The Pipeline

As we prepare to head out to Las Vegas for SFVegas 2025, we are releasing three timely and relevant articles.

The Fed recently released the 2025 CCAR scenarios. In our first article, Alex Levin and Daniel Swanson review the CCAR scenarios, present attribution and loss ratio results, varying loan type and coupon. They also place the scenarios in the context of AD&Co’s 20-scenario grid and place this year’s results in historical context. Finally, in an appendix, they go over interpolation and extrapolation methodologies required to get from the Fed’s data to run our models.

On February 5, the Federal Reserve Board (Fed) released two scenarios—Base and Severely Adverse—for the 2025 Comprehensive Capital Analysis and Review (CCAR). These scenarios describe three-year trajectories based on key economic indicators. Of the 28 variables, the ones used by AD&Co’s mortgage models are home price (CoreLogic national HPI); interest rates (3-month, 5-year, and 10-year Treasury, prime index, and mortgage primary rate); and national unemployment.

With the release of the Kinetics LoanDynamics Modules, AD&Co clients and vendors can seamlessly integrate our flagship prepayment and credit model using a REST API, an alternative to the model’s C++ API.

Our Climate Impact Suite incorporates the impact of rising climate-related risks, as transmitted via rising insurance premiums, using two channels: behavioral changes, accomplished by “climate-conditioning” our Loan Dynamics Model (ccLDM), and changes to our house price appreciation (ccHPA) model. In contrast to most of our models, we added these effects based on sound theory and economic rationale, expecting to observe the impact of rising insurance premiums in data in the near term.