Mortgage Research Firm Rolls Risk Analysis Tools On Web

The Mortgage Research Group, a Jersey City-based firm providing data and analytics to determine the risks of mortgage loan and portfolio defaults and refinancings, rolled out a Web page this month featuring applets developed with Sun Microsystems' Java programming language. The firm, founded by former Bear Stearns executives last year, chose to deliver its data and analytics via the Internet and with the help of Java because it wanted to provide an interactive service that would be easily accessible.

The Mortgage Research Group is currently offering two services geared to traders and salespeople via the Web. The first allows users to graph home price indices and determine current loan to value ratios and is available for $2,000 per month. The second service allows users to do default risk scenario analyses. The charge for that service is initially $2.50 per loan.

Gordon Monsen, a former Bear Stearns managing director who, along with Jonathan Raiff, a former associate director at Bear Stearns, established the firm last year (TST, Feb. 20, 1995), says that the Mortgage Research Group "Had planned originally ... to deliver [its services] over more traditional technologies, but we became aware of problems in how you deliver to these different platforms." With Bloomberg, for instance, "You're locked into this proprietary network.... If you want interactivity, it's very difficult."

Monsen, who says the combination of the Mortgage Research Group's database, which contains about 130 gigabytes of data, its analytics, and the array of architecture on the Street, made the task of delivering the research firm's services more difficult. "So we really felt that the Web really offered the easiest way to penetrate into these institutions without having to create variations," he says.

The data in the research firm's database is primarily supplied by TRW Information Systems and Services, which has a financial interest in the Mortgage Research Group, Monsen says, declining to elaborate. The units of TRW Information Systems and Services include TRW Real Estate Information Services, TRW Consumer Credit and TRW Target Marketing. The charge for access to the database via traditional technology is $3,500 per month.

To use the applets, the Mortgage Research Group downloads the client's portfolio of loans and runs that through its database to match each loan with the relevant data. Users access the results of that matching process via the applets.

The first applet allows users to graph home price indices for roughly 6,000 zip codes, 361 counties and 36 states, typically for the last 15 years. Within those categories, the data can be broken down by tier: luxury homes, high-priced homes, mid-priced homes and entry homes. The data allows users to determine the ratio of the amount owed on a loan to the value of the property, or what is known as current loan to value.

Says Raiff: "[The indices] are used in the whole loan markets to measure how leveraged various mortgages are. Obviously, the more leverage, the more risk." The applet also provides the data in tabular form.

The second applet allows a user to perform default risk scenario analyses. Says Raiff: "What appears is a three by three grid, with nine buckets. These buckets have various risk [characteristics]." On one axis, the columns are divided by current loan to value ratios. On the other, they're divided by a credit measure, such as how the owner of the mortgage is paying on his or her credit cards.

"So what you end up with, for each one of these sets of analyses, [is a] bucket, which is people who have bad credit and have no equity in their homes," Monsen says.

Monsen says the analysis can vary, depending on the parameters users choose for defining who has good credit, or what current loan to value ratios are good, for example. Using the applet, the client can run as many analyses as many different ways as he or she wants, Monsen says.

Another applet within this applet allows a user to see which loans are in each of the nine boxes, Monsen says. "It's very cool for people who invest in these things," he says.

The Mortgage Research Group is also planning to list foreclosure delinquency and default rates by county and state on its Web site. This service will cost in the range of $100 per month.

Monsen says that the Mortgage Research Group has encountered some difficulties with the Java technology. "Some of the people that want to use us have firewalls that won't allow the Java applets to get through," he says. "So there are still a lot of issues as the technology itself rolls out."

The Mortgage Research Group's Web address is: http://www.tmrg.com. Users need a password to access the applets.