2007 will not soon be forgotten by mortgage market participants. It has been a trying year for originators, investors, dealers, rating agencies and the firms that support them. Those of us old enough to be employed in the mortgage industry in the 1990’s need to assure our younger brothers and sisters in the business that brighter days are ahead. History has shown time and time again that markets never trend in one direction and troughs are inevitable. We are a resilient and creative industry which will rebound in 2008 and beyond. It is our hope that pending legislation, various industry initiatives and a more rigorous analytical approach will lead to a saner and productive market. Link to this article

In this article we look at prepayment speeds for sub-prime loans by quarter of origination starting from 2005Q1. It is common knowledge that prepayment speeds for sub-prime loans have slowed down. This article shows the magnitude of the slowdown and some interesting trends.

We obtained data for this study from Intex. The prepayment speeds indicate total terminations, which include voluntary and involuntary prepayments. Prepayments are recorded whenever the balance becomes zero regardless of the reason. Link to this article

Happy Holidays, dear friends, clients, and supporters!  Like me, you probably prefer to read an article on a single topic that is presented simply and systematically. This month, however, I feel it is important to reflect on a few different topics. For those who use or plan to use the AD&Co. valuation and interest rate modeling products, the following discussions should be of interest:

SATO Tuning for TBAs
More on Interest Rate Model Selection
Practical Monte-Carlo Recipes

Link to this article