Homework 3_Solutions - Baruch College, CUNY REES 3400 (All Answers are Correct)

Homework 3 Question 1 Given the following information on a MPT, what is the anticipated total cash flow available to investors in year 2? Round your answer to two decimals. (Note: You can perform this calculation with the spreadsheet or by completing it iteratively) • 10 year FRM, fully amortizing, annual payments • 10% CPR assumption • 100 loans in the pool • Average starting balance of $350,000/loan • Mortgage rate 5%, annual • No servicing/guarantee fees Answer • Use Excel for this question, but also know how to calculate if given beginning of year 2 information. This question is asking how much money investors are scheduled to receive in year 2 (not cumulatively). • 6,911,978.83 Question 2 Given the following information on a MPT, what is the servicing fee in year 3? Round your answer to two decimals. (Note: You can perform this calculation with the spreadsheet or by completing it iteratively) • 10 year FRM, fully amortizing, annual payments • No prepayment or default • 100 loans in the pool • Average starting balance of $350,000/loan • Mortgage rate 5%, annual • Servicing fee of 0.5% of the period’s starting outstanding pool balance Answer • Always calculate servicing fee from starting pool balance that year. You can use excel for this question, but also know how to calculate it if you were given the starting year 3 balance. • 146,477.73 Question 3 Given the following information of the mortgage pool that backs a MPT, what is the regular scheduled payment in month 1 of the security? Use WAC as the mortgage rate and WAM as the number of periods for your calculations. Round your final answer to two decimals. • 30 year FRM, fully amortizing, monthly payments • WAC: 4% • Servicer/Guarantee fee: 0.55% • Starting pool balance: 250,342,967 • Prepayment assumption: 75% PSA • WAM: 357 (Loans seasoned for 3 m