Bear Stearns new home equity prepayment model enhances reliability of home equity valuations

Business Wire, Feb 29, 1996

NEW YORK--(BUSINESS WIRE)--Feb. 29, 1996--Bear Stearns & Co. Inc., one of the top three underwriters of Home Equity Securities, released a report on Feb. 16, 1996 detailing a comprehensive loan level prepayment model and valuation methodology authored by Dale Westhoff. Mr. Westhoff is Bear Stearns' highly regarded fixed income research analyst, ranking No. 1 for three consecutive years in the prepayment research category by Institutional Investor magazine.

The study, billed "Home Equity Loan Securities: Prepayment Modeling and Valuation," was developed from historical observations on nearly 300,000 individual loans provided by leading users of home equity securities. Unique to this study is the isolation of common loans and borrower characteristics that are responsible for differences in prepayments across issuers and deals. Linked to Bear Stearns' option adjusted spread model, the prepayment model allows investors to differentiate and value the prepayment uncertainty inherent in home equity securities with very diverse loan and borrower attributes. Bear Stearns' prepayment expert Westhoff believes, "Our model provides the foundation for home equity valuations that are more accurate and reliable than anything currently available in the home equity market."

Home equity securities currently account for over $16 billion in annual issuance and 15 percent of the ABS market.

Bear, Stearns & Co. Inc., a leading worldwide investment banking and securities trading and brokerage firm, is the major subsidiary of The Bear Stearns Companies Inc. (NYSE:BSC). With approximately $7.1 billion in total capital, Bear Stearns serves governments, corporations, institutions and individuals worldwide. The company's business includes corporate finance and mergers and acquisitions, institutional equities and fixed income sales and trading, private client services, asset management, correspondent clearing, securities lending and custody services. Headquartered in New York City, the company has over 7,500 employees located in domestic offices in Atlanta, Boston, Chicago, Dallas, Los Angeles, San Francisco and Washington, D.C.; and an international presence in Beijing, Buenos Aires, Geneva, Hong Kong, Karachi, London, Madrid, Manila, Paris, Sao Paulo, Shanghai, Singapore and Tokyo.

CONTACT: Bear, Stearns & Co. Inc., New York

Hannah Burns, 212/272-2395

Mary Flounders, 212/272-4356