Powerpoint class 10

Question 1

Major Types of Mortgage-backed Securities (MBS)

Answer 1

Mortgage-backed bonds (MBB)

Mortgage pass-through securities (MPTS)

Mortgage pay-through bonds (MPTB)

Collateralized mortgage obligations (CMO)

Question 2

Mortgage Pay-through Bonds (MPTB）

Answer 2

Hybrid securities containing elements of both MBB and MPTS

Can be viewed as an MBB with the pass-through of principal and prepayment features of an MPT

may be issued either with a coupon rate or on a zero-coupon basis

Mortgage originator holds the ownership of the mortgage pool and MPTB is a debt obligation of the issuer

Question 3

Collateralized Mortgage Obligations (CMO)

Answer 3

debt instruments (like MBBs) that are issued using a pool of mortgages for collateral

Question 4

in CMOS, who retains ownership of the mortgage pool?

Answer 4

the issuer

Question 5

amortization and prepayments in CMOs flow through whom?

Answer 5

investors

Question 6

how can , default risk be reduced in CMOs?

Answer 6

by using FHA-VA mortgages or conventional loans with private mortgage insurance

Question 7

how are CMOs issued?

Answer 7

issued in multiple classes against the same pool of mortgage

ex: different maturities

Question 8

CMO Prioritization

Answer 8

prioritizing the payment of interest and principal among the various classes of debt securities issued against the pool (tranches)

Question 9

true or false ?

A CMO can also be referred to as a multiple security class, mortgage pay-through security

Answer 9

True

A CMO can also be referred to as a multiple security class, mortgage pay-through security