What does CPR mean in ADVERTISING

Factors such as market conditions, loan terms, and the type of security can affect the expected prepayment rate. For example, in a falling interest rate environment, shorter loans will usually have higher prepayment rates than longer loans. In addition, collateral characteristics such as credit risk and loan-to-value ratio can also influence the anticipated prepayment rate.

Investors use CPR to estimate future cash flows from MBS investments. Knowing the expected rate of repayment can help inform investment decisions and optimize potential returns. A higher CPR means a higher return on investment since more principal will be repaid sooner. Conversely, a lower CPR could mean that investors may have to wait longer for their return on investment.

Most mortgage originators update their CPR values on either a monthly or quarterly basis. The updates reflect current market conditions and underlying pool characteristics that might influence the anticipated prepayment speeds of loans within the pool.

Originators typically use complex formulas to estimate expected prepayments based on several factors such as historical data, borrower characteristics, loan terms, market conditions and granular pool level information. These calculations are done on a regular basis and used to help investors make educated decisions about their investments.

Yes - one way to minimize exposure would be to invest in securities with median life structures or “bullet” structures which generally offer greater stability against fluctuations in mortgage interest rates compared to traditional methods such as lockouts/extension options where interest rates come into play. Additionally, investing in pools with larger sizes and high quality mortgages may also provide better predictability for MBS investors over time.