A good news effect of increased mortgage prepayments on a mortgage pool caused by decreasing market interest rates includes the receipt of fewer scheduled interest payments.

Question

Quizplus · Accepted Answer

Increased mortgage prepayments typically result in the early return of principal to investors, reducing the amount of time their investment earns interest, which is generally considered a negative effect since it leads to reinvestment risk, not a good news effect.

A Good News Effect of Increased Mortgage Prepayments on a Mortgage