1. Which of the following statements is most likely correct?
Statement 1: Securitization is beneficial for banks because it allows banks to maintain ownership of their securitized assets.
Statement 2: Securitization is beneficial for banks because it increases the funds available for banks to lend.
A. Statement 1.
B. Statement 2.
C. Neither of them.
2. Frank Smith obtains a recourse mortgage loan for $300,000. One year later, when the outstanding balance of the mortgage is $290,000, Frank cannot make his mortgage payments and defaults on the loan. The lender forecloses the loan and sells the house for $250,000.
What amount is the lender entitled to claim from Frank?
3. Which of the following is an important consideration of non-agency residential mortgage-backed security (RMBS) as compared to an agency RMBS?
A. Credit risk.
B. Extension risk.
C. Contraction risk.
The next topic is – R55 Fundamentals of Credit Analysis.