FAQ: How is the Average UPB Calculated?

Q: How does Charlie calculate the Average UPB? 

A: Charlie automatically calculates the Average Unpaid Principal Balance (UPB) using the following process:

• Start with the Note Loan Amount
  Use the original note loan amount as the starting balance for the first month.

• Repeat for 12 Months
  Perform the following calculations for each month of the year (12 times total):

  • Calculate Monthly Interest:
    Multiply the previous balance by the note rate (expressed as a percentage).

  • Round the Result:
    Round this interest calculation to two decimal places, following standard rounding rules (if the third decimal place is 5 or higher, round up).

  • Convert to Monthly Interest:
    Divide the rounded result by 1200 (to account for the annual interest rate converted to monthly).

  • Round Again:
    Round the result of this division to two decimal places, again based on the value of the third decimal place.

  • Update Balance:
    Add the calculated monthly interest to the previous balance.

  • Subtract Monthly Payment:
    Deduct the proposed monthly payment (Principal & Interest payment) from this updated balance to get the new balance for the next month.

• Calculate the Average for the Year:
  After computing the balances for all 12 months, total these 12 values.

• Determine the Average UPB:
  Divide the yearly total by 12. This final figure represents the Average UPB for the first year.