Vectors™ ABS Prepayment Model
 Fixed Rate Home Equity Loan (Sub Prime) Model
Adjustable Rate Home Equity Loan (Sub Prime) Model
Manufactured Housing Model
Auto Loan Model
Fixed Rate Home Equity Loan (Sub Prime) Model
Model Overview :
The Fixed Rate Home Equity Loan Prepayment Model provides models for 15yr and 30yr fixed Home Equity (Sub Prime) loans. This model was fit using first lien non-revolving mortgage data through December 2005.
Inputs : WAC, WAM, Loan Age, Loan Size, Original LTV
Factors Considered: Turnover, Refinancing, Credit Curing, Cashouts
Functional Form: Active-Passive Decomposition (for Burnout)
Loan Types Covered: 15yr & 30yr
Delivery: Subroutine and Online Demo (request a demo)
Performance Reports: Available Online (view Performance Reports)
Tuning Parameters: Turnover, Refi, Cashout, Credit Cure, Aging, SATO, Curve Spread, Lag, Scale, Slide, and Burnout
Risk Multipliers & Enhanced Data: The Home Equity Loan Prepayment model uses risk multipliers for Original Balance and Original LTV.
Model Documentation:
Fixed-Rate Home Equity Loan Prepayment Model, Sept '05
Divide & Conquer: Exploring New OAS Horizons, Parts I, II & III
Adjustable Rate Home Equity Loan (Sub Prime) Model
Model Overview: Based on ARM data through December 2005, the model incorporates the Active-Passive Decomposition method of modeling burnout found in the fixed rate model, and it utilizes a “risk aversion” methodology to model prepayment behavior near ARM reset dates. The risk aversion refers to the borrower’s propensity to refinance before reset because of their perception of a substantially higher interest rate at the reset date. The model uses a forward averaging methodology which forecasts the expected WAC the borrower will face at reset, based on the cap/floor/margin structure of the loan.
This model also has the ability to handle reset behavior past the initial roll. An important feature is that the user does not select a specific model, like “HEL_15YR.” Model selection is done based on the user inputs into the model, which are listed below.
Other major featuers of the model include the ability to forecast prepayments for Interest Only (IO) loans and Prepayment Penalty loans, as well as allowing the user to choose the interest rate on which the ARM is indexed.
Model Inputs: Original Gross WAC, Current Gross WAC, Original WAM, Loan Age, Initial Reset Months, Months Between Reset, IO Months, Penalty Months, ARM Index, Gross Margin, Life Cap, Life Floor, Periodic Cap, Periodic Floor.
Loan Level Inputs: WA Original Loan Size, WA Original LTV
Factors Considered: Turnover, Refi, Burnout, Seasonality, Risk Aversion, SATO, Home Price Appreciation (Cashout) and Yield Curve Spread Effect
Functional Form: Active-Passive Decomposition with Risk Aversion
Loan Types Covered: 2/28's, 3/27's, 5/25's, with IO and Prepay Penalty features
Delivery: Subroutine and Online Demo (request a demo)
Performance Reports: Available soon
Tuning Parameters: Turnover, Refi, Cashout, Credit Cure, Aging, SATO, Curve Spread, Lag, Scale, Slide, and Burnout
Risk Multipliers & Enhanced Data: The Vecotrs™ ABS Prepayment Model for sub prime loan types uses risk multipliers for Original Balance and Original LTV.
Model Documentation:
Divide & Conquer: Exploring New OAS Horizons, Parts I, II & III
Manufactured Housing Loan Model
Model Inputs: Coupon, Ownership Type, Unit Size, New/Used Status, Loan Term, Loan Age
Factors Considered: Refinance Incentive, Ownership Effect, Size Effect, New/Used Effect, Aging
Model Documentation:
New Prepayment Model: Mobile Homes, March '98
Auto Loan Model Model Inputs: Coupon and Age
Factors Considered: Coupon Effect, Aging, Seasonality
Model Documentation:
New Prepayment Model: Auto
Loans, June '98
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