Mortgage-Backed Bonds (MBB) Differ from Pass-Throughs and Collateralised Mortgage Obligations

question 3

Multiple Choice

Mortgage-backed bonds (MBB) differ from pass-throughs and collateralised mortgage obligations (CMOs) in which of the following ways?

• A)The MBB bondholders have a junior claim to assets of the FI.
• B)There is no direct link between the cash flow on the mortgages backing the bond and the interest and principal payments on the MBB.
• C)The assets backing a MBB issue are normally removed from the balance sheet of the FI.
• D)Tranches of a MBB are treated equally with respect to prepayments on mortgages backing the bond issue.

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