ARE144_chap_19_bf13ed_v2 - efficiency as it relates to...

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1 Managerial Economics (ARE) 144 University of California, Davis Instructor: John H. Constantine Handout: Chapter 19, The Secondary Mortgage Market: Pass-Through Securities (1) What is the secondary mortgage market? List three reasons why it is important. (2) What were the three principal activities of FNMA under its 1954 charter? What is its principal function now? (3) Name two ways that FNMA currently finances its secondary mortgage operations. (4) When did GNMA come into existence? What was its original function? What is its main function now? (5) Why was the formation of FHLMC so important? (6) What is a mortgage-related security? What are the similarities and differences between mortgage securities and corporate bonds? (7) There are several ways that mortgages can be sold in the secondary market. Choose two and compare and contrast their length of distribution channel, relative ease of transaction, and
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Unformatted text preview: efficiency as it relates to maximizing funds flow from sale. (8) Name five important characteristics of mortgage pools. Tell why each is important. (9) In general, would a falling rate of market interest cause the price of an MPT security to increase or decrease? Would the increase or decrease be greater if the security was issued at a discount? Would an increase in prepayment be likely or unlikely? Describe with an example. (10) Describe the basic activities of Fannie Mae in the secondary mortgage market. How are these activities financed? (11) Explain the importance of Fannie Mae and Freddie Mac to the housing finance system in the United States. (12) What is a CMO? Explain why a CMO has been called as much of a marketing innovation as a financial innovation. (13) What is the major difference between a CMO and the other types of mortgage-related securities? (14) Why are CMOs overcollateralized?...
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This note was uploaded on 03/14/2012 for the course ARE 144 taught by Professor Johnson,e during the Spring '08 term at UC Davis.

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