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King100
Topic Author
Posts: 1
Joined: April 21st, 2017, 9:47 am

CDR projections for legacy non-agency RMBS pools

April 21st, 2017, 9:51 am

Most of the street projects declining CDRs when modelling legacy RMBS (usually by applying roll-rate approach).  Collateral performance has improved consistently over time as deals have become more seasoned and 60+/90+ delinquency rates have been declining continuously since around 2010 and outlook for unemployment and house prices remains benign.  

However, the complication is that if you look at historical CDRs for legacy portfolios, although these also declined from a peak in 2009 although way up to 2014,  they have remained flat since then.  This trend is blamed on the foreclosure pipeline, which is still sizable and due to limited capacity by servicers to process backlog of foreclosed loan, liquidation rates (CDR’s) have remained steady.  I therefore think that projecting CDRs to decline immediately is somewhat optimistic but how to best to predict when CDRs will decline is the issue. I wonder if anyone has analysed this or might have any insights.
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