Clearing House Interbank Payment System and Refinancing risk: Difference between pages

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(CHIPS).  
1.  


An independent message-switching system that permits international financial transactions to be settled among New York banks.  
For any borrower, the risk of adverse pricing or lack of availability of replacement financing, when the current financing reaches the end of its term.
 
 
2.
 
For a mortgage borrower, the risk that he or she will not be able to refinance an existing mortgage at a future date under favourable terms.
 
 
3.
 
The risk to an investor in mortgage-backed securities (MBS) that an early unscheduled repayment of principal will occur when the underlying mortgages are refinanced by borrowers.
 
All MBS buyers assume some level of prepayments in their initial yield calculations, but an increase in the level of refinancing (which usually occurs as a result of falling interest rates) means that MBSs mature faster and will have to be reinvested at lower rates.


CHIPS is operated by The Clearing House (previously the New York Clearing House Association).


== See also ==
== See also ==
* [[Clearing house]]
* [[CMBS]]
* [[Clearing House Automated Payment System]]
* [[Mortgage ]]
* [[Interbank Funds Transfer System]]
 
[[Category:Manage_risks]]

Revision as of 16:13, 9 May 2015

1.

For any borrower, the risk of adverse pricing or lack of availability of replacement financing, when the current financing reaches the end of its term.


2.

For a mortgage borrower, the risk that he or she will not be able to refinance an existing mortgage at a future date under favourable terms.


3.

The risk to an investor in mortgage-backed securities (MBS) that an early unscheduled repayment of principal will occur when the underlying mortgages are refinanced by borrowers.

All MBS buyers assume some level of prepayments in their initial yield calculations, but an increase in the level of refinancing (which usually occurs as a result of falling interest rates) means that MBSs mature faster and will have to be reinvested at lower rates.


See also