Agency Mortgage pass through securities

Question 1

Two sectors of the residential Mortgage Market based on credit

Answer 1

Prime mortgage market
subprime mortgage market

Question 2

Prime sector includes

Answer 2

loans that satisfy the underwriting standard of Agencies
loans that fail to conform for a reason other than credit quality

Question 3

Sub prime includes

Answer 3

loans provided to borrowers with an impaired credit rating or where the loan is a second lien

Question 4

PSA committee examined seemed to suggest that mortgages became seasoned

Answer 4

) after 30 months and the CPR tended to be 6%.

Question 5

If mortgage rates rise and you own a pass through(extension risk)

Answer 5

like the price of any bond, will decline it will decline more because lack of prepayments and will slow down rt of payment just when you and the money to invest at a higher rate

Question 6

What is a mortgage Pass through

Answer 6

one type of RMBS created when one or more mortgage holders of loans pool them and sell a single debt obligation that is to be repaid from the cash flow of the specific loan pool with each investor entitled to a pro rata share of the cash flow.