## Why you can’t trust median home prices

This spreadsheet may come in handy if you ever have to explain to someone why you can’t trust home prices published in the media. Typically, home prices are based upon the median sales price. In my area (Sothern California) it is not uncommon to see home prices down 20% or more (YoY) in one city, […]

## Skip-a-Payment

Around this time of year, banks and credit unions will sometimes offer borrowers the option to skip a payment or two in return for a fee. This offering is a spreadsheet that calculates the APR on a loan after the borrower accepts the offer to skip one or more payments. There are two amortization schedules […]

## Simple Formula for Converting Compound Interest Rates

This workbook has a simple formula to convert compound interest rates. =IF(t>500,f*LN(1+g/f),IF(f>=500,t*(EXP(g/t)-1),(t*((1+g/f)^(f/t))-t)))  Where: g = Current interest rate f = Number of times the current rate compounds per year t = Number of times the converted new rate compounds per year This lookup table grabs two of the numbers for the formula Continuous compounding in Excel […]

## Standard Default Assumption (SDA)

My last post and spreadsheet concerned the Constant Default Rate (CDR) on a pool of loans. As the name implies, the CDR uses the same default rate for the complete term of the loan. It does not allow for the probability of default, depending upon the age of the loan. The SDA curve was developed […]

## Constant Default Rate (CDR)

Also see this post: Comparing CDR Default Formulas to Industry Standard Default Formulas   Constant Default Rate (CDR) is an annualized rate of default on a pool of loans. The default rate on loans depends on a number of conditions, such as the age of the loans, seasonality, burnout levels, FICO, LTV, income, etc. Since […]

## Convert CPR, SMM & ABS (APS)

We have already discussed Constant Prepayment Rate (CPR) and Single Monthly Mortality Rate (SMM). Another prepayment rate is the Absolute Prepayment Speed (APS), used mostly for  securities backed by auto, truck, and RV loans. The acronym for Absolute Prepayment Speed (APS) is also referred to as ABS, which is confusing because ABS is also the acronym for Asset-Backed […]

## Solve for Last Payment Due

In my first blog post back in August, I had a formula that would solve for future value given dates and amounts. In this post we will use the same formula to solve for the last payment due. There are a number of scenarios where the last payment might be needed. Assume for a moment that you won a court judgment […]

## Reverse Engineering Constant Prepayment Rate (CPR)

This post has been updated in a new post called Calculating Historic CPR. The spreadsheets has also been updated “CalCPR.xlsm” After you review this post, please see the updated post. Unless you work for a firm that packages pools of mortgages, you will probably never need to calculate the historic CPR on an existing pool. Even so, […]