More Geographic Bias Seen in Affordable Loans: State Prepayment Differentials

Kurt van Kuller

Municipal Finance Journal, 2005, vol. 26, issue 2, 61 - 82

Abstract: This account of state prepayment differentials offers geographic rankings derived from the GNMA market. These data have a direct bearing on the behavior of single family mortgage revenue bonds, due to their overlap and similar borrower profile with GNMA/FHAs. GNMAs contain more bias than conventional loans, the extent of which is not unexpected. Income levels and loan size are prominent influences on prepayment behavior, and economic cycles may have greater impact on lower income mortgagors. The large systematic differences suggest that geographic bias should be a primary consideration in evaluating concentrated pools such as SFMRBs. This report presents geographic factors for 50 states plus the District of Columbia and Puerto Rico based on conventional loan data, and GNMA factors for 39 states and Puerto Rico.

Date: 2005
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