Practice Test Geeks(CMA) Certified Mortgage Advisor Practice Test
← All CMA Flashcard Decks

Mortgage-Backed Securities Overview Flashcards

7 cards from real CMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Mortgage-Backed Securities Overview flashcards as text

  1. What does the PSA prepayment model assume about prepayment speeds in the first 30 months of a mortgage pool?

    Answer: Prepayments ramp up from 0% CPR to 6% CPR linearly

    The PSA standard model assumes prepayments ramp up at 0.2% CPR per month for 30 months until reaching 6% CPR, then remain constant.

  2. Which type of MBS pools only adjustable-rate mortgages?

    Answer: ARM MBS

    ARM MBS (Adjustable-Rate MBS) are securitizations backed exclusively by adjustable-rate mortgage loans.

  3. In the TBA (To-Be-Announced) market, what is typically settled on trade settlement date?

    Answer: The specific pool identifiers, face value, and price

    At TBA settlement, the seller announces the specific pool(s) — including CUSIP, face value, and price — that will be delivered to fulfill the forward trade.

  4. What is the effect of negative convexity on an MBS investment when interest rates fall sharply?

    Answer: Price increases less than expected due to prepayments

    Negative convexity causes MBS prices to lag Treasury price gains when rates fall sharply, because accelerating prepayments cap the upside.

  5. Which CMO tranche receives no periodic interest payments but is sold at a deep discount and accretes to par?

    Answer: Z-tranche (accrual bond)

    The Z-tranche accrues interest that is added to principal balance until all preceding tranches are retired, then receives full cash flows.

  6. What is the primary difference between Fannie Mae MBS and Ginnie Mae MBS regarding credit risk?

    Answer: Ginnie Mae MBS carry explicit U.S. government guarantee; Fannie Mae MBS carry only GSE guarantee

    Ginnie Mae's guarantee is backed by the full faith and credit of the U.S. government, while Fannie Mae's guarantee is a GSE obligation without direct Treasury backing.

  7. When analyzing MBS, what does the option-adjusted spread (OAS) measure?

    Answer: The spread over Treasuries after removing the value of embedded prepayment options

    OAS isolates the credit and liquidity spread of an MBS by stripping out the value of the borrower's embedded prepayment option.