WAM vs. Average life

what is the difference intuitively?

WAM is the average term of all the loans within the pool, so if a pool has 2 loans L1 : Remaining term = 220 Balance = 100k L2 : Remaining term = 180 Balance = 200k then the average WAM is 193(approximately)… this has no dependency on how the pool prepays… with the WAL or the Average life, you compute the cashflows of the pool with a CPR assumption for each of the month and then compute the WAL as the time weighted average of the principal paid down (part of the cashflows). WAL is dependent on your prepay assumptions where as WAM is not. one tells you when the pool is supposed to be paid down (Assuming no prepays) and the other gives you the average life of the pool based on prepay assumptions.

does WAM apply to the MBS or the loan pool? How about WAL?

if I’m not mistaken, then all of this applies to the collateral…so the loans

but I always see “the average life of a passthrough…” so what is a passthrough?

both of them apply to the MBS and the underlying loans drive the values of the WAM and the WAL… Passthrough — vanilla MBS with no tranches, the loan payments are directed to the investors net of the service and guarantee charges