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Question No 1

Many companies have developed an asset/liability management approach that is founded on understanding product liabilities. Mortgages meet the primary objective of maintaining:

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A tight asset/liability match

A well - diversified core of investments

A tight asset/liability match with a well - diversified core of investments.

Real estate lending by insurance companies

Question No 2

___________ is an amount of money, loaned at interest for a specified term, secured by real estate and by its improvements such as buildings and infrastructure. This form of instrument itself varies by jurisdiction, but the debt is always evidenced by an accompanying promissory note.

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Question No 3

Prepayment of a conventional mortgage loan, prior to its specified maturity, is discouraged through the general market acceptance of significant prepayment penalties. Often these penalties are calculated so that when prevailing market interest rates are:

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Lower than the rate on the loan being repaid the borrower has to make up the interest rate differential and the lender is essentially “made whole” for a potential loss of interest.

Greater than the rate on the loan being repaid the borrower has to make up the interest rate differential and the lender is essentially “made whole” for a potential loss of interest.

Equal to the rate on the loan being repaid the borrower has to make up the interest rate differential and the lender is essentially “made whole” for a potential loss of interest.

Lower than the rate of interest being paid to the borrower has to make up the interest rate differential and the lender is essentially “made whole” for a potential loss of interest.

Question No 4

These are securities whose underlying assets consist of commercial mortgage loans. The commercial loans are pooled, which brings diversification and liquidity to the asset class. What are these?

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Question No 5

There are many different sources of CMBS. Conduits and aggregate pools generally consist of loans newly originated, purchased or held by investment bankers until the pool is large enough for an efficient execution. Government agencies such as the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corp. (FHLMC) are important sources of:

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