It may seem counterintuitive, but MBS backed by reperforming loans, and thus not eligible to be traded in the to-be-announced market, are the ideal assets in collateralized mortgage obligation deals. According to a report from Stifel’s fixed income strategy division, the reason is simple — most modified loans are unlikely to be refinanced as they have “a unique and desirable prepayment profile.” Borrowers with modified loans have already had their rates dramatically reduced. They're unlikely to ...