Dealer-Median Prepayment Speed

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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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
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  2. Prepayment

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  3. Public Securities Association Standard ...

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  4. Conditional Prepayment Rate - CPR

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  5. Mortgage-Backed Security (MBS)

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