The Pipeline

As we prepare to travel to Las Vegas this month, we present four pipeline articles as part of our Vegas edition.

At Andrew Davidson & Co., Inc. (AD&Co), we believe that mortgage borrowers behave consistently across time when faced with similar circumstances and incentives. Relying upon this belief, we build stable, reliable, and accurate prepayment and credit models, so that we do not create models that constantly chase changing behavior.

On February 9, the Federal Reserve Board (Fed) released two scenarios—Base and Severely Adverse—for the 2023 Comprehensive Capital Analysis and Review (CCAR). These scenarios describe three-year trajectories based on key economic indicators—of the 28 variables, the ones used by AD&Co’s mortgage models are home price (CoreLogic national HPI); interest rates (3-month, 5-year, and 10-year Treasury, prime index, and mortgage primary rate); and national unemployment.

In this article, we go over our progress in developing our climate impact suite, for which we are seeking an advisory group of interested firms to help guide further development and ensure that it meets emerging client use cases. We anticipate that this will meet the growing need to incorporate climate risk analysis into risk management practice.

In recent years, there have been efforts to make credit assessment both more accurate and fairer by augmenting the use of consumer credit scores with additional information and analysis, thus developing a more complete consumer financial profile. One such example is the use of Trended Data fields that characterize an individual’s use of revolving credit accounts, classifying them as Transactors or Revolvers. Thanks to a relationship with Equifax, Andrew Davidson & Co., Inc.