- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 45. Introduction to Asset-Backed Securities
- Subject 4. Mortgage Pass-Through Securities
CFA Practice Question
Which of the following statements is the LEAST accurate with respect to the various forms of mortgage-backed securities?
A. Agency securities only use conforming mortgages.
B. Nonagency mortgage passthrough securities are usually issued by commercial banks. They use nonconforming mortgages as collateral.
C. Size is not a criteria for making a mortgage conforming.
Explanation: The size of a mortgage is a criteria for making the mortgage conforming. In particular. Only loans up to a certain size may be included in conforming pools.
User Contributed Comments 3
| User | Comment |
|---|---|
| rhardin | So nonagencies use only nonconforming mortgages and agencies use only conforming? That sounds backwards to me. Can someone explain how this is the case? Thanks! |
| tim2 | seems ok, see wikipedia for "non conforming mortage" |
| ars2011 | agencies will only back securities which meet some underwriting standards which is the case only with conforming mortgages |