Weighted Average Remaining Term - WART

A mortgage-backed security consists of a bundle of home mortgages packaged together into a single investment vehicle. Because the security exists as a collection of individual mortgages, there's also a collection of individual maturity dates. Bob's mortgage might have 17 years, 4 months to go. Sandy's might have 18 years, one month to go. And so on.

The Weighted Average Remaining Term provides a figure that gives an average term for the mortgage-backed security as a whole.

Think of it like a baseball team. Each player has his own batting average. But then there's the team average...the weighted average for the complete collection of players.

The "weighted" part of the Weighted Average Remaining Term just means that terms for higher-value mortgages count more in determining the final WART figure. So if Bob has 17 years, 4 months to go on a $1.2 million house and Sandy's mortgage has 18 years, 1 month to go on a $225,000 house, then the weighted average between the two will be much closer to Bob's 17 1/3 year term.

We've used mortgage-backed securities here as the example, because they provide the most common example of WART in use. However, the stat can work for any asset-backed security.