The Beyondbond Prepayment Model is a dynamic econometric model that applies economic theory to analyze mortgagor's prepayment behaviors and then fits them using historical US residential prepayment information. In order to develop the model, essential mortgage characteristics such as amortization term, age, contract rate, and principal factor, as well as crucial economic variables, such as housing turnover rate, prevailing market mortgage rate, and yield curve information over time were selected to determine the fixed rate prepayment factors.

For Hybrid Adjustable-Rate Mortgages (ARM), teaser, and interest only characteristics are factored into calibration. The applications of the model can be used not only for prepayment forecast but also for pricing, options adjusted spread evaluation, and scenario analysis for mortgages and mortgage-backed securities. The model specification employs cubic spline functions over a wide range of variables.

The prepayment model is used in conjunction with an in-house OAS or pricing model. Beyondbond has created an easy to use C function API for users who wish to use the prepayment model. Model delivery can be either subroutine in C library or Microsoft Excel. As well, the model is customized in a user-friendly way such that users can customize and fine-tune it via any web browser.