What is the value of the GNMA

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Question - What would be the impact on GNMA pricing if the pass-through was not fully amortized? What is the present value of a $10 million pool of 15-year mortgages with an 8.5 percent per annum monthly mortgage coupon if market rates are 5 percent? The GNMA guarantee fee is assumed to be 6 basis points, and the bank servicing fee is 44 basis points.

a) Assume that the GNMA is fully amortized. What is the value of GNMA?

b) Assume that the GNMA is only half amortized. Half amortized means there is a lump sum payment at the maturity of the GNMA that equals 50 percent of the mortgage pool's face value. The other half is amortized (paid off) using monthly payments. What is the value of the GNMA?

c) PSA prepayment model (Excel needed) Consider a mortgage pool of 500 residential mortgages of 200,000$ each. The coupon rate on the pass through is 11.5% annual rate compounded monthly. The life of the mortgages is 30 years each. The mortgage prepayment is estimated to be 150 PSA. The yield on newly issued par value GNMA pass through is 11.25%.

For months 0 through 360 calculate the Opening balance, Interest, Principal, Prepaid Principal, Cash flows and the closing balance for this pool What is the market value of this pool based on the above calculations.

Reference no: EM132927195

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