SUMMARY
Prepayment behavior has evolved greatly over time, impacted by changes in both the consumer mortgage and real estate markets. Since 2002, baseline prepayment speeds have been elevated by faster turnover and equity withdrawal, while refinancing activity has been boosted by a growing assortment of mortgage products into which borrowers can refinance and cut their monthly cash outlay. Understanding prepayment behavior requires a flexible approach; rather than rote memorization of the impact of different attributes on prepayment speeds, the relevant characteristics must be viewed in the context of the current environment for consumer financing and real estate.
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