PT  - JOURNAL ARTICLE
AU  - Laurie S Goodman
AU  - Roger Ashworth
AU  - Brian Landy
AU  - Ke Yin
TI  - Benefiting from Extension Risk in the Non-Agency Market
AID  - 10.3905/JFI.2010.19.3.013
DP  - 2009 Dec 31
TA  - The Journal of Fixed Income
PG  - 013--029
VI  - 19
IP  - 3
4099  - https://pm-research.com/content/19/3/013.short
4100  - https://pm-research.com/content/19/3/013.full
AB  - Two trends in the mortgage market are quite apparent: the time spent in the liquidation pipeline is increasing and modification activity is increasing. This article reviews these trends and then focuses on three types of bonds that are attractively priced in the base case and benefit from these trends: 1) front pay tranches of subprime deals, where the deal goes pro rata when the subs are extinguished; 2) selective mezzanine tranches of subprime deals that are trading as credit IOs; and 3) non-agency inverse IOs.TOPICS: MBS and residential mortgage loans, risk management, exchanges/markets/clearinghouses