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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Real World Data on House Price Impact of Climate RisksThoughtsThe earliest paper we found examining the impact of climate risks on house prices was from 2017, which found a relationship between elevation/sea level rise and house price differences.[1]
We built our climate-conditioned HPA model in 2022 based on the idea that an increase in insurance costs would impact house prices (something we had not studied yet) in the same way that an increase of the same size in mortgage rates would impact house prices (something that we were quite familiar with).
The real world evidence for this relationship has been accumulating recently – on October 15, 2024 the Washington Post published an article entitled “Where climate change poses the most and least risk to American homeowners” which contains the following chart (which is based on an analysis of 2 million home sales in Florida since 2000):
We can see from the lines comparing lower and higher flood risk properties that until very recently, the housing market was not pricing for flood risk. But now there is a clear divergence in price trend.
For the particular case of Florida, there is reason to believe that this trend will strengthen in the near term: until recently, the only reason most people got flood insurance was that they were in a FEMA flood zone and they were required to buy a NFIP policy in order to obtain a mortgage. FEMA flood zone maps are known to be extremely outdated. However, with the accumulation of flooding incidents occurring outside those zones and the publishing of flood risk scores on Zillow, buyers are becoming much more aware of flood risk whether or not a property is in a FEMA zone.
Additionally, the state of Florida is gradually requiring all homeowners buying insurance through Citizens (its FAIR plan for homeowner’s insurance) to also have flood insurance regardless of flood zone status. This requirement started in 2024 for houses priced $600,000 and above, and by January 1, 2027, will extend to all properties insured by Citizens. At the end of 2023, Citizens was the largest insurer in Florida with 15% of all policies and over half a trillion dollars of insured properties.
Furthermore, the different post-event experiences of homeowners who have flood insurance versus those who didn’t is likely to encourage more homeowners – even those not taking a policy through Citizens – to add flood insurance to their property. So flood risk, at least in Florida, is getting closer to being fully priced into real estate values.
While the Washington Post article only discusses flood risk, all borrower costs matter to housing affordability – property taxes, homeowner’s and flood insurance, and the mortgage (leaving aside the psychological costs of nuisance events that don’t rise to the level of filing a claim). To truly capture the potential impact on both house prices and borrower behavior of all these rising costs, a fully climate conditioned approach, combining home prices as well as borrower behavior models (how will prepayment, delinquency, default and loss severity be affected?) is required. This is what our Climate Impact Suite offers.
[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3073842&itid=lk_inline_enhanced-template
The S-Curve Archives
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ThoughtsRecently, aggregators have crossed market borders by issuing residential mortgage-backed securities (RMBS) backed by owner-occupied (OO), GSE-eligible conforming loans. Additionally, conforming mortgage loans have drawn investment interest from insurance companies fronted by aggregators and evaluated by third-party firms. These developments constitute historically rare disintermediations of the nearly monopsonist purchases of conforming loans by the GSEs.
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PodcastJoin Rob Landauer in a conversation with Abe Martin as they discuss his recent Pipeline article, "Modeling the Balance Behavior of HELOC Borrowers." In this episode, they highlight key points from the article as he shares insights into the draw component of HELOCs and provide an update on the beta rele
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News
We’re excited to announce a major addition to the Andrew Davidson & Co., Inc. (AD&Co) team. Industry leaders Kelli Sayres and Gene Park, known for building and scaling leading fixed-income analytics platforms, have joined AD&Co’s Business Development team.
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ThoughtsBuilding on our earlier research on expanded consumer attributes, AD&Co continues to explore how credit data contributes to modeling delinquency and prepayment risk, which are key drivers of mortgage servicing rights cash flows and valuation.
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EventsAndrew Davidson recently joined NFM Lending’s Greg Sher on the One On One podcast to discuss our recent white paper, “The Impact of Moving Away From the Tri-Merge Standard.”
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EventsAD&Co recently sponsored and attended SFVegas 2026 and Optimal Blue Summit 2026. This post shares the AD&Co team's unique perspectives and key takeaways from attending both conferences.
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NewsAD&Co US Mortgage High Yield Indices
The Federal Reserve Economic Data (FRED) portal, housed by the Federal Reserve Bank of St. Louis, has been publishing AD&Co’s CRT indices since 2019. These series posted under the overall name of “US Mortgage High-Yield” include total return rates and credit and option-adjusted spreads (crOAS) – a projected return’s spread over Treasury (in the past, Libor). These series are available going back to 2014-end and tiered by CRT initial supports.
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ThoughtsIn July 2025, the US Federal Housing Finance Agency (FHFA) announced that the government-sponsored entities (the Enterprises or GSEs), Fannie Mae and Freddie Mac, would permit lenders to choose between Classic FICO and VantageScore 4.0 credit score models for loans sold to the GSEs. FHFA also stated in a social media post that the tri-merge standard would be maintained for mortgage underwriting. Nevertheless, some mortgage industry stakeholders recommend moving away from the tri-merge standard for GSE mortgages in favor of a single or bi-merge report standard.
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News
As housing faces more climate threats that result in more losses, the insurance program that it sits on is teetering on the brink of collapse. Yet, the home insurance market has three distinct stakeholders that have competing priorities, and today, there is no motivation for a collaborative solution.
Understanding how to strengthen and protect the current structure requires looking at the cost burdens along with the risk for each of those parties.
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ThoughtsThere has been a flurry of activity in the mortgage markets since the 2018 passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act. This act requires the Federal Housing Finance Agency (FHFA, now known as US Federal Housing) to validate and modernize the credit score models used in the housing finance system. It should be noted that so far, the discourse has been around mortgages sold to the Enterprises (Fannie Mae and Freddie Mac). Ginnie Mae has not provided any guidance on their plans to start using new credit score models.