In the modern framework of home mortgage lending, there are four channels by which first mortgage home loans are created. Within which of the following channels would you typically find a Wall Street investment bank obtaining loans, pooling loans, and creating a senior-subordinate security structure?

Question

Quizplus · Accepted Answer

Nonconforming conventional loan securitization is the channel where Wall Street investment banks typically obtain loans, pool them, and create a senior-subordinate security structure. Nonconforming loans are those that do not meet the eligibility criteria for sale to Fannie Mae or Freddie Mac, and therefore cannot be securitized through the conforming conventional loan channel. Instead, these loans are typically securitized through private label securitization, which is a process dominated by investment banks. Therefore, option D is the correct answer.

In the Modern Framework of Home Mortgage Lending, There Are