// definition
CPR
Conditional prepayment rate
Short definition
An annualised measure of mortgage prepayments relative to the principal still exposed after scheduled amortisation. CPR may summarise observed repayments or represent a modelling assumption; the distinction must be stated. Its monthly equivalent, single-month mortality or SMM, is SMM = 1 − (1 − CPR)^(1/12), with rates expressed as proportions.
risk atlas
Knowledge map
Intuition
Prepayments apply to a principal balance that shrinks as payments arrive.
Formula
SMM = 1 − (1 − CPR)^(1/12), CPR and SMM expressed as proportionsRelated analyses
Primary sources
- Freddie Mac: Daily Prepayment Report GuidePages 12 and 13: the SMM denominator and annualised CPR conversion.