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{{ref improve|date=June 2017}}
{{Technical|date=July 2008}}

In finance, a '''pool factor''' is the amount of the initial principal of the underlying mortgage loans that remain in a mortgage-backed security transaction. It is expressed as a factor of one that is used to indicate the remaining principal balance. Pool factors are only used to describe specific classes of securities, namely pooled [[Asset-backed security|asset-backed securities]] (ABSs) and [[Mortgage-backed security|mortgage-backed securities]] (MBSs) whose component payments are returned to investors on a monthly basis.<ref>http://www.investopedia.com/terms/p/poolfactor.asp Investopedia:Pool Factor</ref> Pool factors are published monthly in the US for [[Ginnie Mae]], [[Fannie Mae]], and [[Freddie Mac]] mortgage-backed securities.<ref>{{cite web|title=Credit Market Daily|url=https://www.creditmarketdaily.com/|accessdate=5 June 2017}}</ref><ref>[https://web.archive.org/web/20010821032038/http://www.forbes.com/tools/glossary/search.jhtml?term=pool_factor Forbes.com] Forbes Financial Glossary: Pool Factor</ref>

==Calculation==
To calculate the pool factor,<br />
:<math>{Outstanding Principal Balance\over Original Principal Balance} = {Pool Factor}</math><br />
For example, a pool factor of '''0.523''' indicates that for each note of $10,000, '''$4,770''' of principal has been repaid.
If one multiplies the original [[face value]] of mortgage back security with the pool factor, we get the current face value.

==Usage==
[[Asset-backed security|Asset-backed securities]] and MBSs typically contain issue terms that specify a method through which redeeming principal is shared among investors. When redemption is done [[pro-rata]], a pool factor is useful to investors in cases of early repayment. Early repayment reduces the amount of [[collateral (finance)|collateral]] available for an issue, and therefore some of the outstanding principal is returned to investors as stated in the issue terms. In this case, the pool factor is used to indicate how the remaining outstanding principal is adequately securitized.<ref>Choudhry, Moorad, et al. ''Capital Market Instruments: Analysis and Valuation''. Prentice Hall, 2002. Pg 183. {{ISBN|0-273-65412-8}}.</ref>

==References==
{{reflist}}

{{DEFAULTSORT:Pool Factor}}
[[Category:Fixed income]]

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Pool factor - Revision history

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