Dealer-Median Prepayment Speed


DEFINITION of 'Dealer-Median Prepayment Speed'

The median value of all Wall Street securities dealers' prepayment speed estimates for the underlying mortgages used to form mortgage-backed securities. The prepayment speed estimates used by banks and other regulated financial enterprises to value and manage mortgage-backed security portfolios are a concern to regulators. To that end, dealer-median speeds are widely used as conservative estimates.

BREAKING DOWN 'Dealer-Median Prepayment Speed'

The dealer-median prepayment speed is an important consideration, as it is the median measure of how fast mortgage borrowers will prepay their mortgages. Prepayment speed estimates are also a very important variable in mortgage-backed securities valuation and analysis. Investors and traders compete to develop more accurate proprietary models in order to outperform each other in the broader market.

  1. Collateralized Mortgage Obligation ...

    A type of mortgage-backed security in which principal repayments ...
  2. Prepayment

    The satisfaction of a debt or installment payment before its ...
  3. Planned Amortization Class (PAC) ...

    A class of tranche in a planned amortization class (PAC) bond ...
  4. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  5. Conditional Prepayment Rate - CPR

    A loan prepayment rate that is equal to the proportion of the ...
  6. Public Securities Association Standard ...

    An assumed monthly rate of prepayment that is annualized to the ...
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