
Conditional Prepayment Rate  CPR

Conditional Prepayment Rate or CPR is a measure of the rate of payments from a Bond that pays principal payments in excess of scheduled payments (socalled prepayments).
CPR is defined as the annualized rate of principal payments beyond the regularly scheduled payments, and is stated as a percentage of outstanding amount of the Security or loan minus the scheduled payments. Such bonds include mortgagebacked securities, CMO's, and ABS, which prepay at some rate usually dependent on the level of Interest rates.
A loan prepayment rate that is equal to the proportion of the principal of a Pool of loans that is assumed to be paid off prematurely in each period.
The calculation of this estimate is based on a number of factors such as historical prepayment rates for previous loans that are similar to ones in the Pool and on Future economic outlooks.
The CPR can be used for a variety of loans. For example, mortgages, student loans and passthrough securities all use CPR as estimates of prepayment.
Typically, CPR is expressed as a percentage. For example, a Pool of mortgages with a CPR of 8% would indicate that for each period, 8% of the Pool's remaining principal outstanding Will be paid off.

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