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1. The risk that an early unscheduled repayment of principal on mortgage-backed securities(抵押贷款支持债券) will occur when the underlying mortgages are refinanced by borrowers. All 抵押贷款支持债券 buyers assume some level of ppayments in their initial yield calculations, but an increase in the level of refinancing (which usually occurs as a result of falling interest rates) means that 抵押贷款支持债券s mature faster and will have to be reinvested at lower rates. 2. For a mortgage borrower, the risk that he or she will not be able to refinance an existing mortgage at a future date under favorable terms.
|||1. The ppayment estimates used to price mortgage-backed securities are made based on market conventions known as "speeds". There are two primary measures of mortgage ppayment speeds: the conditional ppayment rate and the Public Securities Association standard ppayment model. 2. Typically, refinancing risk is associated with short-term mortgage products such as hybrid ARMs and payment option ARMs. Borrowers often take on unforeseen risks when they assume that they will be able to refinance out of an existing mortgage at some planned future date - usually before a payment or interest rate reset date - to avoid an increase in their monthly payments. Interest rates might rise substantially before that date, or home price depciation could lead to a loss of equity, which might make it hard to refinance as planned. |
