R&R Launches PrimeX Valuation (PrimeTRAK)

R&R Consulting, an eleven-year-old Structured Finance consultancy expert in valuing complex securities, is offering new analysis to gauge the credit of prime non-agency residential mortgage backed securities. R&R’s analysis, which they dub PrimeTRAK, provides a current credit valuation on the synthetic mortgage index known as PrimeX.FRM.2, developed by Markit. The PrimeX.FRM.2 index was designed to replicate prime, non-agency fixed-rate mortgage securitizations.

“The bad news from Dexia and other European banks in early October raised a lot of questions about prime RMBS, particularly as price levels on the PrimeX plummeted. Investors want to know the real credit risk of the exposures they are holding. PrimeTRAK gives them new and valuable information,” said Ann Rutledge, co-founder of R&R Consulting.

The credit story on these RMBS is not cut-and-dried, according to R&R’s head of risk management, David Abitbol. “Overall the index holds value, though not at the level one would hope for from a ‘prime’ exposure. But within the FRM.2 index, there is wide variability in the credits of different referenced transactions, ranging from securities whose fair market value by PrimeTRAK is a premium to par, those worth much less than 100 cents on the dollar.”

Previously, R&R produced a month-to-month time series of valuations on the ABX.HE 06-01, the first index used to price or take position against the subprime mortgage market, which showed a tremendous mismatch between prices and valuations, even at origination. The firm’s analysis of the PrimeX index employs the same methodology. It raises interesting questions like

  • What are “credit valuations”?
  • How do they compare to traded prices?
  • Are Moody’s and S&P producing this kind of analysis?
  • Why and how do these credit valuations change over time?
  • Can we see sample outputs?

The firm will perform similar analysis on the other three Markit prime mortgage indexes, known as FRM.1, ARM.1 and ARM.2.

Previously R&R Consulting used the ABSTRAK® Ratings and Analytics platform to value structured securities and the PIT Engine to rank the credit of securities within the entire universe of available structured exposure. Their analysis showed a gaping mismatch between price and value, even at origination. See Jerome S. Fons, “Shedding Light on Subprime RMBS,” The Journal of Structured Finance, Spring 2009.

Investors interested to know more about the PrimeX valuation or interested in a demonstration of the R&R’s analytics should contact David Abitbol at 212-867-5693 or info@creditspectrum.com.


About R&R Consulting
R&R Consulting is a pioneer in developing data-intensive, self-consistent frameworks for modern credit analysis. The company provides reliable, real-time measures of value and risk for cash/synthetic ABS and CDO transactions. R&R Consulting also offers structuring advisory services for securitizing the business assets.