Real Estate Investment (Securities)

In each of the following circle True or False, and then write a short sentence that explains the basis for your answer. a) The prepayment rates on commercial mortgages tend to be much lower than the prepayment rates on residential mortgages because commercial mortgages usually impose a higher cost on a prepaying borrower. True or False Explanation: Write your answer in your spreadsheet. b) Everything else being equal, a commercial mortgage with a lower LTV ratio is more likely to default than a similar mortgage with a higher LTV ratio. True or False Explanation: Write your answer in your spreadsheet. c) In the senior-subordinated structure of a non-agency MBS, BBB tranche typically has a shorter maturity than AAA tranche. True or False. Explanation: Write your answer in your spreadsheet. d) For a multi-tranche CMBS to be profitable for the issuing Investment Bank, the sum of the market values for all the tranches must exceed the mortgage value on a stand-alone basis. True or False. Explanation: Write your answer in your spreadsheet. e) Trepp research on COVID-19 Impact on Commercial Real Estate predicts higher default rates in the lodging sector than in the office sector because lodging mortgages have higher LTV ratios. True or False. Explanation: Write your answer in your spreadsheet