You really can’t trust Bloomberg for CPR, CDR or Severity
We now have discovered two (2) situations where Bloomberg is reporting incorrect CPR, CDR and Loss Severity.
NEW REPORTING ERROR:
Correct: Trustee reporting loan as a voluntary prepay.
Incorrect: Bloomberg reporting loan as a liquidation.
In this odd situation, Bloomberg is taking good data from the trustee and changing it into bad data. This error occurs when the servicer collects 100% of the forbearance outstanding at payoff, which is a really good situation for investors. Since the Trust took a loss at the modification effective data, the Trust now passes through a full recovery, thereby resulting in a cumulative loss of $0.00. The remittance report clearly shows this as a voluntary payoff, but somehow Bloomberg built logic into their system that changes this into a liquidation. It appears that the recovery (negative loss) triggers Bloomberg to report the payoff as a liquidation. Thus, the Bloomberg CPR is understated, the CDR is overstated and the loss severity is understated. In some cases, Bloomberg shows a ridiculous negative loss severity. See pages 2-7 for examples.
FROM OUR SEPTEMBER 12, 2016 COMMENTARY:
Incorrect: Wells Fargo reporting loan as a liquidation, when it is clearly a voluntary prepay.
Incorrect: Bloomberg reporting loan as a liquidation per the trustee data
At payoff, some servicers are passing through to the Trust certain expenses that are not collectible from the borrower, but are collectible from the Trust. Some of these expenses are as low as 4 cents while most are less than $100. These expenses can include certain fees required under the HAMP program that specifically state the borrower is not to be charged along with certain bankruptcy expenses that are also not allowed to be charged to the borrower. There are certainly other fees and expenses that we are not aware of. At payoff or any time after, these expenses appear as a loss to the Trust. However, when the loss is passed through at the exact month of payoff, Wells Fargo, as Securities Administrator, is incorrectly reporting these loans as a liquidation. These are clearly current loans that paid off. Even a 4 cent loss on a voluntary prepay causes Wells Fargo to incorrectly flag the loan as a liquidation. Consequently, Bloomberg takes the data delivered and thus report incorrect CPR, CDR and Severity. Even through Wells Fargo created this error, Bloomberg can simply override it with one line of code, which is exactly what Webbs Hill does. We believe Intex also has this wrong. See pages 8-11 for examples.
It is nuts that Bloomberg has written code that takes good data and converts it to bad data but has no code that takes bad data and converts it to good data. Webbs Hill is here to supply you with the correct CPR, CDR and Severity. Don’t let Bloomberg mislead you.
Contact us at 203-276-0672 to become a client and access all reports and attachments.