As an assistant vice president at a regional bank, your boss has tasked you to acquire $100 million of residential mortgages to be securitized in a pass-through MBS. There must be between 250–300 mortgages in the portfolio, none of them with a maturity below 200 months or greater than 360 months. In the interest of time, your boss suggests that you create a hypothetical group of diverse mortgages (meaning each with a different interest rate, principal amount, and maturity) then aggregate the mortgages into a pool to calculate the portfolio WAC and WAM. Your task is to provide your boss with a summary spreadsheet that shows the individual mortgages and the portfolio’s WAC and WAM calculations, along with a memo of at least 300 words that explains the following:
- The number of residential mortgages in the portfolio and the range of principal values, interest rates, and maturities
- The residential mortgage portfolio’s WAC and WAM
- A discussion of the WAC of the pass-through MBS the group has created and whether it represents a coupon rate indicative of a high credit quality or a lower credit quality pool of mortgages. Include in the discussion the MBS issue’s spread over the comparable Treasury rate.
- Include in your analysis at least 1 outside source for the Treasury rate.
- MUST INCLUDED SPREADSHEET WITH LIST OF MORTGAGES IN PORTFOLIO
- MUST INCLUDED WORD DOC. SHOWING ANSWERS FROM ABOVE QUESTIONS ABOUT PORTFOLIO
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