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1. [10 points] What happened to the jumbo-conforming spread during the 2007-09 financial crisis? Why did this occurr? What's happened more recently? 2. [10 points]

1. [10 points] What happened to the jumbo-conforming spread during the 2007-09 financial crisis? Why did this occurr? What's happened more recently? 2. [10 points] Assume that the borrowers underlying a particular fixed-rate pass-through MBS pool are all from a city where house prices unexpectedly start to decline, making it more difficult to refinance. Would this increase or decrease negative convexity on this security? Would this event make the security more or less valuable? Briefly explain

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