Valuation Commentary
AD&Co OAS 5.2b: Enhanced Data, Bloomberg Links, Pay-ups & More
by Alex Levin

Our July Pipeline introduced a new OAS version 5.2 loaded with improvements. Now, using this OAS as the engine, we have built a more powerful Excel application featuring the ability to take advantage of the enhanced pool data (loan size, LTV, FICO, geography, purpose, type, occupancy). The Excel sheet even has a Bloomberg link so that a user can download available data automatically. Whereas enhanced data is a benefit, it's not a must: missing data is disregarded and carries no effect on prepayments.

Simple Modeling Approach
How is the additional information being used? The entire set of data, beyond WAC and WAM, collapses into just two tunings: the turnover tuning and the refinancing tuning. For example, high average LTV leads to a slower refinancing, but a faster turnover. Loan size and credit score are other important indicators of refinancibility. Some states are proven to be faster than others. Occupants of single-family, first homes, refinance most often, etc.

Just one additional DLL comes with the system - it translates the enhanced data into turnover/refi tunings. All Bloomberg links are built-in, but always in a VBA module and never by worksheet formulas. Hence, one can overwrite Bloomberg data without damaging the links embedded in the spreadsheet.

Exhibit 1. Enhanced information (grey cells) linked to Bloomberg