The Pipeline

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Welcome to the Pipeline, Andrew Davidson & Co., Inc.‘s newsletter, a “pipeline” of relevant and useful information, focused on recent trends, changes, and advances in the mortgage investor’s market.

Issue No. 179 | Nov 2022

THE CHANGING
Eknath Belbase

Since the beginning of the year, fixed-income markets in general and MBS markets in particular have undergone seismic changes. In this edition of the pipeline, we present two articles which examine these changes through slightly different, complementary lenses.

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TURN AND FACE THE STRANGE . . . CHANGES
Mickey Storms

In Part 1 of this two-part article series, we look retrospectively, in detail, at the magnitude and consequences of recent mortgage risk transitions.

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2022 MARKET CHANGES AND RISK NEUTRAL PREPAYMENT MODELING
Alex Levin

Through this and many other AD&Co articles written since 2003-04, we are continuing to raise awareness that, contrary to the common perception, an OAS method linked to an empirically designed borrower-behavior model is not going to deliver market-observed risk and sensitivity measures. Luckily, a useful alteration is available and explained. In this article, we advocate the use of a risk-neutral (RN) version of LoanDynamics Model (LDM) to better project interest rate risk.

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© 2022 Andrew Davidson & Co., Inc. All rights reserved. You must receive permission from marketing@ad-co.com prior to copying, displaying, distributing, publishing, reproducing, or retransmitting any of the content contained in The Pipeline.
This publication is believed to be reliable, but its accuracy, completeness, timeliness, and suitability for any purpose are not guaranteed. All opinions are subject to change without notice. Nothing in this publication constitutes (1) investment, legal, accounting, tax, or other professional advice or (2) any recommendation or solicitation to purchase, hold, sell, or otherwise deal in any investment. This publication has been prepared for general informational purposes, without consideration of the circumstances or objectives of any particular investor. Any reliance on the contents of this publication is at the reader’s sole risk. All investment is subject to numerous risks, known and unknown. Past performance is no guarantee of future results. For investment advice, seek a qualified investment professional. Note: An affiliate of Andrew Davidson & Co., Inc. engages in trading activities in securities that may be the same or similar to those discussed in this publication.

The Pipeline Archive

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Date:
04-2019
Issue:
165
Author:
Richard Cooperstein
Title: ECONOMIC PRINCIPLES AND ENDURING HOUSING FINANCE REFORM
Date:
02-2019
Issue:
164
Author:
Eknath Belbase
Title: HOME ON THE RANGE
Date:
02-2019
Issue:
164
Author:
Eknath Belbase
Title: OUTLOOK 2019: HOME ON THE RANGE?
Date:
02-2019
Issue:
164
Author:
Daniel Swanson
Title: A LOOK INTO TRENDED DATA
Date:
02-2019
Issue:
164
Author:
John Gao
Alex Levin
Daniel Swanson
Title: 2019 CCAR SCENARIOS: AD&CO'S ANALYTICS AND DATA FILES
Date:
12-2018
Issue:
163
Author:
Eknath Belbase
Title: HOLIDAY JITTERS
Date:
12-2018
Issue:
163
Author:
Alex Levin
Title: AD&CO UPDATES ITS HPI OUTLOOK
Date:
12-2018
Issue:
163
Author:
Dan Szakallas
Title: INVESTIGATING THE UNEXPECTED RISE IN PREPAYMENTS IN 2018
Date:
12-2018
Issue:
163
Author:
Sanjeeban Chatterjee
Title: NEW TUNINGS FOR NON-AGENCY LOANDYNAMICS MODEL
Date:
10-2018
Issue:
162
Author:
Eknath Belbase
Title: A WINDY FALL
Date:
10-2018
Issue:
162
Author:
Alex Levin
Title: COMMONLY IGNORED REALITIES OF HOME-PRICE DYNAMICS
Date:
10-2018
Issue:
162
Author:
Eknath Belbase
Title: A YEAR OF QUANTITATIVE TIGHTENING (QT)
Date:
09-2018
Issue:
161
Author:
Eknath Belbase
Title: FLOODING FROM FLORENCE
Date:
09-2018
Issue:
161
Author:
Daniel Swanson
Title: IMPACT OF PAST HURRICANES ON THE MORTGAGE UNIVERSE
Date:
09-2018
Issue:
161
Author:
Alex Levin
Title: LOANKINETICS 1.10 IS COMING SOON: PRODUCT HIGHLIGHTS
Date:
08-2018
Issue:
160
Author:
Eknath Belbase
Title: FRETTING ABOUT FLATNESS
Date:
08-2018
Issue:
160
Author:
Dan Szakallas
Title: TUNING FILE UPDATES FOR AGENCY LDM
Date:
08-2018
Issue:
160
Author:
Alex Levin
Mickey Storms
John Gao
Title: CECL REPORTING FOR MORTGAGES WITH LOANKINETICS
Date:
06-2018
Issue:
159
Author:
Eknath Belbase
Title: UP AND BACK IN MAY
Date:
06-2018
Issue:
159
Author:
Alex Levin
Title: MAKING A DIFFERENCE WITH AD&CO'S HOME PRICE SIMULATION MODEL: PRACTICAL CASE STUDIES
Date:
06-2018
Issue:
159
Author:
Andrew Wilcox
Title: MULTIFAMILY LDM AND CHANGING ECONOMIC ENVIRONMENTS
Date:
05-2018
Issue:
158
Author:
Eknath Belbase
Title: THE CRT EDITION'INTRODUCING THE AD&CO CRT INDEX
Date:
05-2018
Issue:
158
Author:
Richard Cooperstein
Alex Levin
Jin Chen
Title: DEMOCRATIZING INVESTMENT IN US MORTGAGE CREDIT RISK: Announcing The AD&Co CRT Total-Rate-of-Return Index
Date:
05-2018
Issue:
158
Author:
Eric Limjoco
Title: A MISSIVE FROM THE FRONT LINE OF AD&CO
Date:
03-2018
Issue:
157
Author:
Eknath Belbase
Title: RATES, SPREADS & CCAR CHANGES
Date:
03-2018
Issue:
157
Author:
Eknath Belbase
Title: THINGS (FINALLY) START CHANGING
Date:
03-2018
Issue:
157
Author:
John Gao
Alex Levin
Daniel Swanson
Title: CCAR 2018: AD&CO'S ANALYTICS AND DATA FILES
Date:
02-2018
Issue:
156
Author:
Eknath Belbase
Title: IS THE ZERO LOWER BOUND PERIOD FINALLY OVER?
Date:
02-2018
Issue:
156
Author:
Daniel Swanson
Title: GRANULAR DELINQUENCY BUCKETS IN LDM 2.2
Date:
02-2018
Issue:
156
Author:
Eknath Belbase
Harry Lijia Qin
Title: A PRIMER FOR STACR AND CAS CREDIT RISK TRANSFER DEALS
Date:
01-2018
Issue:
155
Author:
Eknath Belbase
Title: A NEW YEAR
Date:
01-2018
Issue:
155
Author:
Eknath Belbase
Harry Lijia Qin
Title: TRENDING TRENDS: WHAT CHANGES CAN WE FORECAST FOR 2018?
Date:
01-2018
Issue:
155
Author:
Alex Levin
Title: AN OAS MODEL FOR MULTIFAMILY AGENCY MBS
Date:
01-2018
Issue:
155
Author:
Rose Barnabic
Title: A QUICK LOOK AT THE FIRST CRT BACKED BY HARP REFERENCE POOL
Date:
12-2017
Issue:
154
Author:
Eknath Belbase
Title: MERRY MODELING: MULTIFAMILY & REVERSE MORTGAGES ' Will They Go Down in History*?
Date:
12-2017
Issue:
154
Author:
Alex Levin
Title: ON MULTI-FAMILY HOME PRICE MODELING
Date:
12-2017
Issue:
154
Author:
AD&Co Modeling Team
Title: GRAPHS OF THE MONTH: AD&CO'S MULTIFAMILY LDM EVALUATES PREPAYMENT AND CREDIT RISK
Date:
12-2017
Issue:
154
Author:
Mackenzie Meadows
Title: THE NEW REVERSE MORTGAGE LANDSCAPE: A PRIMER (PART III OF III)
Date:
10-2017
Issue:
153
Author:
Eknath Belbase
Title: RISING INTO FALL
Date:
10-2017
Issue:
153
Author:
Eknath Belbase
Harry Lijia Qin
Title: SLOW AND STEADY: A LOOK AT QUANTITATIVE TIGHTENING
Date:
10-2017
Issue:
153
Author:
Rose Barnabic
Title: ON THE ROAD WITH ANDREW DAVIDSON & CO
Date:
09-2017
Issue:
152
Author:
Eknath Belbase
Title: HAMMERED BY HARVEY AND IRMA
Date:
09-2017
Issue:
152
Author:
Dan Szakallas
Daniel Swanson
Sanjeeban Chatterjee
Title: HARVEY CAME, SAW, AND CAUSED DESTRUCTION
Date:
09-2017
Issue:
152
Author:
Alex Levin
Title: CURRENT NATURAL DISASTERS AND RELATED CHANGES IN CRT VALUATION
Date:
08-2017
Issue:
151
Author:
Eknath Belbase
Title: SUMMER SUMMARY
Date:
08-2017
Issue:
151
Author:
Eknath Belbase
Title: REMEMBRANCE OF BACKUPS PAST
Date:
08-2017
Issue:
151
Author:
Alex Levin
Harry Lijia Qin
Title: THE DYNAMICS OF AGENCY CREDIT RISK AND IMPLIED G-FEE
Date:
08-2017
Issue:
151
Author:
AD&Co Modeling Team
Title: GRAPHS OF THE MONTH: IMPLIED G-FEES FOR CRT ISSUANCE
Date:
06-2017
Issue:
150
Author:
Eknath Belbase
Title: STRESSING ABOUT ACCOUNTING (OR CCARED BY CECL)
Date:
06-2017
Issue:
150
Author:
Alex Levin
Lingyu Wu
Title: CCAR 2017: FORWARD VALUATION WITHOUT FORESIGHT ("ADVANCED CCAR")