Glossary term
Single Monthly Mortality (SMM)
Single monthly mortality, or SMM, is the monthly prepayment rate for a mortgage pool after scheduled principal payments are accounted for.
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What Is Single Monthly Mortality (SMM)?
Single monthly mortality, or SMM, is the monthly prepayment rate for a mortgage pool after scheduled principal payments are accounted for. It measures the share of remaining mortgage principal that prepaid during a month.
SMM is used in mortgage-backed security analysis because prepayments change cash-flow timing. It is the monthly companion to conditional prepayment rate, or CPR.
Key Takeaways
- SMM measures monthly mortgage prepayment speed.
- It is calculated after scheduled principal payments are considered.
- Higher SMM means faster principal return for an MBS investor.
- SMM can be converted into CPR for annualized interpretation.
- The measure changes with rates, refinancing incentives, housing turnover, and borrower behavior.
How SMM Relates to CPR
A common conversion from annual CPR to monthly SMM is:
In this expression, SMM is the monthly prepayment rate and CPR is the annualized conditional prepayment rate.
For example, if CPR is 12%, the implied SMM is about 1.06%. That means roughly 1.06% of the remaining scheduled balance is assumed to prepay in a month under that speed.
How to Read SMM
SMM movement | General meaning |
|---|---|
Rising SMM | Borrowers are prepaying faster. |
Falling SMM | Prepayments are slowing. |
Stable SMM | Monthly prepayment behavior is relatively steady. |
Cash-Flow Interpretation
SMM affects how quickly principal returns to mortgage-backed security investors. Faster prepayment can shorten expected life and force reinvestment. Slower prepayment can extend the security when rates have risen and prices are under pressure.
The measure is especially useful for monthly reporting because mortgage pools produce monthly cash flows. CPR is easier to discuss as an annualized rate, but SMM is closer to the month-by-month cash-flow mechanics.
Small-looking monthly changes can compound into meaningful annual differences. A pool moving from 0.5% SMM to 1.5% SMM is not just slightly faster; it can materially shorten expected principal timing and change duration, convexity, and reinvestment assumptions.
SMM also helps separate scheduled amortization from unscheduled borrower behavior. That distinction matters because normal principal repayment is expected, while unscheduled prepayment can change the security's value, hedging profile, and reinvestment assumptions.
Analysts often look at SMM alongside CPR rather than treating one as superior. SMM is closer to monthly cash reporting, while CPR makes it easier to compare prepayment speeds across pools and time periods.
Used carefully, SMM keeps the analysis grounded in the actual monthly pace of principal return rather than only in annualized shorthand. It is especially helpful when reviewing pool-level reports, because the cash flows arrive month by month and can shift before the annualized CPR narrative fully catches up.
The Bottom Line
Single monthly mortality is the monthly prepayment-speed measure for mortgage pools. It helps investors translate borrower prepayment behavior into expected MBS cash-flow timing.