Average note-rate measure for loans in a mortgage pool, weighted by remaining balance.
Weighted average coupon, often called WAC, is the average coupon or note-rate measure for loans in a mortgage pool, weighted by each loan’s balance.
WAC matters because an MBS pool is made of many individual loans that may not all have exactly the same note rate. A balance-weighted measure gives investors a cleaner way to describe the pool’s overall loan-rate profile.
For borrowers, WAC is useful as a bridge between the individual loan and the larger mortgage market. A borrower knows one note rate. The MBS market summarizes many note rates into a pool-level measure.
Borrowers usually do not see WAC during application or closing. The term appears in secondary-market reporting, MBS pool descriptions, and investor analysis after many loans have been pooled.
It becomes practical when explaining why a Mortgage Pool can have a single summary rate even though it contains many mortgages.
| Term | What it describes |
|---|---|
| Note Rate | The rate on one borrower’s mortgage note |
| Weighted average coupon | The balance-weighted loan-rate profile of the pool |
| MBS Coupon | The security-level coupon label |
| Pass-Through Rate | The rate used for cash flow passed through to investors |
A pool contains many mortgages with slightly different note rates. Larger loans carry more weight in the calculation than smaller loans, so the pool’s weighted average coupon reflects the balance-weighted rate profile rather than a simple average of loan counts.
Weighted average coupon differs from Note Rate because note rate belongs to one loan, while WAC summarizes many loans in a pool.
It also differs from MBS Coupon. WAC describes the underlying loan-rate profile. MBS coupon is the security-level label used for investor cash flow.
It also differs from Pass-Through Rate. Pass-through rate reflects what is passed through to investors after the security and servicing structure, while WAC describes the underlying loan coupons.