Consider a primary mortgage market lender who has just now originated 1,000 30-year, monthly payment loans for $300,000 each at 5.5% interest. The lender wishes to sell the pool of mortgages as mortgage pass through securities (MPTS). Investors are demanding a 4.875% yield on the MPTS backed by the pool. A servicing firm is willing to service the loans in the pool for 0.5% annually (paid monthly) and the pool is expected to prepay based on the 100% PSA prepayment model. What is the market value of the pool? What gross amount would the lender receive from the sale of the MPTS in the previous problem if the expected prepayment was forecast using a 200% PSA prepayment model?
| Notional | 300 |
| WAM | 360 |
| WAC | 5.00% |
| rPT | 4.88% |
| PSA | 200% |
| C | 1.610 |
| Price | 295.5518 |
USing the given formula
Consider a primary mortgage market lender who has just now originated 1,000 30-year, monthly payment loans...
One hundred identical mortgages are pooled together into a pass-through security. Each mortgage has a $100,000 principal, a fixed interest rate of 9% p.a. (paid monthly), and is fully amortized over a term of 30 years. Assume the bank charges servicing fees of 40 basis points and GNMA charges 10 bp to insure the timing of the payments. If investors expect no prepayment on these loans over the 30 years life of the pass-through, what should they pay for this...
QUESTION 5 Use the information below to answer questions 5 through 7. The Cashman mortgage company originated a pool containing 25 five-year fixed interest rate mortgages with an average balance of $100,000 each. All mortgages in the pool carry a coupon of 10%. (For simplicity, assume that all mortgage payments are made annually at 10% interest.) Assuming a constant annual prepayment rate of 10% (for simplicity, assume that prepayments are based on the pool balance at the end of the...