prepayment rate of a pool of mortgages

The four main factors that have been shown to affect prepayments are

1. prevailing mortgage rates
2. the characteristics of the underlying mortgage pool (such as the location of the real estate)
3. seasonal factors (i.e., the time of year in which the prepayment rate is measured, NOT the time of year when the mortgage were initiated) and
4. general economic activity

Principal-Only (PO) passthrough securities

Principal-Only (PO) passthroughs generally increase in value when interest rates fall.