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.

Subscribe to our publications to make sure you stay up to date
Blog - Latest
  • The Signal and The Noise

    Tom Parrent

    Thoughts

    Separating signal from noise is at the heart of what we do at AD&Co. One of the key tools we utilize for that purpose is a sophisticated set of model performance trigger reports. These monthly reports not only alert us to model drift but also point to possible causes for the drift.

    In the mortgage market, changes in behavior on the part of both borrowers and lenders may create gaps between model projections and actual performance. Early analysis of these gaps provides rich information to our modelers based on which they can either identify temporary drifts in model performance or, more importantly, highlight fundamental changes in behavior that need to be captured in our models.

    Every product type is monitored along the following four dimensions, with residuals defined as the monthly difference between projected and actual results:

    Moving average: Are residuals deteriorating over time?

    Trend: Are residuals consistently becoming more positive or negative?

    Bias: Is the model persistently overpredicting or underpredicting actuals?

    Magnitude: Are model misses large enough to matter?

    Multiple types of triggers are useful for determining the seriousness of a breach as well as the type of adjustments that might be warranted in response. For example, a moving average warning might indicate a developing change in borrower behavior that may require either additional explanatory variables or more complex functions of existing variables to tighten the residuals. Alternatively, updated data may provide key information for refitting the model. A small but persistent bias, on the other hand, may be easily corrected with a simple tuning parameter adjustment.

    These triggers also help us monitor performance at the factor level. Rather than simply observing, for example, how GNMA 15-year MBS are performing, we have triggers at different levels of credit score, LTV, note rate, and many other factors. This deep analysis, presented as an easy-to-use dashboard, quickly identifies possible causes of model drift.

    In January, we will present a detailed review of our trigger methodology, and show how we use the reports to help set our modeling priorities in order to explain performance and, when necessary, modify our models to accommodate new behavioral patterns. For now, we will leave you with the following example of a segment of a trigger report for FHLMC MBS using LDM 2.2 with COVID tunings applied.

    Happy Holidays!

    Tom Parrent, Model Risk Management

    tparrent@ad-co.com

     

    October 2020 FHLMC Trigger Report
     

      Trigger Type
      Bias Magnitude MovAvg Trend
    LoanType UPB        
    FHLMC_30YR 2,085,272,108,356 ⬤ ⬤ ⬤ ⬤

     

      Trigger Type
      Bias Magnitude MovAvg Trend
    LoanType Net Coupon UPB        
    FHLMC_30YR 2.0 196,050,740,636 ⬤ ⬤ ⬤ ⬤
    2.5 253,743,515,938 ⬤ ⬤ ⬤ ⬤
    3.0 547,254,721,052 ⬤ ⬤ ⬤ ⬤
    3.5 498,363,756,722 ⬤ ⬤ ⬤ ⬤
    4.0 331,086,483,224 ⬤ ⬤ ⬤ ⬤
    4.5 152,994,012,086 ⬤ ⬤ ⬤ ⬤
    5.0 59,076,412,520 ⬤ ⬤ ⬤ ⬤

     

    Legend
    Pass ⬤
    Watch ⬤
    Warning ⬤

     

  • Andrew Davidson & Co., Inc.’s LoanDynamics Models Empowers Fite Analytics’ MBS Analytics Service

    AD&Co Marketing Team

    News

    Andrew Davidson & Co., Inc. (AD&Co), is proud to support Fite Analytics’ innovative cloud-native Mortgage-Backed Securities Analytics Service. The Fite Analytics solution incorporates AD&Co’s LoanDynamics models that provide forecasts of voluntary prepayments, defaults and losses that drive risk analytics across the mortgage-backed securities market with comprehensive coverage. To read the full press release click here.

     

  • Introducing the New AD&Co Website

    Eric Limjoco

    News

    We are thrilled to announce that Andrew Davidson & Co., Inc. has launched a new look for ad-co.com. Some of the exciting new features of this site include:

    • A dynamic homepage highlighting the firm’s latest innovations, AD&Co client benefits, announcements, and Diversity, Equity and Inclusion efforts.

    • Our new blog titled The S-Curve that offers our latest announcements, product updates, and insights on the mortgage market in real time.

    • An enhanced solutions-focused structure organized by I Work In (includes industry and investment categories), Tools (product pages), Consulting, Insights (announcements and literature), and Client Portal (downloads portal and model resources). 

    • About AD&Co includes Our Company and Diversity, Equity, and Inclusion sections which offer a look into the firm’s foundation, culture, and practices.

    Please take the time to:

    Finally, we’ve updated our Terms of Use and Privacy Statement. You will be asked to accept them when you log in for the first time.

    Please let us know feedback or concerns to ensure we continue to serve you well. Thank you.

Blog - Archives

The S-Curve Archives

  • Tom Parrent

    Thoughts

    AD&Co held our annual employee meeting in Detroit, Michigan. In addition to gathering everyone in person to socialize and strategize, we use these annual meetings to learn about different cities, especially with regard to housing market dynamics.

    We chose Detroit because the oft-maligned city is undergoing a significant renaissance, and we wanted to explore the area and learn how housing may have played a role in both Detroit’s decline and rebirth.

  • Niraj Tailor, Hikmet Senay

    Products

    Andrew Davidson & Co., Inc (AD&Co) is pleased to announce the beta release of MARS+, the next generation of Mortgage Analysis & Reporting System (MARS), which has been in use since 2008 for performance reporting of AD&Co models. MARS+ aims to provide enhanced and advanced capabilities and features for mortgage analysis and reporting.

    The new enhancements of MARS+ include:

  • Eknath Belbase, Laura Silberg, Aidan Loftus, Joni Baker, Sam Sutton, Richard Cooperstein

    Events

    Several AD&Co employees attended SFVegas 2025. This post shares their unique perspectives from attending the conference and key takeaways from the sessions.

  • Eknath Belbase

    Thoughts

    We’re excited to announce our latest Quantitative Perspectives providing in-depth insights into current market trends and advanced valuation techniques. This publication offers valuable information for mortgage market participants and those involved in credit risk transfer transactions.

  • Laura Silberg, Andrew Davidson, Eknath Belbase, Alex Levin

    Podcast

    Tune in to Laura Silberg's interview with Andrew Davidson, Eknath Belbase and Alex Levin as they discuss their latest Quantitative Perspectives, our independent commentary series, titled 

  • Andrew Davidson

    Thoughts

    As providers of mortgage models for financial institutions, Andrew Davidson & Co., Inc. (AD&Co) enables clients to validate their use of our models and offers documentation describing the conceptual framework of the models, back-testing results, and sample forecasts under a variety of economic conditions. We also work with analytics providers who have incorporated our models to ensure that the models works as intended.

  • Alex Levin, Andrew Davidson, Eknath Belbase, Mickey Storms, Nathan Salwen

    Thoughts

    We’re excited to announce two new Quantitative Perspectives that provide in-depth insights into current market trends and advanced valuation techniques. These papers offer valuable information for mortgage market participants and those involved in credit risk transfer transactions.

  • Joni Baker

    Events

    Andrew Davidson & Co. Inc. (AD&Co) proudly sponsored the Information Management Network (IMN)’s 10th Annual Mortgage Servicing Rights (MSR) Forum, held November 21 - 22, 2024 at the New York Marriott at Brooklyn Bridge.

  • Michelle Stepien Breier, Alex Levin, Matteo Caracciolo-King

    Podcast

    Tune in to Michelle Stepien Breier's interview with Alex Levin & Matteo Caracciolo-King as they discuss their latest Pipeline article “AD&Co Updates its Home Price Index Model.” The interview highlights key points from the article as they share recent updates to the HPI3 model.

  • Andrew Davidson

    Thoughts

    With the increasing volumes of Synthetic Risk Transfer (SRT) and Credit Risk Transfer (CRT) along with the discussion of BASEL III, we thought it would be useful to re-issue our comment letter to FHFA on the capital treatment of Credit Risk Transfer.