REE6327 Global Real Estate Capital Market – Amberton University

 

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Assessment Details:-

  • Course Code: REE6327
  • Course Title: Global Real Estate Capital Market
  • Referencing Styles : Open
  • Words: 9999+
  • University: Amberton University
  • Country: US

 

 

Assessment Task:

 

Task1.

ABC Bank originates a pool of containing 100 15-year fixed-rate mortgages with a loan amount of $100,000 each. All mortgages in the pool carry a rate of 6% with annual payments. Suppose that the servicing fee is 0.5%. ABC Bank would like to sell the pool to investors via Mortgage Pass-Through (MPT) security. Suppose that 100,000 shares will be issued and the market interest rate is 5.5%.

 

Questions

  1. Assume that there are no prepayment and no default, how much an investor would like to pay for each share of the MPT security?
  2. What is the price of each share of the MPT if there are a constant annual prepayment rate of 10% and no default?
  3. What is the price of each share of the MPT if there is a constant annual default rate of 10% (assuming the recovering rate is 50%) and no prepayment?
  4. Please briefly discuss your findings.

 

 

Task2.

The Green Bank originates a pool of containing 100 30-year fixed-rate mortgages with a loan amount of $250,000 each. All mortgages in the pool carry a rate of 6.5% with monthly payments. The servicing fee is 0.05% each month. The Green Bank would like to sell the pool to investors via IO/PO Strips. Suppose that they issue 150,000 shares of IO/PO Strips and the market interest rate is 6%.

 

Questions

  1. Assume that there are no prepayment and no default, how much an investor would like to pay for each share of the IO/PO Strips?
  2. What is the price of each share of the IO/PO Strips if there is a constant prepayment rate of 1.5% every month and no default?
  3. What is the price of each share of the IO/PO Strips if there is a constant default rate of 1.5% every month (assuming the recovering rate is 50%) and no prepayment?
  4. Please briefly discuss your findings.

 

 

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