On October 1, 2005, Fannie Mae issued a mortgage pass through security and the prospectus supplement stated the following FANNIE MAE MORTGAGE BACKED SECURITIES PROGRAM SUPPLEMENT TO PROSPECTUS DATED JULY 01, 2004 $464,927,576 00 ISSUE DATE OCTOBER 01, 2005 SECURITY DESCRIPTION FNMS 05 0000 CL 84480...

a b The average note rate or weighted average coupon rate is 575 and is a weightedaverage of the note rates for all mortgage loans in the loan pool c Not all of the mortgages that are included in the ...

On October 1, 2005, Fannie Mae issued a mortgage pass-through security and the prospectus supplement stated the

Question:

On October 1, 2005, Fannie Mae issued a mortgage pass-through security and the prospectus supplement stated the following:

FANNIE MAE
MORTGAGE-BACKED SECURITIES PROGRAM
SUPPLEMENT TO PROSPECTUS DATED JULY 01, 2004
$464,927,576.00
ISSUE DATE OCTOBER 01, 2005
SECURITY DESCRIPTION FNMS 05.0000 CL-844801
5.0000 PERCENT PASS-THROUGH RATE
FANNIE MAE POOL NUMBER CL-844801
CUSIP 31407YRW1
PRINCIPAL AND INTEREST PAYABLE ON THE 25TH OF EACH MONTH
BEGINNING NOVEMBER 25, 2005
POOL STATISTICS
SELLER	WELLS FARGO BANK, N.A
SERVICER	WELLS FARGO BANK, N.A
NUMBER OF MORTGAGE LOANS	1986
AVERAGE LOAN SIZE	$234,312.06
MATURITY DATE	10/01/2035
WEIGHTED AVERAGE COUPON RATE	5.7500%
WEIGHTED AVERAGE LOAN AGE	1 mo
WEIGHTED AVERAGE LOAN TERM	360 mo
WEIGHTED AVERAGE REMAINING MATURITY	359 mo
WEIGHTED AVERAGE LTV	73%
WEIGHTED AVERAGE CREDIT SCORE	729

Answer the below questions.

(a) What does the “pass-through rate” of 5% for this security mean?

It means that the coupon rate for the security is 5.00%.

(b) What is the average note rate being paid by the borrowers in the loan pool for this security?

(c) Why does the pass-through rate differ from the average note rate paid by the borrowers in the loan pool for this security?

(d) What is the pool number for this security, and why is the pool number important?

(e) What is the prefix for this security, and what does a prefix indicate?

(f) The “maturity date” for this security is shown as “10/01/2035.” An investor in this security might be concerned about its very long maturity (30 years). Why is the maturity date a misleading measure of the security’s maturity?

(g) If an investor purchased $15 million principal of this security and, in some month, the cash flow available to be paid to the security holders (after all fees are paid) is $12 million, how much is the investor entitled to receive?

(h) Every month a pool factor would be reported for this security. If the pool factor for some month is 0.92, what is the outstanding mortgage balance for the loan pool for that month?

(i) Why does the weighted average loan term differ from the weighted average remaining maturity?

(j) Wells Fargo Bank, N.A. is identified as the seller and the servicer. What does that mean?

(k) What does the following mean: “MORTGAGE-BACKED SECURITIES PROGRAM SUPPLEMENT TO PROSPECTUS DATED JULY 01, 2004”?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...