Moody’s Analytics has updated its risk management tool called Mortgage Portfolio Analyzer (MPA) to help retail portfolio managers manage the credit risk in their mortgage portfolios.

The updated MPA has an framework for modeling stressed macroeconomic scenarios, defaults, prepayments and severities, a release from the firm stated.

Banks can now run their mortgage portfolios under the following scenarios using the tool's updated version: Fed’s Comprehensive Capital Analysis and Review (CCAR), user-defined and Moody’s Analytics’ macroeconomic scenarios.

MPA allows clients to input their own models for prepayments, defaults, loss given defaults (LGDs), and recovery lags. They can also get loss distributions consistent with their customized baseline forecasts of macroeconomic variables. MPA also gives loan-level expected loss, probability of default and LGDs estimates corresponding to a specified tail scenario, such as VaR or credit enhancement levels of a tranche.

The enhanced MPA now allows users to run analyses of mixed mortgage loan portfolios such as prime, subprime, Alt-A, HELOCS, and NegAm. I can also automatically classify loans into prime or subprime categories. MPA’s collateral-level output is formatted for use with a number of leading cash flow waterfall products.

“As banks respond to increased regulatory and economic uncertainty, they are faced with pressure to accurately measure and manage their exposure to risk related to RMBS and whole loan residential mortgages,” says Ashish Das, managing director of research at Moody’s Analytics. “The updated MPA will help banks to quickly run their mortgage portfolio under stressed scenarios, delivering greater transparency into the risk drivers and enhanced flexibility of use.



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