Tag: vintage analysis

A vintage analysis comparing 60 or more days past due (DPD) delinquency performance at the one-year mark for mortgages originated between 2002 and 2010 shows that 2010 outperformed previous years, with a delinquency rate of 0.37 percent. The worst- performing vintage was 2006, with a 60 or more DPD delinquency rate of 3.84 percent – more than 10 times the delinquency rate of 2010. Listen to our recorded Webinar for a detailed look at the current state of strategic default in mortgage and an update on consumer credit trends. Source: Experian-Oliver Wyman Market Intelligence Reports

Recent findings on vintage analysis Source: Experian-Oliver Wyman Market Intelligence Reports Analyzing recent vintage analysis provides insights gleaned from cursory review Analyzing recent trends from vintages published in the Experian-Oliver Wyman Market Intelligence Reports, there are numerous insights that can be gleaned from just a cursory review of the results. Mortgage vintage analysis trends As noted in an earlier posting, recent mortgage vintage analysis' show a broad range of behaviors between more recent vintages and older, more established vintages that were originated before the significant run-up of housing prices seen in the middle of the decade. The 30+ delinquency levels for mortgage vintages in 2005, 2006, and 2007 approach and in two cases exceed 10 percent of trades in the last 12 months of performance, and have spiked from historical trends, beginning almost immediately after origination. On the other end of the spectrum, the vintages from 2003 and 2002 have barely approached or exceeded 5 percent for the last 6 or 7 years. Bandcard vintage analysis trends As one would expect, the 30+ delinquency trends demonstrated within bankcard vintage analysis are vastly different from the trends of mortgage vintages. Firstly, card delinquencies show a clear seasonal trend, with a more consistent yearly pattern evident in all vintages, resulting from the revolving structure of the product. The most interesting trends within the card vintages do show that the more recent vintages, 2005 to 2008, display higher 30+ delinquency levels, especially the Q2 2007 vintage, which is far and away the underperformer of the group. Within each vintage pool, an analysis can extend into the risk distribution and details of the portfolio and further segment the pool by credit score, specifically the VantageScore® credit score.  In other words, the loans in this pool are only for the most creditworthy customers at the time of origination. The noticeable trend is that while these consumers were largely resistant to deteriorating economic conditions, each vintage segment has seen a spike in the most recent 9-12 months. Given that these consumers tend to have the highest limits and lowest utilization of any VantageScore® credit score band, this trend encourages further account management consideration and raises flags about overall bankcard performance in coming months. Even a basic review of vintage analysis pools and the subsequent analysis opportunities that result from this data can be extremely useful. This vintage analysis can add a new perspective to risk management, supplementing more established analysis techniques, and further enhancing the ability to see the risk within the risk. Purchase a complete picture of consumer credit trends from Experian’s database of over 230 million consumers with the Market Intelligence Brief.

Analysis opportunity for vintage analysis Vintage analysis, specifically vintage pools, present numerous useful opportunities for any firm seeking to further understand the risks within specific portfolios. While most lenders have relatively strong reporting and metrics at hand  for their own loan portfolio monitoring...these to understand the specific performance characteristics of their own portfolios -- the ability to observe trends and benchmark against similar industry characteristics can enhance their insights significantly. Assuming that a lender possesses the vintage data and vintage analysis capability necessary to perform benchmarking on its portfolio, the next step is defining the specific metrics upon which any comparisons will be made. As mentioned in a previous posting, three aspects of vintage performance are often used to define these points of comparison: Vintage delinquency including charge-off curves, which allows for an understanding of the repayment trends within each pool. Specifically, standard delinquency measures (such as 30+ Days Past Due (DPD), 60+ DPD, 90+ DPD, and charge-off rates) provide measures of early and late stage delinquencies in each pool. Payoff trends, which reflect the pace at which pools are being repaid. While planning for losses through delinquency benchmarking is a critical aspect of this process, so, too, is the ability to understand pre-repayment tendencies and trends. Pre-payment can significantly impact cash-flow modeling and can add insight to interest income estimates and loan duration calculations. As part of the Experian-Oliver Wyman Market Intelligence Reports, these metrics are delivered each quarter, and provide a consistent, static pool base upon which vintage benchmarks can be conducted. Clearly, this is a rather simplified perspective on what can be a very detailed analysis exercise. A properly conducted vintage analysis needs to consider aspects such as: lender portfolio mix at origination; lender portfolio footprint at origination; lender payoff trends and differences from benchmarked industry data in order to properly balance the benchmarked data against the lender portfolio.

Vintage analysis 101 The title of this edition, ‘The risk within the risk’ is a testament to the amount of information that can be gleaned from an assessment of the performances of vintage analysis pools. Vintage analysis pools offer numerous perspectives of risk. They allow for a deep appreciation of the effects of loan maturation, and can also point toward the impact of external factors, such as changes in real estate prices, origination standards, and other macroeconomic factors, by highlighting measurable differences in vintage to vintage performance. What is a vintage pool? By the Experian definition, vintage pools are created by taking a sample of all consumers who originated loans in a specific period, perhaps a certain quarter, and tracking the performance of the same consumers and loans through the life of each loan. Vintage pools can be analyzed for various characteristics, but three of the most relevant are: * Vintage delinquency, which allows for an understanding of the repayment trends within each pool; * Payoff trends, which reflect the pace at which pools are being repaid; and * Charge-off curves, which provide insights into the charge-off rates of each pool. The credit grade of each borrower within a vintage pool is extremely important in understanding the vintage characteristics over time, and credit scores are based on the status of the borrower just before the new loan was originated. This process ensures that the new loan origination and the performance of the specific loan do not influence the borrower’s credit score. By using this method of pooling and scoring, each vintage segment contains the same group of loans over time – allowing for a valid comparison of vintage pools and the characteristics found within. Once vintage pools have been defined and created, the possibilities for this data are numerous... Read more about our analysis opportunities for vintage analysis and our recent findings on vintage analysis.