Local banks could pass the risk involved in holding mortgage debts on to an investor with a higher risk tolerance using:

Question

Quizplus · Accepted Answer

Local banks can use mortgage-backed securities to pass on the risk involved in holding mortgage debts to investors who have a higher risk tolerance. These securities are created by pooling together multiple mortgages and then dividing the pool into smaller pieces that are sold to investors. The investors receive the payments from the mortgages and thus assume the risk associated with them, while the bank gets rid of the risk and receives cash in exchange.

Local Banks Could Pass the Risk Involved in Holding Mortgage