Portfolio Runoff

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Portfolio Runoff

A reduction in the mortgages represented in a mortgage-backed security as a result of prepayment of some of the mortgages in it. This can reduce the yield on an MBS and, at times, force the security holder to reinvest proceeds at a lower coupon rate than the MBS paid. Most mortgage-backed securities provide safeguards against portfolio runoff unduly affecting yields. See also: Prepayment risk.
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Stevens noted that one reason why First Financial FCU entered the private student lending market was because the credit union was nearing its regulatory cap for outstanding business loans and needed a new way to keep up with loan portfolio runoffs.