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    Advantages/Disadvanages to Mortgage Bonds

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    What are the advantages to investing in mortgage bonds? What are the disadvantages? Would you personally invest in mortgage bonds? What kind would you pick and why?

    What are some of the key variables affecting interest rates to watch in the upcoming months?

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    Solution Preview

    I found the following:

    "Mortgage-backed securities, also called mortgage-backed bonds, are pools of real estate mortgages that have been securitized by the issuer, and sold to investors. Based on securitized mortgage contracts, known as pooling and servicing agreements, these mortgage pools consist of particular classes of mortgages in regard to interest rate, maturity, and type of property. Usually, the bank that originated the mortgage also services the loan, for which it continues to deduct a small ...

    Solution Summary

    The solution goes into a discussion of mortgage bonds. It starts with a thorough description of what one is, and then provides some brief comments designed to get the student to think critically about what the advantages or disadvantages are over time, and what factors influence interest rates.