With prepayments in 2001 and 2002 exhibiting different characteristics from previous refinancing waves, Merrill Lynch has just released a model that incorporates knowledge obtained from more recent prepayment experience.

Merrill analyst Akiva Dickstein noted that aside from the higher level of prepayments recently seen, there has also been a significant differentiation across collateral types and vintages. For instance, 2000 vintage collateral has prepaid much faster than 1999 vintage. Added to this, Dickstein said that there has been a segregation of numerous pools that was based on desirable characteristics such as Alt-A and low loan balance. This has led to adverse selection in the TBA market.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.