A “paydown factor” basically tells us how much of the principal amount of borrowed money is paid back in a given month.
As an example, let’s look at Vlad. (No, really, everyone look at Vlad.) Vlad is a homeowner with a $2,000 monthly mortgage payment. His original mortgage loan was for $350,000, and he’s locked in at a 3.5% interest rate. According to his statement, $1,300 of last month’s mortgage payment went toward the principal, while the other $700 went to interest. If we want to calculate the paydown factor, all we have to do is divide $1,300 by $350,000. When we do, we get .0037, which tells us that Vlad paid off .37% of his loan principal last month.
Vlad’s a multifaceted kind of guy, so in addition to owning a home, he also invests in mortgage-backed securities, or MBSs. We bring this up because paydown factors have uses outside of individual mortgage calculations. For example, calculating the paydown factor for MBSs works just like it does for single mortgages: we just look at how much of the overall principal amount was paid back in a given month, divide it by the overall principal amount, and voila. MBS paydown factor.
Related or Semi-related Video
Finance: What is SIPC?23 Views
finance a la shmoop what is the SIPC SIPC say it fast and it'll protect you [Guy stood in front of a skyscraper]
fast Civic Securities investor Protection corporation it's an
intentionally nonprofit corporation not like shmoop which basically insures your [Building that says 'deadpuppiesashats.com']
assets like investments in stocks and bonds which are held at a brokerage firm
which is troubled well the SI pc exists because in the [Piles of money in front of brokerage firms]
past brokerage firms have in fact gone bankrupt sometimes its customers then
lose everything they had with that fly-by-night brokerage and the notion [Bags of money next to people start to disappear]
that investors can't trust the people to whom they are giving their life savings
is a very bad notion bad for America that Trust has to be protected at all [Knights appear]
costs or it means the death of well trust in the financial system of America [Gravestone for trust]
at which point things get yeah oh so bad so today the SIPC limit is 500 grand of [Bomb explodes]
protection with half of that being protections against cash holdings and
the rest covers investments in stocks and bonds if you have more money than
that at a given brokerage like an individual one and they should disappear [Types of invested money shown]
well too bad for you at least for everything over 500 grand [Calculation showing a loss of $100,000]
so because the u.s. is such a kindly loving place both citizens and [The statue of liberty]
non-citizens are protected under SIPC and this is actually a very good idea [Two people stood under a SIPC umbrella]
financially because it encourages foreign investors to trust the u.s. [Businessmen shaking hands]
system often more deeply than they trust the systems of their home country
note that the SIPC mandate is not to protect bad stock picks bonds that don't
keep up with inflation or lousy advice from that slick-talking broker with [Broker with a cigar handing over tickets]
great hair in the NBA Tickets always ready for you and your family so if this
set of definitions or protection sounds familiar it should the SIPC is kissing
cousins with the FDIC or Federal Deposit Insurance Corporation because the FDIC [People with SIPC and FDIC briefcases for heads loved up]
is in fact sensitive to the protection of the value of securities you have
invested with it and if you care about all this crap well we have a whole opus [Shmoop video on the FDIC]
video on the FDI see - yeah good luck staying awake for
the whole thing [Guy falls asleep behind his computer]
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