Once upon a time (all my numbers and loans are fictitious) the loan department was negotiating the sale of a parking lot. It seemed that the buyer and we were at a stalemate. We wanted $5,700,000 for the lot and the buyer was only willing to pay $5,500,000. The market rate for this type of loan was […]
Category: Uncategorized
Asset Growth vs. ROA – Net Worth Ratio
This concept came from a calculator that was readily available on the internet years ago. I would give credit to the original author, but I don’t remember the name. It was made available online by either CUNA or one of the other credit union associations. I have only embellished it with the addition of charts and a […]
Why you can’t trust median home prices
This spreadsheet may come in handy if you ever have to explain to someone why you can’t trust home prices published in the media. Typically, home prices are based upon the median sales price. In my area (Sothern California) it is not uncommon to see home prices down 20% or more (YoY) in one city, […]
Skip-a-Payment
Around this time of year, banks and credit unions will sometimes offer borrowers the option to skip a payment or two in return for a fee. This offering is a spreadsheet that calculates the APR on a loan after the borrower accepts the offer to skip one or more payments. There are two amortization schedules […]
Simple Formula for Converting Compound Interest Rates
This workbook has a simple formula to convert compound interest rates. =IF(t>500,f*LN(1+g/f),IF(f>=500,t*(EXP(g/t)-1),(t*((1+g/f)^(f/t))-t))) Where: g = Current interest rate f = Number of times the current rate compounds per year t = Number of times the converted new rate compounds per year This lookup table grabs two of the numbers for the formula Continuous compounding in Excel […]
Standard Default Assumption (SDA)
My last post and spreadsheet concerned the Constant Default Rate (CDR) on a pool of loans. As the name implies, the CDR uses the same default rate for the complete term of the loan. It does not allow for the probability of default, depending upon the age of the loan. The SDA curve was developed […]
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 […]
Reverse Engineering Constant Prepayment Rate (CPR)
This post has been updated in a new post called Calculating Historic CPR. The spreadsheets has also been updated “CalCPR.xlsm” After you review this post, please see the updated post. Unless you work for a firm that packages pools of mortgages, you will probably never need to calculate the historic CPR on an existing pool. Even so, […]
Mortgage Pool Price and Average Life One Cell Formulas
See updated formula at: MBS Math Formula. Servicing, CPR, Payment Delay, Default Rate & Loss Severity http://pistulka.com/Other/?p=2384 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 […]
Currency Risk
After the bubble burst in home prices (along with the rest of the U.S. economy), I was wondering what happened to the European investors that were buying up million dollar condos in Florida at the highs. They had two major risks if they were not hedged: housing prices and currency fluctuations. I used the same […]
Amortization Schedule With Variable Rates
Note: I have updated this post with more options. See Variable Rate Amortization – Day/Year Count & Last Payment Options. Have you ever wanted an amortization schedule where you can set the rate for one term and then change the rate for another term, and change the rate and term a total of six times? […]
PSA vs. CPR
In past posts I showed you how to calculate a Constant Prepayment Rate (CPR) with an amortization schedule. This post will allow you to compare a CPR rate to a model provided by the Public Securities Association (PSA). PSA is based upon the CPR calculation. Both use a Single Monthly Mortality (SMM) calculation. The difference is […]
Macaulay Duration Plus Balloon Payment
I was asked by a reader to add an option to the workbook “MacaulayDuration”. The option is to include a balloon payment. I added the option in a separate workbook called “MacaulayDuration_with_Balloon”. Read my post on “Macaulay Duration of an Amortizing Loan” for further information. Download “MacaulyDuration_with_Balloon” from: http://www.pistulka.com/Excel_Shared/ Downloads Written in Excel 2013
Dutch Auction
The U.S. Treasury (and other countries) uses a Dutch auction to sell securities. This workbook contains two examples of how a Dutch auction might work. One assumes the bids are on a yield basis or discount rate basis, like Treasury bills. The other sheet is the same except it assumes bids are made on a price […]