Pool factor

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In finance, the pool factor is the initial principal amount of the underlying mortgage loan that remains in the mortgage backed security transaction. This is expressed as one of the factors used to indicate the remaining principal balance. Pool factors are only used to describe specific types of securities, ie, supported asset securities (ABS) and mortgage-backed securities (MBS) whose component payments are returned to investors each month. Pool factors are published monthly in the US for Ginnie Mae, Fannie Mae, and mortgage-backed securities Freddie Mac.

Video Pool factor

Calculation

Untuk menghitung faktor pool,

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For example, the pool factor 0.523 indicates that for each note of $ 10,000, $ 4,770 of the principal has been paid. If one multiplies the original face value of the mortgage back with the pool factor, we get the current nominal value.

Maps Pool factor

Usage

Asset-backed securities and MBS usually contain important terms that determine the method by which the principle of exchange is shared among investors. When redemption is done pro-rata, pool factor is useful for investors in terms of early payment. Early redemption reduces the amount of collateral available for a problem, and therefore some outstanding principal is returned to the investor as stated in problem terms. In this case, the pool factor is used to show how the remaining principal outstanding is securitized securitized.

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References

Source of the article : Wikipedia