Data, in and of itself, is useless. It only becomes valuable if it drives informed action. Knowing that prepay speeds are up or down may be interesting, but it doesn’t drive action.

Level1Analytics® Loan and MSR valuations can include a loan level assessment of prepay propensity. Incorporating our proprietary prepayment model, each loan is assessed on a variety of characteristics: coupon, age, principal balance, LTV/FICO, and occupancy type, among others. These are just some of the characteristics that our seven years of analysis on 30+MM loans have shown to be drivers of prepayments.

As is shown above, modeled speeds (blue bars) are higher on the higher prepay propensity categories. Back-testing, to see actual CPR performance of these tranches (yellow bars), supports the predictive capability of this modeling.

While today, the highest propensity tranches usually make up only a small percentage of typical portfolios, this has not been the case historically, nor will it continue to be the case. We are seeing the “High” and “Highest” propensity tranches growing in principal balance every month.

Why guess, when you can be right? Get in touch - we’ll put this data to work for you.