The single-monthly mortality rate (SMM) is equal to 0.003. The mortgage balance for March is $250 million. The scheduled principal payment is $3 million in March, and $3 million in April. Calculate April’s estimated prepayment.
(250-3)x0.003 = $0.741million for march prepayment So opening balance of april = 246.259 April prepayment = (246.259-3)x0.003 = $0.7297
March: Prepayment = SMM * (Balance - Scheduled Principal) = 0.003 * (250m - 3m) = 0.741m April: Opening Balance = 250m - 3m - 0.741m = 246.259m Prepayment = 0.003 * (246.259m - 3m) = 0.729m
We are assuming the same SMM? Should’nt the SMM increase based on the number of months seasoning and PSA. Unless 30 months are already over, we cannot use the same SMM for march and april. Right?
rpradeephere Wrote: ------------------------------------------------------- > We are assuming the same SMM? Should’nt the SMM > increase based on the number of months seasoning > and PSA. Unless 30 months are already over, we > cannot use the same SMM for march and april. > Right? Technically we should not. But there is no other information provided in the question.