Given the following information of the mortgage pool that backs a MPT, what is the regular scheduled payment in month 1 of the security? Use WAC as the mortgage rate and WAM as the number of periods for your calculations. 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 :
Formula = Opening fund value*(WAC/12) / (1-1/(1+(WAC/12))^balance period)
= 25,03,42,967*(4%/12)/(1-1/(1+(4%/12))^357)
= 12,00,381.53
Schedule principal = Principal - interest = 1200381.53-834476.56= 3,65,904.97
Interest = Opening fund value*(WAC/12) = 25,03,42,967*(4%/12) = 8,34,476.56
CPR = (.06/30)*PSA = .06/30*75%= 0.0015
Single monthly mortality rate (SMM) =
1-(1-CPR)^(1/12) = 1-(1-.0015)^(1/12) = 0.000125086
Prepaid Principal = SMM*(Opening fund value -
Schedule principal) = 0.000125086*(25,03,42,967-3,65,904.97 ) =
31,268.64
Cash flow for 1st month = Interest + Schedule principal +prepaid principal =
8,34,476.56+ 3,65,904.97 + 31,268.64 =12,31,650.17
= 12,31,650.17
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