Explanation:
Correct answer: D.
The statement is the opposite of the correct concept. The effect described is the burnout effect: mortgage pools that have already refinanced heavily in the past tend to become less sensitive to further interest-rate declines, not more likely to refinance at higher-than-average rates.
Why the others are true:
Therefore, the false statement is D.
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According to Veronesi, each of the following is true about mortgage prepayments EXCEPT:
A
Summers are characterized by large prepayments; this is called "seasonality"
B
The prepayment rate tends to be slow (low) in the early years of a mortgage
C
As property values decline, prepayments tend to decline
D
Mortgage pools that refinanced heavily in the past tend to refinance again at higher-than-average rates; this is called "loyalty of repeat customers"