MDX.GN FAQ

Index

    • MDX indices (called Series) are designed to measure mortgage borrower credit stress.

    • MDX indices track credit events to facilitate timely calculations.

    • MDX indices do not follow loans to their final disposition because reliable data allows for defined calculation of credit events — again, credit stress, not liquidation — earlier in the borrower performance reporting cycle.

    • MDX.GN indices contain loans selected from Ginnie Mae II MBS pools.

    • Approximately 85% of loans from these pools fit the eligibility criteria for inclusion in an MDX.GN Index (note: modified and reperforming loans are excluded).

    • Each MDX Series covers a 6-month pooling window, and each reference loan is seasoned for a minimum of 4 months before being included.

  • A typical series has between 450,000 (2023) and 1,150,000 (2022) individual loans.

  • A new MDX Series is constructed and published every six months (March and September).

  • Borrower credit metrics vary based on prevailing FHA and VA origination trends. Median values for Ginnie Mae borrowers recently are 691 FICO, 98% LTV, 45% DTI, and 72% first-time homebuyers.

    • Vista creates the index selection criteria and calculation process.

    • ICE Mortgage Data and Analytics is the official computation agent for MDX, populating the loans that fit index construction criteria and reporting their performance monthly.

    • MDX calculates the number of cumulative credit events relative to the total number of reference loans in a Series (see calculation rules).

    • The index starts at 100 and goes up as credit events accumulate.

    • MDX is updated each month on the 8th business day.

    • A credit event is evidence of borrower credit stress as reported by Ginnie Mae loan level data.

    • A reference loan experiences a credit event when it becomes 120-days delinquent or receives a modification.

  • Nothing. Once a loan experiences a credit event, there’s no curing.

  • Prepaid loans remain in the Series reference pool but can never experience a credit event for calculating the value of the index.

    • The index is equal weighted based on loan counts.

    • A fixed severity for each loan is required to determine the impact of borrower credit events on the index calculation.

    • 100% severity is the most efficient for index and trading purposes.

Swaps

  • Counterparties exchange fixed payments and floating payments. Floating payments are based on the rate of changes to the value of a reference index. This mechanism allows the buyer of the swap to source credit exposure by receiving fixed amounts and paying floating amounts. Conversely, the seller of the swap hedges credit risk by paying fixed amounts and receiving floating amounts tied to the borrower performance of the reference index. Since MDX measures credit stress in the floating leg, the payer of the floating leg is the counterparty long the credit performance of the reference borrowers— the better the credit performance, the small the floating leg payment owed.

  • Due to the frequency and regularity of credit events on mortgage loans, MDX index values are expected to change monthly.  This is different from corporate credit default swaps, where credit events (and floating payments) occur episodically.

    • The fixed payer pays an upfront amount (or receives depending on trading level) and a fixed rate monthly to the floating payer based on a 2.00% annual coupon.

    • The floating payer pays a floating rate monthly to the fixed payer based on changes to the MDX factor.

    • Payments are netted between the fixed payer and floating payer (see MDX Trade Example for more detail).

  • The MDX factor is the inverse of the MDX index.  Example: If the MDX index is 102%, then the MDX factor is 0.98.

  • The notional value of the swap is reduced each month by the change in the MDX factor.  Example: If the original notional amount of the swap is $10,000,000, and the MDX factor is 0.98, then the current notional amount is $9,800,000.

  • The original notional amount is the nominal size of the exposure agreed to in the swap trade.  The current notional amount is the original notional amount multiplied by the effective MDX Factor on a given date.

    • The monthly fixed leg payment is the fixed coupon rate (2.00%) multiplied by the current notional value of the swap multiplied by the day count fraction (actual # of days/360).

    • The payment is expected to decrease each month as the current notional value of the swap declines.

  • The monthly floating leg payment is the change in the current notional amount month over month. This can also be calculated by multiplying the change in MDX factor from the prior month by the original notional value of the swap.

  • The firm responsible for calculating payments is specified in the trade confirmation.  Vista offers reference calculations on its website.

  • The initial term is 63 months at the start of each new trading series.

  • If a counterparty holds an MDX Swap for the six months it is on-the-run, the average duration will be exactly five years.

    • The Index Effective Date is the 8th business day of each month.  This is the date that the new MDX Factor is published to the market.

    • This is also the date that the new MDX factor is used for calculating the monthly floating payment and begins the interest accrual periods for the fixed payment. 

Data

    • Vista and ICE provide all MDX index data including MDX factors and reference loan constituent identifiers (request data here).

    • This data is free of charge and is expected to be available through other market data distributors.

    • Loan level performance data on Ginnie Mae reference loans matching the index results is available from ICE Mortgage Data and Analytics for a subscription fee and other market data distributors.

  • Swap reference data is free of charge and available directly from Vista and ICE, as well as through other market data distributors.

    • Ginnie Mae provides monthly updates to its loan level database around 6 PM on the 6th business day of the month.

    • Vista provides official MDX factors on the 8th business day of the month for outstanding series.

    • Vista provides preliminary index constituent data the 2nd Friday of the month prior to the publication of a new index series (e.g. 2nd Friday of February, 2nd Friday of August).

Analytics

    • ICE, Bloomberg, and INTEX have created MDX models.

    • The ICE-Vista MDX calculator is available through a web interface, API, and Excel add-in. It will also will be accessible within the ICE FI Select™ trading platform in a future release.

    • Bloomberg offers its CDSW function for MDX Swaps and can be found at MDXGN501 Corp CDSW.

    • The INTEX MDX model is available in the US RMBS library. Series 1 can be found using the ticker MDXGN1.

Trading Conventions

    • MDX will trade on clean dollar price.

    • The ICE-Vista MDX Calculator is available free of charge to convert price to spread.

  • The ICE-Vista MDX Calculator and Bloomberg CDSW function both utilize the ISDA standard rate curve for discounting payments. 

    • MDX Swaps can be traded by voice or electronically through the ICE FI Select platform.

    • MDX Swaps must be traded through a Vista-licensed dealer using ISDA standard documentation. 

    • Initially, MDX Swaps will trade as bilateral, over-the-counter derivatives.  ICE anticipates that MDX could become clearing eligible based on market adoption and FCM support. 

    • The use of ICE FI Select and ICE Link for trading and processing will facilitate a smooth transition from bilateral to cleared trading. 

    • All MDX Swap trades will be reported to DTCC GTR and trade details are publicly disseminated.

    • The exact price, time, and size (up to a cap of $250 mm) are reported for each trade.

    • Trade data is available on DTCC’s website and the Bloomberg SDR function under index CDS.

  • Yes.   ICE Derivatives will produce a continuous MDX Composite Price throughout the trading day, which will be available real-time on ICE FI Select.  The composite prices will be computed from indicated prices and completed trade reporting.  The final reported composite price will serve as the EOD price.

Documentation

    • MDX Swap trading will be covered by existing ISDA Master Agreement documentation.  An ISDA MDX Standard Terms Supplement and Confirmation will be used for executing MDX Swap trades.

    • Depending on counterparty arrangements, Credit Support Annex documentation may need to be amended for MDX.

  • To trade on ICE FI Select, a firm needs to review and accept ICE’s rule book and complete a participation agreement.  If a firm is not already trading counterparty at ICE, it needs to go through an onboarding process including standard KYC protocols and AML documentation. 

Margin

  • GRID initial margin for MDX is 5%.  Each dealer will decide margin amounts on a client-specific basis.

  • Dealers and clients expect to post the same collateral as is used under existing ISDA collateral agreements.

Capital

  • Indications are between 150% and 300%.

  • MDX positions are unlikely to provide any initial direct regulatory capital offsets against existing mortgage credit positions. 

Historical Performance

  • Vista has MDX index results going back to 2014, the year that Ginnie Mae began publishing monthly loan level performance data.

  • 5-year Credit Event rates have ranged from 6% to 12%.

  • Over a period from 2019 through 2024, dealers estimated that daily on-the-run MDX Swap dollar prices ranged from over par to the mid/high 80s. This data is available for request.