Burn-out factor is the aggregate percentage of the mortgage pool that:
A)has been prepaid prior to the sale of the loan
B)will be paid after the month under consideration
C)has been prepaid prior to the month under consideration
D)has defaulted

Question

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The burn-out factor is the percentage of the mortgage pool that has been prepaid prior to the month under consideration. Prepayments are made by borrowers who either pay off their entire mortgage or make additional payments to decrease the outstanding balance of their loan. This is an important factor for investors in mortgage-backed securities because prepayments can affect the expected cash flows from the investment.

Burn-Out Factor Is the Aggregate Percentage of the Mortgage Pool