Scribd
Upload
29 views

Mortgage Back Securities: 0 N N N 0 N

This document discusses mortgage-backed securities and key attributes of mortgages. It provides equations to calculate the future and present value of mortgage payments as an annuity. Some key attributes that define mortgages are lien status, loan term, credit classification including prime versus subprime loans, interest rate type, amortization type, loan balances, and prepayments.

Uploaded by

testtest1
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
29 views

Mortgage Back Securities: 0 N N N 0 N

This document discusses mortgage-backed securities and key attributes of mortgages. It provides equations to calculate the future and present value of mortgage payments as an annuity. Some key attributes that define mortgages are lien status, loan term, credit classification including prime versus subprime loans, interest rate type, amortization type, loan balances, and prepayments.

Uploaded by

testtest1
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 1

Mortgage Back Securities

- MP = MB0 [ i(1+i)n] / [(1+i)n – 1]


o MP [(1+i)n – 1] / i = MB0 [ (1+i)n]
 The future value of an annuity of mortgage payments = The future value of the original loan
o Present Value of an annuity derived: Sn = a(1-rn) / (1-r) = a + a(1+r) + a(1+r)2 + … + a(1+r)n
 MB0 [ (1+i)n] = MP + MP (1+i)1 + MP (1+i)2 + … + MP (1+i)n = [ MP (1 – (1+i)n) ] / [ 1- (1+i) ]
= [ MP ( (1+i)n) -1 ) ] / i
- Key Attributes that Define Mortgages
o Lien status/ original term loan
 Lien status – first lien (first cal on liquidation proceeds)
 Original loan term – loans with shorter terms amortize more quickly
o Credit classification
 Prime loans - low delinquency and default vs Subprime Loans
 Credit Score (FICO, Experian, Transunion) > 660
 LTV < 90%
o Original LTV: time the loan was orginated vs current LTV (CuLTV; Market)
 Alternative-A Loans - were once prime loans but are in between prime and subprime
o Interest rate type
o Amortization type
o Credit Guarantees
o Loan Balances
o Prepayments and prepayment penalties

1|Page

You might also like