Why has the ARM PC coupon rate changed even though it hasn reached the first adjustment date?
The PC coupon is a weighted average of the individual mortgage note rates and can change prior to the first adjustment date. For example, if loans are paid off prior to the first adjustment date it may impact the overall weighted average of the PC coupon. • How do I account for a Neg Am factor in my calculation of monthly principal and interest payments? Freddie Mac payment-capped ARM PCs (prefixes 39, 42, 79, 94, 96 and 5A) and structured PCs series E003 are subject to negative amortization. Negative amortization occurs when a fixed monthly payment on a mortgage is less than the interest accruing on the mortgage for that month. The excess, or deferred, interest, which cannot be paid for the month, is added to the negative amortization (Neg Am) factor, which translates any negative amortization of the underlying mortgages into a number that can be used to adjust the payment of principal and interest on the related PC or structured PC. The following is an example of how to use the Neg A
