Prepayment speed

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Prepayment 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.

Prepayment Speed

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
References in periodicals archive ?
Given the investor concerns about pre-payment speeds, working with FHA to create this trial-modification initiative was clearly in the best interest of borrowers, issuers and investors."