Same as previous question (Question 4), consider a sequential pay CMO that is backed by 100 mortgages with average balance of $150,000 each. The mortgages have monthly payments with WAM = 30years and WAC = 6%. There is a servicing fee rate of 0.4% and prepayment is according to 150% PSA. Tranche A holds $6,000,000 of the mortgage pool principal at origination, tranche B holds $3,000,000 and tranche Z holds $5,000,000. The rest of the pool principal is held by the SPV as a residual. The SPV has set a pass-through rate (coupon rate net of the serviceriguarantee fee) of 4% for Tranche A, 4.5% for Tranche B and 5% for Tranche Z. What is the cash flow to the residual tranche in month 1?
Same as previous question (Question 4), consider a sequential pay CMO that is backed by 100 mortgages with average balance of $150,000 each. The mortgages have monthly payments with WAM = 30years and WAC = 6%. There is a servicing fee rate of 0.4% and prepayment is according to 150% PSA. Tranche A holds $6,000,000 of the mortgage pool principal at origination, tranche B holds $3,000,000 and tranche Z holds $5,000,000. The rest of the pool principal is held by the SPV as a residual. The SPV has set a pass-through rate (coupon rate net of the serviceriguarantee fee) of 4% for Tranche A, 4.5% for Tranche B and 5% for Tranche Z. What is the cash flow to the residual tranche in month 1?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Same as previous question (Question 4), consider a sequential pay CMO that is backed by 100 mortgages with average balance of $150,000 each. The mortgages have monthly payments with WAM
= 30years and WAC = 6%. There is a servicing fee rate of 0.4% and prepayment is according to 150% PSA. Tranche A holds $6,000,000 of the mortgage pool principal at origination, tranche B holds
$3,000,000 and tranche Z holds $5,000,000. The rest of the pool principal is held by the SPV as a residual. The SPV has set a pass-through rate (coupon rate net of the serviceriguarantee fee) of 4%
for Tranche A, 4.5% for Tranche B and 5% for Tranche Z. What is the cash flow to the residual tranche in month 1?
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