- Which of the following best describes the relationship between the MBS passthrough and CMO and an ABS paythrough? An ABS paythrough structure is: A) created directly from the underlying loans unlike the way a CMO is created from an MBS passthrough. B) similar to an MBS passthrough security except when using non-agency-based mortgages as collateral. C) created from an ABS passthrough structure in the same way a CMO is created from an MBS passthrough. D) created from an ABS passthrough structure unlike the way a CMO is created directly from the underlying mortgages. 2. Which of the following statements most accurately describes the difference, if any, in prepayment characteristics of auto loans versus mortgages? Prepayments on auto loans: A) occur frequently, but are rarely affected by refinancing. B) rarely occur, since auto loans traditionally have short maturities and low interest rates. C) are more sensitive to interest-rate changes than mortgage prepayments. D) are affected by the same factors as mortgage prepayments. T/G
Wow, the first one I am having trouble on: C? B
1…C maybe?? 2.B
Q1. C. ABS paythrough are created from an ABS passthrough LIKE CMO is created from an MBS passthrough Q2. B
A, A Changed the second to A after seeing NG’s post.
A i think and A for sure. saw these awhile back though.
disptra and ng30 nailed it 1. The correct answer was A) created directly from the underlying loans unlike the way a CMO is created from an MBS passthrough. A CMO is a paythrough structure. A pool of passthrough securities serves as collateral for CMO paythrough securities. In the ABS market, once the loans are pooled, either passthrough or paythrough securities may be issued – it is not necessary to first create passthroughs when creating a paythrough structure for an ABS. 2. The correct answer was A) occur frequently, but are rarely affected by refinancing. Car loans tend to balances that are small enough so that the benefits from refinancing are small. Auto-loan prepayments occur whenever a car is sold, traded in, or wrecked—all of which are relatively frequent occurrences. Auto loans are less sensitive to interest rates than mortgage loans because of the relatively short maturities and smaller principal amounts. Consequently, they are not affected by all the same underlying factors as mortgage loans. T/G
2nd one is a b/c people are constantly trading in cars, wrecking them, stealing them, etc. so lots of prepayments b/c loan’s gettting paid off then. people rarely refinance auto loans, although i did once.
I’ll go with A,A. Which may be where I am headed anyway.
Dang, this is my best section too… Just dumb mistakes and not reading carefully… Auto loans don’t necessarily have low interest rates, in fact they can be very high… and on the first one, I guess I don’t quite understand the difference between paythrough and passthrough.
Good one GOD! … at such a rate of 0/2 I hope I have your blessings for 7th