Constant Default Rate - CDR

Filed Under » , , ,
Dictionary Says

Definition of 'Constant Default Rate - CDR'

An annualized rate of default on a group of mortgages, typically within a collateralized product such as a mortgage-backed security (MBS). The constant default rate represents the percentage of outstanding principal balances in the pool that are in default, which typically equates to the home being past 60-day and 90-day notices and in the foreclosure process.

The constant default rate analysis assumes that if a home is in foreclosure (a process that can take 12 months or more to complete), the interest and principal payments are being advanced into the MBS by the mortgage servicing company.

Investopedia Says

Investopedia explains 'Constant Default Rate - CDR'

The CDR method for evaluating losses is one of several methods used by analysts and company controllers to determine the current market value or asset value of a mortgage-backed security. The CDR method can account for both fixed-rate and adjustable-rate mortgages.

Another method is the Standard Default Assumption (SDA) model created by the Bond Market Association, but this is more suited to standard 30-year fixed mortgages. In the mortgage crisis of 2007-2008, the SDA model proved to have vastly underestimated the true rate of default; foreclosure rates hit multi-decade highs during that period.

Articles Of Interest

  1.

    Profit From Mortgage Debt With MBS

    Mortgage-backed securities can offer monthly income, a fixed interest rate and even government backing.

  2. Saving Your Home From Foreclosure

    Learn the tactics you can use to prevent your home from being repossessed.

  3. Who Is To Blame For The Subprime Crisis?

    From lenders to buyers to hedge funds, it appears everyone has blood on their hands.

  4. The Fuel That Fed The Subprime Meltdown

    Take a look at the factors that caused this market to flare up and burn out.

  5. Should You Offer Alternative Investments?

    Find out what problems arise for financial representatives when they start to diversify their client offerings.

  6. An Overview Of Commodities Trading

    Commodities markets, both historically and in modern times, have had tremendous economic impact on nations and people. Investing in commodities can quickly degenerate into gambling or speculation ...

  7. Regression Basics For Business Analysis

    This tool is easy to use and can provide valuable information on financial analysis and forecasting. Find out how.

  8. Investing In Fine Wine

    If you fail to uncork profits in this market, you can always toast your loss.

  9. Get An Academic Finance Career

    Working nine months a year and earning a six-digit salary might seem like the high life, but these jobs are not easy to come by.

  10. The Basics Of The T-Bill

    The U.S. government has two primary methods of raising capital. One is by taxing individuals, businesses, trusts and estates; and the other is by issuing fixed-income securities that are backed ...
comments powered by Disqus
Marketplace
Hot Definitions

  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...

  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center