Roll rate analysis measures how loans migrate between delinquency states from one month to the next. The core mechanics are simple. Take every loan in the 30 to 59 days past due bucket at month start. At month end, categorise where each one went. Either it cured back to current, stayed in 30 to 59, rolled forward to 60 to 89, or rolled all the way to charge off. The percentage that moved from each state to each other state is the roll rate.
Run that across every bucket and you have a transition matrix. Mathematically this is a Markov chain. It represents the probability that a loan in state i at time t will be in state j at time t plus one. Multiply your current state distribution vector by the matrix and you get the expected distribution one period forward. Multiply again and you get two periods forward. This is how warehouse bank credit teams project your 90 day DPD exposure from today's data, and why they often know your portfolio's two month forward trajectory before you do.
The two rates that matter most right now.
In the current environment, the roll rates that drive everything are the 30 to 60 transition and the 60 to 90 transition. The 30 to 60 historically ran 35 to 40 percent in subprime auto. Roughly a third of 30 day delinquent loans cure, a third stay in the bucket, and a third roll worse. In stressed environments like the current one, that figure pushes toward 45 to 50 percent.
The 60 to 90 transition is stickier. In stable conditions it runs 50 to 60 percent. In stress it pushes toward 65 to 70. Loans that reach 60 days past due rarely recover. The borrower is structurally distressed by that point, not just timing out a temporary cash flow gap.
What this means for your reporting cadence.
A lender whose 30 day bucket grew by 0.5 percentage points in January should expect 90+ DPD to grow by roughly 0.2 to 0.25 percentage points by March, assuming historical roll rates hold. If roll rates are elevated, which they are right now, that projection is conservative. The actual move could be larger.
Running this analysis monthly gives you 60 to 90 days of forward visibility on the metrics warehouse banks are watching. Waiting for the 90+ DPD number to move in your aging report before taking action means responding to a problem that started two to three months earlier. By then your dealer mix, origination quality, and collection priorities should already have been adjusted, not just about to be adjusted.
How to build it without a credit team.
Pull two consecutive monthly snapshots of your active book. Tag each loan with its bucket at month start and its bucket at month end. Pivot one against the other. The resulting nine cell matrix is your transition matrix. Save the matrix every month. After three months you have the trailing average roll rates. After six months you have enough data to spot regime changes.
Apply your latest transition matrix to your current state distribution. The result is your projected one month forward distribution. Apply it again and you get two months forward. This is the runway view the bank already has on you. Building it costs you one afternoon of work per month.
The advantage of doing the analysis yourself is not just the projection. It is the ability to spot when your roll rates change before the change shows up in your headline metrics. Roll rates are the leading indicator. Aging reports are the lagging indicator. The bank works from the leading indicator. The lenders who get caught flat footed work from the lagging one.