Setting Up a Mortgage Category

Use this information to create mortgage prepay categories. For each category, you can create unique coupon/age pairs with specific prepayment speed details.

Whether your prepay source is a third-party vendor or the result of an internal study, mortgage prepay categories provide you with an easy way to enter this information.
  1. Navigate to Setup > Prepay Tables > Mortgage Tables.
  2. Select the What If model that the new category belongs to.
  3. Select Add..
  4. Enter a unique Table Name for the category.
  5. Select Add Coupon/Age.
  6. Enter the Coupon as a percent, and enter the Age as a number from 0 through 360.
  7. Select Apply, and then repeat steps 5–7 until all necessary coupon/age pairs are added.

    A new row is added to the grid. The rows are sorted from lowest to highest coupon rate.

    Typically, multiple ages are added for each coupon. Adding coupons and ages only affects the category currently being modified.

    The application determines the Origination Period from the age that you enter. This column is a reference and is not editable.

  8. Select Manage Scenarios, and then select Add..
  9. Enter a whole number value from -1000 through 1000.
  10. Repeat steps 8–9 until the necessary scenarios are added.
    Adding rate shocks only affects the category currently being modified.
  11. Select Apply.
  12. Enter the appropriate prepayment speeds in the grid as annual rates, or Constant Prepayment Rates (CPR), for the defined shocks.
    When these values are used in prepayment calculations, the program converts these rates to monthly rates.
  13. Select Save.

After a mortgage category is set up, you can assign it individually to specific accounts on Setup > Chart of Accounts > Prepayments.

When you use a mortgage prepay category to determine the prepayment speeds for the instruments that comprise a linked account, the following guidelines apply:

  • If an instrument's rate does not match a coupon in the mortgage prepay category, the next lower rate is used.
  • If an instrument's age does not exactly match an age in a coupon/age pair, the next higher age is used.
  • If only one rate was entered in the coupon/age row being used to calculate an instrument's prepayment speeds, that value is applied flat across all shocks.
  • When at least two rates exist in the coupon/age pair row being used to calculate an instrument's prepayment speeds, the prepay rates are interpolated for shocks that are blank (not zero) in the table.
  • For shocks that contain a zero value (not blank) in the table, prepayment speeds for the related shocks are also zero for accounts that are associated with the specified category.
  • Prepayment rates are not extrapolated. Therefore, for shocks that are greater than the largest shock supplied, the rate for the largest shock is used. For shocks that are less than the smallest shock supplied, the rate for the smallest shock is used.
Parent topic: Prepay Tables