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

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.