Post-Crisis Predictive Power and Effective Solutions for New Regulations
Leveraging the full scope of CoreLogic data resources, RiskModel can predict the risk associated with whole loan portfolios and formulate accurate assumptions to support the valuations of both agency and non-agency residential mortgage-backed securities.
Drawing from a wealth of historical loan-performance data, RiskModel’s sophisticated age curves enable it to capture the effect of credit burnout on more seasoned loans that continue to perform despite the presence of negative equity.
Both comprehensive and cost-effective, RiskModel can play a critical role in:
- Fed-mandated stress tests
- OTTI estimates
- Setting bank reserve levels
- Projecting and reporting asset impairments now required by GAAP
Dialing for Model Sensitivities
Model sensitivities can be quickly and easily modified to reflect the behavioral effect of loan characteristics, such as:
- Loan modification type
- Product type
- Delinquency status
- Payment history
By fine-tuning a model's sensitivity to such variables based on experience, RiskModel users can improve estimates of future performance as it relates to a portfolio or a specific security.
This adjustable framework also lets users create dials that adjust for supplemental data—enabling the factoring in of borrower credit, public record, servicer, origination channel, and other relevant data.
RiskModel draws on the mortgage industry’s most comprehensive databases—with more than 70 million active and historical prime, alt-A, and subprime loans—including:
- The CoreLogic Loan-Level Market Analytics (LLMA) database—covering 42 million active mortgages, 76% of residential mortgages, worth $7.6 trillion
- The CoreLogic securities database—covering 97% of all non-agency MBS and ABS securities, worth more than $1.13 trillion
- The CoreLogic LLMA-derived agency residential mortgage dataset—covering more than seven million servicer-contributed active agency loans
- CoreLogic HPI—the most comprehensive and timely U.S. housing market price index.
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.
CoreLogic HPI provides the most comprehensive and timely set of monthly home price indices and median sales prices available covering:
- 600+ ZIP codes (58 percent of total U.S. population)
- 640 Core Based Statistical Areas (86 percent of total U.S. population)
- 1200+ counties (84 percent of total U.S. population) located in all 50 states and the District of Columbia
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.
RiskModel’s stochastic capabilities enable users to evaluate the impact of different macro-economic scenarios and measure future levels of uncertainty. The result is a broad distribution of probabilistic outcomes, yielding significant strategic insights.
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
How to Access RiskModel
CoreLogic offers multiple ways to access RiskModel’s power:
- Desktop graphical user interface (GUI)—RiskModel’s Windows-based GUI allows users to leverage its sophisticated analytics through a simple graphical user interface, providing access and flexibility right on the user’s desktop
- RiskModelDIRECT—this non-agency, MBS-vectors data service is available directly via SFTP, generated by RiskModel with future home price simulations guided by CoreLogic HPI Forecasts™. Users can subscribe to the entire MBS/ABS dataset or customize to match their portfolio’s focus. 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—our advisory and professional services experts first understand users’ needs then tailor their efforts to provide appropriate RiskModel-based analysis, a process that often saves both time and money. Professional Services staff can also liaise with CoreLogic analytics teams to develop client-directed custom calibrations for unique portfolios
- Application programming interface (API)—clients can also incorporate a Windows-based, customizable API that will automate analytics research and reporting by integrating it directly into the company’s existing systems infrastructure.