on a pro rata basis. That is, if there are X certificates issued against a pool of mortgage loans, then a certificate holder is entitled to 1/X of the cash flow from the pool of mortgage loans. The cash flow for the certifi- cate holder depends on the cash flow of the underlying mortgages: monthly mortgage payments representing interest, the scheduled repay- ment of principal, and any prepayments. Payments are made to security holders each month. Neither the amount nor the timing, however, of the cash flows from the pool of mortgages are identical to that of the cash flows passed through to investors. The monthly cash flows for a passthrough are less than the monthly cash flows of the underlying mortgages by an amount equal to the servicing fee and other fees. The other fees are those charged by the issuer or guarantor of the passthrough for guaranteeing the issue. The coupon rate on a passthrough, called the "passthrough coupon rate," is less than the mortgage rate on the underlying pool of mortgage loans by an amount equal to the servicing fee and guarantee fee. Not all of the mortgages that are included in a pool of mortgages that are securitized have the same mortgage rate and the same maturity. Con- sequently, when describing a passthrough security, a weighted average coupon rate and a weighted average maturity are determined. A weighted average coupon rate, or WAC, is found by weighting the mortgage rate of each mortgage loan in the pool by the amount of the mortgage balance outstanding. A weighted average maturity, or WAM, is found by weight- ing the remaining number of months to maturity for each mortgage loan in the pool by the amount of the mortgage balance outstanding.   Agency Mortgage Passthrough Securities There are three government agencies that issue passthrough securities: Government National Mortgage Association, Federal National Mortgage Association, and Federal Home Loan Mortgage Corporation. The first is a federally related government agency. The last two are government spon- sored enterprises. There are also MBS issued by nonagencies. We will postpone discussion of nonagency MBS until later in this chapter. The Government National Mortgage Association (nicknamed "Gin- nie Mae") passthroughs are guaranteed by the full faith and credit of the U.S. government. For this reason, Ginnie Mae passthroughs are viewed as risk-free in terms of default risk, just like Treasury securities. The security guaranteed by Ginnie Mae is called a mortgage-backed     security (MBS). All Ginnie Mae MBS are guaranteed with respect to the timely payment of interest and principal, meaning the interest and prin- cipal will be paid when due, even if any of the borrowers fail to make