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.

HOUSE PRICES AND LDM V4.0 TEMPERING
Eknath Belbase

In this issue of the Pipeline, we present two articles.

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AD&CO’S ANNUAL HPI OUTLOOK UPDATE: MODERATE GROWTH
Alex Levin

On the last business day of August, Andrew Davidson & Co., Inc. (AD&Co) distributed a new set of data files containing the latest FHFA Home-Price Index (HPI) series through 2026Q2. This information dataset alters the HPI outlook used by AD&Co’s models and systems.

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TEMPERING NON-AGENCY LDM V4.0
Eknath Belbase, Vivian Li

Andrew Davidson & Co., Inc. (AD&Co) recently released a beta version of LDM v4.0. In this article, we evaluate the credit model by comparing current non-QM originations against historical data used in model estimation and rating agency subordination levels. We review the model’s performance under different economic shocks - including recessions, stagflations, and extreme stress scenarios – to establish where intentional parameter “tempering” is required to prevent model overfitting during this beta period.

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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:
02-2023
Issue:
181
Author:
Tom Parrent
Title: THE MEANDERING S-CURVE: UNRAVELING DYNAMIC PREPAYMENT INCENTIVE BEHAVIOR
Date:
02-2023
Issue:
181
Author:
Alex Levin
Daniel Swanson
Title: 2023 CCAR SCENARIOS: A DECADE OF EMPOWERING STRESS-TESTING THROUGH AD&CO’S ANALYTICS
Date:
02-2023
Issue:
181
Author:
Eknath Belbase
Title: OUR PLAN FOR A CLIMATE IMPACT SUITE
Date:
02-2023
Issue:
181
Author:
Joni Baker
Richard Cooperstein
Sanjeeban Chatterjee
Title: A LOOK AT UTILITY PAYMENTS AND THEIR POSITIVE IMPACT ON FUTURE MORTGAGE PERFORMANCE
Date:
12-2022
Issue:
180
Author:
Eknath Belbase
Title: THE HOLIDAY ISSUE
Date:
12-2022
Issue:
180
Author:
Michelle Stepien Breier
Title: ACCESSING AD&CO MODELS THROUGH THIRD-PARTY ANALYTICS PROVIDERS
Date:
12-2022
Issue:
180
Author:
Sanjeeban Chatterjee
Title: TUNING LDM FOR THE NEW ALT-A MARKET
Date:
11-2022
Issue:
179
Author:
Eknath Belbase
Title: THE CHANGING
Date:
11-2022
Issue:
179
Author:
Mickey Storms
Title: TURN AND FACE THE STRANGE . . . CHANGES
Date:
11-2022
Issue:
179
Author:
Alex Levin
Title: 2022 MARKET CHANGES AND RISK NEUTRAL PREPAYMENT MODELING
Date:
09-2022
Issue:
178
Author:
Eknath Belbase
Title: A CHANGED LANDSCAPE
Date:
09-2022
Issue:
178
Author:
Dan Szakallas
Title: THE CHANGING COMPOSITION OF POOL ISSUANCE DURING PANDEMIC TIMES
Date:
09-2022
Issue:
178
Author:
Mickey Storms
Title: PERSPECTIVES: FRB MBS BALANCE SHEET REDUCTION
Date:
09-2022
Issue:
178
Author:
Matteo Caracciolo-King
Alex Levin
Vivian Li
Title: PRIMARY-SECONDARY SPREAD (PSS) MODELING: 10 YEARS LATER
Date:
09-2022
Issue:
178
Author:
Matteo Caracciolo-King
Title: NEURAL NETWORKS AND PREPAYMENT MODELING
Date:
07-2022
Issue:
177
Author:
Eknath Belbase
Title: COOLING INTO SUMMER
Date:
07-2022
Issue:
177
Author:
Mickey Storms
Title: PERSPECTIVES, JUMBO AND CONFORMING LOAN RATES
Date:
07-2022
Issue:
177
Author:
Alex Levin
Title: AD&CO’S HPI OUTLOOK UPDATE: WHY DOES IT REMAIN STRONG?
Date:
07-2022
Issue:
177
Author:
Connor Campbell
Title: MOVING BEYOND THE BLACK BOX WITH MACHINE LEARNING INTERPRETABILITY
Date:
03-2022
Issue:
176
Author:
Eknath Belbase
Title: A CHANGED LANDSCAPE
Date:
03-2022
Issue:
176
Author:
Sanjeeban Chatterjee
Daniel Swanson
Richard Cooperstein
Title: THE IMPACT OF TRENDED CONSUMER DATA ON MORTGAGE RATES
Date:
03-2022
Issue:
176
Author:
Alex Levin
Daniel Swanson
Title: 2022 CCAR SCENARIOS: AD&CO’S ANALYTICS AND DATA FILES
Date:
03-2022
Issue:
176
Author:
Alex Levin
Title: FLOOD INSURANCE SPIKE IN FLORIDA: EFFECT ON HOME PRICES AND THE ECONOMICS OF LOAN GUARANTEES
Date:
03-2021
Issue:
175
Author:
Eknath Belbase
Title: BEARS COME OUT OF HIBERNATION
Date:
03-2021
Issue:
175
Author:
Daniel Swanson
Title: NEW FEATURES IN LDM 3.0
Date:
03-2021
Issue:
175
Author:
John Gao
Alex Levin
Daniel Swanson
Title: 2021 CCAR SCENARIOS: AD&CO’S ANALYTICS AND DATA FILES
Date:
03-2021
Issue:
175
Author:
Tom Parrent
Title: HOW TO AVOID BEING TRIGGERED BY MODELS
Date:
12-2020
Issue:
174
Author:
Eknath Belbase
Title: FAREWELL TO 2020
Date:
12-2020
Issue:
174
Author:
Alex Levin
Title: UPCOMING RELEASES: FINANCIAL ENGINEERING TOOLS
Date:
12-2020
Issue:
174
Author:
Eknath Belbase
Title: POST-ELECTION INCREASE IN VISIBILITY FOR CLIMATE CHANGE RISK
Date:
10-2020
Issue:
173
Author:
Eknath Belbase
Title: A STEEPER FALL
Date:
10-2020
Issue:
173
Author:
Chris Widman
Title: DRIVING INTO 2021 WITH AUTO LDM
Date:
10-2020
Issue:
173
Author:
Alex Levin
Title: RECENT CHANGE IN HPI OUTLOOK AND ITS CONSEQUENCES
Date:
08-2020
Issue:
172
Author:
Eknath Belbase
Title: COVID-19 TUNING UPDATES
Date:
08-2020
Issue:
172
Author:
Daniel Swanson
Title: LDM COVID-19 CREDIT TUNINGS
Date:
08-2020
Issue:
172
Author:
Dan Szakallas
Title: UPDATED COVID-19 PREPAYMENT TUNINGS
Date:
04-2020
Issue:
171
Author:
Eknath Belbase
Title: SPECIAL PIPELINE EDITION: COVID-19 UPDATE
Date:
04-2020
Issue:
171
Author:
Dan Szakallas
Kevin Atteson
Daniel Swanson
Title: THE AD&CO MACROECONOMIC SCENARIOS
Date:
04-2020
Issue:
171
Author:
Chris Widman
Title: AUTO LOAN PERFORMANCE DURING THE COVID-19 PANDEMIC
Date:
04-2020
Issue:
171
Author:
Mickey Storms
Richard Cooperstein
Title: BENCHMARKING CRT DEFAULT AND LOSS TOLERANCES
Date:
04-2020
Issue:
171
Author:
Alex Levin
Title: CRT PRICES POINT TO AN INCREASE IN EXPECTED LOSSES: IMPLEMENTATION RECIPES
Date:
03-2020
Issue:
170
Author:
Eknath Belbase
Title: SPECIAL PIPELINE EDITION: MARKET UPDATE
Date:
03-2020
Issue:
170
Author:
Mickey Storms
Alex Levin
Title: CRT MARKET VOLATILTY: INTERPRETING PRICES AND SPREADS
Date:
02-2020
Issue:
169
Author:
Eknath Belbase
Title: THE SFVEGAS 2020 EDITION
Date:
02-2020
Issue:
169
Author:
Chris Widman
Title: MODELING AUTO LOANS
Date:
02-2020
Issue:
169
Author:
John Gao
Alex Levin
Daniel Swanson
Title: 2020 CCAR SCENARIOS: AD&CO’S ANALYTICS AND DATA FILES
Date:
12-2019
Issue:
168
Author:
Eknath Belbase
Title: THE HOLIDAY EDITION
Date:
12-2019
Issue:
168
Author:
Chris Widman
Title: AUTO LOAN PERFORMANCE
Date:
12-2019
Issue:
168
Author:
Alex Levin
Nathan Salwen
Title: WHOLE-LOAN VALUATION METHODS: RISK NEUTRAL MODELING VERSUS VIRTUAL SECURITIZATION
Date:
09-2019
Issue:
167
Author:
Eknath Belbase
Title: BOUNCING INTO AUTUMN