Original Face is a term used to reference the total principal balance of a mortgage-backed security (MBS) at the time the security is issued. To further explain this concept, it is important to note that mortgage-backed securities are created by pooling individual residential mortgages and then selling securities with claims on the pool to investors. The original face amount of the security is indicative of the total principal balance of the individual loans backing the security, established at the issue date of the security.

Original face would remain consistently present in a security until the underlying loans are paid off. As the underlying loans are repaid, the outstanding balance of the security decreases, resulting in a difference between the original face and the current value of the MBS. The current value of the MBS, however, is highly dependant on the level of loan repayment, which could cause a difference to the original balance of the security over a period of time.

Mortgage-backed securities issued around the same time with the same original face can have different current values. This is due to the varying payments and repayment amount from the underlying loans which have an effect on the security’s current value. Furthermore, the duration of loan repayment can also vary, making it all the more difficult for investors to accurately predict the security’s current value.

It is clear that original face plays an integral role in assessing mortgage-backed securities. Investors seeking to analyze such securities need to acknowledge the original face amount, its comparison to current values, and the magnitude of loan repayment in order to assess past and future performance.