Post-Crisis Predictive Power and Effective Solutions for New Regulations
By leveraging CoreLogic data sources, the RiskModel can better predict the risk associated with whole loan portfolios and formulate accurate assumptions to support the valuations of non-agency residential mortgage-backed securities.
Drawing from a wealth of historical loan-performance data, its sophisticated “age curves” enable the RiskModel to better capture the effect of “credit burnout” on more seasoned loans that continue to perform despite the presence of negative equity.
The RiskModel is also a comprehensive and cost-effective tool to be utilized in connection with:
- Fed-mandated stress tests
- OTTI estimates
- Setting bank reserve levels
- Projecting and reporting asset impairments now required by GAAP
Dialing for Model Sensitivities
The model’s sensitivity can be quickly and easily modified to reflect the behavioral effect of loan characteristics, such as:
- Loan modification type
- Product type
- Vintage
- Delinquency status
- Payment history
- Occupancy
- Documentation
By fine-tuning the model's sensitivity to these variables based on experience, the RiskModel can better estimate future performance as it relates to a user's portfolio or a specific security.
This adjustable framework additionally lets users create dials to adjust for supplemental data—the user can factor in borrower credit information, public records data, servicer, origination channel, and other relevant factors.
The Data
The RiskModel draws on CoreLogic’s databases—the mortgage industry’s most comprehensive with more than 70 million active and historical prime, alt-A, and subprime loans.
- CoreLogic Loan-Level Market Analytics database—covering 42 million active mortgages, 76% of residential mortgages, worth $7.6 trillion.
- CoreLogic Securities database—covering 97% of all non-agency MBS and ABS securities, worth more than $1.13 trillion.
- CoreLogic HPI—most comprehensive and timely U.S. housing market price index.
CoreLogic HPI®
The CoreLogic HPI incorporates more than 30 years of repeat sales transactions, representing more than 65 million observations sourced from CoreLogic’s industry-leading property record, securities and servicing databases.
The CoreLogic HPI provides the most comprehensive and timely set of monthly home price indices and median sales prices available covering:
- 6,587 ZIP codes (59 percent of total U.S. population)
- 608 Core Based Statistical Areas (86 percent of total U.S. population)
- 1,142 counties (84 percent of total U.S. population) located in all 50 states and the District of Columbia
The RiskModel uses zip-code level indices to approximate the current property value for every loan it analyzes. Future home prices are simulated at the CBSA level based on assumptions for expected growth and volatility that are easily modified by the user.
To learn more about the CoreLogic HPI, click here.
Stress Testing
The RiskModel’s stochastic capabilities enable users to evaluate the impact of different macro-economic scenarios as well as measure future uncertainty. The result is a broad distribution of probabilistic outcomes, yielding significant strategic insight.
The Federal Reserve’s currently mandated stress testing of top-tier banks’ capital adequacy outlines an approach that companies can follow to assess their ability to manage mortgage assets under difficult circumstances.
Even for the institutions not covered by the Fed’s mandate, such stress testing can help users better manage their portfolios. RiskModel can assist this effort by:
- Helping assess portfolio vulnerabilities
- Updating or replenishing the assets or their mix to reduce the impact of weaknesses
- Preparing for potential market interruptions and performance deterioration
- Highlighting the warning signs of unacceptable risk
Multiple Ways to Access the RiskModel
- Desktop Graphical User Interface (GUI)—The RiskModel Windows™-based GUI allows the user to leverage the sophisticated analytics of the RiskModel through a simple graphical user interface, providing flexibility on the user’s desktop.
- RiskModelDIRECT—A non-agency, MBS-vectors data service is available directly via SFTP, generated by the RiskModel with future home price simulations guided by the CoreLogic HPI Forecast. Users can subscribe to the entire MBS/ABS datasets or customize their portfolios. Vectors can be integrated with structured finance modeling tools, such as INTEXdesktop and INTEXcalc, or through select third-party partners.
- Advisory and Professional Services Engagements—CoreLogic Advisory and Professional Services aim to understand users’ needs and provide RiskModel-based analysis, saving both time and money. CoreLogic Professional Services staff can also liaise with our Analytics team to develop custom calibrations for distinct portfolios.
- Application Programming Interface (API)—By using a Windows-based, customizable API, users automate their analytics research and reporting by integrating it directly into a company’s existing infrastructure and systems.
