Modeling of Mortgage Prepayments and Defaults

Impact of Multi-Year Lows in Rates 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 4 Apr 97 4 Jul 97 3 Oct 97 2 Jan 98 3 Apr 98 3 Jul 98 2 Oct 98 Rate (%) 0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 Mortgage Rate (Left Axis) MBA Refinancing Index (Right Axis) Rates drop 100bp from April to Year-End’97, but nothing happens Rates back to early 1998 ... ................
................