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| 1 | |
______________ are specialized investment funds established to invest in distressed loans. |
| | A) | IOs |
| | B) | POs |
| | C) | CMOs |
| | D) | Vulture funds |
| | E) | Mutual funds |
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| 2 | |
_____________ refers to the incentive for sellers of loans to offload their "bad" loans, while retaining their "good" ones. |
| | A) | Country risk |
| | B) | Moral hazard |
| | C) | Exchange rate risk |
| | D) | Securitization |
| | E) | Collateralizing |
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| 3 | |
In 2007 and 2008, mortgage delinquencies and foreclosures increased, leading to: |
| | A) | a collapse in the value of mortgage backed securities. |
| | B) | a substantial jump in mortgage securitizations. |
| | C) | an increase in lending by financial institutions. |
| | D) | lower interest rates being offered on new mortgage loans. |
| | E) | (b) and (c). |
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| 4 | |
The major government-sponsored agencies involved in securitization of home mortgage loans are: |
| | A) | GNMA |
| | B) | FNMA |
| | C) | FHLMC |
| | D) | All of the above |
| | E) | b and c |
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| 5 | |
A/an ________________ is similar to a "pass through" security, but it assigns different combinations of risk and return to various investor groups. |
| | A) | HLT loan |
| | B) | bank loan sale |
| | C) | CMO |
| | D) | vulture fund |
| | E) | loan participation |
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| 6 | |
One type of loan sale is a ________________. No new securities are created, and the buyer is not a party to the underlying credit agreement. The buyer has limited control over contractual terms. |
| | A) | LDC loan |
| | B) | loan participation |
| | C) | vulture fund |
| | D) | Brady bond |
| | E) | CMO |
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| 7 | |
"Ginnie Mae" is known for providing: |
| | A) | timing insurance, on interest and principal payments of mortgage securities. |
| | B) | deposit insurance. |
| | C) | loans to lesser developed countries. |
| | D) | subsidizing the low-income sector of the home market. |
| | E) | insuring against fraudulent conveyance. |
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| 8 | |
The Government National Mortgage Association is well known for its role in producing: |
| | A) | LDC loans |
| | B) | Brady bonds |
| | C) | zero coupon bonds |
| | D) | vulture funds |
| | E) | pass through securities |
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| 9 | |
One type of loan sale is known as a/an ______________, where all rights are transferred to the loan buyer, who will have a direct claim against the borrower. |
| | A) | assignment |
| | B) | revolving credit agreement |
| | C) | pass through |
| | D) | participation |
| | E) | securitization |
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| 10 | |
Loan securitizations have occurred for: |
| | A) | automobile loans |
| | B) | credit card receivables |
| | C) | mortgage loans |
| | D) | all of the above |
| | E) | (b) and (c) |
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| 11 | |
Suppose mortgages are pooled and pass-through securities are created. Then, purchasers of the pass-through securities use them as the collateral for CMO creation. Such as scenario has been characterized as: |
| | A) | an IO strip |
| | B) | a PO strip |
| | C) | double securitization |
| | D) | a zero coupon security |
| | E) | a Z-class security |
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| 12 | |
Assume that New Bank's risk-based capital requirement is 8%, and that mortgage loans are in the 50 percent risk weight category for capital regulation purposes. New Bank has $30 million in home mortgage loans. What amount of
capital must the bank maintain, against this portfolio of mortgages? |
| | A) | $2,400,000 |
| | B) | $0 |
| | C) | $172,671 |
| | D) | $86,335 |
| | E) | $1,200,000 |
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| 13 | |
A significant part of ______________ entails small banks selling off parts of their larger loans to bigger banks. |
| | A) | correspondent banking |
| | B) | securitization |
| | C) | vulture fund activities |
| | D) | the commercial paper market |
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| 14 | |
In the loan sale market, a bank buying a/an __________________ faces risks from the borrower as well as from the original lending institution. |
| | A) | commercial paper |
| | B) | loan participation |
| | C) | corporate bond |
| | D) | closed end bank loan mutual fund |
| | E) | Brady bond |
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| 15 | |
The propensity of mortgage borrowers to _______________________ means that
realized cash flows on pass-through securities can deviate from the stated coupon flows. |
| | A) | borrow more than their homes are worth |
| | B) | make large down payments |
| | C) | prepay their mortgages |
| | D) | let their homes depreciate in value |
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| 16 | |
With a _________________bond, mortgage loans are serving as collateral for the bond, but the bond's interest and principal payments are not necessarily directly connected to the mortgage payments. |
| | A) | U.S. Treasury |
| | B) | corporate |
| | C) | highly leveraged |
| | D) | pass through |
| | E) | mortgage backed |
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| 17 | |
One particular kind of CMO is the "mortgage pass-through strip." It has just two classes of securities, known as the: |
| | A) | "portfolio-only" and "individual-only" |
| | B) | "principal-only" and "interest-only" |
| | C) | "principal-only" and "income-only" |
| | D) | "payment-only" and "interest-only" |
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| 18 | |
Some mortgage securitization structures have multiple classes, including a last regular class known as a/an ___________ class. Owners of this class do not receive interest or principal until all other classes have been retired. |
| | A) | IO |
| | B) | PO |
| | C) | participation |
| | D) | distressed |
| | E) | Z |
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