Exam 26: Securitization

One hundred identical mortgages are pooled together into a pass-through security. Each mortgage has a $150,000 principal, a fixed annual interest rate of 8 percent (paid monthly), and is fully amortized over a term of 30 years. -What is the monthly payment on the mortgage pass-through if a 44 basis point servicing fee is deducted monthly?

The underlying GNMA 15-year mortgage pool has a principal amount of $50 million and an annual yield of 6 percent (paid monthly). Assume that there are no prepayments. -What is the first monthly payment on the Principal Only (PO) strip?

All else equal, advantages of a DI operating as an asset broker in regard to mortgages includes all of the following EXCEPT

FNMA supports only those pools of mortgages that comprise mortgage loans whose default or credit risk is insured by one of three government agencies.

GNMA pass-through bondholders can be protected against default risk by FHA/VA housing insurance.

An FI funds a $5 million residential mortgage in 2012 by allocating capital and by issuing demand deposits. The mortgage represents a loan-to-value of 70 percent. The demand deposits have a reserve requirement of 10 percent and a deposit insurance premium of 23 basis points. -What is the deposit insurance premium on the demand deposits issued to fund the mortgage?

Historically, FNMA has had a secured line of credit with the U.S. Treasury.

The following information is for a collateralized mortgage obligation (CMO). Tranche A has a face value of $110 million and pays 5 percent annually. Tranche B has a face value of $90 million and pays 7 percent annually. -If at the end of the first year, the CMO trustee receives total cash flows of $15 million, how are they distributed?

GNMA helps create pass-through asset-backed securities by providing timing insurance.

Mortgage-backed bonds (MBB) differ from pass-throughs and CMOs in which of the following ways?

One advantage of asset securitization to a bank is the ability to originate new assets before the original assets have matured.

Depository institutions have followed and originate-to-distribute model of loan origination only since the Financial Services Modernization Act of 1999.

GNMA is more active in the market for mortgage pass-through securities than either FNMA or FHLMC.

Which of the following factors occurred in the early 2000s and created concerns about the ability of Fannie Mae and Freddie Mac to manage their portfolios of assets?

Which of the following are functions of GNMA?

An FI funds a $5 million residential mortgage in 2012 by allocating capital and by issuing demand deposits. The mortgage represents a loan-to-value of 70 percent. The demand deposits have a reserve requirement of 10 percent and a deposit insurance premium of 23 basis points. -What would have been the capital requirements if the FI had securitized the mortgage?

On September 7, 2008, FNMA and FHLMC were placed under conservatorship and both are controlled by a federal government agency.

A principal-only (PO) mortgage pass-through strip security is attractive to investors that wish to increase the interest rate sensitivity of their portfolio.

A claim to the present value of the interest payments made by the mortgage holders in a GNMA pool is

A bad news effect of increased mortgage prepayments on a mortgage pool caused by decreasing market interest rates includes a reduction in the discount rate on the mortgage cash flow.