What is Weighted Average Remaining Maturity (WARM)?
Weighted Average Remaining Maturity is the average remaining term of a loan pool, weighted by each loan's balance. WARM = Σ(balance_i × remaining_term_i) / Σ(balance_i). It represents how long the pool will generate cashflows assuming no prepayments. WARM differs from WAL (Weighted Average Life) because WARM ignores prepayment while WAL incorporates it. WARM is always longer than WAL because prepayments shorten the actual life of the pool.
Formula
WARM = Σ(current_balance_i × remaining_term_i) / Σ(current_balance_i)
How LoanBook Uses Weighted Average Remaining Maturity
LoanBook calculates WARM from loan tape data and displays it alongside WAL. WARM is also the name of the simplest CECL methodology (Weighted Average Remaining Maturity method), where expected loss = historical loss rate × WARM in years.
Frequently Asked Questions
Why is WARM always longer than WAL?
WARM assumes no prepayments; every loan pays to maturity. WAL incorporates prepayment, which returns principal earlier. Since prepayments shorten the time to receive principal, WAL is always shorter than WARM.
Related Terms
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