Mortgage-Backed Securities and Mortgages

A Financial Analysis of Consumer Mortgage Decisions

Mortgage Bankers Association (June 2009)

With housing prices falling and mortgage rates near historic lows, many homeowners are tempted to take advantage of this by buying or refinancing. However, due the complexity of the mortgage market, despite all the available disclosures, many consumers are still left in the dark, and by not considering all the necessary facts, they often leaves thousands of dollars on the table.


Mortgage Servicing Rights and Interest Rate Volatility

Mortgage Risk (May 2008)

Standard prepayment models produce faulty results when valuing mortgage servicing rights. More reliable conclusions are obtained from an option-based prepayment model that includes volatility of interest rates as an input.

A Pointer on Points

OR/MS Today (June 2007)

Should a homebuyer pay upfront points in return for a lower mortgage rate? A proper answer requires comparing each alternative’s “option adjusted APR” – a refinement of the standard mortgage rate that adds the value of the option to refinance if interest rates decline.

The True Cost of No-Cost Mortgages

Mortgage Risk (October 2007)

Misgauging the likely prepayment behavior of no-cost loans (whose closing costs are wrapped into a higher interest rate) could leave banks with assets they cannot securitize, or investors with securities worth less than they bargained for.

An Option-Theoretic Prepayment Model for Mortgages and Mortgage-Backed Securities

International Journal of Theoretical and Applied Finance (December 2004)

Ginnie Mae and the Secondary Mortgage Market: An Integral Part of the American Economic Engine

Ginnie Mae (2003)

This monograph explains Ginnie Mae’s role in connecting global capital markets to the U.S. housing market, promoting affordable housing in America.

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