Background: in the US, mortgagors are allowed to prepay any amount and in any arbitrary time during the lifetime of the mortgage, which leads to prepayment risk if this deviation differs from the previously assumed one.
What I do not understand: is the CPR (a.k.a constant/conditional prepayment rate) being newly re-calculated once the mortgagor deviates from the original amortization schedule? Let's say the mortgagor obeys the amortization schedule until month t=99, but in month t=100 prepays 20% of his/her outstanding principal balance at the beginning of month t=100 (at the end of month t=99).
If this being the case, then I assume that the remaining amortization schedule, the fixed monthly installments of subsequent months are also being recalculated based on the new beginning month outstanding principal balance, right?
Or is CPR always calculated based on the original amortization schedule?
I am working on a research paper, but still, after having searched on the internet, I could not find any clear answers to this potentially trivial question.
I would be more than glad if you could help me pointing to an answer to this question.