DEFINITION of Weighted Average Loan Age - WALA
The weighted average loan age (WALA) measures the average age of the loans in a pool of mortgage-backed securities. The weights are based on the dollar amount of each loan in proportion to the aggregate total of the pool, and can be weighted on the remaining principal balance dollar figure or the nominal value of the loan.
BREAKING DOWN Weighted Average Loan Age - WALA
Weighted average loan age is used by investors to estimate how long it will take for a pool of mortgage backed securities to be repaid. The measure varies over time as some mortgages get paid off faster than others.
Weighted average maturity (WAM) is a more broadly used measure for the maturity of pools of mortgage-backed securities. It measures the average time it takes for securities in a debt portfolio to mature, weighted in proportion to the dollar amount invested in the portfolio. Portfolios with higher weighted average maturities are more sensitive to interest rate changes.