30.2.3 WSA Engine and OFSAA Product Characteristic Definition

A New tab “Model Integration” is introduced for Moody's WSA Integration. This tab is enabled only for the account types “Structured Products - Assets” “Structured Products - Liabilities”.

Model Selection, Tuning, and tuning parameters for the selected model can be passed through the Model Integration in Product Characteristic UI.

Users should logically branch the deals (RMBS, CMBS, SLABS, Credit Cards) in their hierarchy for modeling the behavior in the following two ways. Details follow:

  • Passing the assumptions from a table: The user can choose to pass the following assumptions (listed in the table below) through the table “FSI_D_BEHAVIOR_ASSUMPTIONS”. These would be read from the table and applied to the deal with the matching “INSTRUMENT_NUM” in the instrument table. In the model selection UI, the user has to select “Source system provided” against the particular node for modeling with the user provided assumptions.

    Table 30-1 Assumption Types/Subtype Details

    ASSUMPTION TYPE ASSUMPTION SUBTYPE DESCRIPTION
    PREPAYMENT PREPAY_CURVE_PSA Standard prepayment curve measuring for prepayments in the residential mortgage market.
    PREPAYMENT PREPAY_CURVE_SMM Monthly prepayment or default rate.
    PREPAYMENT PREPAY_CURVE_CPR Constant Prepayment Rate (CPR): Prepayment percentage expressed as an annual compounded rate.
    PREPAYMENT PREPAY_CURVE_HEP Home Equity Prepayment: A measure of prepayments for closed-end, fixed-rate HEL loans. This curve accounts for the faster seasoning ramp for home equity loans.
    PREPAYMENT PREPAY_CURVE_ABS Asset-Backed Securities (ABS): It is used in ABS markets, where prepayments differ significantly from standard mortgages. This model defines an increasing sequence of monthly prepayment rates, which correspond to a constant absolute level of loan prepayments in all future periods.
    DEFAULT DEFAULT_CURVE_CDR Constant Default Rate (CDR): Default percentage expressed as an annual compounded rate
    DEFAULT DEFAULT_CURVE_SDA Standard default curve: Measuring for defaults in the residential mortgage market
    DEFAULT DEFAULT_CURVE_MDR Monthly Default Rate
    DEFAULT DEFAULT_CURVE_SEASONED_CDR
    DEFAULT DEFAULT_CURVE_SEASONED_MDR
    DELINQUENCY dq30Val A pointer to data for from 30 to 59 day's delinquency
    DELINQUENCY dq60Val A pointer to data for from 60 to 89 day's delinquency
    DELINQUENCY dq90Val A pointer to data for 90 plus day's delinquency
    RECOVERIES RECOVERY Vector of recoveries
    DRAW HELOC_DRAW_RATES Vector of annualized draw rates for HELOC
    FORBEARANCE FORBEARANCE Sets the constant or vectored forbearance rate for SLABS deals
    DEFERMENT STUDENT_LOAN_REPAY_TYPE_FULL_DEFER Capitalize Interest
    DEFERMENT STUDENT_LOAN_REPAY_TYPE_PRIN_DEFER Pay Interest, Balance Flat
    CREDIT_CARDS CREDIT_CARD_ASSUMP_YIELD Portfolio/Annual Yield
    CREDIT_CARDS CREDIT_CARD_ASSUMP_REPAYMENT Repayment Rate
    CREDIT_CARDS CREDIT_CARD_ASSUMP_RECOVERY Loss Rate
    CREDIT_CARDS CREDIT_CARD_ASSUMP_PURCHASE Purchase Rate
    CREDIT_CARDS CREDIT_CARD_ASSUMP_DEFAULT Default Rate
    • When a user is passing assumptions, for example, the Prepayment vector, the subtype values can be in; – PSA, SMM, CPR, HEP, and ABS. Users have to make sure they are passing the correct and acceptable subtype with respect to Moody's. Only one subtype can be applied for prepayment and default per each CUSIP.
    • When passing the delinquency assumptions, the dq30val, dq60Val, and dq90Val mentioned for are not subtypes; rather they are various levels of delinquencies possible. Typically a deal would have all three vectors available.
  • ADCo prepayment and default modeling: The user can also choose to model through the ADCo model by selecting “ADCo” in the model selection drop-down list. ADCo can only be used against RMBS deals, as ADCo can only model Mortgage-Backed Securities.

    Tuning Parameters: Tuning is available to allow the user to customize the assumptions being provided to Moody's WSA engine.

  • For Source System Provided:

    Table 30-2 Tuning Parameters

    Tuning Parameter Description Default Value
    Prepayment The magnitude for prepaying rate 1
    Default The magnitude for the default rate 1
    Recovery The magnitude for the recovery rate 1
    Recovery Lag Recovery lag applied to each loan 0
    Draw Rates The magnitude for mortgage draw rates 1
    Servicer Advancing NONE/INTEREST/BOTH None
  • For ADCO: Additionally, the Parameters available are:

    Table 30-3 Tuning Parameters

    Tuning Parameters Description Default
    ficoToUseIfNotAvailable Fico to use for loans that do not have this INFO 680
    ficoSubprimeThreashold The loan is considered subprime if FICO is less than this value ( 620 if not provided) 620
    SMM for Failed Loans SMM for Failed Loans NA
    Recovery for Failed Loans Recovery for Failed Loans NA
    MDR for Failed Loans MDR for Failed Loans NA