Question

Given the following information, answer the following questions for month 12 of this security

-15 year FRMs, monthly payments

-PSA 150

-4.5% mortgage rate, 0.5% servicing fee, 3.75% discount rate

- Pool balance at the beginning of month 12: $75,946,124

- The loans were not seasoned before entering the pool

C: What is the payment to investors in month 12?

Round your answer to the nearest cent.

Answer 1

FRMs = 15 Yrs, monthly payment hence 180 months, PSA = 150, Mortgage rate = 4.50% (assuming yearly), monthly rate would be 4.50/12 = 0.00375, servicing fee = 0.50% (assuming yearly), monthly would be 0.50/12 = 0.000417.

Pool balance at the end of month 12 = Balance at start of the month + Interest

Balance at start of month 12 = $75946124

Interest for month 12 = $75946124*0.00375(being monthly interest rate) = $284798

Servicing fee for month 12 = $75946124*0.000417 = $31644

Total payment at end of month 12 = Interest - Servicing fee

                                                    $284798 - $ 31644 = $ 253154

Hence, total payment at end of month 12 to the investors would be $ 253154.