Question

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 1

Inforlamation as per question

Fund value -  25,03,42,967
WAM- 3.57
PSA- 75%
WAC- 4%

Principal - 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

Interest = Opening fund value*(WAC/12) = 25,03,42,967*(4%/12) = 8,34,476.56

Schedule principal = Principal - interest = 1200381.53-834476.56=  3,65,904.97

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