Assume I purchase $750,000,000 of 20-year, fixed-rate residential mortgages with an average interest rate of 5.75%. I intend to issue 3 sequential pay tranches backed by these mortgages. Tranche A is $275,000,000 and promises a 4.25% return. Tranche B is $200,000,000 and promises a 5.00% return. Tranche Z is $225,000,000 and promises a 5.75% return. Compute the amortization sheet and the Tranche A cash flows for the first 3 years of the pool. For simplicity, assume these mortgages and the pool have annual payments.

Assume I purchase $750,000,000 of 20-year, fixed-rate residential mortgages with an average interest rate of 5.75%. I intend to issue 3 sequential pay tranches backed by these mortgages. Tranche A is $275,000,000 and promises a 4.25% return. Tranche B is $200,000,000 and promises a 5.00% return. Tranche Z is $225,000,000 and promises a 5.75% return. Compute the amortization sheet and the Tranche A cash flows for the first 3 years of the pool. For simplicity, assume these mortgages and the pool have annual payments.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Assume you are purchasing an income-producing property for $10,000,000. The estimated NOI in the next year is $600,000. A lender is willing to provide a mortgage with an annual interest rate of 4.0%. Payments will be made monthly based on a 30-year amortization schedule. The lender requires a minimum debt coverage ratio of 1.25. Based on this required minimum debt coverage ratio, what is the largest loan the lender is willing to make (rounded to the nearest dollar)? Assume the lender will not allow the loan to exceed 85% of the acquisition price under any circumstances. $8,500,000 O $8,478,000 O None of the selections is within a $2 of the correct answer O $8,378,450 O $13,964,083
8. Lone Watie is considering a possible mortgage, arranged through a mortgage broker. It will have a face value of $3,500,000 with a contract rate of j₂ = 10%, 25-year amortization period, 6-year term, and monthly payments rounded up to the next higher $100. The mortgage broker will charge a brokerage fee of 3% of the loan's face value which will be deducted from the face value of the loan. What effective annual interest rate will Lone Watie be paying on the funds advanced? (1) 11.060915% (2) 10.495351% (3) 11.015229% (4) 11.639249%
Suppose Bank A offers a $201,000, 20-year, 2.1% fixed rate mortgage with closing costs of $1900 plus 2 points. What are the closing costs associated with this mortgage? Answer to the nearest dollar.
Assume a borrower is purchasing a property for USD 100,000and faces two possible loan alternatives. A lender is willingto make an 80% first mortgage loan, or USD 80,000, for 25years at 12% interest. The same lender is willing to lend 90%, or USD 90,000, for 25 years at 13%. Both loans will have afixed interest rates and CPM. How should the borrowercompare these two alternatives?.
Consider a primary mortgage market lender who has just now originated 1,000 30-year, monthly payment loans for $800,000 each at 5.25% interest with each borrower paying 1 point at origination. The lender wishes to sell the pool of mortgages as a mortgage pass through security (MPTS). Investors are demanding a 4.875% yield on the MPTS backed by the pool. A servicing firm is willing to service the loans in the pool for 0.5 % annually (paid monthly) and the pool is expected to prepay based on the 100% PSA prepayment model. What is the market value of the ppol?
Same as previous question (Question 4), 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?
1. You have just obtained a commercial mortgage for $6.25M with a 5-year term, 25-year amortization period and 6.50% mortgage interest rate. (a) Construct an amortization table for the term of the loan assuming annual payments. What is the annual payment? What is the balance at maturity? (b) What is the e¤ective cost of borrowing if the borrower pays an origination fee of $30,000? (c) The borrower can repay the balance of the loan at any time prior to its maturity, but must pay a penalty of 5% of the outstanding balance. What is the cost of borrowing if the borrower pays an origination fee of $30,000 and pays off the remaining balance of the loan after making payments for 4 years?
Assume we have a $1 million 15 year mortgage with monthly payments beginning in exactly one month; the interest rate is 6%. Determine the monthly mortgage payment under the following assumptions. In each case verify your calculation by giving the relation between the pay rate and the accrual rate. It is an 10 loan O Monthly payment: $5000; pay rate: 0.5%; accrual rate: 0.5% O Monthly payment: $5000; pay rate: 6%; accrual rate: 6% O Monthly payment: $5000; pay rate: 0.05%; accrual rate: 6% O Monthly payment: $60000, pay rate: 6%; accrual rate: 6%
Overseas bank is pooling 50 similar and fully amortized mortgages into a pass-through security. The face value of each mortgage is $100,000 paying 180 monthly interest and principal payments at a fixed rate of 9 percent per annum. What is the monthly payment received by investors of the mortgage pass-through if the Fl deducts a 50 basis points servicing fee? $49,237. $50,713. $50,459. $51,200. $52,100.
The Green Mortgage Company has originated a pool containing 75 ten-year fixed interest rate mortgages with an average balance of $102,400 each. All mortgages in the pool carry a coupon of 12 percent. ( For simplicity, assume that all mortgage payments are made annually at 12% interest.) Green would now like to sell the pool to FNMA. Required: a. Assuming a constant annual prepayment rate of 10 percent (for simplicity, assume that prepayments are based on the pool balance at the end of each year), what will be the price that Green should obtain on the date of issuance if market interest rates were (1) 11 percent? (2) 12 percent? (3) 9 percent? b. Assume that five years have passed since the date in (a). What will the pool factor be? If market interest rates are 12 percent, what price can Green obtain then? c. Instead of selling the pool of mortgages in (a), Green decides to securitize the mortgages by issuing 100 pass-through securities. The coupon rate will be 11.5 percent and the…
Consider a GNMA mortgage pool with principal of $50 million. The maturity is 30 years with a monthly mortgage payment of 13 percent per annum. Assume no prepayments. a) What is the monthly mortgage payment (100 percent amortizing) on the pool of mortgages? b)If the GNMA insurance fee is 5 basis points and the servicing fee is 45 basis points, what is the yield on the GNMA pass‑through? c) What is the monthly payment on the GNMA in part (b)? d)Calculate the first monthly servicing fee paid to the originating FIs. e) Calculate the first monthly insurance fee paid to GNMA.
1.) Consider a 15-year, 9% mortgage for $200,000 with annual payments that are structured in the following way: for the first five years the payment is equal to just one third of the accrued interest for the respective year, for the remaining 10 years the payment assumes full amortization of the outstanding mortgage balance over the remaining term of the loan. Develop an amortization table for this loan.

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