The article analyzes mortgage-backed securities by creating a model to predict when homeowners will pay off their mortgages early. They use a process called prepayment cost process, which is not visible in the market. They also consider a unique risk for each group of mortgages, called loan pool risk. By studying these factors, they can estimate when homeowners will not prepay and calculate the value of mortgage-backed securities. The likelihood of homeowners not prepaying and the loan pool risk distribution are crucial in their analysis.