Positive float

Positive float

See: Float
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In order to have positive float benefit, the short-term interest rate applied to the total number of days from prepayment to remittance must be high enough to offset the interest expense of the loan (pass-through rate) from the prepayment date to the end of the month.
Also, there is less likelihood that interest rates will remain at those higher levels or increase, creating positive float days.
* If the remittance risk can't be managed--If the origination volumes or servicing portfolio size is such that the impact of negative float days and the related interest expense is not an exposure that can be afforded or counterbalanced by positive float benefit in other years, then the prepayment risk should be avoided.
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