The last several weeks have been trying ones for most participants in the MBS markets. Rest assured that AD&Co. is here to help smooth your path during these turbulent times as we have been working hard to ensure that our models keep pace with the rapidly changing environment. Please do not hesitate to give us a call to ask for our advice as to how to most effectively apply our models to your business or to discuss your concerns about the market. We are here for you.

There are several important developments to announce. Link to this article

In 1998 the financial world was stressed by a series of crises. Most notable, the Russian default in that August, triggered a chain reaction causing a number of large funds (like LTCM) to collapse, their counter-parties realized losses and everyone sought a safe harbor – U.S. Treasuries. All “spread products” cheapened drastically and, even on an LOAS basis, MBS widened to as much as 50 bps. LOAS for the current-coupon TBA came back down to 20 bps in about 3 months and in 3 more months, returned to its long-term normal range (-20 bps to +10 bps) where it had remained most of the time. Link to this article

This month we will spend some time discussing the issues that have arisen in the past couple months as a result of the “credit crunch” being felt across the mortgage industry. We have been actively monitoring prepayment and default behavior to ensure that our models are still accurately forecasting this behavior, and if any tuning recommendations are needed. We will address two different issues in this article related to this research. Link to this article