PRINCIPLES OF REAL ESTATE

Q1(a). What is the difference between a Mortgage Backed Security and a Collateralized Debt Obligation? Explain with reference to the source of the funds from which investors will be repaid.

Q1(b). What is a tranche and how did to help make Mortgage Backed Securities comprised of risky subprime loans a more attractive investment?

Q1(c). The quasi-governmental agencies Fannie Mae and Freddie Mac were established to make residential home mortgages available to the average consumer.

In class, we discussed three reasons why banks didnt like making these kinds of loans on their own.

List and briefly discuss two of those reasons.