Mortgage-backed Securities

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Question 1

Free

Multiple Choice

Which one of the following is defined as bonds which represent a claim on the cash flows of an underlying pool of mortgages which flow through to bondholders?

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mortgage bonds

mortgage certificates

mortgage passthroughs

collateralized securities

mortgage collaterals

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Question 2

Free

Multiple Choice

Mortgage-backed securities are defined as securities whose investment returns are based on which one of the following?

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lease payments from the tenants of financed property

interest only on mortgage loans

loan refinancings

condominium fees

pool of mortgages

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Question 3

Free

Multiple Choice

Which one of the following terms is applied to the process of creating mortgage-backed securities from a pool of mortgages?

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mortgage aggregation

mortgage securitization

mortgage bundling

mortgage pooling

mortgage financing

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Question 4

Free

Multiple Choice

When a borrower pays a fixed monthly amount on his or her home mortgage based on a fixed rate of interest,he or she has which type of mortgage?

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prepayment-based

open-end

fixed-rate

variable-rate

floating-rate

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Question 5

Free

Multiple Choice

Which one of the following is the amount of a mortgage loan outstanding?

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mortgage remainder

mortgage face value

mortgage par value

mortgage principal

mortgage accrual

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Question 6

Multiple Choice

Which one of the following terms applies to the process of reducing the mortgage principal over the life of the mortgage according to a schedule?

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mortgage amortization

mortgage prepayment

mortgage elimination

mortgage securitization

mortgage passthrough

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Question 7

Multiple Choice

Mortgage prepayments are best defined by which one of the following?

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reducing the mortgage according to a schedule over the life of the mortgage

paying a monthly mortgage payment before the regular due date

paying off the principal faster than required by the amortization schedule

paying a cash deposit when purchasing a property

paying each mortgage payment as scheduled

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Question 8

Multiple Choice

Which one of the following is the government agency assigned the responsibility of promoting liquidity in the home mortgage market?

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FNMA

GNMA

FHLMC

SPIC

FDIC

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Question 9

Multiple Choice

Which one of the following is the type of mortgage pool that guarantees timely payment of interest and principal?

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prepaid

refinanced

secured

fully amortized

fully modified

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Question 10

Multiple Choice

Which one of the following is the risk associated with receiving a mortgage bond's principal payments sooner than anticipated?

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prepayment risk

default risk

amortized risk

market risk

seasoned risk

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Question 11

Multiple Choice

FHLMC and FNMA are government-sponsored enterprises charged with which one of the following duties?

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providing home mortgages directly to homeowners

purchasing only defaulted mortgages from banking institutions

guaranteeing mortgages with the full faith and credit of the U.S. government

providing guarantees equal to GNMA's to the home mortgage market

promoting liquidity in the home mortgage market

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Question 12

Multiple Choice

What is the probability that a mortgage will be prepaid during a given year called?

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mortgage reduction rate

amortization rate

filtration rate

prepayment rate

postponement rate

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Question 13

Multiple Choice

Seasoned mortgages are defined as mortgages that are,or have been,which of the following?

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prepackaged

resold

being paid faster than scheduled

refinanced

over 30 months old

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Question 14

Multiple Choice

Which one of the following statements correctly applies to an unseasoned mortgage?

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The mortgage is less than 30 months old.

The mortgage is still held by the original mortgage company.

The mortgage has at least one term or provision that is uncommon to most mortgages.

The mortgage has an adjustable interest rate that has not been adjusted to date.

The mortgage was obtained by a first-time home owner.

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Question 15

Multiple Choice

Which one of the following is the prepayment rate for a mortgage pool which is dependent upon the age of the mortgages comprising the pool?

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unseasoned rate

average life rate

aged payment rate

conditional prepayment rate

amortized rate

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Question 16

Multiple Choice

The average time it takes for a mortgage in a pool to be paid off is referred to as which one of the following?

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average amortized period

seasoned period

maturity life

average life

normal pool life

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Question 17

Multiple Choice

Which one of the following is the measure of interest rate risk for fixed-income securities?

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standard deviation

Macaulay duration

variance

Jensen's alpha

beta

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Question 18

Multiple Choice

The _____ duration for mortgage-backed securities is the duration measure that accounts for how mortgage prepayments are affected by changes in interest rates.

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mean

modified

average

effective

adjusted

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Question 19

Multiple Choice

What are the securities which are created by splitting the cash flows from mortgage pools according to specific allocation rules called?

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collateralized mortgage obligations

collateralized housing bonds

mortgage amortized strips

pooled mortgage obligations

secured mortgage strips

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Question 20

Multiple Choice

Interest-only strips are securities that do which one of the following?

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pay interest only at maturity

pay only the interest cash flows to investors

pay interest over the life of the security and the entire principal at maturity

pay interest only when requested by the holder with all remaining amounts paid at maturity

pay interest monthly and principal quarterly

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