JHU Fannie Mae Individual Case Study
Data Description:
1.
Table: Loans
 Loan ID: Each single loan has a specific ID
 Orig UPB: The UPB (unpaid balance) of the loan at its origination date
 Note Rate: Mortgage rate of the loan (all loans are fixed rate for term of the loan)
 Orig LTV: The mark to market Loan-to-Value ratio of the loan at its origination date.
‘Loan’ means the remaining loan balance and ‘Value’ means the house value of the loan
 Orig FICO: The FICO score of the borrower of the loan at the origination date
 Orig Date: The day at which the loan originated
 Investor: This is a flag variable. ‘Y’ means the borrower bought the house as an
investment. ‘N’ means the borrower bought the house to live in it (“Owner Occupied”).
 Term: The term of the mortgage in months. 360 means it’s a 30 years mortgage.
2.
Table: Loan Time Series
 Loan ID: The same meaning as above
 Time Series Information: This is a time series table, for which ‘P’ means the loan has
been prepaid (only concern about fully prepay, no partially prepay) at that time point and
‘D’ means defaulted at the time point. Numeric means the loan is still alive at that time.
‘0’ tells you the originate date of the loan
3.
Table: Market Data
 HPI: House Price Index (Monthly Data) where 100 is the index value
 Interest Rate: The prevailing market mortgage rate at that time period (Monthly Data);
note that Interest Rates are displayed in % terms (so 5.00% = 0.0500)
Background Terminology and Formula
1. SMM: Single Monthly Mortality due to prepay/default.
smm_prepayn =
(Prepaid UPB during month n)
⁄(Total UPB at the beginning of the month)
smm_default n =
(Defaulted UPB during month n)
⁄(Total UPB at the beginning of the month)
n = 1,2 … …
2. CPR: Conditional Prepay Rate (Annualized)
1 − CPR = (1 − smm_prepay1 ) … … (1 − smm_prepay12 )
3. CDR: Conditional Default Rate (Annualized)
1− CDR = (1 − smm_default1 ) … … (1 − smm_default12 )
Hints for the Case Study
-
-
Calculate Mark to Market LTV for loans over time
Calculate Refinance Incentive (loan interest rate minus current market interest rate)
Organize the data so that you can identify loans that have defaulted, prepaid, or survived
Calculate CPR and CDR for loans over time (treating all the loans as one pool)
Plot CPR and CDR by loan attributes and time
Find correlations between attributes such as
 FICO and Default
 Seasoning (loan age) and Default
 Mark to Market LTV and Default
 Investor and Default
 Refinance Incentive and Prepayment
Analyze the correlations over different time periods to see if the strength of the correlation
changed at certain points in time
Hints for the Presentation
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Demonstrate your knowledge of mortgage loans and default and prepayment behavior
Explain the major drivers of default and prepayment
Explain how government programs and external market factors may have affected default and
prepayment behavior over the past several years
Explain how you analyzed the data provided to you
Describe (using charts or other methods) any conclusions that you drew