ABS prepayment risk question

CFA Level II
#1

On schweser book 4 study session 14, page 261, it says "in the case of non-amortizing collateral, due to the call provision on the ABS, while the underlying collateral(loans) has no prepayment risk, the securities backed by such collateral may have prepayment (call) risk.

What does this mean? How can underlying loans not have prepayment risk? (You can always pay off your credit card princpal early, no?) can someone explain this?

#2

http://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/91318721

#3

Ahh… Key sentence – “it doesn’t have a principal repayment schedule” that makes a lot sense. I guess when there’s prepayment risk, there has to be a scheduled payment plan, so the investor expects certain amount cash flow, but if the payments exceed the schedule payment amount, the expected future cash flow diminishes, which is the prepayment risk.

thx again for the link

#4

My pleasure.