Definition of Weighted Average Coupon (WAC)

weighted average of the underlying coupon interest rates of mortgage loans or other loans backing asset-backed securities or mortgage-backed securities, as of the issue date, using the balance of each mortgage as the weighting factor. This calculation is used only when the underlying loans have variable interest rates. WAC is computed by multiplying the coupon rate of each mortgage or mortgage-backed security by its remaining balance, adding the products, and dividing the result by the remaining balance.