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Strategic Analytics’ Mortgage Risk Model provides unparalleled accuracy in Mortgage and Home Equity portfolio forecasting. MRM technology captures product lifecycles, macroeconomic impacts and adverse selection–that other software models relying on scores or roll-rates alone–cannot accomplish.

Mortgage Risk Model Brochure [pdf, 1.4M]

How could seemingly sophisticated quantitative models in use by respected analysts, regulators, and risk managers have missed the mortgage meltdown?

The answer is simple—the overwhelming preponderance of roll-rate and other modeling techniques led to a misplaced sense of security regarding performance of mortgage portfolios and RMBS assets. According to Strategic Analytics Inc.’s co-founder and chief scientist Joseph L. Breeden, PhD, “any model that did not include explicit measures of the product lifecycle and environmental impacts could not have succeeded through the recent crisis, so any prior estimates of model accuracy were illusory.” Unable to quickly detect market turns, users of roll-rate and scoring models found their portfolios hopelessly underwater by the time these models alerted them to a problem.

Strategic Analytics’ scenario-based forecasting software using Dual-Time Dynamics analytical engine was the only commercially-available forecasting solution that predicted the current mortgage market crisis as early as 2005. The Dual-Time Dynamics modeling engine automatically separates and quantifies the core drivers of portfolio performance: vintage maturation effects, outside impacts from macroeconomics and competition, seasonality and originations quality. Strategic Analytics has taken this technology and enhanced it further for the mortgage sector, creating the Mortgage Risk Model™ solution.

Portfolio managers and risk managers–anyone responsible for mortgage performance—can utilize scenarios for future origination or capitalization plans including segment mix, target origination levels, and credit quality. These assumptions combined with macroeconomic scenarios can then be used to forecast key portfolio behavior. Since the process is robust and reproducible, scenarios may be used as tools across business units and between groups such as Risk and Finance in order to reinforce enterprise goals in portfolio decisions.

Customized Mortgage Risk Model Configurations

  • Delinquent Accounts and Balances;
  • Loss Severity;
  • Prepayment Rates;
  • Default Rates.

Data-cube infrastructure, pivot-type tables and report design tools allow end users to configure their own data view for history and to forecast across all portfolio variables. Mortgage Risk Model™ includes access to curve libraries produced and updated quarterly from Strategic Analytics’ Eclipse Database–a database with vintage-level performance data from 90% of the RMBS market. Analysts can utilize these industry curve libraries of account balance, delinquency, and losses segmented in thousands of dimensions to seed portfolio analysis where internal data is thin or compare historical portfolio performance with the industry. One-click industry overlays answer the question, “is it our company or is it the industry?”
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