Why does the factor on an Interest-only (IO) REMIC bond decline each month even though the bond doesn pay principal?
An IO REMIC bond usually pays interest based on a declining notional (theoretical) principal balance. Typically, an IO REMIC is paired with another bond that has an actual principal balance associated with it. The notional balance of the IO declines proportionately with its paired bond’s paydown when applicable.
Related Questions
- Why does the factor on an Interest-only (IO) REMIC bond decline each month even though the bond doesn pay principal?
- How much of the members pay can an applicant receive each month? What if there are other allotments in place?
- What happens if I am not able to pay off my principal loan after the 6 month contract is completed?
