Puzzle #2 asked how a $6 million mortgage pool with a weighted average LTV of 80% could have a total property value of $9 million when the average LTV implies a value of $7.5 million. Chun Lee NG provided a good explanation in a comment to that post.
Here are two follow-up questions for Puzzle #2:
1. Suppose there are just two mortgages in the pool. Can you give a specific example of two loans that fits the description of the puzzle?
2. If weighted average LTV can be inconsistent with the ratio of total loans to total value, does this mean that it is a flawed measure of loan pool quality?
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