What is Weighted average loan age (WALA)?

The weighted average loan age is used to calculate the average age of loans in a

Weighted average loan age is used by investors of mortgage-backed securities to estimate how long it will take for a pool of mortgage-backed securities to be repaid. The measure varies over time due to the fact that some mortgages get paid off faster than others.

Essentially, a mortgage-backed security turns the bank into an intermediary between the homebuyer and the investment industry. A bank can grant mortgages to its customers and then sell them at a discount for inclusion in an MBS. The bank records the sale as a plus on its balance sheet and loses nothing if the homebuyer defaults sometime down the road.

The investor who buys a mortgage-backed security is essentially lending money to home buyers. An MBS can be bought and sold through a broker. The minimum investment varies between issuers.

Investors in mortgage-backed securities use weighted average loan age to estimate how long it will take to repay a pool of mortgage-backed securities. Because some mortgages are paid off faster than others, the measure varies over time.

A mortgage-backed security, in essence, transforms the bank into an intermediary between the homebuyer and the investment industry. A bank can make mortgage loans to its customers and then sell them at a loss to be included in an MBS. The bank records the sale as a gain on its balance sheet and suffers no loss if the homebuyer defaults later.