Answer--One problem investors have with mortgage-backed participation certificates (PCs), such as Ginnie Maes, is that their maturity is uncertain due to the unpredictability of prepayments
. PCs on a given mortgage pool are all identical, have a single stated maturity, and pass through a pro rata share of all cash flows to all participants in the mortgage pool.
Speeds, Yields, and Interest Rate Changes.
Westhoff joined Bear Stearns in 1990 specializing in the analysis and modeling of Mortgage-Backed Securities prepayments
. He was voted an eight-time "First Team All-American" by Institutional Investor Magazine in the Mortgage-Backed Prepayment/Strategy category, and has been the only winner of this category since its inception in 1993.
Although autonomous prepayments
are not refinancings (which are treated separately in the Murphy model), the rate of prepayments
not related to refinancings has been found to be related to market interest rates (Heuson, 1988).
In a letter to IRS Commissioner Charles Rossotti, NLC President Bob Knight, Mayor of Wichita, Kan., wrote that prepayments
for natural gas supplies through tax-exempt bends are substantial business transactions and not a violation of arbitrage restrictions.
Investments with prepayment
risk -- The FASB added this subproject to its agenda in January 1991 at the request of the EITF.
We do not have information on the extent to which the Rule of 78s is being used to calculate rebates of unearned finance charges in prepayments
. We suspect that it is not used widely in mortgage transactions.
According to the Bangko Sentral ng Pilipinas, prepayment
of debts owed to foreign creditors is a prudent exercise in times of significant appreciation of the peso.
6603, a prepayment
made as a deposit was referred to as a deposit in the nature of a cash bond.) While the taxpayer was successful, the case serves as a reminder that for a prepayment
of a disputable tax to be considered a deposit, taxpayers must closely follow Rev.
The Financial Accounting Standards Board removed from its technical agenda a project on investments with prepayment
The cost of acquiring blocks of individual issues of even $100,000 in the retail market is extremely high, and the need for diversification is paramount in order to minimize the risk of an unexpected mortgage prepayment
. Also, because ARM securities can be complex, management should be handled by investment professionals.