New York - Panelists at the CPR & CDR Technologies 2004 Prepayment and Mortgage Credit Modeling and Strategy Conference held last week discussed whether new products currently proliferating in the mortgage sector - predominantly hybrid ARMs and IO loans - would change relative value relationships going forward. Discussions also centered on the accelerated prepayments on 2003 originated collateral. Participants shared their thoughts on what's driving discounts speeds to unchartered territory, and whether historical data is still relevant given the major structural changes in MBS land.

In the Round Table on Mortgage Backed Securities: Trends, Outlook and Strategies, researchers from the major Wall Street dealerships said that the movement to ARMs is not a borrower-driven phenomenon but it is a trend being pushed by lenders. After the strong employment report released in April caused rates to rise, there was a noticeable marketing shift by a number of large mortgage originators in order to maintain margins. These lenders started offering a matrix of hybrid ARM options even to borrowers who were mainly interested in a 30-year mortgage.

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