FINANCES – COLLATERAL PERSONAL CREDIT PERFORMANCE
In this section, we examine the delinquency and roll rates, and the default and loss severity of subprime loans. The delinquency status of a loan indicates the number of days the borrower is contractually past due (i.e., days past due or dpd). The loan delinquency statistics may be calculated using either the Mortgage Bankers Association (MBA) method or the Office of Thrift Supervision (OTS) method.
Using the MBA method, a loan is considered contractually delinquent if the payment is not received by the end of the day immediately preceding the loan’s next due date (generally the end of the month). For example, a loan due on November 1, 2006 with no payment received on November 30, 2006 would be reported delinquent on the November statement to bondholders.
Using the OTS method, a loan is considered contractually delinquent if the payment is not received by the close of business on the loan’s due date in the following month. For example, a loan due on November 1, 2006 with no payment received on November 31, 2006 would not be reported delinquent on the November statement to the bondholders.
The OTS method delays the reporting of delinquent loans by one month relative to the MBA method. It is important to know which reporting method is used by each originator or servicer when comparing delinquency statistics.