What is the difference between a cash-out refinancing and a rate-and-term refinancing?
Answer to relevant QuestionsWhat are the front ratio and back ratio, and how do they differ? Answer the below questions. a. Explain what is meant by a residential mortgage-backed security. b. Describe the sectors of the residential mortgage-backed securities market. Complete the following table (in thousands of dollars) assuming a prepayment rate of 165 PSA: Original balance: $ 100,000,000 Pass-through rate: 9.0% WAM: 360 months Answer the below questions. (b) What are contraction risk and extension risk? (c)Why would a pass-through with a WAM of 350 months be an unattractive investment for a savings and loan association? How does a CMO alter the cash flow from mortgages so as to shift the prepayment risk across various classes of bondholders?
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