Weightedaverage Coupon (WAC) Financial Glossary

What is it? The average interest rate charged to mortgage loan borrowers in an MBS pool weighted by the size of each loan. Individual loans in an MBS pool will not usually have the same rates of interest. For example, FNMA pools may have mortgages with up to 250 basis points spread between the highest-rate and the lowest-rate loans in the pool. Investors must remember that the WAC may change over time as some loans in the pool repay faster than others. Since loan by loan information is not available, investors must rely on the original WAC throughout the life of the pool.

Finance Term Definition Added By: Alexander

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