Tag: Prepayment Protection

How Commercial Prepayment Speeds Are Making Your Margins Worse [Get Our Model]

LENDING PORTFOLIO MANAGEMENT
LENDING PORTFOLIO MANAGEMENT

There has been substantial research on how prepayment speeds of residential mortgages affect the profitability of individual loans and portfolios.  Because of the homogenous nature of residential mortgages, many firms have developed highly predictive models to calculate prepayment speeds based on past behavior, portfolio makeup, and macroeconomic variables.  However, very little research is available on prepayment speeds of commercial mortgages – this is understandable because of the uniqueness of each commercial loan.  Even sophisticated loan risk-adjusted return on capital (RAROC) models

Our Favorite Loan Prepayment Provision

Loan Prepayment Protection

Most bank lenders are finding it difficult to negotiate loan fees – borrowers resist both loan origination fees and loan prepayment fees.  However, there is a strong case to be made that loan prepayment fees are more important in increasing loan profitability than loan origination fees.

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