the high supply as more money is being raised and put to work by investors in this space. Supply remains high due to the need for mortgage originators to monetize the value of MSR to balance out the impact from declining originations.

However, the nature of the MSR trade has evolved from the investor’s perspective. When rates were at historic lows for an extended period, the MSR trade was relatively straightforward as there was a broader secular rate play in motion. Now, however, bidders are scrutinizing available deals more closely — evaluating how speeds may differ from historical trends or from what the models would typically forecast.

These more granular reviews are necessarily beginning to focus on how much lower today’s already very low turnover speeds can actually go and the extent of lock-in effects for out-of-the-money loans at differing levels of negative refi incentive. Investors’ differing views on prepays across various pools in the market will often be the determining factor on who wins the bid.

Investor preference may also be driven by the diversity of an investor’s other holdings. Some investors are looking for steady yield on low-WAC MSRs that have very small prepayment risk while other investors are seeking the higher negative convexity risk of higher-WAC MSRs — for example, if their broader portfolio has very limited negative convexity risk.

In sum, investors have remained patient and selective — seeking opportunities that best fit their needs and preferences.

So what else do MSR holders need to focus on that may may impact MSR valuations going forward? 

The impact from changes in HPI is one key area of focus.

While year-over-year HPI remains positive nationally, servicers and other investors really need to look at housing values region by region. The real risk comes in the tails of local home price moves that are often divorced from national trends. 

For example, HPIs in Phoenix, Austin, and Boise (to name three particularly volatile MSAs) behaved quite differently from the nation as a whole as HPIs in these three areas in particular first got a boost from mass in-migration during the pandemic and have since come down to earth.

Geographic concentrations within MSR books will be a key driver of credit events. To that end, we are seeing clients beginning to examine their portfolio concentration as granularly as zipcode level. 

Declining home values will impact most MSR valuation models in two offsetting ways: slower refi speeds will result in higher MSR values, while the increase in defaults will push MSRs back downward. Of these two factors, the slower speeds typically take precedence. In today’s environment of slow speeds driven primarily by turnover, however, lower home prices are going to blunt the impact of speeds, leaving MSR values more exposed to the impact of higher defaults.

Edge: Zombie Banks

At the market highs, banks gorged themselves on assets, lending and loading their balance sheets in an era of cheap money and robust valuations. As asset prices drop, these same companies find their balance sheets functionally impaired and in some cases insolvent. They are able to stay alive with substantial help from the central bank but require ongoing support. This support and an unhealthy balance sheet preclude them from fulfilling their role in the economy.

We are describing, of course, the situation in Japan in the late 1980s and early 1990s, when banks lent freely, and companies purchased both real estate and equity at the market highs. When the central bank tightened monetary policy and the stock market tanked, many firms became distressed and had to rely on support from the central bank to stay afloat. But with sclerotic balance sheets, they were unable to thrive, leading to the “lost decade” (or two or three) of anemic growth.

While there are substantial parallels between the U.S. today and Japan of three decades ago, there are differences as well. Firstly, the U.S. has a dynamic non-bank sector that can fill typical roles of lending and financial intermediation. And second, much of the bank impairment comes from Agency MBS, which slowly, but surely, will prepay and relieve pressure on their HTM assets.

Source: The Wall Street Journal

How fast will these passthroughs pay off? It will vary greatly from bank to bank and depends on their mix of passthroughs and their loan rates relative to current market rates, what MBS traders call “refi incentive” or “moniness.” It is helpful to remember that incentive also matters to housing turnover, which is a form of mortgage prepayment. For example, a borrower with a note rate that is 100bp below prevailing rates is much more likely to move to a new house than a borrower with a note rate that is 200bp out of the money, a trait that mortgage practitioners call “lock-in”.

Source: RiskSpan’s Edge Platform

As a proxy for the aggregate bank’s balance sheet, we look at the universe of conventional and GNMA passthroughs and remove the MBS held by the Federal Reserve.1 The Fed’s most substantial purchases flowed from their balance sheet expansion during COVID, when mortgage rates were at all-time lows. Consequently, the Fed owns a skew of the MBS market. Two-thirds of the Fed’s position of 30yr MBS have a note rate of 3.25% or lower. In contrast, the market ex Fed has just under 50% of the same note rates.

Source: RiskSpan’s Edge Platform

From here, we can estimate prepayments on the remaining universe. Prepay estimates from dealers and analytics providers like RiskSpan vary, but generally fall in the 4 to 6 CPR range for out-of-the-money coupons. This, coupled with scheduled principal amortization of roughly 2-3% per annum means that for this level in rates, runoff in HTM MBS should occur around 8% per annum — slow, but not zero. After five years, approximately 1/3 of the MBS should pay off. Naturally, the pace of runoff can change as both mortgage rates and home sales change.

While the current crisis contains echoes of the Japanese zombie bank crisis of the 1990s, there are notable differences. U.S. banks may be hamstrung over the next few years, with reduced capacity to make new loans as MBS in their HTM balance sheets run off over the next few years. But they will run off — slowly but surely.

Webinar Recording: An Investor’s Guide to America’s Housing Supply Crisis


Amy Crews Cutts

President, AC Cutts and Associates and Chief Economist, NACM

Michael Neal

Equity Scholar and 
Principal Research Associate, Urban Institute

Janet Jozwik

Senior Managing Director and Head of Climate Analytics, RiskSpan

Divas Sanwal

Managing Director and Head of Modeling, RiskSpan

Recorded: Wednesday, March 29th

An informative webinar on the nation’s current “out-of-whack” housing supply and what it means for mortgage investors, homeowners, prospective homebuyers, and renters alike!

Housing economists Amy Crews Cutts and Michael Neal join RiskSpan credit and prepayment modelers Janet Jozwik and Divas Sanwal as they explore the factors that contribute to the current housing supply imbalance, including the cost of building, the impact of permits and zoning, and the emergence of the “missing middle.” They discuss how high interest rates and rental prices are incentivizing owners who relocate to hold old on to their old properties and become landlords. They also examine the impact of ADUs, zoning issues, and the availability of renovation financing.

Mortgage loan and security investors will learn about what housing supply means for prepay speeds. The panelists will consider the role of financing in addressing housing supply issues, including the market for low-balance loans and unconventional options like contracts for deed and lease-to-own arrangements.

The panel discusses the evolving housing needs of the population, including the desire to age in place, the challenges posed by multigenerational living arrangements, and the viability of several proposed solutions, including the potential for converting unused commercial properties into housing.

Are Recast Loans Skewing Agency Speeds?

In a previous blog, we highlighted large curtailments on loans, behavior that was driving a prepayment spike on some new-issue pools. Any large curtailment should also result in shortening the remaining term of the loan because the mortgage payment is nearly always “level-pay” for loans in a conventional pool. And we see that behavior for all mortgages experiencing large curtailments.

However, we noted that nearly half of these loans showed a subsequent extension of their remaining term back to where it would have been without the curtailment.1 This extension occurred anywhere between zero and sixteen months after the curtailment, with a median of one month after the large payment. We presume these maturity extensions are a loan “recast,” which is explained well in a recent FAQ from Rocket Mortgage. In summary, a recast allows the borrower to lower their monthly payment after making a curtailment above some threshold, typically at least $10,000 extra principal.

Some investors may not be aware that a recast loan may remain in the trust, especially since the terms of the loan are being changed without a buyout.2 Further, since the extension lowers the monthly payment, the trust will receive principal more slowly ex curtailment than under the original terms of the loan. This could possibly affect buyers of the pool after the curtailment and before the recast.

While the number of recast loans is small, we found it interesting that the loan terms are changed without removing the loans from the pool. We identified nearly 7,800 loans that were issued between 2021 Q4 and 2022 Q1 and had both a curtailment greater than $10,000 and a subsequent re-extension of loan term.

Of these loans, the typical time to term-recast is zero to two months, with 1% of the loans recasting a year or more after the curtailment.

Some of these loans reported multiple curtailments and recasts, with loan 9991188863 in FR QD1252 extending on three separate occasions after three large curtailments. It seems the door is always open to extension.

For loans that recast their maturities after a curtailment, 85% had extensions between 10 and 25 years.

Large curtailments are uncommon and term-recasts comprise roughly half of loans in our sample with large curtailments, so term recasts will typically have only a small effect on pool cash flows, extending the time of principal receipt ex curtailment and possibly changing borrower behavior.3 For large pools, any effect will be typically exceeded by prepayments due to turnover.

However, for some smaller pools the WAM extension due to recast is noticeable. We identified dozens of pools whose WAM extended after a recast of underlying loan(s). The table below shows just a few examples. All of these pools are comparatively small, which is to be expected since just one or two individual loan recasts can have an outsized effect on a small pool’s statistics.

Pool IDFactor DateCurrent FaceExtension (months)
FR QD76177/202220,070,7376
FR QD00061/202215,682,7755
FN CB336711/202214,839,9195
FR QD57367/202210,916,9596
FN BU05814/202210,164,0006
FR QD44926/20223,113,53216
FN BV20765/20223,165,50918
FR QD60137/20223,079,25022

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