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Burnout |
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Burnout Depletion of a tax shelter's benefits. In the context of mortgage backed securities it refers to the percentage of the pool that has prepaid their mortgage. Burnout In a mortgage-backed security, the percentage of mortgages underlying the security that were not re-financed following a drop in interest rates. Historically, a mortgage that is not re-financed is less likely to re-finance at the next drop in interest rates. As a result, potential investors in mortgage-backed securities often look for a high burnout rate because it reduces prepayment risk, or the risk that investors will be deprived of future interest payments because too many mortgages are prepaid. Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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