What type of security is created when mortgage loans are pooled together and sold to investors?
Correct Answer
A) Mortgage-backed securities (MBS)
Mortgage-backed securities (MBS) are created when multiple mortgage loans are pooled together and sold as securities to investors, allowing the cash flows from the underlying mortgages to be passed through to investors.
Why This Is the Correct Answer
Mortgage-backed securities (MBS) are created when multiple mortgage loans are pooled together and sold as securities to investors, allowing the cash flows from the underlying mortgages to be passed through to investors.
More Mortgage Knowledge Questions
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A borrower asks about the difference between discount points and origination fees. What is the most accurate explanation?
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Previous Question
A borrower is comparing two loan offers: Loan A has no points and 4.5% interest rate, Loan B has 2 points and 4.0% interest rate. The loan amount is $400,000. How much will the borrower pay upfront for the points on Loan B?
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