Which of the following statements is false?
A)A credit enhancement of a pass-through is usually provided by posting excess collateral and/or through an insurance bond purchased by the originator.
B)With a credit enhancement, the guarantor trust stands to collect from the credit enhancer an amount to cover losses due to defaults up to a specified coverage.
C)With a credit enhancement, a pass-through instrument is free of default risk.
D)The level of enhancement coverage is determined by a credit rating agency.
E)None of the above.

Question

Quizplus · Accepted Answer

With a credit enhancement, a pass-through instrument is not entirely free of default risk. While the credit enhancement provides additional protection against defaults, there is still a possibility of default and loss.

Which of the Following Statements Is False