Question: For mortgage loans what is prepayment risk
For mortgage loans, what is prepayment risk?
Answer to relevant QuestionsExplain why the higher the loan-to-value ratio is, the greater the credit risk is to which the lender is exposed. What is an alternative-A loan? Indicate whether you agree or disagree with the following statement: “The PSA prepayment benchmark is a model for forecasting prepayments for a pass-through security.” Answer the below questions. (a) What is the cash flow yield of a mortgage pass-through security? (b)What are the limitations of cash flow yield measures for a mortgage pass-through security? Although it is often stated that Ginnie Mae issues mortgage-backed securities, why is that technically incorrect?
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