Mortgage Pass-Through Securities. Chapter 11. Pass-Through Securities. created when one or more mortgage holders form a collection (pool) of mortgages and sell shares (participation certificates) in the pool
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original loan of $125,000, age of 12 months, no rate premium at origination, no prior option to
refinance, 3.5% annual home price appreciation
shows model’s S-curves for $25,000 loan size increments – relative to loans with balances less than
$100,000, loan balances that exceed $150,000 are about 1.5 to 2.5 times more sensitive to refinancing
semiannual cash flow yield = (1 + y M)6 – 1
where yM is monthly interest rate that equates PV of projected monthly CF to price of PT