Is this an error? mock pm question, correct, instead, error

hassan

question 8.
Do they mean “incorrect” in the question instead of “correct”?
THanks

Kiakaha

Really? But the answer says:
Non-amortizing assets, prior to the lockout or revolving period, principal repayments can
be either paid out to security holders or reinvested in additional loans.
where as the statement in the question is missing the “reinvested” part.
Maybe I’m just not getting the question. Can someone please explain to me why the other two statements related to the question are wrong?
Thanks!!

tarik64

Same here I think it was an error, because ok: in a non amortizing mbs the minimum payment may not be even the interest, so that one is incorrect, but the other two are correct statements.
The one about collateral, it doesnt change for an amortizing security (just for defaults or when payment is finished for a bond) but if it is for this reason it would be a very very very tricky answer
The principal payments is all correct

thisisbrianly

hey guys,
so what shuld be the question and what should be the answer then? I would say as frangoya said, the question should be asking for the incorretc statement…
Thanks,
M.

clearlycanadian

Amortizing payment: Principal and interest
Non amortizing: Interest only
Should be B

Howd

so why A and C are worng then?
M.

invic

Collateral for amortizing assets can change due to prepayments.
Lockout periods aren’t restricted only to non amortizing collateral. Your mortgage can have a prepayment lockout if the lender wants to structure it that way.