There is an abundance of "street" research providing delinquency and loss performance for manufactured housing and home equity issuers. The data tracks levels of 30 and 60-day delinquencies, current losses and cumulative losses with a focus on whether the respective triggers are passing or failing. These "triggers" have important implications for the ultimate principal payout as a pro-rata or sequential structure, with further implication on the timing of return of principal and yield (prepayment and extension scenarios). However, investors who rely on this information as an indicator of actual deal performance are missing a critical element of future default trends.
Deal performance can only be properly assessed through a careful examination of the servicing reports, an exercise which Structured Finance Advisors, Inc. ("SFA") performs on a monthly basis for its clients. SFA has determined that a leading indicator of defaults is contained in two additional measures: the amount of repo inventory and level of servicer advancing. Taken together these two measures provide a barometer of pending defaults.