Question

Given the following information of the mortgage pool that backs a MPT (same as Question 3,4,5,6), what is the month 1 ending/month 2 starting pool balance for this security? Round your final answer to two decimals.

• 30 year FRM, fully amortizing, monthly payments

• Loans seasoned for 3 months before entering pool

• WAM: 357

• WAC: 4%

• Servicer/Guarantee fee: 0.55%

• Starting pool balance: 250,342,967

• Prepayment assumption: 75% PSA

Answer 1

Solution:

Total Cash Flow for 1 month:

Principal components payments in month 1       = Starting Pool Balance/(No. of Years* No of Months)

                                                                                                = 250,342,967/(30 Years * 12 Months)

                                                                                                = 250,342,967/360

                                                                                                 = 695,397.13

Interest Payments for 1 month                                 = Starting Pool Balance * (WAC – Guarantee Fee)/No of Months

                                                                                               = 250,342,967 * (4% - 0.55%) / 12 months

                                                                                               = 250,342,967 * (0.04 - 0.0055) / 12

                                                                                               = 250,342,967 * 0.0345 / 12

                                                                                               = 719,736.03

Total Cash Flows for 1 month                                    = Principal Component Payment for 1 month + Interest payment for 1 month

                                                                                              = 695,397.13 + 719736.03

                                                                                              = 141,513,3.16