One hundred identical mortgages are pooled together into a pass-through security. Each mortgage has a $150,000 principal, a fixed annual interest rate of 8 percent (paid monthly), and is fully amortized over a term of 30 years.
-What is the monthly payment on the mortgage pass-through if a 44 basis point servicing fee is deducted monthly?
A)$105,499.
B)$114,700.
C)$11,340.
D)$1,055.
E)$1,277,494.

Question

Quizplus · Accepted Answer

The total principal in the pool is $150,000 x 100 = $15,000,000. The monthly payment on each mortgage is calculated using the PMT function in Excel, which gives a result of $1,100.65. Multiplying this by 100 mortgages gives a total monthly payment of $110,065. Deducting the 44 basis point servicing fee ($15,000,000 x 0.0044 / 12 = $6,600) results in a final monthly payment of $103,465. Multiplying this by 12 gives an annual payment of $1,241,580. Dividing this by the original principal of $15,000,000 gives a yield of 8.28 percent.

One Hundred Identical Mortgages Are Pooled Together into a Pass-Through