In: Finance
Consider an MPT that is backed by 100 mortgages with average balance of $350,000 and monthly payment. The MPT has a WAC = 5% and WAM = 60 months. There is no servicing fee on this security. Assuming the prepayment model of CPR=5% and market rate is 3%, how much should this security sell for?
As PSA rate is not given , i assume PSA =100% , effective CPR = PSA * CPR = 100 *0.05 = 5%
Similarly , WAC = 5% , WAM = 60 Months.
effective Monthly CPR = 5/60 = 0.083%
Value of MPT = 100 * 350,000 = 35,000,000
Using the concept of discounted cash flow at rate of 3% = 0.25% monthly ,
Selling price of the , MPT = $35,319,826 for 100 mortgage => $ 353,198.26 each mortgage
Remaining Mortgage Balance | $35,000,000 | Pass-Through Cash-Flows (Using PSA Prepayment Benchmark) | PSA Parameters | ||||||||
Mortgage Rate | 5.000% | Time | CPR Rate | ||||||||
Pass-Through Rate | 5.000% | Prepayment Multiplier (in PSA units) | 100% | 1 | 0.1% | ||||||
Initial Monthly Payment | $660,493.178 | 30 | 2.5% | ||||||||
Seasoning (Months) | 0 | Average Life (Years) | 2.59 | 60 | 5.0% | ||||||
Term of Loan (Months) | 60 | ||||||||||
Market Value | $35,319,826 | ||||||||||
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Conditional | Single-Monthly | Beginning | Monthly Interest | Monthly Interest | Scheduled | Total | Ending | Market | |||
Prepayment | Mortality | Monthly | Monthly | Paid In By | Paid Out To Pass- | Principal | Principal | Mortgage | Mortgage | ||
Month | Rate (CPR) | (SMM) Rate | Balance | Payment | Mortgage Holders | Through Investors | Repayment | Prepayment | Payment | Balance | Value |
1 | 0.08% | 0.01% | 35,000,000 | 660,493.178 | 145,833.33 | 145,833.33 | 514,659.844 | 2,386.144 | 517,045.988 | 34,482,954.01 | 658846.1 |
2 | 0.17% | 0.01% | 34,482,954 | 660,447.476 | 143,678.98 | 143,678.98 | 516,768.501 | 4,712.010 | 521,480.511 | 33,961,473.50 | 657157.6 |
3 | 0.25% | 0.02% | 33,961,474 | 660,355.854 | 141,506.14 | 141,506.14 | 518,849.715 | 6,966.541 | 525,816.255 | 33,435,657.25 | 655427.8 |
4 | 0.33% | 0.03% | 33,435,657 | 660,218.294 | 139,315.24 | 139,315.24 | 520,903.055 | 9,148.763 | 530,051.818 | 32,905,605.43 | 653657.2 |
5 | 0.42% | 0.03% | 32,905,605 | 660,034.784 | 137,106.69 | 137,106.69 | 522,928.095 | 11,257.731 | 534,185.826 | 32,371,419.60 | 651845.9 |
6 | 0.50% | 0.04% | 32,371,420 | 659,805.325 | 134,880.92 | 134,880.92 | 524,924.410 | 13,292.525 | 538,216.935 | 31,833,202.67 | 649994.3 |
7 | 0.58% | 0.05% | 31,833,203 | 659,529.926 | 132,638.34 | 132,638.34 | 526,891.582 | 15,252.252 | 542,143.834 | 31,291,058.83 | 648102.7 |
8 | 0.67% | 0.06% | 31,291,059 | 659,208.607 | 130,379.41 | 130,379.41 | 528,829.195 | 17,136.049 | 545,965.244 | 30,745,093.59 | 646171.5 |
9 | 0.75% | 0.06% | 30,745,094 | 658,841.396 | 128,104.56 | 128,104.56 | 530,736.840 | 18,943.080 | 549,679.919 | 30,195,413.67 | 644201.1 |
10 | 0.83% | 0.07% | 30,195,414 | 658,428.331 | 125,814.22 | 125,814.22 | 532,614.108 | 20,672.539 | 553,286.647 | 29,642,127.02 | 642191.7 |
11 | 0.92% | 0.08% | 29,642,127 | 657,969.461 | 123,508.86 | 123,508.86 | 534,460.598 | 22,323.649 | 556,784.248 | 29,085,342.78 | 640143.8 |
12 | 1.00% | 0.08% | 29,085,343 | 657,464.842 | 121,188.93 | 121,188.93 | 536,275.914 | 23,895.665 | 560,171.578 | 28,525,171.20 | 638057.7 |
13 | 1.08% | 0.09% | 28,525,171 | 656,914.542 | 118,854.88 | 118,854.88 | 538,059.662 | 25,387.868 | 563,447.530 | 27,961,723.67 | 635933.8 |
14 | 1.17% | 0.10% | 27,961,724 | 656,318.637 | 116,507.18 | 116,507.18 | 539,811.455 | 26,799.574 | 566,611.029 | 27,395,112.64 | 633772.5 |
15 | 1.25% | 0.10% | 27,395,113 | 655,677.213 | 114,146.30 | 114,146.30 | 541,530.910 | 28,130.129 | 569,661.039 | 26,825,451.60 | 631574.2 |
16 | 1.33% | 0.11% | 26,825,452 | 654,990.367 | 111,772.72 | 111,772.72 | 543,217.652 | 29,378.909 | 572,596.561 | 26,252,855.04 | 629339.2 |
17 | 1.42% | 0.12% | 26,252,855 | 654,258.203 | 109,386.90 | 109,386.90 | 544,871.307 | 30,545.324 | 575,416.631 | 25,677,438.41 | 627068.1 |
18 | 1.50% | 0.13% | 25,677,438 | 653,480.836 | 106,989.33 | 106,989.33 | 546,491.510 | 31,628.816 | 578,120.326 | 25,099,318.08 | 624761.1 |
19 | 1.58% | 0.13% | 25,099,318 | 652,658.391 | 104,580.49 | 104,580.49 | 548,077.899 | 32,628.860 | 580,706.759 | 24,518,611.32 | 622418.8 |
20 | 1.67% | 0.14% | 24,518,611 | 651,791.001 | 102,160.88 | 102,160.88 | 549,630.121 | 33,544.962 | 583,175.083 | 23,935,436.24 | 620041.5 |
21 | 1.75% | 0.15% | 23,935,436 | 650,878.810 | 99,730.98 | 99,730.98 | 551,147.825 | 34,376.663 | 585,524.489 | 23,349,911.75 | 617629.6 |
22 | 1.83% | 0.15% | 23,349,912 | 649,921.969 | 97,291.30 | 97,291.30 | 552,630.670 | 35,123.539 | 587,754.209 | 22,762,157.54 | 615183.7 |
23 | 1.92% | 0.16% | 22,762,158 | 648,920.641 | 94,842.32 | 94,842.32 | 554,078.317 | 35,785.197 | 589,863.514 | 22,172,294.03 | 612704.1 |
24 | 2.00% | 0.17% | 22,172,294 | 647,874.996 | 92,384.56 | 92,384.56 | 555,490.438 | 36,361.280 | 591,851.717 | 21,580,442.31 | 610191.4 |
25 | 2.08% | 0.18% | 21,580,442 | 646,785.216 | 89,918.51 | 89,918.51 | 556,866.706 | 36,851.464 | 593,718.171 | 20,986,724.14 | 607645.9 |
26 | 2.17% | 0.18% | 20,986,724 | 645,651.490 | 87,444.68 | 87,444.68 | 558,206.806 | 37,255.463 | 595,462.269 | 20,391,261.87 | 605068.1 |
27 | 2.25% | 0.19% | 20,391,262 | 644,474.016 | 84,963.59 | 84,963.59 | 559,510.425 | 37,573.022 | 597,083.447 | 19,794,178.43 | 602458.5 |
28 | 2.33% | 0.20% | 19,794,178 | 643,253.002 | 82,475.74 | 82,475.74 | 560,777.259 | 37,803.923 | 598,581.182 | 19,195,597.24 | 599817.5 |
29 | 2.42% | 0.20% | 19,195,597 | 641,988.666 | 79,981.66 | 79,981.66 | 562,007.011 | 37,947.983 | 599,954.994 | 18,595,642.25 | 597145.7 |
30 | 2.50% | 0.21% | 18,595,642 | 640,681.233 | 77,481.84 | 77,481.84 | 563,199.390 | 38,005.055 | 601,204.445 | 17,994,437.81 | 594443.5 |
31 | 2.58% | 0.22% | 17,994,438 | 639,330.937 | 74,976.82 | 74,976.82 | 564,354.113 | 37,974.854 | 602,328.968 | 17,392,108.84 | 591711.4 |
32 | 2.67% | 0.22% | 17,392,109 | 637,938.030 | 72,467.12 | 72,467.12 | 565,470.909 | 37,857.489 | 603,328.399 | 16,788,780.44 | 588949.8 |
33 | 2.75% | 0.23% | 16,788,780 | 636,502.762 | 69,953.25 | 69,953.25 | 566,549.510 | 37,652.919 | 604,202.429 | 16,184,578.01 | 586159.4 |
34 | 2.83% | 0.24% | 16,184,578 | 635,025.395 | 67,435.74 | 67,435.74 | 567,589.653 | 37,361.138 | 604,950.792 | 15,579,627.22 | 583340.5 |
35 | 2.92% | 0.25% | 15,579,627 | 633,506.198 | 64,915.11 | 64,915.11 | 568,591.085 | 36,982.179 | 605,573.264 | 14,974,053.95 | 580493.7 |
36 | 3.00% | 0.25% | 14,974,054 | 631,945.451 | 62,391.89 | 62,391.89 | 569,553.559 | 36,516.109 | 606,069.668 | 14,367,984.29 | 577619.5 |
37 | 3.08% | 0.26% | 14,367,984 | 630,343.438 | 59,866.60 | 59,866.60 | 570,476.837 | 35,963.030 | 606,439.867 | 13,761,544.42 | 574718.4 |
38 | 3.17% | 0.27% | 13,761,544 | 628,700.456 | 57,339.77 | 57,339.77 | 571,360.688 | 35,323.083 | 606,683.771 | 13,154,860.65 | 571791 |
39 | 3.25% | 0.27% | 13,154,861 | 627,016.807 | 54,811.92 | 54,811.92 | 572,204.888 | 34,596.443 | 606,801.331 | 12,548,059.32 | 568837.6 |
40 | 3.33% | 0.28% | 12,548,059 | 625,292.803 | 52,283.58 | 52,283.58 | 573,009.222 | 33,783.321 | 606,792.544 | 11,941,266.77 | 565858.9 |
41 | 3.42% | 0.29% | 11,941,267 | 623,528.763 | 49,755.28 | 49,755.28 | 573,773.485 | 32,883.965 | 606,657.450 | 11,334,609.32 | 562855.4 |
42 | 3.50% | 0.30% | 11,334,609 | 621,725.014 | 47,227.54 | 47,227.54 | 574,497.476 | 31,898.659 | 606,396.134 | 10,728,213.19 | 559827.6 |
43 | 3.58% | 0.30% | 10,728,213 | 619,881.893 | 44,700.89 | 44,700.89 | 575,181.005 | 30,827.720 | 606,008.725 | 10,122,204.46 | 556776.1 |
44 | 3.67% | 0.31% | 10,122,204 | 617,999.741 | 42,175.85 | 42,175.85 | 575,823.889 | 29,671.506 | 605,495.395 | 9,516,709.07 | 553701.3 |
45 | 3.75% | 0.32% | 9,516,709 | 616,078.910 | 39,652.95 | 39,652.95 | 576,425.956 | 28,430.404 | 604,856.360 | 8,911,852.71 | 550603.8 |
46 | 3.83% | 0.33% | 8,911,853 | 614,119.759 | 37,132.72 | 37,132.72 | 576,987.039 | 27,104.843 | 604,091.882 | 8,307,760.83 | 547484.1 |
47 | 3.92% | 0.33% | 8,307,761 | 612,122.651 | 34,615.67 | 34,615.67 | 577,506.981 | 25,695.283 | 603,202.264 | 7,704,558.56 | 544342.9 |
48 | 4.00% | 0.34% | 7,704,559 | 610,087.962 | 32,102.33 | 32,102.33 | 577,985.635 | 24,202.221 | 602,187.856 | 7,102,370.71 | 541180.5 |
49 | 4.08% | 0.35% | 7,102,371 | 608,016.071 | 29,593.21 | 29,593.21 | 578,422.860 | 22,626.188 | 601,049.047 | 6,501,321.66 | 537997.6 |
50 | 4.17% | 0.35% | 6,501,322 | 605,907.365 | 27,088.84 | 27,088.84 | 578,818.525 | 20,967.750 | 599,786.275 | 5,901,535.38 | 534794.8 |
51 | 4.25% | 0.36% | 5,901,535 | 603,762.240 | 24,589.73 | 24,589.73 | 579,172.509 | 19,227.508 | 598,400.017 | 5,303,135.37 | 531572.5 |
52 | 4.33% | 0.37% | 5,303,135 | 601,581.095 | 22,096.40 | 22,096.40 | 579,484.698 | 17,406.097 | 596,890.794 | 4,706,244.57 | 528331.3 |
53 | 4.42% | 0.38% | 4,706,245 | 599,364.339 | 19,609.35 | 19,609.35 | 579,754.987 | 15,504.186 | 595,259.173 | 4,110,985.40 | 525071.8 |
54 | 4.50% | 0.38% | 4,110,985 | 597,112.387 | 17,129.11 | 17,129.11 | 579,983.282 | 13,522.478 | 593,505.759 | 3,517,479.64 | 521794.5 |
55 | 4.58% | 0.39% | 3,517,480 | 594,825.660 | 14,656.17 | 14,656.17 | 580,169.495 | 11,461.708 | 591,631.203 | 2,925,848.44 | 518500 |
56 | 4.67% | 0.40% | 2,925,848 | 592,504.585 | 12,191.04 | 12,191.04 | 580,313.550 | 9,322.646 | 589,636.196 | 2,336,212.24 | 515188.7 |
57 | 4.75% | 0.40% | 2,336,212 | 590,149.595 | 9,734.22 | 9,734.22 | 580,415.377 | 7,106.094 | 587,521.472 | 1,748,690.77 | 511861.4 |
58 | 4.83% | 0.41% | 1,748,691 | 587,761.131 | 7,286.21 | 7,286.21 | 580,474.919 | 4,812.886 | 585,287.805 | 1,163,402.97 | 508518.5 |
59 | 4.92% | 0.42% | 1,163,403 | 585,339.637 | 4,847.51 | 4,847.51 | 580,492.124 | 2,443.889 | 582,936.013 | 580,466.95 | 505160.6 |
60 | 5.00% | 0.43% | 580,467 | 582,885.565 | 2,418.61 | 2,418.61 | 580,466.953 | 0.000 | 580,466.953 | 0.00 | 501788.2 |
0.00% | 0.00% | 0 | 0.000 | 0.00 | Total value | 35319826 |