General Securities Representative (Series 7) Practice Exam 2025 - Free Series 7 Practice Questions and Study Guide

The correct answer is the "GNMA/FNMA pass-through certificates." These certificates represent an undivided pool of mortgage-backed, interest-bearing securities that are issued by government-sponsored enterprises like Ginnie Mae (GNMA) and Fannie Mae (FNMA).

When mortgages are pooled together into these certificates, investors buy shares in the pool, receiving regular payments that reflect the interest and principal payments made by homeowners. This structure allows for more liquidity and diversification in a stable investment product. Since these pass-through certificates are secured by the underlying mortgage loans, they provide a measure of safety as well.

The other options do not represent an undivided pool of mortgage-backed securities in the same way. FHA certificates are related to federal housing programs but not specifically to a pool of mortgage-backed securities. Real Estate Investment Trusts (REITs) involve investing in real estate markets rather than pooling individual mortgage payments for securities. Lastly, Collateralized Debt Obligations (CDOs) are complex financial instruments that bundle various types of debt, not specifically focused on mortgage-backed securities. Thus, the GNMA/FNMA pass-through certificates accurately describe a direct investment in a pooled mortgage-backed security.