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KAL_II Loan Servicing Valuation Manual
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Economic : GNMAEX GNMA I Example
Economic Forecasts:
Inflation Forecast Market Index
(Actual Rate) (Actual Rate)
Thru Annual Thru Annual
Month Rate Month Rate
60 0.040000 12 0.070000
90 0.050000 24 0.080000
360 0.040000 360 0.090000
Firm Characteristics
Fraction of P&I Bank Balances Usable: 0.880000
Fraction of T&I Bank Balances Usable: 0.970000
Fraction Purchase Price Expensed : 0.250000
Fraction Conversion Cost Expensed: 0.800000
Methods of Amortization 1 (1 = Straight Line )
Years to Amortize Over: 10
Rate Forecasts
After Tax Discount Equity Discount Tx Rate
(Actual Rate) (Actual Rate) (Actual Rate)
Thru Annual Thru Annual Thru Annual
Month Rate Month Rate Month Rate
360 0.080000 360 0.150000 360 0.350000
Reinvestment Rate Impound Earnings Pay on Impounds
(Actual Rate) (Spread) (Actual)
Thru Annual Thru Annual Thru Annual
Month Rate Month Rate Month Rate
360 0.090000 360 -0.010000 0 0.000000
Cost of Advances
(Spread)
Thru Annual
Month Rate
360 0.010000
Existing Obligations
Existing Existing Debt Existing
Year Fixed Cost Principal Interest Amortization
1 250,000 0 0 0
2 250,000 0 0 0
3 250,000 0 0 0
4 250,000 0 0 0
5 250,000 0 0 0
Portfolio: GNMAEX GNMA I Example
Definition of Status Categories
Category Length Initial
Good Loan 1 Month(s) 0.90000
Del 1 Mon 1 Month(s) 0.03000
Del 2 Mon 1 Month(s) 0.02500
Del 3 Mon 1 Month(s) 0.02000
GT 90 Day 3 Month(s) 0.01500
Foreclose 6 Month(s) 0.01000
Basic Portfolio Information
Number of Loans : 10000
How Enter Balance : 1 (1=Average, 2=Total)
Loan Balance : 50000 (Prior to This Month's Payment)
Original Amort Pd : 360 (Months)
Original Maturity : 360 (Months)
Average Loan Age : 12 (Months)
Portfolio Category : P (P=Purchase, E=Exist, N=New Production)
When Become Active : 0 (Months in future, 0=Now)
Type of Loans : 1 (1=Fixed, 2=GPM, 3=ARM)
Fixed Int Rate : 0.110000
Key to Purchase Price : 1 (1=Pct, 2=Dollars)
Price as Fraction of Balance : 0.020000
Key to Conversion Costs : 1 (1=Per Loan, 2=Total)
Conversion Cost Amount : 20
Payoffs
Payoffs are Based on Specific Forecasts in Table Below
Cost to Process Payoff : 50
Days Interest Owed on Payoff : 2 (0=None, 1=Int, 2=P&I)
Extra Income Sources
Income that applies to all loans
Extra Income : 3.00 ($/Loan/Year)
Customer Base Cross Selling (Servicing Premiums)
Monthly Premium : 15.00 (per Loan )
Commission : 0.370000 (Fraction of Premium)
Current Balance : 25000
Debt Financing
Fraction Financed with Debt : 0.750000
Key to Debt Interest Rate : 1 (1=actual, 2=spread market)
Key to Repayment Method : 2 (2 = Equal Prin Payments)
Number of Years of Payments : 12
Months Between Principal Pmts : 12
Tax and Insurance Impounds
Monthly Property Tax : 50.00 (Average Per Loan )
How Tax Impound Grows : 2 (1=Monthly, 2=Annually )
Monthly Insurance Pmt : 30.00 (Average Per Loan )
How Ins Impound Grows : 2 (1=Monthly, 2=Annually )
Initial Impound Balance: 1 (1=Calculate, 2=Input)
Additional Months Added
Property Tax : 2 (Months)
Insurance : 2 (Months)
Distribute Total Impound : Y
If Yes, Actual Impound Balance : 4800000
Pattern of Remittances from Impound Accounts
Property Tax Insurance Interest
Month To State To Provider To Borrower
1 0 1 0
2 0 0 0
3 0 1 0
4 6 0 0
5 0 0 0
6 0 0 0
7 0 8 0
8 0 1 0
9 0 1 0
10 0 0 0
11 6 0 0
12 0 0 12
Remittance Processing
Description of Servicing Method GNMA 1
For Surviving Loans
Delay in Remitting Payments : 0 (Months)
Day of Month to Remit : 15 (0= Pass Through)
Must Deposit All Funds : Y
Advance Required : 2 (0=None, 1=Int, 2=P&I)
Maximum Period of Advances : 360 (Months)
Remittance Clears Same Day : N
Calculate Initial P&I Receivables : Y
For Loans Paying Off
Interest Owed on Payoffs : 2 (0=None,1=Days,2=Full)
Must Pass Payoffs As Received : N
Late Fees
Late Fees Triggered
On Any Payment Received After: 16 (Day of Month)
Late Fee on P&I : 0.040000
Late Fee on T&I : 0.000000
Fraction Late Fees Collected : 0.650000
For Previously Good Loans Only
Late Notice Triggered : 17 (Day of Month)
Cost of Late Notice : 10.00
Portfolio: GNMAEX GNMA I Example
Cashiering Patterns
Current Loans Delinquent Remittance
Day Still Current Coming Good Payoffs Foreclosure Clearing
1
2
3
4
5
6
7
8
9
10 0.500000
11
12
13
14
15 0.000000
16 0.600000
17
18
19
20 0.750000 0.500000 0.700000
21
22 0.800000
23
24 0.900000
25
26
27
28
29 0.000000
30 1.000000 1.000000 1.000000 1.000000 1.000000
Foreclosure Factors
Hard Out-of-Pocket Cost : 350
Hard Costs Recovered : 0.650000
Service Fees Recovered : 0.000000
P&I Advances Recovered : 0.900000
Tax & Ins Advances Recov : 0.900000
Interest Payments Lost : 2
Principal Balance Lost : 0.010000
Forecasts
Service Cost Property Tax Insurance Impounds
(Inflation Rate ) (Actual Rate) (Actual Rate)
Thru Annual Thru Annual Thru Annual
Month Rate Month Rate Month Rate
60 0.040000 360 0.020000 360 0.060000
90 0.050000
360 0.040000
Anc Income Premium Penetration Premium Growth
(Actual Rate) (Actual Rate) (Inflation Rate )
Thru Annual Thru Annual Thru Annual
Month Rate Month Rate Month Rate
360 0.040000 12 0.100000 360 0.050000
24 0.200000
360 0.250000
Service Fee Debt Rate Payoff Exper
(Actual Rate) (Actual Rate) (Fraction Left)
Thru Annual Thru Annual Thru Annual
Month Rate Month Rate Month Rate
360 0.004400 360 0.100000 12 0.920000
60 0.750000
120 0.500000
360 0.200000
Portfolio: GNMAEX GNMA I Example
Transition Tables
Transition Table 1, Applies from Month 1 Thru Month 24
From Prob Move on Prob Pay Cost to Process
Status To This Status Fully In This Status
Good Loan 0.0330 Computed Good Loan 32.00 Annually
Del 1 Mon 0.8330 Computed Del 1 Mon 4.00 Monthly
Del 2 Mon 0.8000 Computed Del 2 Mon 6.00 Monthly
Del 3 Mon 0.2500 Computed Del 3 Mon 8.00 Monthly
GT 90 Day 0.3330 Computed GT 90 Day 12.00 Monthly
Foreclose 0.7500 Computed Foreclose 15.00 Monthly
Transition Table 2, Applies from Month 25 Thru Month 60
From Prob Move on Prob Pay Cost to Process When
Status To This Status Fully In This Status
Good Loan 0.0270 Computed Good Loan 32.00 Annually
Del 1 Mon 0.8000 Computed Del 1 Mon 4.00 Monthly
Del 2 Mon 0.7500 Computed Del 2 Mon 6.00 Monthly
Del 3 Mon 0.2220 Computed Del 3 Mon 8.00 Monthly
GT 90 Day 0.5000 Computed GT 90 Day 12.00 Monthly
Foreclose 0.7500 Computed Foreclose 15.00 Monthly
Transition Table 3, Applies from Month 61 Thru Month 360
From Prob Move on Prob Pay Cost to Process When
Status To This Status Fully In This Status
Good Loan 0.0270 Computed Good Loan 32.00 Annually
Del 1 Mon 0.6000 Computed Del 1 Mon 4.00 Monthly
Del 2 Mon 0.6670 Computed Del 2 Mon 6.00 Monthly
Del 3 Mon 0.2500 Computed Del 3 Mon 8.00 Monthly
GT 90 Day 0.6670 Computed GT 90 Day 12.00 Monthly
Foreclose 0.5000 Computed Foreclose 15.00 Monthly
Firm : GNMAEX GNMA I Example Page 1
Economic : GNMAEX GNMA I Example
Portfolio: GNMAEX GNMA I Example
Earnings Report
Year 1 2 3
Service Fees 2,069,448 1,895,605 1,769,374
Late Fees 601,465 552,816 504,250
Ancillary Income 93,989 151,882 181,006
Earn on P&I Float 145,980 107,203 118,127
Earn on Impounds 277,908 312,533 350,615
Subtotal (Income) 3,188,791 3,020,039 2,923,373
Servicing Costs 312,949 299,998 292,815
Delinquency Costs 454,650 436,800 417,652
Payoff Costs 39,848 21,707 22,260
Foreclosure Costs 330,414 313,075 342,786
Cost of Advances 33,996 63,145 55,601
Impound Int Paid 0 0 0
Subtotal(Costs) 1,171,858 1,134,725 1,131,114
Operating Income 2,016,933 1,885,314 1,792,258
less Amortization 754,000 754,000 754,000
less Income Tax 442,026 395,960 363,390
Net Income 820,906 735,354 674,868
Cash Flow 1,574,906 1,489,354 1,428,868
Firm : GNMAEX GNMA I Example Page 5
Economic : GNMAEX GNMA I Example
Portfolio: GNMAEX GNMA I Example
P&I Account Report
Year 1 2 3
Previous Balance 0 1,905,302 451,387
Regular Payments 45,610,506 42,158,639 40,436,839
Delinq Payments 5,999,050 5,548,110 4,365,795
Payoff Payments 39,676,287 20,656,798 20,226,774
Foreclosure Adj 896,512 848,087 928,619
Total Inflows 92,182,355 71,116,935 66,409,413
Remittances 88,851,110 70,665,548 65,710,505
Ending Balance 1,905,302 451,387 698,908
Average P&I Bal 2,764,778 1,740,302 1,677,934
Average Advance 424,946 701,608 556,015
Biggest Advance 2,252,310 2,562,525 2,348,444
Firm : GNMAEX GNMA I Example Page 8
Economic : GNMAEX GNMA I Example
Portfolio: GNMAEX GNMA I Example
Impound Account Report
Year 1 2 3
Property Tax
Previous Balance 2,493,243 2,305,365 2,212,185
Plus Received 5,727,224 5,373,624 5,155,434
Less Paid Out 5,697,223 5,351,401 5,116,272
Less Refunded 217,879 115,403 115,199
Ending Balance 2,305,365 2,212,185 2,136,148
Insurance
Previous Balance 2,306,757 2,247,942 2,235,905
Plus Received 3,541,465 3,463,636 3,461,240
Less Paid Out 3,503,211 3,423,242 3,410,645
Less Refunded 97,069 52,430 53,358
Ending Balance 2,247,942 2,235,905 2,233,143
Extra Premiums
Previous Balance 25,000 35,417 69,828
Plus Received 109,709 210,459 261,196
Less Paid Out 97,717 174,314 242,883
Less Refunded 1,575 1,733 2,244
Ending Balance 35,417 69,828 85,896
Firm : GNMAEX GNMA I Example Page 12
Economic : GNMAEX GNMA I Example
Portfolio: GNMAEX GNMA I Example
Financial Results Before Debt Service
Expensed + Amortized = Total
Purchase Price : 2,500,000 7,500,000 10,000,000
Conversion Cost : 160,000 40,000 200,000
Total : 2,660,000 2,540,000 10,200,000
Tax Rate : 0.3500
Tax Savings : 931,000 931,000
Net Initial Cost : 9,269,000
Less Borrowed Funds: -7,500,000
Equity Invested : 1,769,000
Based on 348 Month Simulation
Financial Results - Before Debt Service
Expected Loan Life : 150.45 (Months)
Present Value : 10,745,805 (0.0215 of Bal)
Discount Rate : 0.0800 (after tax)
Modified IRR : 0.0680
Nominal IRR : 0.1078
Economic Duration : 68.23 (Months)
Break-Even Price : 12,016,934 (0.0240 of Bal)
Financial Results - Including Debt Service
Present Value : 2,536,673 (0.0051 of Bal)
Discount Rate : 0.1500 (on equity)
Modified IRR : 0.0905
Nominal IRR : 0.2527
Economic Duration : 55.34 (Months)
Firm : GNMAEX GNMA I Example Page 13
Economic : GNMAEX GNMA I Example
Portfolio: GNMAEX GNMA I Example
Debt Repayment Report
Year 1 2 3
Cash Account Bal 0 492,857 969,041
Earned After Tax 30,451 58,705 87,232
Net Cash/Service 1,574,906 1,489,354 1,428,868
Principal Repaid -625,000 -625,000 -625,000
Interest on Debt -750,000 -687,500 -625,000
Tax Shield 262,500 240,625 218,750
Ending Cash Bal 492,857 969,041 1,453,891
Debt Balance 0 6,875,000 6,250,000
less Repayment -625,000 -625,000 -625,000
New Balance 6,875,000 6,250,000 5,625,000
Firm : GNMAEX GNMA I Example Page 1
Economic : GNMAEX GNMA I Example
Group : GNMAEX GNMA I Example
Budget Report
Year 1 2 3
Service Fees 2,069,448 1,895,605 1,769,374
Late Fees 601,465 552,816 504,250
Ancillary Income 93,989 151,882 181,006
Earn on P&I Float 145,980 107,203 118,127
Earn on Impounds 277,908 312,533 350,615
Subtotal (Income) 3,188,791 3,020,039 2,923,373
Servicing Costs 312,949 299,998 292,815
Delinquency Costs 454,650 436,800 417,652
Payoff Costs 39,848 21,707 22,260
Foreclosure Costs 330,414 313,075 342,786
Cost of Advances 33,996 63,145 55,601
Impound Int Paid 0 0 0
Subtotal(Costs) 1,171,858 1,134,725 1,131,114
Operating Income 2,016,933 1,885,314 1,792,258
less Fixed Costs -250,000 -250,000 -250,000
Interest -750,000 -687,500 -625,000
less Exist Intr 0 0 0
less Amortization -754,000 -754,000 -754,000
less Exist Amrt 0 0 0
Income Before Tax 262,933 193,814 163,258
less Income Tax -92,026 -67,835 -57,140
Net Income 170,906 125,979 106,118
Cash Flow 927,906 879,979 860,118
New Debt Repay 625,000 625,000 625,000
Exist Debt Repay 0 0 0
Number of Loans 9,147 8,565 8,009