The credit crisis has forced MBS investors to adopt new tactics. Notably, they have to take a closer look at the collateral backing mortgage bonds. But the analysis goes beyond that. Investors now need to look at home prices in a geographic region and consider the health of local economies where the homes are actually located. Ahead of the crisis, little attention was paid to whether a property was owner-occupied or if there were multiple liens on a single property. Now, issues like these make a world of a difference. Then there is the question of what actually makes a borrower walk away from a loan? Some observers believe geographic location has much to do with a homeowner's decision to default on their mortgage. Having clues to the roots of a default can help market participants better size up the value of a pool of whole loans or securities out for bid. ASR recently met with some of the market's leading analysts and observers to learn about the leading indicators of a default in a mortgage-backed bond. That discussion, which was moderated by ASR's contributing editor Aleksandrs Rozens, was sponsored by 1010data - a provider of tools and analytics used by many mortgage bond investors today. Interestingly, the panelists agreed that even if the data to look deep in the mortgage bonds were available ahead of this credit crisis, few investors would have held off from snapping up the riskiest mortgage securities. Why? The appetite for risk was just too great.
Rozens:What kinds of tools are people in the industry, originators/dealers, using to get an edge when they look at credit information about homeowners?