information is also essential when multiple factors affect prepayments. Without loan level information, it is impossible to separate effects of coupon, loan size and LTV within a pool, since the pool averages do not show the relationship between these variables.

Yet, even without loan level disclosures, mortgage trading and prepayment modeling will change over the next few years as the new data is integrated into prepayment models, valuation tools and market perceptions. While this new information does create the risk of impacting the liquidity of the TBA market, it is more likely that trading practices will develop that use the new information to enhance liquidity and overcome the current fragmentation of the market. One possible scenario is the development of standard add-ons for valuable characteristics. With a more consistent source of pool characteristics, investors may have greater confidence on pay-ups based on factors that can be clearly identified and modeled. The Bond Market Association can play a valuable role in assuring the continued exceptional liquidity of the TBA market by carefully refining definitions of good delivery for TBAs and standard stipulations. (Stipulations are specifications for characteristics of pools delivered for a given trade.)

The new disclosures are a move in the right direction. We hope they will be followed by additional loan-level disclosures, which will help prepayment modelers provide tools to investors to fully harness the value of the new disclosures.