Prepayments reflected the unpaid principal balance of loans which prepaid in full or experienced a curtailment and were not at or near 98% of the maximum claim amount divided by the prior month’s balance plus accretion, MIP payments, servicing fees and scheduled payments for term/tenure loans as applicable. Accretion and scheduled payments are included in the denominator because the servicer must pay security holders for the full 30 days of interest even if a loan prepays in full on day one. Prepays are converted from single monthly mortality into an annualized prepayment speed. Three, six, nine and tweleve month prepay speeds are calculated consistent with the Bond Market Association standard formula and reflect the sum of prepaid principal over the period divided by the balance the month before the period begins raised to the power of twelve divided by the number of periods. Three months prepays, for example are calculated as: 1-(1-( [sum of prepaid dollars over perior three months] / [four months ago balance plus accretion] ))^ ( [12/3 = 4]).
Draws are expressed in terms of the remaining line of credit. Draws for floating rate HECMS are equal to the decrease in the available line of credit between the current month and prior month divided by the prior month’s line of credit. For purposes of the numerator in the draw calculation, the prior line of credit is assumed to increase by the accretion and the MIP.
In the event MIP and/or servicing fee are not populated, we assume a MIP of 1.25% and a servicing fee margin of 0.36%, respectively. Reported loan age and vintage is calculated at the pool level. The pool’s weighted average origination date is derived from the pool weighted average loan age reported by Ginnie Mae.
We differentiate between first participation pools and subsequent participation pool (otherwise known as “tails”) based on the participation number for the HECM loan (e.g. a first participation is the first in time, and generally the largest, participation for a given loan) and looking at the majority participation number by participation balance. Where a majority of the pool is comprised of first participations, even if seasoned, then we classify the pool as a first participation pool.
Brean reports loan and participation balances for and weights prepayment, draw speeds and collateral characteristics based on the share of the underlying G2 pool participating in each CMO. We take a ratio of the original balance participating in each CMO divided by the aggregate original balance of the underlying G2 to calculate the CMO share. The CMO share is then multiplied by the aggregate loan and participation balance of the constituents each period and summed.