In a discussion of the CMO market, the popular press sometimes refers to this sector of the mortgage-backed securities market as the riskiest sector and the pass-through sector as the safest sector. Comment.
Answer to relevant QuestionsExplain the effect on the average lives of sequential-pay structures of including an accrual tranche in a CMO structure. Answer the below questions. a. Why is it necessary for a nonagency mortgage-backed security to have credit enhancement? b. Who determines the amount of credit enhancement needed? When will a mortgage servicer not advance payments for principal and interest? Answer the below questions. a. At one time, prime and subprime RMBS were traded in separate markets. Why? b. Why after 2007 are prime and subprime RMBS treated as one asset type? Explain why commercial mortgage-backed securities do not trade like residential mortgage-backed securities in the market.
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