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A Loan-Level Residential Mortgage-Backed Security Pricing Model: Are CAP CRA Loans Profit-Making for the Secondary Market?

November 5, 2010

Center researchers develop a loan-level residential mortgage-backed security pricing model that can be used to design hedging strategies for mortgage portfolio interest rate risk and price the cost of guaranteeing the securities’ default risk. The model is particularly useful for managing low-to-moderate income (LMI) mortgages and may help the federal government determine how best to serve the needs of these borrowers.