One of the nation’s leading mortgage lenders had recently acquired several large MSR portfolios and required assistance reviewing, documenting and recommending enhancements to the underlying assumptions of the model used to price the MSR portfolios at acquisition.

Requiring review and documentation included collateral assumptions, cost and revenue assumptions, and prepayment (CDR/CRR/CPR) assumptions.

The Solution

RiskSpan comprehensively analyzed the cash flow impact of each major assumption (e.g., CDR/CRR/CPR, servicing advances, fees, cost) — the collateral assumptions in the model as well as documented forecast vs. actual outcomes.

RiskSpan worked in concert with the servicer’s finance and pricing teams to collect and analyze roll rates and to forecast actual loan-level data around losses, servicing advances, servicing fees, ancillary fees, PIF, and scheduled principal payments.  


A comprehensive pricing model validation report that included the following:

  • Consolidated CDR-, CRR-, CPR-related pricing model data, including balance, delinquency status, recapture, scheduled payments, default, etc. for all acquired portfolios. The resulting dataset could be used both for deal tracking and pricing model validation 
  • Documentation of the calculation and location of pricing model fields.
  • Reconciliation of the different methods for calculating CDR, CRR, and CPR.
  • Deep dives into model predictions of short sales and foreclosure turn-times
  • Loan-state transition model forecasts and comparison of the model variables between two version of the forecast, including shift analyses.
  • Drivers of forecast variance. 
  • Identification of dials responsible for short sale and foreclosure turn forecast shifting.
  • SAS-based streamlined process for comparing model variables for sub-segment and sub-models in loan state
  • Transition Model:  Incorporation of actual and forecast into pricing models to compare with original pricing model cash flow results for acquired portfolios
  • Creation and standardization of the pricing model validation report output.
  • Automation of reporting.  
  • Improvement of the process by creating a calculation template that could be easily replicated for other portfolios. 
  • Documentation of the validation process and comprehensive review of the validation results with the servicer’s risk team, finance team and pricing team management.