Document Type

Working Paper






Metropolitan Studies Program Series


We would like to thank Robert Van Order, Frank Nothaft and Bill Schaumann, all of Freddie Mac, for providing the data used in the study, and for considerable assistance in getting it into a form suitable for estimation.


Economic Policy | Economics | Public Affairs, Public Policy and Public Administration | Public Policy


Estimates of a prepayment function for multifamily mortgages are reported in this paper. These are among the first attempts to estimate such a function; most previous work along these lines focuses on single family mortgages. A further distinguishing aspect of the paper is its attempt to incorporate the impact of unobservable factors on the mortgage refinancing decision. A variant of the maximum likelihood procedure first developed by Meyer (1987) is employed. The results indicate an overall positive duration dependence for the conditional prepayment rate. The estimated response of prepayments to a change in the market rate of interest is significant with the expected sign; it is also larger once the effect of unobserved heterogeneity is taken into account. Nonetheless, the magnitude of the response is substantially less than that predicted by the ruthless option pricing model.


0732 507X

Additional Information

Metropolitan studies program series occasional paper no.177


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Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.



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