About Yield Calculations

This section describes yield calculations for ABS/MBS securities.

Calculate Yield for MBS/ABS Amortizing Loan Securities

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.

Calculate Yield for Non Amortizing ABS Securities

Cash flows for non-amortizing ABS securities (such as CARDS securities) are built on revolving lines of credit and thus do not repay scheduled principal amounts.

Therefore, for securities such as these, Eagle Accounting calculates only an interest component out to the maturity date of the security, or to the effective maturity date if the effective date exists in the Prepayment Time Series table. Eagle Accounting calculates the principal repayment on the Maturity Date/Effective Maturity Date. Eagle Accounting then discounts that cash flow to create the yield to maturity. The effective maturity date can change over time, and when that value changes, Eagle Accounting prospectively calculates a new amortization yield for the coupon period using the new effective date of the change. For information about Prepayment Time Series information, see Understand Prepayment Time Series Information.

When you set up an amortization & accretion rule for credit card securities, by default, the panel sets the Effective Maturity Date Method to Soft Bullet Payment. You can use the effective maturity date (EMD) for both credit card and non-credit card ABS/MBS securities for the purpose of determining cash flows, deriving an amortization yield, and calculating an amortization/accretion amount in Eagle Accounting. For more information, see Amortization & Accretion Rules Panel Options and Understand the Prepayment Assumption Option.

Calculate Weighted Average Life (WAL)

During Earnings processing, the system calculates and stores the weighted average life date and weighted average life in months for all factor based securities on the Income Activity table. The calculations are driven by the cash flows derived for the yield calculations. These fields are used primarily for lot-level insurance reporting.