LoanDynamics Model

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LoanDynamics (LDM) is AD&Co’s flagship prepayment and credit model that helps you manage interest rate and credit risks in mortgage loans by forecasting prepayment, delinquency, default and loss probabilities. Used across the financial industry, LoanDynamics provides an ability to measure risk and forecast portfolio values, based on a variety of changing economic and market conditions such as home prices, interest rates and unemployment.

LoanDynamics is flexible to use, allowing for cash flow projections, bond pricing/valuations, asset/liability management and hedging strategies. The model can be tuned to user-specific portfolios. Users are also given access to full documentation on how LoanDynamics is modeled, affording even greater understanding and total transparency into our approach. From the model’s construction to the outputs it generates, LoanDynamics can also effectively challenge a user’s own internal analytics.

LoanDynamics is available through a variety of third-party vendors. Product users are provided with user guides and a variety of publications that report on model updates, technology developments and related market issues.

Thanks to a cooperative effort with Equifax (EFX), Andrew Davidson & Co., Inc.’s (AD&Co) Impact Trended Credit for LDM now includes Equifax’s Revolver/Transactor metric that characterizes consumer behavior on their credit card tradelines over time. We can now quantify the impact of trended data on credit risk, prepayment rates, and the price of mortgage related assets such as loans, securities, mortgage insurance and servicing rights.


LoanDynamics (LDM) is available in various versions to satisfy client needs.
The LoanDynamics Model family includes
Agency LDM
For Agency pools

D120; vectors of prepayments, termination through repurchase at 120 days, and a combination of the two

Best for Agency Pools, CMOs, and TBAs

Agency LDM+
For Agency whole loans

D180 or life of loan vectors of voluntary and involuntary terminations and loss given default  

Best for Credit Risk Transfer deals with actual or formulaic severity and agency-quality loan portfolios
Non-Agency LDM
Non-Agency loans and RMBS (jumbo prime, Alt-A, subprime); legacy and post-crisis
Life of loan vectors of voluntary and involuntary terminations and loss given default

Best for non-agency securities and non-agency whole loans

Multifamily LDM
Agency multifamily loans and securities

Life of loan monthly vectors of voluntary and involuntary prepayments

Best for Ginnie Mae, Fannie Mae, and Freddie Mac deals




Auto LDM
Auto Loans (loan level)

Projects life of loan delinquency migration until payoff, prepayment, or default. Projects severity for defaulted loans.

Best for auto loan portfolios or securities

Features and Capabilities
Key Features and Capabilities
  • Voluntary and involuntary prepayments are forecasted within a single framework

  • Single family LDM options include transition-based frameworks for handling loans or pools in any delinquency status

  • Single family LDM options include a dynamic primary-secondary spread rate model

  • Auto LDM includes a two-stage severity model: 1) model probability of repossession; 2) separately model severity for repossessions and non-repossessions

  • Users can "tune" the model to address portfolio nuances

  • Widespread adoption and internal monitoring provide constant feedback ensuring that LDM maintains its relevance

  • Serves as an effective challenge to internal models

  • Comprehensive documentation provides total transparency into the model's approach

  • User guides and publications discuss timely updates, technology developments and related market issues

  • Superior client service is available to support product use and functionality


LoanDynamics can be delivered in multiple ways. LDM is embedded in our applications and is also available through third-party providers. Users can also license the model directly for integration into their own platform. Delivery options include:

  • Third-party systems (see Vendors page)
  • DLLs (for integration into proprietary systems)
  • Kinetics LoanDynamics Module (desktop application, web browser or REST API)
  • Indirectly via wholesale agreements
  • Excel Spreadsheet

See which vendors have integrated the different versions of LoanDynamics.

For questions on optimal system usage and integrations, please contact us.

Supporting Resources
LDM Excel

The LoanDynamics Excel Spreadsheet is a simple, Excel-based interface and is a useful tool for ad hoc analysis, sensitivity and scenario analyses, validation testing and validation of model results coming from a third-party system.

Model Performance Reports

Our model performance reports compare actual vs. forecasted speeds in various dimensions. Monthly trend reports show how the model has been performing recently, while model backtesting reports demonstrate performance on a larger historical windows. While these static reports are delivered as PDFs, our Mortgage Analysis and Reporting System (MARS) is web-based, capable of running customized performance reports on an on-demand basis.

Model Validation

To address regulatory and industry requirements related to model validation and risk management, we have adopted a formal approach based on the inter-agency guidance of banking regulators. This includes assessing the conceptual soundness of all of our models, validating model results by back-testing, and monitoring the models on an ongoing basis, as new data becomes available and as new model versions are released.

Market Analysis Reports

Our market analysis reports consist of a weekly prepayment-risk-and-option-adjusted analysis, across the coupon stack, of the agency and government passthrough markets.

CRT Monitor

The CRT Monitor is a monthly report analyzing traded tranches of Agency Credit Risk Transfer deals. We derive a credit risk rating, our CreditProfile Category (CPC), the underlying credit metrics, and Option-Adjusted Spreads (OAS) given market levels at the close of a month. The underlying analysis is performed using RiskProfiler, our end-user valuation solution, and LoanDynamics credit model.

HPI Outlook

HPI Outlook is a quarterly report that explains our forecasts on the 25-MSA Composite Index and five geographical indices: US National Index, Los Angeles, Miami, New York and Phoenix Metropolitan Statistical Areas. These forecasts are generated by our HomePriceDynamics model.