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the dynamics of mortgage prepayments in factset's prepayment model

FactSet Pre-Payment Model ipadInvesting in mortgage-backed securities (MBS) requires an investor to assume some uncertainty in the timing of principal repayment since the underlying mortgagor has the right to pay off their loans early. The prevailing primary mortgage rate is a key driver of prepayment rates or “speeds”. But prepayment speeds also depend on numerous other variables.

In our white paper, The FactSet Prepayment Model, we describe the elements of our prepayment model and the mechanisms that it utilizes to capture the dynamics of mortgage prepayments. In each section, we include the relevant market background and our rationale for how each element of our model is constructed, including:

  • Sources of prepayments in mortgage pools
  • How prepayment speeds are measured
  • Our model structure and the key speed drivers within it
  • Financing speeds
  • Discount speeds
  • Curtailment speeds and full payoffs
  • Our approach to modeling speeds on Ginnie Mae pools
  • Model fits on selected cohorts

Complete the form to download your free copy of our white paper, The FactSet Prepayment Model.

Patrick Biddiscombe, CEO
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Get Our Prepayment Model White Paper