Welcome to the MBS pre-test. Please fill out the fields below and answer the following questions using only your current knowledge! Feel free to add any other questions, comments, or feedback that you would like to discuss at the class. 1.   If an equity is proof of ownership than a bond is proof of: Investment Debt Ownership Debenture None of the above 2.  Mortgage-backed Securities are referred to as _____________ securities: Institutional Fixed Income Governmental Derivative None of the above 3. Residential mortgage-backed securities include: Single family homes Multi family homes Mobile Homes All of the above None of the above 4.  Collateralized mortgage obligation are: Mortgages collateralized into tranches Special purpose vehicles The rules that dictate the deal The collateralized structures All of the above 5.  A stripped mortgage means that a mortgage: Is no longer required to be paid down Has been taken from a foreclosed loan Has been separated into principle and interest pay downs Is no longer registered with the Fed Wire system None of the above 6. Because of a change in the Tax Reform Act of 1986 income earned by investors in REMICS is tax exempt thus making them such attractive investments. True False 7.  A Fannie Mae mortgage that is issued in excess of set limits is known as a: Jumbo Balloon Mega Gold None of the above 8.  A Ginnie Mae mortgage-backed security that has multiple issuers is known as a: Jumbo Balloon Mega Gold None of the above 9.  Which of the following agencies are guaranteed by the United States government? Fannie Mae Freddie Mac Ginnie Mae All of the above None of the above 10.  In a third party transaction, all of the seller’s performance obligations to a buyer that arise out of a single transaction are transferred from the seller to the third party assignee. True False 11.   Jumbo mortgages are less risky for lenders because they are issued on luxury homes that are very valuable collateral. True False 12.   Servicers garner a fee of _____________ for their services to the MBS industry. $.05 per origination 44 bps per payment $1.380 $30 per pool None of the above 13.        There is a yield premium on government bonds when compared to MBS because of the certainty of payment of government bonds. True False 14.   The average maturity expectations for MBS is approximately: 2 years 8 years 16 years 30 years 35 years 15.   Contraction risk will affect the performance of MBS investments because homeowners will increase prepays as interest rates decline, forcing the holder to reinvest at a lower rate. True False 16. “TBA” in the MBS lexicon stands for: Trade based algorithm To be announced Technical buy analysis Terminal based allocation None of the above 17. Alt-A rated pools are pools rated between prime and sub-prime because the: Borrowers do not have a high enough credit rating but have sufficient funds Borrowers have prime credits ratings but no money Borrowers are prime borrowers but lack proper documentation The property are vacation homes only None of the above. 18. WAC, WALA and WAM are measures that refer to: Pools TBA Mortgages MBS Trades Mortgages None of the above 19.  The regulator of the MBS industry is: The Securities and Exchange Commission The Federal Home Loan Bank The Securities Industry Association The Office of the Comptroller of the Currency None of the above 20. The process of sellers notifying buyers of what pools they will deliver to them is known as: Pooling Settlement Allocation Clearance None of the above 21.   In the course of trading, firms may often provide collateral to an intermediary to mitigate risk on the current market value of an investment versus the settlement value of its trade.  This collateral is referred to as: Vigorish Overround Hedge Margin None of the above 22. When a broker of a trade finally reveals the identity of both trading entities it is referred to as the: Peek Give-up Open kimono Knowing None of the above

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