Asset Securitization Structures

Deliverable Length: Spreadsheet, and memo with at least 300 words

Assignment Objective:
Explain legal, credit, and structural framework for the transactions taking place in the structured finance markets.

As an assistant vice president at a regional bank, your boss has tasked you and the other AVPs to work in a group 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 the group assign group members to find (meaning create some hypothetical) a group of diverse mortgages (meaning each with a different interest rate, principal amount, and maturity) and then as a group, aggregate each member’s mortgages into a pool to calculate the portfolio WAC and WAM. Your group’s 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.

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