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Posted on Jul 20, 2024

Why is the cash flow of a residential mortgage loan unknown? 1) Because the Federal Reserve controls mortgage payoffs. 2) Fannie Mae and Freddie Mac

Why is the cash flow of a residential mortgage loan unknown?

1) Because the Federal Reserve controls mortgage payoffs.

2) Fannie Mae and Freddie Mac are unpredictable.

3) Borrowers may choose to pay the loan off more quickly (or slowly) than predicted by prepayment models would suggest.

4) Investors do not demand predictable cash flows.

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