All else equal, once a mortgage pool has aged, prior prepayments of mortgages in the pool have no bearing on the current value of the pool or the future prepayment rates of mortgages left in the pool.

Question

Quizplus · Accepted Answer

Prior prepayments can affect the current value and future prepayment rates of the remaining mortgages in the pool because they can change the composition of the pool, potentially leaving behind mortgages that are less likely to prepay (due to selection bias). This can affect the average life and yield of the remaining pool.

All Else Equal, Once a Mortgage Pool Has Aged, Prior