Pool 1
number of loans :10
Loan amount : $100,000
Mortgage type: CPM, monthly
Interest: 8%
Maturity 360 months
Pool 2
Number of loans: 10
loan amount: $100,000
Interest : 7.75%
Maturity 300 months
1. WAC, WAM, and WAL of each pool and the combined pool?
2. What are the differences between the two pools’ WAM and WAL? How do the combined pool’s WAC, WAM, and WAL relate to the individual pool s’ characteristics?
3. If the combined pool is used to collateralize a MPT security , what is the average interest rate that the MPT investors receive assuming a servicing fee of 25 bp s and a GSE guarantee fee of 25 bps ?
4. Compute the MPT cash flows and price the security at issuance if the investors ’ required rate of r eturn is 7 % (no prepayment). How much profit will the bank earn?