In the chapter, the FREMF-K67 Mortgage Trust was described.

a. The weighted average loan-to-value (LTV) ratio for the 67 properties was 119.9% according to Moody’s and 115.8% according to Kroll Bond Rating Agency. Almost 58% of the loans have an LTV greater than 120%. What does this information say about the credit risk of the transaction?

b. According to Moody’s, the debt-to-service ratio for the loans with an LTV above 120% was 1.47× (i.e., the ratio of a property’s net operating income divided by the debt service was1.47). What does this information say about the credit risk of the transaction?

c. Two of the guaranteed bond classes received a triple A rating. Given your answers to parts a and b, does it seem odd that the two guaranteed bonds received a triple A rating?