1. Use online search to find out the requirements set by Fannie Mae for a conforming loan (also known as agency loan or conventional loan).

In your answer, provide two such requirements.

In addition, find out the loan limits (i.e., the largest amount you can borrow to qualify for a conforming loan). Note that this limit depends on the number of units in the property.

2. In the lecture, I mentioned Fannie and Freddie as the examples of MBS issuers. Another important agency is Ginnie Mae (Government National Mortgage Association).

Use the scanned book pages to find out two differences between Ginnie and Fannie. (Fannie and Freddie are very similar.)

3. Consider the following mortgage pool: Mortgage#1 15-year 4% annual interest rate with $0.5m principle; Mortgage #2 30-year 3.5% annual interest rate with $0.8m principle; Mortgage #3 15-year 5% annual interest rate with $1m principle.

All three mortgages are just initiated, so they all have their full terms left.

Suppose this pool is divided into 50 "shares". Calculate the monthly cash flow received for owning each share. The actual amount received by end-investors is going to be lower than the theoretical value you calculate. Briefly explain Why.