MCFAM Seminar -  Trends in Mortgage Rate Modeling and the Prepayment Incentive

Speaker: Chris Jones, U.S. Bank Corporate Treasury

Abstract: Valuing mortgages in the context of the secondary market typically refers valuation of a mortgage-backed security (MBS) or mortgage servicing rights (MSR) asset. One fundamental challenge of this exercise is that model development relies on capturing market processes rooted in behavioral dynamics. In this talk, we will briefly review how MBS and MSRs are constructed, important modeling components, and then discuss how recent trends pre- and post-COVID have impacted models for these instruments.