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LoanPerformance gets a fed economist.

SAN FRANCISCO-BASED LOANPERFORMANCE INC., A DATA, research and analytics company, has landed an influential senior economist from the Fed. Paul S. Calem, who received his Ph.D. in economics from Brown University, left the Federal Reserve Board in September, where he served for 10 years. Most recently he was a senior economist in the Division of Research and Statistics. Calem is LoanPerformance's new vice president of product research, overseeing new product and ongoing research and development functions.

"Paul's extensive experience analyzing the mortgage and capital markets will help us better develop new products and solutions for our customers so they may better manage risk, and more efficiently manage capital," said Dan Feshbach, president and chief executive officer of LoanPerformance.

As a 20-year veteran in economic modeling, Calem will have a lot to offer LoanPerformance's clients and customers, which include financial service institutions, Wall Street analysts and mortgage investors. One of the first challenges for Calem will be to develop a model to track the growing industry niche of home-equity loans. "My first task will be to build a performance prediction model for home-equity loans," said Calem. He believes the growth of home-equity lending is potentially a problem for holders of the first mortgage, who tend to not carefully track subsequent borrowing against the property.

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Mortgage Banking asked if this could pose any long-term threat to lenders or consumers. "Whether home-equity borrowing will cause trouble down the road depends in part on what is driving the increased borrowing," Calem said. "If consumers are simply using home-equity loans as substitutes for traditional auto, education, credit card and personal consumer loans, then there are not likely to be problems. If they are transferring medical debt or using the loans to finance business ventures, then this could spell more trouble than expected."

Calem points to the upcoming Federal Reserve's 2004 Survey of Consumer Finances, scheduled to be released in 2005, for more insight on whether the boom in home-equity lending could pose trouble for the industry.

Calem said his new position in the private sector will give him the opportunity to do new and challenging work and apply his knowledge. "The Fed has a strong academic aspect to it," he said. "This means that much of your work is oriented for publication in academic journals. While this is certainly a desirable context for someone with a Ph.D., it also means that much of your research is unlikely to be applied by people in the industry, unlike the work we do at LoanPerformance." Over the years, Calem has published numerous articles on research findings in journals and in Federal Reserve System publications in the areas of housing economics, mortgage and consumer credit, and banking regulation.

Calem's focus will include enhancing current LoanPerformance products. "I hope to focus on enhancing the capabilities of LoanPerformance products as tools for implementing the new Basel II capital requirements and on house-price modeling issues," he said.

Mortgage Banking asked Calem to comment on why house prices are still soaring in certain markets even in the face of rising rates, and whether, in his view, there is a housing bubble. "I don't think there is a bubble in the sense of expectations of higher prices fueling demand," said Calem, who believes that a bubble would not have made it through the recent recession.

"However, persistence of shocks to house-price appreciation rates is an established empirical fact. Just as appreciation rates have been persistently high in recent years, a negative shock [such as a quick run-up in interest rates] that ends or reverses this growth in one or more parts of the country would also likely have a persistent impact. So the danger of long-term stagnation or decline is there--I just wouldn't call it a bubble."

"People are asking for and receiving what the local markets can bear in relation to market fundamentals. However, some markets are more vulnerable than others to the kinds of shocks that can lead to extended declines in house prices, and some markets recover from such shocks more slowly than others. Identifying the characteristics of such markets is an important research question, and one that interests me immensely," Calem said.

The 48-year-old Calem, who holds a B.A. in mathematics from Duke University, will be one of 10 LoanPerformance employees working in offices on the East Coast. In fact, Calem will be working from his home office, and he said not having to commute to work is one of the valued perks of his new job. In his free time, Calem loves cycling, jogging and swimming. He and his wife, Edith, enjoy attending Kennedy Center children's concerts and taking nature hikes with their 6-year-old son, Andrew. Calem also likes spending time with his sister and her 5-year-old son.

LoanPerformance tracks the payment performance of 90 percent of the outstanding prime mortgages, 65 percent of the outstanding subprime market and 80 percent of the private (nonagency) mortgage securities market in the United States. Innovating new products with those valuable databases will keep Calem very busy in his new private-sector job.
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Title Annotation:SPOTLIGHT
Author:Royse, Matthew
Publication:Mortgage Banking
Geographic Code:1USA
Date:Nov 1, 2004
Words:845
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