Monthly measure of mortgage pool principal that prepays ahead of schedule.
Single monthly mortality, often called SMM, is a monthly measure of the share of mortgage pool principal that prepays ahead of schedule.
SMM matters because mortgage cash flow is received month by month. Investors need a monthly view of how much principal is paying off faster than scheduled amortization.
For borrowers, SMM is useful as a market-side explanation term. When many homeowners refinance, sell, or pay down principal, those individual choices appear as faster monthly prepayment in mortgage-pool analysis.
Borrowers do not usually see SMM in their loan files. It appears in MBS analytics, pool performance reports, and prepayment modeling.
The term becomes practical when explaining how a monthly wave of refinances or home sales changes investor cash flow before those changes are annualized into Conditional Prepayment Rate.
SMM is a monthly prepayment measure. CPR is the related annualized prepayment measure.
$$ SMM = 1 - (1 - CPR)^{1/12} $$
In plain language, SMM translates an annualized prepayment idea into a one-month speed.
If many borrowers in a pool refinance during one month, that month’s prepayment amount rises. Analysts can describe the monthly prepayment speed using SMM, then connect it to CPR for annualized comparison.
SMM differs from Conditional Prepayment Rate because SMM is monthly and CPR is annualized.
It also differs from Pool Factor. Pool factor reports how much of the original pool remains, while SMM measures monthly prepayment speed.
It also differs from Prepayment Risk. Prepayment risk is the uncertainty around early payoff behavior. SMM is one metric used to observe or model that behavior.