The S-Curve

Welcome to The S-Curve

Now you will be able to receive the latest announcements, product updates, and our insights on the mortgage market in real time.

The name of the blog, the S-Curve, is a reflection of our logo and the central feature of our prepayment model. S-curves are seen in nature in many phenomenon, from population growth to prepayment and default models. Our first S-curve, in the early 1990s, used the arctangent function, then piece-wise linear functions, and evolved over time to be more complex and vary by FICO, loan size and LTV. This evolution encapsulates both the timeless nature of fundamental relationships and constant innovation to describe them better over time.

We hope you find the information useful and we look forward to your feedback.

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Blog - Latest
  • Mortgages at SFVegas 2023

    Richard Cooperstein


    The Structured Finance Association hosted SFVegas 2023 (February 26 - March 1), a broad capital markets conference with thousands of attendees in Las Vegas.  Andrew Davidson & Co. Inc. (AD&Co) was a sponsor focused on the mortgage sector.  As we engaged with clients and policy leaders, a few themes emerged: Data, Expanding Access Safely, Ginnie Mae Servicing and Auto Loan Performance.


    Well-managed data is the underpinning of well-run mortgage organizations, supporting efforts to manage risk, profitability, and compliance.  Data is essential to developing new products, improving accuracy, and expanding access to mortgage finance.  Nearly everyone we spoke to spends time and money on data and still struggles to manage it through their internal operations, from loan level acquisition to portfolio management and reporting.  They expend additional effort to acquire and pass on data in the larger mortgage ecosystem.  The richness and reliability of data degrade even within companies, let alone as mortgage-related assets pass through the value chain.  This degradation worsens the information asymmetry between sellers and buyers, increasing risk and pushing the mortgage business further from an efficient market.  It impedes adding new data to the data-frame, such as the new Trended Credit Scores or expanded data generally, that helps expand markets.

    These realities align with the economic theory of imperfect markets and utilities.  Markets that provide gains from scale and consistency have attributes of public utilities.  Adding privacy concerns and positive systemic value beyond individual mortgage transactions do as well.  Reducing the inherent information asymmetry between sellers and buyers further suggests that the efficient market outcome could be a regulated market utility of loans and related data.  Data aggregators can supply to the utility, and data consumers can access it.

    Expanding Access Safely

    Safely expanding access to mortgage finance is not automatic.  The legacy of discrimination generally and in housing finance specifically, shows up in the persistently lower homeownership rates of minority populations.  Homeownership rates can be expanded temporarily by lowering standards and raising risk, or durably by using new data that lowers risk.  Making progress requires commitment and solving the data market failure described above.

    Ginnie Mae Servicing

    It’s well known that compliantly servicing non-performing loans can cost several times the fixed servicing fee and thus pose systemic risk.  During the Pandemic, Federal agencies scrambled to provide financing and reduce the burden on non-bank servicers that represent a substantial majority of the Ginnie Mae market without the federal backing that most of the mortgage ecosystem enjoys.  This cost-revenue imbalance is not an advancing issue and cannot be solved by transferring the burden of advancing NPL payments to bond holders.  The market bid for Ginnie Mae servicing in mid-2020 was zero because of the expectation of high NPL rates.  Fortunately, record low mortgage rates and record refinancing volume provided servicers who were also originators with cash flow to offset the cost of servicing FHA NPL rates that temporarily reached 14%.  The next time there is a systemic rise in delinquency rates, this extra cash flow is unlikely.

    What’s the solution for this?  The most straightforward solution is a variable servicing fee that aligns revenues with expenses, but there is surprisingly little enthusiasm for this solution.  Ginnie Mae’s leadership is clearly aware of the systemic risk potential and is seeking a solution.  The U.S. mortgage market often uses a federal backstop behind private financial markets to provide the stability the economy depends on.  The backstops of deposit insurance or for the GSEs are examples.  We will be studying this issue.

    Auto Loan Performance

    For the first time in awhile, attention is being paid to rising auto loan delinquency rates, both prime and subprime.  Ordinarily, today’s historically low unemployment rate would associate with low delinquencies, so this rise is worrisome.  It’s well-known that supply-chain disruptions during the Pandemic caused spikes in new and especially used car prices.  Cars financed at those high prices pose more risk, and used car prices have already dropped about 15% from their peak.  AD&Co will be monitoring this performance and refining our models.

Blog - Archives

The S-Curve Archives

  • Richard Cooperstein


    The Structured Finance Association hosted SFVegas 2023 (February 26 - March 1), a broad capital markets conference with thousands of attendees in Las Vegas.  Andrew Davidson & Co. Inc. (AD&Co) was a sponsor focused on the mortgage sector.  As we engaged with clients and policy leaders, a few themes emerged: Data, Expanding Access Safely, Ginnie Mae Servicing and Auto Loan Performance.

  • Eric Limjoco


    Andrew Davidson & Co., Inc (AD&Co) is pleased to announce the official release of the LoanDynamics Module in Kinetics, AD&Co's new modular platform for running AD&Co analytics via a desktop application, web browser, or REST API. The LoanDynamics Module is the latest way to run the LoanDynamics Model, allowing users to perform sensitivity analysis, validation testing, and scenario analysis in a modern, user-friendly application.

  • Sanjeeban Chatterjee


    Recently the Federal Housing Finance Agency (FHFA) announced some upcoming changes related to the use of new credit scores, FICO 10T and VantageScore 4.0 by Fannie Mae and Freddie Mac. “FHFA expects that implementation of FICO 10T and VantageScore 4.0 will be a multiyear effort. Once implemented, lenders will be required to deliver both FICO 10T and VantageScore 4.0 credit scores with each loan sold to the Enterprises”.[1] This announcement will impact the entire mortgage ecosystem.

  • Adam Marchuck


    January is National Mentoring Month which is very appropriate since it coincides with the time when we typically set out our goals and intentions for the New Year. Organizations are embracing mentoring programs and these programs have indeed become a strategic imperative for many. There are many benefits to mentorship and it's easy enough to comprehend. The individuals involved in a mentoring relationship and the organizations that choose to sponsor a mentoring program all are likely to benefit.

  • Richard Cooperstein


    Homeownership is the largest source of wealth accumulation and inter-generational wealth transfer for the working and middle class. However, the history of racial discrimination (it was actually legal to discriminate by race in housing until the Fair Housing Act of 1968), suggests that we have a continuing responsibility to ensure fair access to housing and housing finance. 

  • Andrew Davidson


    Dear Friends,

    As Andrew Davidson & Co., Inc. (AD&Co) reaches its 30-year milestone, I reflect on two seemingly contradictory ideas:  Firms need experience to guide clients through difficult times but sometimes it is necessary to discard past practices to achieve breakthroughs. 

  • Connor Campbell


    For many people, having accessible transportation (a car, for example) is necessary. Most U.S. people live in areas without adequate public transportation and require vehicles to access jobs, healthcare, and groceries.

  • Daniel Swanson


    As interest rates rise and fewer loans with refinancing incentive remain, other factors are primed to play a larger role in determining prepayment speeds in the coming months (and perhaps years). Turnover, the rate at which people move, is the most cited of these factors.  In this blog post, we’ll consider two other potential drivers: curtailments, or partial prepayments, and mortgage payoffs that don’t involve taking out a new loan.

  • Richard Cooperstein



    In 2021, Andrew Davidson & Co. Inc. (AD&Co) proposed a benchmark cohort approach to setting Ability-to-Repay (ATR) Qualified Mortgages (QM) standards. Successful benchmarks based on data are model-free and transparent, and the cohorts must perform consistently in comparison to one another and across time. Our original work used data through the early stages of the pandemic when non-performing loan percentages skyrocketed.

  • Richard Cooperstein


    How Lowering Capital Costs Affects Higher-Risk Loans

    Government-sponsored enterprises (or GSEs) are companies that provide guarantees and financing to originators through the mortgage secondary market. The size and resilience of the GSE secondary market maximizes diversification and liquidity which reduces financial risk and cost of capital. This benefit accrues to conforming borrowers through lower mortgage rates and resiliently available financing.