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CoreLogic Technology Forecasts Mortgage Performance

""CoreLogic"":http://www.corelogic.com announced the availability of ""RiskModel Version 4.4"":http://www.corelogic.com/capitalmarkets this week. The new technology offering is an analytics application that forecasts future mortgage prepayments, defaults, losses, and cash flows at both the loan and portfolio level.


This latest version integrates the CoreLogic Home Price Index (HPI) with new transition and loss-given-default models for Alt-A first and second-lien mortgages, allowing more than 75 percent of the loans in the development dataset to be estimated at the ZIP code level.

The California-based analytics firm says these additions improve the predictive performance of the RiskModel due to enhanced geographic granularity and product risk differentiation, particularly for negative amortizing products.

A new Refinance Qualification Index has also been developed to better predict prepayment sensitivity given a borrower's current equity and original credit profile relative to today's tighter underwriting guidelines.

Similarly, more sophisticated ""age curves"" enable the RiskModel to better capture the effect of ""credit burnout"" relative to seasoned loans which continue to perform


despite the presence of negative equity, CoreLogic explained.

Covering more than 200 core-based statistical areas (CBSAs), the new CoreLogic HPI Simulator enables a stochastic approach to addressing future housing price uncertainty which remains a key driver for predicting default. CoreLogic says this is achieved by capturing the cyclical nature of housing markets and the dynamics of house price movements, reflecting average appreciation rates and variances as well as market cycle duration.

""With more than $569 billion in Alt-A loans and securities still outstanding, many will need to be refinanced or modified over the next several years,"" said Ben Graboske, SVP of product and technology for CoreLogic. ""These new models with the inclusion of the most robust CoreLogic HPI data available will help holders of mortgage risk and servicers make more precise decisions.""

Graboske added, ""This version of the RiskModel marks the first phase in a plan that ultimately will incorporate CoreLogic HPI data in all analytics delivered by the RiskModel.""

Drawing on CoreLogic's database of more than 70 million active and historical prime and subprime loans representing 97 percent of active non-agency mortgage backed securities, RiskModel 4.4 employs predictive modeling and simultaneously considers credit and prepayment risk.

Key analytical capabilities include built-in Monte Carlo simulators of interest rates and home prices that are user modifiable, ""dials"" to calibrate the model to unique aspects of a client's portfolio and market conditions, the ability to track loan transitions through eight payment statuses of delinquency and default, and an application programming interface (API) that can be embedded in mortgage pricing and trading systems to analyze large volumes of bonds and other securities.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.

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