Lehman Brothers ABS research has added new tools to its LehmanLive online monitoring system, including enhancing its Lehman ABS Index. One of those is a new option-adjusted spread analysis tool for home equity securitizations, and the other is geared toward both auto and home equity deal surveillance. Additionally, Lehman is expected to introduce a floating-rate component to its ABS index sometime in early 2005.

The new home equity option adjusted spread model extends Lehman's interest rate simulations to subprime rates and provides a forecast of both delinquencies and defaults in each rate scenario, extending the analysis with many of the credit components it had been missing. The model projects prepayment, default, and delinquency vectors for each pool in a deal and along each rate scenario and be run on any cash flow model and produce a reasonable projection for any home equity deal. Another new feature of the model is that it can handle deals with floating-rate collateral.

Lehman has also recently introduced performance surveillance tools to analyze historical collateral performance in both the auto loan and home equity sectors and find overall performance drivers for individual deals. Performance can be compared among specific deals, vintages and issuers and "allows drilling down from the aggregate level to the deal level," Dan Mingelgrin, from the quantitative research department at Lehman.

Some notable features of the system are that it can separate loan-level data within home equity deals along categories such as ARMs and fixed-rate loans. For auto deals, the system can compare things such as voluntary prepayments versus total prepayments as well as the default levels between various deals.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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