Bear, Stearns & Co. has developed a new mortgage valuation model that gives investors detailed loan-level information about securities backed by nonagency mortgages.

The model was released last month and is a "turning point in nonagency analytics," said Dale Westhoff, senior managing director for mortgage research at Bear Stearns. Nonagency loans do not qualify for sale to the major secondary market buyers.

"We think the accuracy and analytics will surpass what's available in the agency sector," Mr. Westhoff said.

The model offers investors property value, loan size, and coupon distribution information that can be used for valuation or hedging, Mr. Westhoff said.

"It's a step in the right direction," said Craig G. Ellinger, associate director for mortgage-backed securities at PPM America Inc. in Chicago. The model has the potential to give Mr. Ellinger, an investor, more accurate option-adjusted spreads, which are used to find the true value of a bond, he said.

"It appears as if it is going to be more in line with models we use here," he said, calling this important to PPM because it is a "big player in the jumbo mortgage market," where loans that exceed the agency loan limit are securitized.

The model, developed in the last two years, draws on "ZIP-code level" home price data to update loan-to-value information for the more than 350,000 home loans in the company's nonagency data base.

The nonagency category includes jumbo loans, alternative-A loans, A- minus loans, and credits with a 125% loan-to-value ratio, said Arthur Q. Frank, director of fixed-income research at Nomura Securities International.

"You do have a diversity of collateral types behind these" collateralized mortgage obligation, or CMO, structures "out there in the nonagency market," said Mr. Frank. And reliable loan-level data are "certainly helpful for modeling prepayments," he said.

Bear's model has "very rich loan-level detail" that is not available in the agency sector, Mr. Westhoff said.

"We don't get that much information on agency pools," Mr. Westhoff said, which makes it more difficult to forecast prepayment behavior.

During the last couple of years Fannie Mae and Freddie Mac "have widened their underwriting guidelines, and the pools have become more heterogeneous," Mr. Westhoff said.

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