Mortgage Pool – Holding Period Return

This spreadsheet was originally compiled to help make the decision to either sell mortgages that were originated, or keep them. It can also be used to help with the decision to purchase a pool of whole loans, or a securitized mortgage pools. Two different concepts of return are referred to in this post. The two are […]

Constant Default Rate (CDR)

Also see this post: Comparing CDR Default Formulas to Industry Standard Default Formulas   Constant Default Rate (CDR) is an annualized rate of default on a pool of loans. The default rate on loans depends on a number of conditions, such as the age of the loans, seasonality, burnout levels, FICO, LTV, income, etc. Since […]

Convert CPR, SMM & ABS (APS)

We have already discussed Constant Prepayment Rate (CPR) and Single Monthly Mortality Rate (SMM). Another prepayment rate is the Absolute Prepayment Speed (APS), used mostly for  securities backed by auto, truck, and RV loans. The acronym for Absolute Prepayment Speed (APS) is also referred to as ABS, which is confusing because ABS is also the acronym for Asset-Backed […]

Mortgage Pool Price and Average Life One Cell Formulas

See updated formula at: MBS Math Formula. Servicing, CPR, Payment Delay, Default Rate & Loss Severity A few posts back I showed the “megaformula” I used back in the day for calculating the price of a mortgage pool with prepayments (CPR). Rather than treating the one cell formula as just an interesting antique, I […]

Mortgage Backed Securities (MBS) “MegaFormula”

See updated formula at: MBS Math Formula. Servicing, CPR, Payment Delay, Default Rate & Loss Severity This post is just to show you 20-somethings what we had to go through to calculate the price of a mortgage backed security back in the day. I had the first desktop computer (before Apple and Radio Shack were […]

Valuing Servicing Matrix

On August 26, 2014 I showed  an amortization schedule that could be used for initially valuing servicing. I introduced the use of constant prepayment rates (CPR) in order to get a more realistic pricing than assuming the pool of mortgages or commercial loans would never prepay. Considering the ease of refinancing and the mobility of the labor […]

Valuing Servicing With CPR

Long before I wrote user defined functions for valuing servicing on a pool of mortgages, I developed amortization tables to understand the cash flows and proof my VBA. The amortization schedule provided below is not the typical amortization. It has a number of uses besides explaining the math of constant prepayment rates (CPR) and servicing. For example, if you […]