Mortgage-Backed Securities Market

This question tests whether a candidate understands how mortgage cash flows are transformed into tradable securities, from the transfer of loans into a special purpose vehicle to the issuance of bonds backed by those loans. It also checks familiarity with the basic flow of principal and interest from borrowers to investors, which is a core concept in securitization and structured products. Interviewers ask this because mortgage-backed securities are an important part of fixed income markets and a common example of how banks package, fund, and distribute credit risk across investors. Understanding this market helps candidates discuss market size, funding mechanics, and the role of securitization in capital markets.