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- Mortgage Prepayment Analysis - HELOC Retention Marketing Application
- A large bank is trying to better manage their cash-flows from their mortgage portfolio by trying to identify segments or tranches within their portfolio of consumer loans that have a high probability of closing their loans or using market parlance "Prepay" their loans. They especially wanted to focus on Home...
- White papers 2008-02-14
Additional Resources
- Prepayment Risk of Public Housing Mortgages
- This paper examines the determinants of prepayment risk of mortgages for public housing, which are adjustable rate mortgages. An understanding of the prepayment risk of mortgages is important because prepayments affect investor return from investing in mortgage-backed securities. The findings show that prepayment is positively related to market sentiments and...
- White papers 2004-01-19
- Commercial Mortgage-backed Securities: Prepayment and Default
- One of the major developments in real estate finance during the 1990s was the emergence of a viable market for commercial mortgage backed securities. The growth in this market has spurred greater interest in empirical and theoretical research on commercial mortgage default and prepayment. The article employs a competing risks...
- White papers 2002-02-19
- Under Heterogeneous Prepayment Penalty Structures
- The article states that much of the literature on pricing commercial mortgages and commercial mortgage backed securities has assumed homogeneity in prepayment penalty structure. In this paper, it provides evidence that such an assumption is inappropriate and examines the effect of penalty structures observed in actual contracts. After conducting preliminary...
- White papers 2002-10-03
- The Right to Prepay: A Complex Analysis for Financial Engineers
- This paper highlights a case study on fixed Income. Determining when to prepay on a debt contract at a fixed price is a problem frequently encountered in finance. The net value of each future prepayment right can be estimated in different ways. One method is to employ simulations. However, it...
- Case studies
- Discrimination or an end to abuse?
- Currently, the regulations that the state housing creditors are allowed to borrow when making such loans include provisions preempting state restrictions on prepayment penalties and late charges. This article focuses primarily on the effect of these changes on prepayment penalties. The article includes the argument regarding preempting and argument for...
- White papers 2003-01-01
- Woodhead Behavior and the Pricing of Residential Mortgages
- The article says that option theory which has dominated residential mortgage prepayment and default research implies that a borrower will exercise prepayment or default options if the call option or put option, respectively, is "in the money" by some optimal amount. Empirical research provides evidence that the financial value of...
- White papers 2000-12-01
- Stay, Pay, or Walk Away: A Hazard Rate Analysis of Federal Housing Administration–Insured Multifamily Mortgage Terminations
- "This study presents a competing-risk proportional hazard model of Federal Housing Administration (FHA)–insured multifamily mortgage prepayment and claim behavior. Estimates of multifamily prepayment and claim hazards in a competing-risk framework are provided. A bivariate Heckman-Singer nonparametric random effects distribution is used to control for unobserved heterogeneity in the...
- White papers 2003-01-01
- Improving Parametric Mortgage Prepayment Models with Non-parametric Kernel Regression
- Developing a good prepayment model is a central task in the valuation of mortgages and mortgage-backed securities but conventional parametric models often have bad out-of-sample predictive ability. A likely explanation is the highly non-linear nature of the prepayment function. Non-parametric techniques are much better at detecting non-linearity and multivariate interaction....
- White papers 2002-01-01
- Does Mortgage Hedging Amplify Movements In Long-term Interest Rates?
- The growth of the mortgage market in recent years has raised the question of what effects, if any, the hedging of mortgage portfolios has on the behavior of long-term interest rates. This paper finds that the volatility of the ten-year swap rate implied by swaptions increases when the prepayment risk...
- White papers 2003-08-01
- OTS Adopts Proposal To Eliminate Preemption Protection For Prepayment Charges And Late Charges Under Parity Act
- The article tells that OTS adopts proposal to eliminate preemption protection for prepayment charges and late charges under Parity Act. The Parity Act authorizes state-chartered housing creditors to make, purchase and enforce alternative mortgage transactions without regard to certain state laws or regulations by granting the creditors parity with federally...
- White papers 2003-09-30
- Collateralized Mortgage Obligations
- Collateralized Mortgage Obligations (CMOs)1 —also known as Real Estate Mortgage Investment Conduits (REMICs)—are one of the most innovative investment vehicles available today, offering regular payments, relative safety, and notable yield advantages over other fixed-income securities of comparable credit quality. A wide variety of CMO securities with different cash flow...
- White papers 2003-01-01
- Bonds Begin at Home
- When bond traders run out of things to analyze to determine the future direction of bond prices, they can turn their attention to mortgage data. Article gives a look at the current situation. It states that bond traders are funny people, sometimes intentionally so. Their primary tasks, forecasting interest rates...
- White papers 2003-08-01
- Enhancing Mortgage Credit Availability Among Underserved And Higher Credit-Risk Populations: An Assessment Of Default And Prepayment Option Exercise Among Fha-Insured Borrowers
- While prior analyses have provided substantial evidence of elevated default probabilities among mortgages originated to lower income, less credit worthy and minority borrowers, those risks may be offset by the reduced prepayment probabilities of those loans. To the investor in FHA-insured mortgages, such offsets could serve to appreciably reduce total...
- White papers 2002-08-01
- Mortgage Terminations: The Role of Conditional Volatility
- Studies of mortgage termination decisions typically rely on a competing risks framework comparing defaults and prepayments. While useful tools have been developed to approximate the values of these competing default and prepayment options, the available metrics do not adequately account for the role of the conditional volatility of interest rates...
- White papers 2002-01-01
- Woodhead Behavior & The Pricing Of Residential Mortgages
- Mortgage terminations arise because borrowers exercise options. This paper investigates the apparently irrational behavior of those borrowers who do not terminate their mortgages even when the exercise value of the option is deeply in the money.The article develops an option-based empirical model to analyze this phenomenon -- the behavior of...
- White papers 2002-12-01
- Internal Analysis
- This presentation explains that internal analysis, external analysis, strategic intent, and strategic mission are combined to formulate and implement strategy. It includes the components of internal analysis, core competencies, four criteria of sustainable advantages, value chain analysis, and SWOT analysis. This presentation helps to determine if a capability is a...
- Presentations 2003-01-01
- Strategic Group Analysis
- From the executive summary: ‘Strategic group analysis is a subset of industry analysis that looks specifically at the different groups of rival firms clustered around similar competitive approach or strategic position. Strategic group analysis plays an important role in industry analysis. It forms the analytical link between industry structure and...
- White papers 2003-01-01
- Incentive-Compatible Guaranteed Renewable Health Insurance
- This paper uses medical expenditure data to estimate an optimal competitive age-based premium schedule for a benchmark renewable health insurance policy. Find that the amount of prepayment by younger individuals that would be necessary to cover future claims is mitigated by three factors: high-risk individuals will either recover or die,...
- White papers 2003-07-01
- Technical Analysis and Derivatives Trading
- In making decisions about where and when to take a position, investors, traders and analysts use two different approaches: fundamental analysis and technical analysis. Fundamental analysis is the appreciation of the economics underlying a particular trade. If you want to know where to invest and why, you use the techniques...
- White papers
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