Non-agency mortgage pass-through securities are supported by credit enhancements such as:

Question

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Non-agency mortgage pass-through securities, which are not guaranteed by government agencies, often rely on credit enhancements to improve their attractiveness to investors. These enhancements can include corporate guarantees, pool insurance from a mortgage insurance company, a bank letter of credit, and the structuring of securities into senior/subordinated interests to distribute risk. All these mechanisms are designed to reduce the risk of default and make the securities more appealing.

Non-Agency Mortgage Pass-Through Securities Are Supported by Credit Enhancements Such