Investors in GNMA pass-through securities are exposed to the risk that the originating bank may fail, and the risk that the trustee may mismanage monthly interest and principal payments collected.

Question

Quizplus · Accepted Answer

GNMA pass-through securities are backed by the full faith and credit of the U.S. government, which mitigates the risk of the originating bank failing. Additionally, the role of the trustee in managing payments is structured to ensure the proper handling of interest and principal payments, reducing the risk of mismanagement.

Investors in GNMA Pass-Through Securities Are Exposed to the Risk