If a mortgage home lender has the resources and is sizeable enough, can it securitize its own pool of loans into MBS and sell them to wall street?
A loan is perceived as a revenue-generating tool for the bank, credit union and other financial institutions. A loan is required to fulfil the requirements of the funds by the borrower. Financial institutions impose interest on a loan.
Answer and Explanation:
Yes, a lender can securitize the pool of loan, to securitized the pool of loan the lender is required to sell it to investment bank who will merge or pool it with the similar type of loan. After this pool of loan transferred to special purpose vehicle firm to sell it in the secondary market as a mortgage-backed security.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
from Corporate Finance: Help & ReviewChapter 12 / Lesson 1