Which of the following are correct regarding Mortgage-backed securities?
I.Interest only passes through to the investor.
II.Invest in a pool of mortgage loans.
III.Principal only passes through to the investor.
IV.Referred to as a pass-through security.

Question

Quizplus · Accepted Answer

Mortgage-backed securities invest in a pool of mortgage loans and are referred to as pass-through securities, meaning that both principal and interest payments are passed through to the investor. Therefore, statements I and III are incorrect. Statement II is correct and statement IV is also correct.

Which of the Following Are Correct Regarding Mortgage-Backed Securities