Lehman Brothers analysts recently examined the effect of slowing home price appreciation on prime MBS, concluding that these pools will suffer from higher severities and experience lower prepayments under this scenario.

Even though the pace of home price growth has been robust nationally over the past decade, Lehman analysts report there have been differences in regional home price growth - 3% in the worst quartile versus 15% in the best quartile, allowing analysts to draw meaningful conclusions about prime mortgage performance in a slowing housing market.

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