Reflecting the hybrid ARM product's increasing importance in the mortgage-backed market, Andrew Davidson & Co., Inc. (AD&Co) has recently launched a new hybrid ARM prepayment model.

Prior to the release of this model, the firm combined its existing balloon model prior to reset with its one-year ARM model post-reset to mimic the performance of hybrid ARMs. This was done because the necessary data to model hybrid ARM prepayment experience was unavailable. However, AD&Co was recently able to get data from CPR-CDR, Inc. with six to seven years history on 3/1, 5/1, 7/1 and 10/1 ARMs to update its models.

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