Individual Project 4 Elenise Pinto
American Intercontinental University

Company Name:
Company Address:
Date of Memo: 02.02.2015
To: Boss
From: Elenise Pinto
Subject: Mortgage-backed bond
Mortgage backed securitization refers to the act of creating and issuing bonds or debt securities where by the payment of interest and the principal amount is generated form the cash flows originating from mortgage of the same characteristic. Individuals concern with the origin of mortgage divides such securities based on similar characteristics then issues them. Once a homogeneous set of loans is formed, the issue of mortgage to the intended person is finalized. The idea of mortgage securitization has over time because it provides sufficient housing capital at a time in case of inflation thus eliminating the traditional way of in house financing. The traditional ways of lending money enabled the financers to earn from the interests on clients savings which at times led to loss of clients and money to money markets. The most important aspect of mortgage backed securities is that it cuts across regional and national diversities hence the recommendation for the use in our institution. In addition, once we issue the mortgage backed security the cash flows of the client from the underlying pool will be allocated to be cleared on a prorate basis. The tax for the issue of the pass through certificate will be on the trust concern with issuance of the same. This will mean that such expense will have been passed from our organization to someone else’s organization thus saving us from incurring expenses. This passage of expense is based on the internal revenue code that requires that whoever is holding the pass through certificates should be taxed just like a direct owner of the trust potion that can possibly be allocated to the certificate. This will enable us to minimize possible losses that can result due to default of the mortgage. Therefore, in my option I would recommend the issue of the pass-through Mortgage Backed Security with 7.15% coupon rate.

Company Name:
Company Address:
Date of Memo: 02.02.2015
To: Boss
From: Elenise Pinto
Subject: VADM tranche
VADM stands for very accurately defined maturity; it has scheduled cash that is channeled within stated range of advanced payments. However, it essential to state that VADM is always open for extension of the guaranteed cash flows that are planned and repaid till it is 0%. It is worth noting that VADM has no risks associated with extension, in addition,