1. 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 = 30 years and WAC = 6%. There is a servicing fee 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 servicer/guarantee fee) of 4% for Tranche A, 4.5% for Tranche B and 5% for Tranche Z. What is tranche A's outstanding principal balance at the end of the first month (beginning of the second month)?

5 points

QUESTION 7

1. Same as Question 6, 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 servicer/guarantee 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?

QUESTION 8

1. Consider a sequential pay CMO that is backed by 125 mortgages with average balance of $100,000 each. The mortgages have monthly payments with WAM = 15 years and WAC =7%. There is a servicing fee of 0.3% and prepayment is according to 200% PSA. Tranche A holds $7,000,000 of the mortgage pool principal at origination, tranche B holds $3,000,000 and tranche Z holds $2,000,000. 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 servicer/guarantee fee) of 5.5% for Tranche A, 5.75% for Tranche B and 6.5% for Tranche Z. At the beginning of month 7, the overall mortgage pool balance has 12,173,352.58 of principal remaining. Of that overall principal at the beginning of month 7, Tranche A holds 6,607,465.99, Tranche B holds 3,000,000 and Tranche Z holds 2,065,886.59. What is tranche A's outstanding principal balance at the end of month 7 (beginning of month 8)?

   [Note: You can answer this question starting with the fact that "At the beginning of month 7, the overall mortgage pool balance has 12,173,352.58 of principal remaining" without deriving cash flows for all periods before and after]

QUESTION 9

1. Same as Question 8, consider a sequential pay CMO that is backed by 125 mortgages with average balance of $100,000 each. The mortgages have monthly payments with WAM = 15 years and WAC = 7%. There is a servicing fee of 0.3% and prepayment is according to 200% PSA. Tranche A holds $7,000,000 of the mortgage pool principal at origination, tranche B holds $3,000,000 and tranche Z holds $2,000,000. 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 servicer/guarantee fee) of 5.5% for Tranche A, 5.75% for Tranche B and 6.5% for Tranche Z. At the beginning of month 7, the overall mortgage pool balance has 12,173,352.58 of principal remaining. Of that overall principal at the beginning of month 7, Tranche A holds 6,607,465.99, Tranche B holds 3,000,000 and Tranche Z holds 2,065,886.59. What is the cash flow to the residual tranche in month 7?

   [Note you can derive the answer with the fact that "At the beginning of month 7, the overall mortgage pool balance has 12,173,352.58 of principal remaining" without needing to derive cash flows for all periods]