AD&Co. Update

New Prepayment Model Version v5.1e
by Rob Landauer

We are pleased to announce the availability of a new version of the AD&Co. Prepayment Model, v5.1e. This new version was announced at our annual conferences and provides two significant enhancements to the v5.1d model.

First, for the agency Hybrid ARM models, the post initial reset prepayment forecast has now been modeled. Previous versions of the Hybrid ARM model held the post reset prepayment forecast constant except for variability caused by seasonality. Now that we have studied the model's performance on post-reset data, we feel it is no longer necessary to use a constant prepayment vector, and, instead, let the model generate prepayment forecasts as it does during the initial fixed period, with slightly dampened speeds.

Additionally, to provide a better fit between actual and forecasted prepayments, we are recommending the following tuning parameter adjustments be implemented for all the agency FHLMC and FNMA Hybrid loan types (3-1, 5-1, 7-1 and 10-1) in all versions of the MBS Prepayment Model (v5.1e, v4.3.4 and v5.0.2b) effective immediately:

SLIDE: 1.05
REFI: .75
SCALE: 1.10

Please note that the Dynamic Performance Reports now use v5.1e and differentiates between pre and post initial reset performance of the Hybrid ARM models. When you select a Hybrid ARM Performance Report, you will see a new field called Reset Period which allows the user to select "pre," "post" or "all" data for actual versus forecasted prepayments.

Second, in v5.1e, the multipliers for two of the enhanced data items, state of origination (NY, FL, CT etc) and loan purpose (purchase vs, refinance) have been reconfigured to be consistent with and normalized like the other enhanced data items. This means that the refi and turnover tuning adjustments for these data items have been updated.

For access to v5.1e, please contact Ilda, Rob or Sekiko.

Conference Redux

It was our great pleasure to meet and greet almost 350 of our friends, clients and colleagues during our 2006 conference that was held in New York and San Francisco in mid June. We hope you found the conference to be enlightening, invigorating and enjoyable and that you took a least one or two valuable nuggets of information home with you. Please provide us with any feedback or comments about the conference so that we can make sure we cover the topics that are of greatest concern to you next year.

A hearty thank you to all of our vendor partners that participated in our event, and a special note of gratitude to our friends who provided invaluable information during the client panels.

All of the Powerpoint presentations from the conference are now available on our website at http://www.ad-co.com/research_reports.htm. These presentations are password protected, so please contact Jon Paladini at jon@ad-co.com if you need access.

Finally, we invite all of you intrepid souls who attended our conference to take the ADCo. crossword puzzle challenge. Complete your puzzle (found in the conference goodie bag) and mail it back to Ilda Jacobsen at:

520 Broadway
8th Floor
New York, NY 10012

Those who correctly complete the puzzle are eligible for a prize. Winners will be announced in next month's The Pipeline.