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hamstrman
02-02-2008, 12:48 AM
What is a "partial prepayment" of a mortgage? Isn't any payment made in advance of the actual month that it's due a prepayment? And any prepayment made is the whole prepayment... how do you partially prepay when the prepayment is entirely unexpected? If I am supposed to pay $500/mth and I pay the $500 for that month plus an extra $200, I have made a prepayment of $200. Not a partial prepayment; a whole $200. If there was an expected prepayment amount, why wouldn't it just become part of the expected payment for that month and not be a prepayment?

Car'a'carn
02-02-2008, 12:57 PM
I assume this is from HOFIS. The book uses prepayment as a full mortgage repayment, and partial prepayment as any repayment which does not pay off the remaining balance.

hamstrman
02-02-2008, 06:44 PM
I assume this is from HOFIS. The book uses prepayment as a full mortgage repayment, and partial prepayment as any repayment which does not pay off the remaining balance.

It's SN-116-07 HOMBS (Handbook of Mortgage Backed Securities)...

But they also talk about prepayment schedules. If a prepayment was defined as the full repayment, there'd only be one payment to be made, right? :-?

Car'a'carn
02-02-2008, 07:34 PM
It's SN-116-07 HOMBS (Handbook of Mortgage Backed Securities)...

It is using it same way.

But they also talk about prepayment schedules. If a prepayment was defined as the full repayment, there'd only be one payment to be made, right? :-?

Prepayment schedule is used in the prepayment models: it is an assumption (e.g. 100bp, 300bp, etc.) how much extra principal the mortgage pool gets each month. It is used to structure the tranches. Does not relate to any particular mortgage, just the pool. In the mortgage chapters in HOFIS, they call it prepayment speeds, prepayment bands, etc.

hamstrman
02-03-2008, 03:54 PM
To add a question, although in the same study note, pages 307-308 discuss collars with respect to tranches... In Exhibit 4, I see the path of the collar as they described it. Then they dicuss in Exhibit 5 something about 7 tranches and they talk about how *apparent* it is... to see the tranches and how the collars affect them.

I don't see seven of anything in Exhibit 5. There are 6 vertical lines making 5 boxes in the graph. There are 3 prepayment speeds. If you further divide the 5 boxes by the dotted lines of the prepayment schedule, you get 8 segments. Where are there 7 of anything??

Edit: I don't think I understand much of anything in Chapter 18 whatsoever.