Exam 27: Securitization

Overseas bank is pooling 50 similar and fully amortized mortgages into a pass-through security.The face value of each mortgage is $100,000 paying 180 monthly interest and principal payments at a fixed rate of 9 percent per annum. What is the market (present) value of the mortgage pass-through to the investor if the interest rates on this risk category of securities decrease to 7 percent? (Note that investors receive payments net of the 50 basis points servicing fees.)

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 Interest Only (IO) strip?

Which of the following is the more traditional form of off-balance sheet subsidiary for removing loans from the FIs balance sheet?

Full amortization of a thirty-year fixed rate mortgage means that monthly payments are equal and include both principal and interest.

GNMA pass-throughs can assist an FI in resolving duration mismatch and illiquidity risk problems.

The life span of an SPV (Special Purpose Vehicle) is limited to

Which of the following assets have not been securitized by FIs?

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 life of a Structured Investment Vehicle (SIV) is not tied to any particular asset class that it is responsible for securitizing.

The securities that form a GNMA pass-through are U.S.Treasury bonds, bills, and notes.

Overseas bank is pooling 50 similar and fully amortized mortgages into a pass-through security.The face value of each mortgage is $100,000 paying 180 monthly interest and principal payments at a fixed rate of 9 percent per annum. For the first monthly payment, what are the interest and principal portions of the payment?

The following information is for a collateralized mortgage obligation (CMO).Tranche A has a face value of $50 million and pays 6 percent annually.Tranche B has a face value of $50 million and pays 8 percent annually.All mortgages have maturities of 30 years. If at the end of the first year, the trustee of the CMO receives total cash flows of $10 million, how are they distributed to Tranche A and B, respectively?

Certificates of Amortizing Revolving Debts are asset-backed securities that have a claim on automobile installment loans.

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

Which of the following is an incentive to securitize mortgage assets?

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

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

The Government National Mortgage Association

Why are the regular GNMA pass-throughs not very attractive to insurance companies and pension funds seeking long-term duration assets to match their long-term duration liabilities?

This is an accrual class of a CMO that makes a payment to bondholders only when preceding CMO classes have been retired.