Abstract
The amount and timing of unscheduled principal amortization determines the ex‐post yield to holders of mortgage‐backed securities. In this paper, the relationship between pool characteristics and the early return of principal is addressed. Empirical results are based on actual terminations from June 1985 to June 1986 on a sample of all GNMA pools. The relative termination experience of pools with loan rates close to the refinancing rate faced by the underlying borrower is examined in detail. The impact of pool age and size is also considered. Unscheduled termination depends on the refinancing rate, as well as the specific characteristics of a pool.
