Understand Prepayment Time Series Information

Eagle Accounting and Prepayment Time Series Information

You can add prepayment information for amortizing securities that are backed by loans and have a schedule of principal repayments and time series information, such as the following:

• Certificates of amortizing revolving debt (CARDs), which are asset backed securities backed by credit card loans. These types of securities do not have a scheduled principal repayment on a specific timely basis. However, they have an effective maturity date that can change over time.

• Certificates for automotive receivables (CARs), which are asset backed securities backed by car loans. The monthly prepayment is expressed as a percentage of the original collateral amount, known as the absolute prepayment speed (ABS).

For example, suppose you provide prepayment time series information with an effective date of 03/01/14 and a value of 04/01/14 and a lot is earned through 04/30/14. You can roll back a position’s earnings to 03/01/14 and roll the earning's forward to 04/30/14. The system uses the values in place based on the specified effective date. When earnings are rolled back to 03/01/14 and replayed to 04/30/14, the system uses the time series information on 03/01/14, from 03/01/14 through 03/31/14, and then switches to the time series information on 04/01/14, from 04/01/14 through 04/30/14.

Eagle Accounting only uses prepayment time series information records with a Prepayment Time Series Release Status of Released. It does not use records with a Pending release status in the processing of amortization or cash flows. However, you can use the Amortization Schedule research report to report on time series information with a Pending or Released status.

About the Time Series Table

The Time Series table stores the ABS/MBS time series data used in the calculation of trade and amortization yield. Eagle Accounting stores the following data based upon a single Effective Date in the table, rather than on the Security Master Record:

• Current WAC (Weighted Average Coupon)
• Current WAM (Weighted Average Maturity)
• Current WALA (Weighted Average Loan Age)
• CPR 1 month (Constant Prepayment Rate)
• CPR 3 Month
• CPR 6 Month
• CPR 12 Month
• CPR Life
• PSA 1 month (PSA stands for the Public Security Association)
• PSA 3 Month
• PSA 6 Month
• PSA 12 Month
• PSA Life
• ABS 1 month (ABS stands for the Absolute Prepayment model
• ABS 3 Month
• ABS 6 Month
• ABS 12 Month
• ABS Life
• SMM (Single Monthly mortality
• Effective Maturity Date
• Prepayment Time Series Release Status

By storing the data in a time sensitive structure, the earnings process has tighter control over which values are used, and when they are used, in yield calculations during earnings roll forward and roll back. Another benefit of storing data as time sensitive elements is that when data changes from one period to the next, Eagle Accounting takes a prospective approach for the coupon period for the calculation of the amortization yield and subsequent amortization.

By storing the time series information, Eagle Accounting has the ability to correctly process ABS securities backed by credit card loans, also known as Certificates of Amortizing Revolving Debt or simply as CARDS. CARDS securities are different from other ABS/MBS securities as they do not amortize principal in a scheduled manner; there is no scheduled principal repayment on a specific basis. CARDS securities also have an Effective Maturity Date which acts as the new target Amortization Date (this also known as Soft Bullet Maturity). The Effective Maturity Date is a time sensitive element and can change over time. When the Effective Maturity Date changes, Eagle Accounting takes a prospective approach to calculation of the amortization yield and subsequent amortization.

Prepayment Time Series Example 1

In this example, you provide the Prepayment Time Series Information table with an Effective Date of 03/01/2005 and a value of 04/01/2005, and a lot is earned thru 04/30/2005.

You roll back a position’s earnings to 03/01/2005 and then roll the earnings forward to 04/30/2005. Eagle Accounting uses the values in place based on their specified Effective Date. When earnings are rolled back to 03/01/05 and then replayed to 04/30/05, Eagle Accounting uses the time series information on 03/01/05, from 03/01/05 thru 03/31/05 and then switches to use the time series information 04/01/05, from 04/01/05 thru 04/30/05.

Prepayment Time Series Example 2: Loading PSA Data

Assume you are loading PSA time series data for a security. You ensure that effective date of the time series data matches the beginning coupon date of the corresponding coupon period. If PSA data for the security is available for the coupon period with a coupon date of 01/01/2012, you load Prepayment Times Series data for the security with an Effective Date of 01/01/2012.

Otherwise, if that PSA data does not become available until 01/12/2012, you load the Prepayment Times Series data for the security using an Effective Date of 01/01/2012, rather than the day you actually received that data. Until the most recent times series data is available and loaded into the system, Eagle uses the previous months’ time series data in the interim. Nothing is specifically loaded on 01/01/2012 (in this example) as a placeholder. Instead, the previous month’s information is leveraged but is considered stale.

If you load the PSA data with an Effective Date of 01/01/2012 on 01/12/2012, you do not need to rollback and replay earnings in order for the security to apply the corresponding time series data. Once the new time series data is available and in a Released status, when you run the Earnings process, Eagle Accounting automatically prospectively trues up the amortization and retriggers a yield recalculation, which results in a delta correction.