Prepayment methods determine how prepayments are calculated.
The following are the four types of prepayment methods used in the
Forecasting module:
-
SMM (Single Monthly Mortality) - A prepayment rate expressed as a
monthly rate.
-
PSA (Public Securities Association) - A methodology
where the amount being prepaid each month changes with the average age of the loan or
portfolio.
-
CPR (Constant Prepayment Rate) - A methodology that
assumes a constant portion of the outstanding loan portfolio prepays each month.
-
% of Total Balance - A methodology that uses the total
maturity amount for the current month to calculate prepayment amounts in all other time
frames.