Answer:

1. Prepayment (call) and extension risks are of concern to investors because of their impact on mortgage valuations. Unlike noncallable bonds, which increase in value at an increasing rate when yields fall and decrease in value at a decreasing rate when yields rise, mortgage portfolios increase in value at a decreasing rate when yields fall.

2. potential buyers of mortgage debt could not afford to asses the credit-worthiness of every mortgaged homeowner, but many people could afford to assess the worth of gov't debt securities. more people are willing to buy mortgage debt instruments in the secondary market is they are insured

3. Many mortgage-backed securities have characteristics similar to government bonds. Pass-throughs, participation certificates, and collateralized mortgage obligations are sold in even denominations. Also, because they are guaranteed, they can be resold easily if desired. Further, mortgage-backed bonds and CMOs not only are of standard denomination, these also provide guaranteed repayment schedules. Thus, as such securities gain more characteristics of bonds, they become more readily interchangeable with bonds in investors' portfolios. As a result, they can compete more effectively with bonds for investors' fund

4. Mortgages can be defined as the loans that are secured by real estate. The bonds are debt securities that are issued by the corporations to finance their business operations and projects. The secondary market for the mortgages enables the transfer of mortgages from one market participant to another market participant. Under this the secondary market acts as a platform wherein mortgage funds flows from investors to the needy home buyers. In secondary market for bonds, the bonds can be traded between different bond traders and it helps in providing liquidity. There are investors who wish to buy bonds as and when there is fall in the level of interest rates as well as there are those investors who purchase bonds to derive fixed interest income. The major players in mortgage secondary markets are home buyers, financial institutions and government sponsored enterprises that facilitate mortgage transfers between the participants. In US, the role of government sponsored enterprises are played by GNMA and FNMA. GNMA stands for Government national mortgage association and FNMA stands for federal national mortgage association. In case of bond markets, the market participants are market makers such as dealers, bond traders and investors. Hence The secondary market for the mortgages are to be segmented from secondary markets for bonds as both mortgages and bonds are different financial products or innovations.