Ann: Investment Update - June 2023, page-5

here's a standard RMBS term sheet. Gives you a glimpse of a typical structure. the Weighted avg cost (in this case weighted avg 1M bbsw + margin) less Weighted Average rate (underlying mortgages) is what we call excess spread. This spread is what the issuer earns but it is also consider 'credit support' as in loan defaults wipes this each month first. This is without accounting for other credit enhancement features included before it starts eating into each note.




Ps, i previously worked in the industry buying these types of investments.