Current-balance-weighted number of scheduled months remaining across loans in a mortgage pool.
Weighted average maturity (WAM) is the current-balance-weighted number of scheduled months remaining on loans in a mortgage pool.
WAM matters because a mortgage pool’s timing profile is not described only by its coupon. Investors also need a scheduled-term measure showing how long the underlying loans would remain outstanding without early payoff or other departures from their payment schedules.
For borrowers, WAM explains how a 30-year, 20-year, or 15-year note becomes part of a pool-level measure. It does not predict the actual payoff date of one loan and does not change any borrower’s maturity date.
Borrowers do not usually see WAM in loan documents. It appears in MBS pool descriptions, analytics, and investor reporting after loans have been pooled.
The term becomes useful when explaining how a Mortgage Pool can be described by both rate measures and timing measures. Current balances are used as weights, so a larger loan has more influence than a smaller loan with the same remaining term.
A simplified pool calculation is:
Here, B_i is loan i’s current principal balance and M_i is its remaining scheduled number of monthly payments. Disclosure rules determine the balance date, treatment of curtailments or modified loans, missing values, and rounding.
| Pool change | Potential effect |
|---|---|
| One reporting month passes | Remaining term falls for each surviving loan |
| Longer-term loans prepay faster | Shorter-term loans gain weight and WAM can fall faster |
| Shorter-term loans prepay faster | Longer-term loans gain weight and WAM can fall by less than one month or even rise |
| Loan modification changes maturity | Reported remaining term can change under the disclosure rules |
WAM is recalculated from the surviving balances. It is not simply the prior month’s WAM minus one.
| Measure | What it summarizes |
|---|---|
| Weighted Average Coupon | Loan-rate profile |
| Weighted average maturity | Remaining scheduled maturity profile |
| Weighted Average Loan Age | How long loans have already been outstanding |
| Average Life | Expected timing of principal return |
A pool contains a $300,000 loan with 330 months remaining and a $100,000 loan with 90 months remaining:
The simple unweighted average would be 210 months, but that would give the smaller, shorter loan too much influence. Balance weighting produces a 270-month, or 22.5-year, scheduled-maturity measure.
As loans amortize, prepay, or leave the pool, the composition and weights change. WAM can therefore change by more than one month between reporting periods even though every surviving loan is one month closer to maturity.
WAM differs from Weighted Average Loan Age because WAM looks forward to remaining scheduled maturity, while loan age looks backward at how long the loans have already existed.
It also differs from Average Life. Average life estimates when principal is expected to return, including prepayment assumptions. WAM is tied to scheduled remaining maturity.
It also differs from Extension Risk. Extension risk is the risk that loans stay outstanding longer than expected. WAM is a descriptive timing measure.
It differs from the security’s legal final maturity date. WAM summarizes the underlying loan pool, while the security documents establish the date by which final amounts are due under the security terms.