Consumer credit conditions improved in March, although some of this improvement is attributable to regular seasonal factors. Auto-related credit is the shining star of consumer credit at the moment.Author: Cristian deRitis Date: April 24, 2012
Consumer credit conditions improved in February with first-mortgage and auto loans contributing positively to overall credit quality.Author: Cristian deRitis Date: March 17, 2012
Leveraging its exhaustive portfolio of regional economic time series and forecasts, Moody’s Analytics has developed a modeling methodology and forecasting tool that can provide utilities with a method for forecasting their accounts receivable and losses under a variety of economic scenarios. Through the use of this tool, utilities can more accurately forecast their short-, medium- and long-term losses and take appropriate actions to insure their profitability, solvency and commitment to providing the public with uninterrupted electric, gas, telecommunications and other services. Author: Cristian deRitis and Sergiy Stetsenko Date: February 27, 2012
Performance should improve across non-mortgage loan products throughout the year as the labor market recovery continues and outstanding balances rise on the back of increased demand for credit. Author: Cristian deRitis Date: February 23, 2012
Despite the year-over-year decline in balances in December, a reported increase in the amount of available credit suggests that this trend may be coming to an end.Author: Cristian deRitis Date: January 18, 2012
The Federal Reserve has a set of suggestions to jump-start the moribund U.S. housing market, which is experiencing its sixth year of falling prices. The Fed’s ideas are not new; other agencies and analysts have discussed them extensively since the crisis began. Yet Chairman Ben Bernanke’s entry into the discussion is notable, since many of the proposals require action by entities other than the Fed. That said, even if the central bank’s advice is implemented, its effect on the health and recovery of the market is likely to be limited. Author: Cristian deRitis Date: January 10, 2012
The consumer credit market continues to show signs of improvement in both balance growth and performance. Consumers have changed their behavior and improved their balance sheets significantly as credit availability remained limited. Author: Cristian deRitis Date: December 20, 2011
Consumers are improving their balance sheets, both by choice and out of necessity, as credit availability remains limited. The summer slump in economic conditions and drop in confidence was a negative for credit as well, contributing to the end of the decline in delinquencies. Yet, at least in some segments, delinquency rates had fallen so low it was hard to see them dropping much further in the face of high unemployment and a weak economy.Author: Scott Hoyt Date: November 14, 2011
Consumer credit conditions are still improving. There is little room left for reductions in delinquencies in some segments, and the weak economy limits improvement as well. Easing lending standards, combined with the reacceleration of economic growth, will bring deleveraging to an end and support credit quality later this year and next. Author: Scott Hoyt Date: October 13, 2011
Credit conditions deteriorated as the debt-ceiling debate, U.S. government downgrade, and European debt crisis shookconsumer confidence. Delinquency and default rates on consumer loans rose in August while declines in volume slowed. Broader economic fundamentals should lead to improving conditions once uncertainty is contained. Author: Cristian Deritis Date: September 19, 2011
The economic pause is slowing the improvement in credit conditions. Deleveraging accelerated, but defaults fell sharply in July. Easing lending standards, combined with the reacceleration of economic growth, will bring deleveraging to an end and support credit quality later this year and next. Author: Scott HoytDate: August 8, 2011
Methodology is outlined to allow for effective assessment of private loan portfolios using broader publicly available data and rigorous modeling techniques.Author: Anthony Hughes & Brian Poi Date: July 14, 2011
The economic pause is contributing to a slower rate in the decline in consumer credit balances. The pause is also limiting the improvement in credit quality. Easing lending standards, combined with the reacceleration of economic growth, will bring deleveraging to an end and support credit quality later this year and next. Author: Scott HoytDate: July 12, 2011
Practitioners apply various methods of portfolio analysis to the evaluations of the credit risk of retail debt. One way to characterize these approaches is to differentiate them along two dimensions: the unit of analysis (loan-level vs. pool-level) and the state-space of the analysis (single path vs. full-distribution of paths). We provide a heuristic framework for evaluating these tradeoffs and highlight instances where one framework may be preferred to another. It is often the case that additional factors, besides quantitative ones, bear on the analytic choice. Author: Roger M. Stein Date: May 18, 2011
U.S. consumers’ financial obligations and debt burdens continue to fall, but rising borrowing rates will eventually end this trend. Minimum required interest and principal payments fell 0.7% from the third to the fourth quarter of 2010, the slowest rate of decline in two years. Obligations fell 1.3% in the first quarter of 2010. Debt payments have fallen for 10 consecutive quarters. Prior to the third quarter of 2008, debt payments had only fallen twice in the history of the series back to 1980.Author: Scott HoytDate: March 15, 2011
Economic Scenario Generator (ESG) is the cornerstone of a market-consistent valuation of the balance sheet. In particular, ESG represents what we consider to be the appropriate tool to properly monitor and manage both market and credit risk from an integrated perspective. Author: Juan Licari, Andrea AppedduDate: September 1, 2010
In this article, we present new research on how best to forecast collateral losses that bolsters the case for a vibrant market for structured asset-backed securities. With the waterfall modeling problem solved, we will concentrate on the more controversial issue of how best, in an uncertain world, to predict the underlying cash flow from the assets backing each deal. A natural extension of this pursuit is a system that enables investors and originators to conduct meaningful stress tests so they can more confidently assess the probability of elevated capital losses. Moody’s Analytics has engaged in a number of consulting projects in recent years using this modeling approach. Author: Juan Carlos Calcagno, Anthony Hughes, Ioannis Stamatopoulos Date: August 5, 2010
Macroeconomic trends and business cycles are not adequately accounted for in the risk assessment process of consumer credit. This article argues that a regional business cycle adjustment should be applied to existing consumer credit scores.Author: Anthony Hughes Date: April 12, 2010
This paper presents some stylized facts about the role of mortgage underwriting standards in the current market crisis. Disentangling the time-varying effects of changes in economic factors, such as home prices, from the time-varying effects of underwriting standards can pose challenges, particularly given the effects of the loan prepayment option common in the US market. This study uses a new simulation tool to model mortgage losses related to conditional prepayment probability, conditional default probability and conditional loss given default. The simulation experiments suggest that introducing an additional factor, based on publicly available underwriting surveys, permits the model to capture better the unusually poor performance of late-vintage subprime mortgages, while also producing reasonable estimates for earlier vintages. Author: Ashish Das & Roger M. Stein Date: July 31, 2009
Surviving mortgage lenders should seek to learn from the industry’s past mistakes. This article applies loan level models and the MCC vintage methodology to the portfolio of a failed subprime mortgage lender and sheds light on some of the reasons for loan losses. It describes how the two modeling approaches can be used and illustrates how users can derive scoring models fully consistent with aggregate level portfolio forecasts and stress tests.Author: Cristian deRitis, Anthony Hughes Date: March 1, 2009
Credit scores have a long and celebrated history in the field of credit risk management. Ostensibly, such scores assess the creditworthiness of individuals based on a statistically derived formula that links past activity in consumer credit markets with the probability that a default will later appear on the individual’s credit file. This article argues that macroeconomic conditions should also be considered in understanding how credit scores can be used to manage credit risk and offers an approach to including macroeconomic factors in the modeling of credit score distributions. Author: Anthony Hughes Date: September 1, 2008
This article addresses the question of whether aggregate models of credit risk provide better forecasts of portfolio aggregates than individual level specifications. The question is addressed using a Monte Carlo simulation study. The article illustrates how aggregate models are preferable for forecasting and how such models may be structured.Author: Anthony Hughes Date: August 8, 2008