Page 71 - FINAL CFA SLIDES DECEMBER 2018 DAY 14
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Session Unit 15:
53. Introduction To Asset-Backed Securities
Investors in mortgage pass-
through securities receive the
monthly cash flows generated
by the underlying pool of
mortgages, less any servicing
and guarantee/insurance fees.
tanties The fees account for the fact
that pass-through rates (i.e., the
coupon rate on the MBS, also
called its net interest or net
coupon) are less than the
mortgage rate of the underlying
mortgages in the pool.
The timing of the cash flows to pass-through security holders does not exactly coincide with the cash
flows generated by the pool. This is due to the delay between the time the mortgage service provider
receives the mortgage payments and the time the cash flows are passed through to the security holder.
