What is the difference between a private-label and subprime mortgage-backed security? Be sure to mention how they differ in terms of credit enhancement.
Answer to relevant QuestionsWhat is the concern with the inclusion of fixed-rate mortgage loans in the collateral pool when the liabilities are floating rate? How can excess spread be a form of credit enhancement? Explain why commercial mortgage-backed securities do not trade like residential mortgage-backed securities in the market. Why might an investor be skeptical about the loan-to-value ratio for a commercial mortgage loan? What is the limitation of a third-party guarantee as a form of credit enhancement?
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