The Impact of Additional Loan Level and Market Data on the BondEdge Fixed-Rate Prepayment Model

Bill Burns

In 2004, Fannie Mae, Freddie Mac and Ginnie Mae each committed to disclosing supplementary loan level data for the pools they issue. Some of this data has significant explanatory power in predicting the prepayment behavior of mortgage borrowers. This article discusses the impact of including this loan level data within the BondEdge fixed-rate prepayment model. In addition, we discuss enhancements made to the functional form of the fixed-rate prepayment model to accommodate market variables such as the spread at origination (SATO) and the slope of the borrowing curve (SBC).