What is Weighted Average Loan Age (WALA)?
Weighted Average Loan Age measures the seasoning of a loan pool. WALA = Σ(balance_i × loan_age_i) / Σ(balance_i). A pool with WALA of 24 months has been outstanding for an average of 2 years. Seasoning is important because default risk follows a bathtub curve; new loans have low defaults, defaults ramp to a peak (typically 18-36 months for consumer, 24-48 for residential), then decline for well-seasoned loans. A pool past its default peak is less risky than a newly originated pool.
How LoanBook Uses Weighted Average Loan Age
LoanBook calculates WALA from loan tape data. Each loan's own age drives seasoning in both the Prepay Model and the Default Model.
Frequently Asked Questions
Why does WALA matter for pricing?
Seasoning affects both prepayment and default expectations. Well-seasoned pools have already survived the peak default period and have established payment histories. This typically commands a tighter spread (lower required yield) compared to newly originated pools.
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