Pay-ups on MBS

[d2rockstar]

Hi,
I have been hearing of this term off late in my office. I tried to google and wikipedia but was not of much help. Can any one tell me what pay-up is and how does it work?

 

[MBStrader]

For each coupon there is a price for the generic TBA. You pay up (higher price) for a spec pool with favorable characteristics. For example, low loan balance offers prepay protection in a falling rate environment. Other examples are FICO, LTV, certain state concentrations, program (rural, VA, FHA), servicer etc.

 

[former trader]

Did you sign up just to answer this question?

 

[MBStrader]

Lol I’ve lurked around here since level 2. Now that I’m done studying I find myself bored.

 

[igor555]

whats the point of pricing speeds if P&I bonds all price at 100