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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Impressions from SFVegas and OB Summit 2026EventsAD&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.
The New Non-Agency Model, Real Estate Exposure to Climate-Related Hazards & Escrow Analysis (Eknath Belbase)
Daniel and I recorded a Exchange Live: Tech Odyssey podcast on Kinetics and the upcoming release of LDM v4.0. The 30-minute audio and accompanying slides are available on demand. We focused on DSCR/prepay penalty, along with the addition of climate.
My panel on climate risk and property values went well – this year the focus shifted a bit to resilience, and the opportunity to reduce the rate of insurance increases by putting money up front into strengthening homes. Several states are funding the initial outlay required in pilot programs as part of insurance affordability initiatives (including Deep South states). David Zhang of MSCI started off the discussion with a tally of damages from physical risk sorted into quintiles of cost (measured against home value). The top quintile is already at a mean of 55bps per year of loss (these are only losses from weather events of scale and insurance needs to include costs such as fires starting from appliances or flooding from sewer back-ups).
Finally, we learned that Cotality has a database of property tax histories on all U.S. single-family homes and is working on an approach to forecast taxes going forward, so our vision of a full escrow-conditioned HPA and LDM is within reach.
Contact us for more information on LDM v4.0.
Key Takeaways (Daniel Swanson)
It was great to see so many familiar faces and to see the conference booming (though also a bit foreboding – the last time it was so packed, there was a crisis shortly thereafter). Here are a few key takeaways I had from talking to different people.
Non-QM
- There is a lot of interest in non-QM from many sophisticated participants
- Analyzing new loans is complicated and most people are not taking advantage of all the information in the deals
Climate
- State-level behavior is changing, particularly FL payups, perhaps due to taxes and insurance (that link is hard to prove)
- Servicers are starting to care about T+I for several different reasons (escrow float=positive, delinquency risk=negative)
Credit Scores
- Participants are mostly worried about disruption to their process when thinking about credit scores rather than performance
AI
- Everyone is thinking about AI, whether they are talking about it or not (and there are plenty of people talking about it)
How AD&Co and Optimal Blue Are Transforming Pipeline Risk Management for Loan Originators (Yvonne Chen)
At the Optimal Blue Summit 2026, we connected with loan originators and our alliance partners at Optimal Blue to discuss the evolving challenges in the mortgage origination sector. The conversations and conference sessions reinforced the patterns we've been seeing: Origination is a thin margin business, and originators must carefully manage the uncertainty and financial risks from locking rates at the beginning of the application process through to loan sale. Lenders manage their pipelines across agency and non-agency loan products while simultaneously borrowing closing funds and hedging to protect their profit margins – all while contending with interest rate volatility, fallout risk, basis risk in non-QM products, and borrower renegotiation. Fallout rates have climbed in recent years as borrower behavior shifts and competition intensifies in a low-volume market, making accurate pipeline risk management more critical than ever. Optimal Blue and AD&Co see the persistent need for the kind of sophisticated analytics that we can provide to help lenders stay ahead of these challenges.
AD&Co was featured on a panel where Matteo Caracciolo-King had the chance to present a first look at our insights on consumer behavior in the application process based on Optimal Blue’s national application data set. Originators were keenly interested in forecasting application stage transition probabilities, which vary over time and across interest rates, as well as the kind of financial risk metrics that AD&Co can provide. The conference confirmed our view that, as pipeline hedging grows more complex, particularly with a fast-growing non-agency market, we see a meaningful opportunity to help originators strengthen their risk management through advanced analytics integrated into the Optimal Blue platform they already rely on.
The S-Curve Archives
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ThoughtsJanuary 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.
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ThoughtsHomeownership 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.
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ThoughtsDear 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.
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ThoughtsFor 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.
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Thoughts
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.
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Thoughts
Summary
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.
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ThoughtsHow 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.
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ProductsThe release of Andrew Davidson & Co., Inc.’s (AD&Co) new generation of financial engineering tools marks a shift to a new reality; when the traditional benchmark for MBS valuation, the LIBOR/ Swap yield curve, becomes unavailable. Our recent Product Release email informed our readers about the change. In short, our users can:
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ThoughtsFHFA held a listening session for interested parties on its proposed rule on the GSE process for credit scores. The objective is making mortgage underwriting and pricing more accurate and more fair while balancing practical implementation by firms in the mortgage ecosystem. Along with many others, I had the opportunity to provide insights on this proposed rulemaking.
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ThoughtsIn our January 19th blog entitled, A More Equitable Lending System Will Not Be Created by Accident, we described the efforts it will take to overcome not just bias in lending today, but the systemic factors that have limited access to credit in the past and have created an unjust system.