Mortgage-backed bonds (MBB)differ from pass-through and CMOs in which of the following ways?

Question

Quizplus · Accepted Answer

Unlike pass-through and CMOs, there is no direct link between the cash flow on the mortgages backing the bond and the interest and principal payments on the MBB. MBB bondholders have a senior claim to assets of the FI, and tranches of a MBB may be treated differently with respect to prepayments on mortgages backing the bond issue. The assets backing a MBB issue may or may not be removed from the balance sheet of the FI, depending on the structure of the bond.

Mortgage-Backed Bonds (MBB)differ from Pass-Through and CMOs in Which of the Following