Examples of Discount Mortgage Loan in a sentence
Second, the Adjusted Net Mortgage Rate determines whether a loan is a Non-Discount Mortgage Loan (i.e., a mortgage loan with an interest rate greater than or equal to the Required Coupon) or a Discount Mortgage Loan (i.e., a mortgage loan with an interest rate lower than the Required Coupon).
In full, this part of the definition of Adjusted Net Mortgage Rate provides: “For purposes of determining whether any Substitute Mortgage Loan is a Discount Mortgage Loan or a Non-Discount Mortgage Loan and for purposes of calculating the applicable PO Percentage and the applicable Non-PO Percentage, each Substitute Mortgage Loan shall be deemed to have an Adjusted Net Mortgage Rate equal to the Adjusted Net Mortgage Rate of the Deleted Mortgage Loan for which it is substituted.” PSA, art.
I, I-1 (“For purposes of determining whether any Substitute Mortgage Loan is a Discount Mortgage Loan or a Non-Discount Mortgage Loan and for purposes of calculating the applicable PO Percentage and the applicable Non-PO Percentage, each Substitute Mortgage Loan shall be deemed to have an Adjusted Net Mortgage Rate equal to the Adjusted Net Mortgage Rate of the Deleted Mortgage Loan for which it is substituted.”).
PO PercentageÌFor any Discount Mortgage Loan, (6.87% ¿ the related Net Mortgage Rate) § 6.87%.
As an example, if the Required Coupon is 5%, a Discount Mortgage Loan has a balance of$100,000, and the mortgage rate is 4%, then $20,000 would be “stripped” from the principal balance of the mortgage at the inception of the Trust, with that $20,000 being the initial balance of a Principal Only (“PO”) Certificate.