Questions tagged [mbs]

Mortgage-backed securities.

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1answer
32 views

How to calculate aggregated conditional prepayment rates

I understand that the formula for loan-level CPR is: $$ CPR = 1 - ( 1 - SMM)^{12} $$ where $$ SMM = \frac{Prepaid monthly balance}{Scheduled Blance} $$ But Im not too sure how the formula changes ...
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1answer
55 views

Loan level model to understand drivers of mortgage prepayments

I am following up from my question here. As described there, I'm trying to assess the drivers of CPRs for a type of MBS. However, I want to understand, how a loan-level model of such a relationship ...
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1answer
70 views

How to set up data for understanding drivers of prepayments

I would like to understand the drivers of prepayment of a certain sector of MBS. I have some explanatory variables that I think would explain the actual CPR's and want to model the prepayments through ...
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40 views

Understanding the various terms for balances in MBS

I just started working in the MBS space and have a few questions about nomenclature. I've seen the terms "Unpaid Balance", "Collateral Balance", "Original Balance", "...
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1answer
41 views

How to calculate scheduled mortgage payment of a mortgage pass-through security?

I am trying to estimate the cash flows of Mortgage Backed Security. The example is present in the Fixed Income textbook written by Fabozzi. The problem and the solution is as follows:- Suppose there ...
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1answer
41 views

How to determine the cash flows of a Mortgage backed security?

Suppose there is a $400 million mortgage pass-through security with a 7.5% pass-through rate, a weighted average coupon of 8.125% and a weighted average maturity of 357 months, how to compute the cash ...
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0answers
31 views

How to calculate the monthly cash flows of Mortgage Pass through Security?

Suppose there is a $400 million mortgage pass-through security with a 7.5% pass-through rate, a weighted average coupon of 8.125% and a weighted average maturity of 357 months, how to compute the cash ...
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0answers
64 views

Any books on systematic investing in credit securitized products (RMBS, CLO)?

I'm looking for books/research papers that would have information on systematic strategies used in the Credit Securitized products space (specifically RMBS, CLO, etc.), if there are any? I've been ...
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1answer
30 views

Agency Fixed Rate RMBS Yield Decomposition

I'm trying to find the best way to decompose the yield on an index of fixed residential MBS securities and want to open up the question to the community. The goal is to look at this from a ...
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2answers
95 views

What is actually going on in Monte-Carlo simulation for Mortgage backed securities?

I just wanted to clear somethings up when it comes to pricing Mortgage backed securities using Monte-Carlo methods. I understand that interest rate paths have to be modelled in order to come up with ...
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0answers
82 views

Quantlib for Amortizing securitized loans with option for prepayment

I have not had much experience with QuantLib, but from a brief look through the docs it doesn't necessarily seem suited to my task. Consider a mortgage backed loan. There are various options on ...
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2answers
110 views

Mortgage securities prepayment speed and YTM

From the MBS-CMOs brochure of Fidelity Investments, I read: For securities purchased at a discount to face value, faster prepayment rates will increase the yield-to-maturity, while slower ...
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1answer
64 views

How is CPR (re-)calculated for fixed fully amortizing agency mortgage pass-throughs given prior partial prepayments by mortgagors in the pool?

Background: in the US, mortgagors are allowed to prepay any amount and in any arbitrary time during the lifetime of the mortgage, which leads to prepayment risk if this deviation differs from the ...
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84 views

Developing Markov Transition Matrix

I’m working with historical credit performance data and would like to build a transition matrix to predict defaults and delinquencies. I can model the transition between states (ie current - ...
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1answer
108 views

Pricing structured products (Mortgage Backed Securities) [closed]

What would someone have to do to be able to price a structured product like Mortgage/Asset Backed Securities?
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0answers
30 views

How to calculate a prepayment penalty on a mortgage

I have issued 2 mortgages...one with an option to prepay the loan, the other without that option. I want an objective way of calculating the extra interest rate (compared to the second) and ...
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1answer
167 views

MBS Market Duration & Convexity

Soft question...hopefully. I am working on a swaption hedging strategy. Part of this strategy calls for a forward looking indication of changes in implied volatility, using 1m10y implied as a proxy ...
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1answer
41 views

How to compute the Net Leverage Ratio for a mortgage [closed]

In the introduction to the 4th video of lectures series Finance I on MIT Opencurseware (https://www.youtube.com/watch?time_continue=166&v=hyc8h5T76BE), Andrews Lo talks about the net leverage ...
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0answers
30 views

Why no prepayment fee for the reverse mortgage?

I am currently studying the costs (to lender) of adding certain additional options to the reverse mortgage, including the option of prepayment. Would there be any scenarios of housing price/mortgage ...
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1answer
419 views

Loan Level Data for Residential Mortgage Backed Securities

I'm looking for loan level detail for Residential Mortgage Backed Securities. The SEC requires that form ABS-EE (individual level asset data) be filed for all offerings backed by residential ...
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3answers
138 views

How is payment calculated for a mortgage when already missed one payment (D30)?

How is the interest and principal payment calculated when mortgage has already missed one payment? Are the new payments calculated off the new balance (non-amortized balance) or the original scheduled ...
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1answer
141 views

Finding MBS OAS in practice

I'm reading Fabozzi's Bond Markets, Analysis and Strategies, and I have a practical question about finding OAS. The book basically says you simulate interest rate paths and take the average price of ...
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2answers
522 views

How turnover rate is dependent on mortgage rate?

I am new to finance so may be this is a silly question but I got stuck here. I was thinking about how turnover rate is dependent on mortgage rate? I was reading MBS by Lakhmir Hayre, there I had seen ...
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2answers
255 views

Book recommendation for Prepayment model of Mortgage Backed Securities

Can you please suggest me some good reference for Prepayment model of Mortgage Backed Securities. I am looking for a basic book from more of mathematical point of view. P.S.- I am new to finance.
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1answer
95 views

NPV of a mortage loan

I need to model the expected NPV of a mortage loan over his whole life-time. Assume that only the prepayment and default risk matters and that these events can occour at only discrete time-points. I'm ...
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2answers
2k views

Interpretation of OAS on MBS

I'm struggling a little with the interpretation of option adjusted spread on mortgage backed securities. I can see how, for a corporate bond without optionality, the z-spread is sort of like a ...
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1answer
56 views

Calculating the Cost of Delay

I am working on a problem in Davidson and Herskovitz workbook titled the Mortgage-Backed Securities Workbook. The questions asks to find the total opportunity cost to the investor of having a $1 ...
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2answers
177 views

General Mortgage Backed Securities

I understand the basic workflow of MBS, such as securitization, and.etc. I was wondering the following things: The relationship between agency product, securities, and pools: Is ONE security exactly ...
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1answer
138 views

General Framework For Valuing Mortgages

I am becoming more interested in mortgage valuation and would like some pointers on the basic valuation process for a mortgage. I understand there is likely an entire field of study devoted to valuing ...
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0answers
73 views

Number of mortgages in a MBS

Is it possible to know the typical number of mortgages that can be packaged into a MBS product, e.g. a pass-through MBS, or an agency backed TBA. I think the minimum size is \$1-million but if a ...
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0answers
1k views

How to calculate the initial payment of a graduated payment mortgage (GPM). Real estate Mortgage analysis

My professor used this: 12%, monthly-pmt, 30-yr GPM with 4 annual step- ups of 7.5% each, then constant after year 4: $$L=PMT \left[ PV(0.01,12,1) + \frac{1.075}{1.01^{12}}PV(0.01,12,1) + \frac{1....
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0answers
90 views

Is there a standard mortgage model available?

Is there a standard model (or way of modelling) different types of mortgages and different interest rates to find the optimal mortgage structure for home loans? e.g. a loan of $800k structure across ...
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0answers
189 views

Returning historical yield rates for Mortgage Backed Securities in a Bloomberg Terminal?

Forgive me if this isn't the right place, and direct me to the correct place to post. I've been trying to figure out how to get the yield rates for Mortgage Backed Securities (MBS's) in the United ...
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3answers
193 views

reference for elementary mortgage math

I have a student doing a project on default rate & prepayment rate for mortgages. She would like to include a section on how the quantities affect pricing, & so would like to reference a ...
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2answers
1k views

Key Rate Duration for MBSs greater than Key Rate Tenor

Key Rate Durations (KRD) are essentially some fixed income instrument's price sensitivity to a non-parallel shift in interest rates (i.e., a shift at the "Key" Rate). For example, a 10-year bond's ...
5
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2answers
965 views

What is the hedging underlying of MBS

I am working on hedging agency MBSs using treasury bonds. So my question raise as which treasury bond should more likely be a hedging underlying of a MBS. What is the matching criteria usually for MBS ...
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1answer
1k views

Is it more common to hedge a mortgage bond portfolio with other bonds as opposed to Interest Rate Swaps? [closed]

Is it possible to get interest rate swaps on mortgages? If not, why not? Are there models that describe this? Any direction would be great.
3
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2answers
132 views

Why are some MBS's with coupons below the FRM rate priced at a premium?

I'm looking at 30Y 4.0% Freddie Mac MBS prices as of yesterday, approximately 104:10. Meanwhile, 30Y FRM Freddie Mac quotes are 4.39%. Why are the MBS priced at such a premium, even though the coupon ...
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0answers
107 views

Valuation of Mortgage Backed floating notes

Does anybody have experience in valuation of mortgage backed floating notes? I have task to value the 4 different MBS floating notes. I know that it should be done through montecarlo, refinancing ...
4
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1answer
934 views

mortgage prepayment model

I am trying to develop my own MBS prepayment model. I am confused by the terms SMM and CPR. Are they estimates/models in themselves or are they ACTUAL data for the MBS pool. where can I find actual ...
8
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1answer
3k views

What is the best way to forecast prepayment rate in an emerging market mortgage loan portfolio?

I constructed a model to forecast the prepayment rates for a mortgage loan portfolio (of mortgages in an emerging market) using probit regression on factors such as loan-to-value, PTI, time from ...
5
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1answer
862 views

Can duration gap analysis be applied to mortgages?

Can a mortgage loan be treated like a bond and its duration calculated using the bond duration formula? More precisely, can I calculate the loan portfolio duration for duration gap analysis, with ...
9
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1answer
695 views

Are there any standard MBS coupon stack models?

I need to model MBS coupon stack prices. It would not be difficult to create something from scratch, but I don't want to re-invent the wheel (and explain why I did) if a somewhat standard model ...
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3answers
830 views

How are prices calculated for commercial/residential mortgage-backed securities?

What is the theoretical/mathematical basis for the valuation of [C]MBS and other structured finance products? Is the methodology mostly consistent across different products?