In the immediate aftermath of Hurricane Katrina, home equity ABS may go through a short-term decrease in prepayments and delinquencies, according to researchers with Morgan Stanley. The researchers, using hurricane-ravaged Florida in 2004 as a guide, also plotted out four different scenarios based on the extent of the damage, which is not fully known, and its effect on subprime pools.

By way of comparison, Morgan Stanley looked at Florida after last summer's four hurricanes, and found prepayments slowed slightly in the immediate aftermath of the storms, but then climbed back after six months. Since that trend likely had to do with insurance claims being paid, the same is seen likely in Katrina-affected zones, but the insurance data is not yet available to corroborate that theory.

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