This article presents a new model of mortgage prepayments, based on rational decisions by mortgage holders. These mortgage holders face heterogeneous transaction costs, which are explicitly modeled. The model is estimated using a version of Hansen’s (1982) generalized method of moments, and shown to capture many of the empirical features of mortgage prepayment. Estimation results indicate that ...

Mortgage-backed securities differ from corporate and government bonds in that their cash flows cannot be estimated with certainty, since homeowners often prepay their mortgages. Prepayments may include sale of the property, refinancing, curtailments, or liquidation of the property due to foreclosure. Standard fixed-income measurements, which allow investors to compare different types of bonds, ...

We prove some regularity results for viscosity solutions to strongly degenerate parabolic semilinear problems. These results apply to a specific model used for pricing Mortgage-Backed Securities and allow a complete justification of use of the classical Ito’s formula. AMS subject classifications: 35K55, 35K65 , 35B65, 60H30, 91B70.

To view the full product, including the scope and methodology, click on the link above. For more information, contact William B. Shear at (202) 512-8678 or [email protected]. Despite its declining share of the overall MBS market, Ginnie Mae continues to serve its key public policy goal of providing a strong secondary market outlet for federally insured and guaranteed housing loans. Ginnie Mae MBS ...

A dividend imputation tax system provides shareholders with a tax credit that can be used to offset personal tax on dividend income. The size of this credit depends on tax paid at the corporate level so that the “double taxation” of dividends is effectively eliminated. This paper shows how to infer the value of imputation tax credits (which is an important input into the weighted-average cost o...

Public owners face a constant demand for developing new projects and for funding the renewal, maintenance and operation of existing infrastructure projects. One way to raise capitals to provide new financial resources to constrained budgets is to securitize a stream of revenue cash flows from a portfolio of mature infrastructure projects. We present a new type of PBS, the revenue performance-li...

This paper studies a competitive general equilibrium model with default and endogenous collateral constraints. Even though all collateralized contracts are allowed, the possibility and desirability of trade in spot markets (or the equivalent trade in ex ante asset backed securities) creates externalities, as spot prices (or security prices) and the bindingness of collateral constraints interact...