Single-Family Whole Loan Programshttp://www.standardandpoors.com 239Gauranty Claim Large State Small State/Large County Small County/City
Case (3) VA guaranty, loan origination after 1988
Mortgage ($) 95,000 95,000 95,000
Foreclosure costs ($) 20,900 20,900 20,900
Total claim ($) 115,900 115,900 115,900
Recovery (40%, up to $36,000) ($) 36,000 36,000 36,000
Total loss (market loss + foreclosure costs) ($) 44,900 44,900 54,900
Recovery ($) 36,000 36,000 36,000
Net loss ($) 8,900 8,900 18,900
Loss severity (%) 9.37 9.37 19.89
Credit loss Coverage (foreclosure frequency x
1.2 x loss severity (%) 1.97 3.00 8.55
Liquidity coverage (foreclosure frequency x
1.2/three years x monthly constant x 18 months (%) 1.01 1.54 2.08
Insurance Claim
Case (4) FHA Insurance Loss severity will always equal the following
Mortgage rate/12 months x two months = 9%/12x2= (%) 1.50
Forclosure cost less 12 months accrued interest x 1/2=13%x1/3= (%) 4.33
Credit loss coverage (foreclosure frequency x 1.1 x
adjusted loss severity (%) 1.35 2.05 2.76
Liquidity coverage (foreclosure frequency x 1.1/three years x
monthly constant x 18 months (%) 1.12 1.70 2.28
Assumptions
Case (5) RD Insurance
30-year, 9% fixed rate, $100,000. Cost Factor = 10.19% of appraised value.
Appraised value = depression market value + (depression market value x 10%). 100% loan to value
Market value ($) 100,000 100,000 100,000
Mortgage ($) 100,000 100,000 100,000
Depression market value ($) 71,000 71,000 61,000
Appraised value ($) 78,100 78,100 67,100
Cost factor ($) 7,958 7,958 6,837
Foreclosure cost ($) 22,000 22,000 22,000
Total loss ($) 51,858 51,858 61,737
RD recovery
35% of mortgage 35,000 35,000 35,000
85% of total loss less 35% of mort. amt. ($) 14,330 14,330 22,727
Total RD recovery ($) 49,330 49,330 57,727
Standard & Poor’s adjustable recovery
Holding period costs ($) 8,450 8,450 7,050
Appraised value less depression market value ($) 7,100 7,100 6,100
Total adjusted recovery ($) 33,780 33,780 44,577
Net loss ($) 18,079 18,079 17,160
Loss severity (%) 18.08 18.08 17.16
Foreclosure frequency (%) 25.20 38.40 51.60
Loss coverage (%) 4.56 6.94 8.85
Table 3 Examples Of Loss Coverage Calculations At The ‘A’ Rating Level(continued)