Balance-weighted measure of remaining scheduled maturity across loans in a mortgage pool.
Weighted average maturity, often called WAM, is a balance-weighted measure of the remaining scheduled time to maturity for loans in a mortgage pool.
WAM matters because a mortgage pool’s timing profile is not described only by its rate. Investors also care about how long the underlying loans are scheduled to remain outstanding.
For borrowers, WAM helps explain why the secondary market pays attention to loan term, age, refinance behavior, and payoff timing. The borrower sees a 30-year or 15-year mortgage. The MBS market summarizes many remaining loan terms into pool-level timing measures.
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.
| 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 mortgage pool contains loans with different remaining terms. The larger-balance loans receive more weight, so the weighted average maturity summarizes the pool’s remaining scheduled life in a way that reflects principal exposure.
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.