1.   Also like most mortgages, the loan could be prepaid in full at any time.

2.   One trick the new young traders exploited was the tendency of borrowers to prepay their loans when they should not.

3.   Although it limits the supply of new bonds, it also means more homeowners are prepaying their loans by refinancing.

4.   As more homeowners prepay the loans backing mortgage bond, investors get their money back sooner than expected and must reinvest at lower yields.

5.   As interest rates fall, homeowners will be anxious to refinance, prepaying their loans.

6.   If a consumer makes extra payments or prepays the loan, the mortgage is also prone to error, he said.

7.   Meanwhile, discount mortgage bonds tracked Treasuries as interest rates slipped, sparking concern homeowners will prepay the loans that back the bonds.

8.   Mortgage bonds also outperformed Treasuries as steadier interest rates eased concern homeowners will prepay the loans that back mortgage securities.

9.   Mortgage bonds outperformed Treasuries as interest rates rose, easing concern homeowners will prepay the loans that back mortgage securities.

10.   Moreover, homeowners tend to prepay mortgage loans when interest rates fall.