Explanation:
An incentive function measures the borrower's economic motivation to prepay, especially through refinancing. It typically includes variables such as:
The probability of 30-day delinquency is not an incentive for voluntary prepayment; it is related to credit performance and default risk, not refinance motivation.
Ultimate access to all questions.
No comments yet.
Q-54.1 Mortgage prepayment variables: Each of the following is an example of a mortgage loan INCENTIVE FUNCTION EXCEPT for:
A
Present value of reduction in mortgage payments if loan is refinanced
B
Difference between existing mortgage rate and current coupon rate
C
Reduction in monthly payment level as a result of refinancing
D
Probability of 30-day delinquency