Prepayment is the single most important consideration in valuing mortgage cash flows. Lender Processing Services' (LPS) Applied Analytics division has produced a state-of-the-art, behavioral-mortgage prepayment model that moves beyond traditional prepayment models to provide a flexible trading-quality system.
The LPS Prepayment Model offers a powerful open-architecture system that integrates directly with your proprietary trading, portfolio management or valuation system or can be used on a stand-alone basis. This gives clients the flexibility to manage their portfolios and make more informed valuation or trading decisions.
Modeling Sources of Prepayment
With the LPS Prepayment Model, clients can adjust the calculation of prepayments to most accurately reflect projected behavior.
There are four sources of prepayments:
- U.S. home sales activity
- Borrower refinancing activity
- Principal curtailment
- Loan default
Home Sales Activity
As a subset of overall housing market conditions, the total housing turnover-related prepayments are modeled. Incorporated factors include:
- Rate of existing USA housing sales
- Current mortgage rates
- Borrower points (higher upfront costs lead to less prepayment activity)
- Mortgage age
- Seasonality (a borrower is significantly more likely to move in the summer)
- Type of loan
Click here to download the Prepayment Model PowerPoint presentation (1.5MB).
Customer Support
LPS Applied Analytics provides the highest level of support available in the marketplace. The support staff consists of talented representatives who understand what you face every day. Customer support is provided as part of your software license agreement without cost. Training is also available for technical and system implementation.
Contact Us
Call us at 415.989.9800 or send us an e-mail to find out more about LPS Applied Analytics and how we can add the power of data analytics to your portfolio