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Cash flows for MBS/ABS amortizing loan securities consist of three components:
Scheduled Principal Repayment. Eagle Accounting uses the Bond Market standard formula for MBS to calculate the Scheduled Principal Repayments.
Unscheduled Principal Repayment. The prepayment assumption from the amortization rule is used to calculate the Unscheduled Principal Repayments.
Interest. Eagle Accounting calculates the Interest component based on the assumed current face for each coupon period, against the current most applicable rate.
Thus, Eagle Accounting can calculate all three streams of cash flow for an MBS/ABS security to create the projected cash flow of a security. Eagle Accounting then discounts that cash flow to create the yield to maturity.
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