1 Q - Fixed Income principal, scheduled, mortgage, balance, payment

noel

The single-monthly mortality rate (SMM) is equal to 0.003.
The mortgage balance for March is $250 million.
The scheduled principal payment is $3 million in March, and $3 million in April.

Calculate April's estimated prepayment.

ap0258

(250-3)x0.003 = $0.741million for march prepayment

So opening balance of april = $246.259

April prepayment = $(246.259-3)x0.003 = $0.7297

OmarAdnan

March:

Prepayment = SMM * (Balance - Scheduled Principal) = 0.003 * (250m - 3m) = 0.741m

April:

Opening Balance = 250m - 3m - 0.741m = 246.259m

Prepayment = 0.003 * (246.259m - 3m) = 0.729m

Analyze_This

We are assuming the same SMM? Should'nt the SMM increase based on the number of months seasoning and PSA. Unless 30 months are already over, we cannot use the same SMM for march and april. Right?

RMontgomery

rpradeephere Wrote:
-------------------------------------------------------
> We are assuming the same SMM? Should'nt the SMM
> increase based on the number of months seasoning
> and PSA. Unless 30 months are already over, we
> cannot use the same SMM for march and april.
> Right?

Technically we should not. But there is no other information provided in the question.