New production of securities backed by adjustable-rate mortgages surged to a record $206.57 billion in the third quarter of 2004, as a major shift in consumer preferences rewrote the MBS market. A new market analysis by Inside MBS & ABS indicates that ARM securities issuance in the first nine months of 2004 has accounted for a record 35.7 percent of total MBS production. For the year, a total of $505.86 billion of ARM MBS…