Single Monthly Mortality - SMM
- Single Monthly Mortality - SMM
In mortgage-backed securities (MBSs), this is the percentage of the principal amount of mortgages that are prepaid in a given month. For investors of MBSs, prepayment of mortgages is usually undesirable since future interest is foregone.
This is more broadly referred to as "prepayment risk." Due to the importance of prepayment risk, single monthly mortality was developed as a metric for tracking prepayments in the mortgage pool.
Prepayment hinders the returns for MBS investors because mortgages are normally prepaid using refinancing loan, and this happens primarily when interest rates have fallen. So while an investor in an MBS believes they have locked in a higher yielding investment in a low rate environment, they may in fact have the carpet pulled out from under them.
The mortgage holders in the MBS may refinance at lower interest rates, and then pay off the mortgage in the MBS pool. Now the investor has their money back and must reinvest the funds in a lower interest rate environment.
Investment dictionary.
Academic.
2012.
Look at other dictionaries:
single monthly mortality rate — ( SMM) A measure of the amount of monthly principal reduction in excess of the scheduled monthly principal payment. The SMM is simply the amount of prepaid principal in a given month expressed as a percentage of the principal balance at the… … Financial and business terms
SMM — single monthly mortality rate (SMM) A measure of the amount of monthly principal reduction in excess of the scheduled monthly principal payment. The SMM is simply the amount of prepaid principal in a given month expressed as a percentage of the… … Financial and business terms
SMM — may mean: * Solar Maximum Mission * System Management Mode * Standard Method of Measurement * Single Marketing Method * Soft Magnetic Materials Conference * Science Museum of Minnesota * S Methylmethionine * Simulated Method of Moments, a… … Wikipedia
constant percent prepayment — ( CPP) An expression of mortgage loan prepayments in annual terms. The single monthly mortality rate ( SMM) multiplied by 12. CPP annualizes SMM without reflecting the impact of compounding. See constant prepayment rate and single monthly… … Financial and business terms
CPP — constant percent prepayment (CPP) An expression of mortgage loan prepayments in annual terms. The single monthly mortality rate ( SMM) multiplied by 12. CPP annualizes SMM without reflecting the impact of compounding. See constant prepayment rate … Financial and business terms
constant prepayment rate — ( CPR) A measure of the historical or expected prepayment of principal on a mortgage or an MBS that expresses the prepayment as a constant proportion of the outstanding principal. The CPR is an annualized expression of the SMM that reflects… … Financial and business terms
CPR — constant prepayment rate (CPR) A measure of the historical or expected prepayment of principal on a mortgage or an MBS that expresses the prepayment as a constant proportion of the outstanding principal. The CPR is an annualized expression of the … Financial and business terms
