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The UFA Mortgage Report™, developed by UFA, is the authoritative source for
understanding future mortgage risks by economic region. It is published quarterly as a user-friendly 100 page
summary of our research, and forecasts mortgage default and prepayment by state and region using millions of loan observations.
The report's multipliers help you increase
revenues and reduce risks by enabling:
- More profitable loan pricing that adjusts for regional lending risks
- A deeper understanding of the loan portfolio risks during both recessions and expansions
- More refined underwriting that incorporates local market conditions
- Better human resource management in servicing by focusing on the most vulnerable markets
The report provides:
- Effects of the national and regional economic conditions on current and future loan performance
- Annual forecast of default probabilities by state for a loan originated today
- Annual forecast of voluntary repayment probabilities by state
- Annual forecast of total prepayment probabilities by state;
- Graphs and historical data for important economic variables like housing permits, employment growth and house prices
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How does the UFA Mortgage Report™ benefit lenders, servicers and investors?
The
report helps lenders and investors:
- Control and adjust for regional default risks
- Increase profitability by focusing on the best markets while avoiding the risky ones
- Acquire portfolios with favorable prospects
- Identify the most and least profitable loans in a portfolio
- Understand the regional prepayment risks
- Increase servicing income
- Acquire favorable MBS tranches
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How is the analysis done?
Underlying the analysis and research
is UFA’s ForeScore™ modeling framework. In ForeScore, four dimensions of
mortgage loan risk are analyzed in detail and summarized in four component scores. The
four dimensions are the borrower, the loan terms, the collateral and the regional
economics. The borrower component includes commonly used credit scores as well as
information on work experience, debt capacity and other financial characteristics. This
report focuses on the effects of regional economics on mortgage defaults, prepayments and
loan values.
The ForeScore System
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The analysis is based on a constant-quality
loan, that is, a loan with standardized or prototypical characteristics. By focusing on a
constant quality loan the regional economic effects are isolated independent of
underwriting policy. Other characteristics such as borrower credit and loan terms are held
constant. The characteristics are designed to be representative of the nonprime mortgage
loans lenders will typically originate. Experience tells us that these estimates provide
an excellent first cut at regional variation for most lenders.
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What
are the
Multipliers?
The essential output
of the analysis of mortgage loan performance is a set of loan multipliers by state. These
multipliers enable the user to risk adjust any loan or pool of loans for the regional
risks. The multipliers are typically between 0.7 and 1.45 (70% and 145%) and
represent the level of expected defaults, repayments and prepayments over the life of a
loan relative to the national average. For example, if a loan is located in
Connecticut where the default multiplier is 0.82, then expected defaults in
Connecticut are 82% of expected defaults on the average loan in the U.S. Similar
multipliers are provided for voluntary repayments and total prepayments.
The
report provides the profile of annual expected defaults, repayments and prepayments over the
next ten years for a loan originated in the current quarter for each state. The
annual estimates are also presented as multipliers.
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Become a Charter Subscriber
For more information contact:
University Financial Associates LLC
343 S. Main St., Suite 200
Ann Arbor, MI 48104
Email: info@ufanet.com
Phone: 734.995.7271
Fax: 734.629.0636
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