Herrick Payoff Index

The Herrick Payoff Index (HPI) is a measure of the performance of a portfolio of mortgage loans. It is calculated by taking the difference between the principal and interest payments made on the loans and the amount of principal that is repaid. The HPI can be used to compare the performance of different portfolios of mortgage loans and to assess the risk of a particular portfolio.

The HPI is a useful tool for investors and lenders who are considering investing in mortgage loans. It can help them to identify portfolios that are likely to perform well and to avoid portfolios that are likely to perform poorly. The HPI can also be used to monitor the performance of a portfolio of mortgage loans over time.

The HPI is calculated by taking the following steps:

1. Calculate the principal and interest payments made on the loans in the portfolio.
2. Calculate the amount of principal that is repaid on the loans in the portfolio.
3. Subtract the amount of principal that is repaid from the principal and interest payments.
4. The result is the HPI for the portfolio.

The HPI can be positive or negative. A positive HPI indicates that the portfolio is performing well, as more principal is being repaid than is being paid in interest. A negative HPI indicates that the portfolio is performing poorly, as more interest is being paid than is being repaid in principal.

The HPI is a useful tool for investors and lenders, but it is important to note that it does not take into account all of the factors that can affect the performance of a portfolio of mortgage loans. For example, the HPI does not take into account the risk of default on the loans in the portfolio.

Despite this limitation, the HPI is a valuable tool for investors and lenders who are looking for a way to measure the performance of a portfolio of mortgage loans.