QUESTION 1 Check all potential advantages of securitization. Securitization helps remove assets from the balance sheet to maintain capital requirements Securitization provides a way to sell illiquid assets Securitization makes lenders take responsibility for the long-term stability of the loan Securitization helps diversify risk instead of holding on to a particular mortgage Securitization is great for widening the pool of investors QUESTION 2 Check all true statements about SPVs SPV stands for Special Private Vehicle SPV is set up to separate the risk of lenders and investors If the lender goes bankrupt, the investor assets within an SPV are unprotected from the bankruptcy judgement If an MBS goes bust, the lender is protected from investors' claims QUESTION 10 Given the following information on a MPT, how much money is each individual investor receiving in year 5? (Note: You can perform this calculation with the spreadsheet or by completing it iteratively.) 10 year FRM, fully amortizing, annual payments. No prepayment or default 100 loans in the pool Average starting balance of $350,000/loan Mortgage rate 5% Servicing fee of 0.5% of starting outstanding pool balance There are 40 investors with equal shares in the pool