Prepayment speed(redirected from Pre-Payment Speed)
Also called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
In mortgage-backed securities, the estimated rate at which mortgage borrowers will pay off the mortgages that underlie an MBS. The equivalent of the coupon on a mortgage-backed security is a percentage of the interest and principal paid on the mortgages backing the security. A risk associated with mortgage-backed securities is that too many homeowners will pay off their mortgages with too much prepayment speed, depriving the holders of the MBS from future coupon payments.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved