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The Determinants of GNMA Prepayments: A Pool-by-Pool Analysis

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Abstract

This study examines GNMA prepayment determinants as a function of interest-rate factors and the pure aging effect. While we find both interest-rate and age factors to be important, these relationships are not constant across different pools. This suggests that prepayment forecasts need to be made on a pool-by-pool basis. The study also documents a lagged relationship between changing interest rates and prepayment experience, suggesting that the prepayment decision date is made many months before the prepayment recording date.

Suggested Citation

  • Nelson J. Lacey & Nikolaos T. Milonas, 1989. "The Determinants of GNMA Prepayments: A Pool-by-Pool Analysis," Journal of Real Estate Research, American Real Estate Society, vol. 4(2), pages 21-32.
  • Handle: RePEc:jre:issued:v:4:n:2:1989:p:21-32
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    References listed on IDEAS

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    1. V. Vance Roley, 1982. "The Response of Short-Term Interest Rates to Weekly Money Announcements," NBER Working Papers 1001, National Bureau of Economic Research, Inc.
    2. Dothan, Uri & Williams, Joseph, 1981. "Education as an Option," The Journal of Business, University of Chicago Press, vol. 54(1), pages 117-139, January.
    3. Roley, V Vance, 1983. "The Response of Short-Term Interest Rates to Weekly Money Announcements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(3), pages 344-354, August.
    4. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters,in: Theory Of Valuation, chapter 8, pages 229-288 World Scientific Publishing Co. Pte. Ltd..
    5. Chan, Yuk-Shee & Greenbaum, Stuart I. & Thakor, Anjan V., 1986. "Information reusability, competition and bank asset quality," Journal of Banking & Finance, Elsevier, vol. 10(2), pages 243-253, June.
    6. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    7. Marcus, Alan J & Shaked, Israel, 1984. "The Valuation of FDIC Deposit Insurance Using Option-pricing Estimates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 446-460, November.
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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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