PREPAYMENT RISK Definition

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PREPAYMENT RISK, in the area of mortgage-backed securities, which are backed by loans on property, is the possibility that home owners will payoff their mortgages early, returning the investor's principal earlier than expected. This typically occurs during a declining inter­est rate environment, when home owners can refinance at lower rates, leaving investors vulnerable to the risk of reinvestment at lower rates.

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CONTROL POLICIES AND PROCEDURES are the policies and procedures that help ensure management directives are carried out. Those pertinent to an audit include performance reviews, information processing, physical controls and segregation of duties.

TRANSPORTATON IN is freight costs paid by the buyer therefore added to the costs of merchandise, i.e. part of inventory cost.

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