Which of the following is CORRECT?

a.

All else equal, once a mortgage pool has aged, prior prepayments of mortgages in the pool have no bearing on the current value of the pool or the future prepayment rates of mortgages left in the pool.

b.

Most mortgage-backed bond issues conducted by depository institutions are under-collateralized

c.

A bad news effect of increased mortgage prepayments on a mortgage pool caused by decreasing market interest rates includes a reduction in the discount rate on the mortgage cash flow

d.

A good news effect of increased mortgage prepayments on a mortgage pool caused by decreasing market interest rates includes the receipt of fewer scheduled interest payments

e.

Mortgage-backed bonds differ from Collateralized Mortgage Obligations (CMOs) and pass-through securities in that there is no direct link between the cash flows on the mortgages and the interest and principal payments on the bonds