There are 4 questions. However, I don't know how to do #2. I have to read the article and answer the question. Can you help me in #2?
1. What's securitization? How does it encourage lax mortgage lending?
2. What key role were rating agencies supposed to play in managing the risk? Associated with securitization? In particular, without a rating agency, why would it have been hard (if not impossible) for securitization to have emerged?
3. Why did rating agencies do a poor job?
4. What can be improved to solve the problem?© BrainMass Inc. brainmass.com October 10, 2019, 6:45 am ad1c9bdddf
2. What key role were rating agencies supposed to play in managing the risk associated with securitization? In particular, without a rating agency, why would it have been hard (if not impossible) for securitization to have emerged?
In securitization, we take illiquid assets and transform them into a security. For example, a mortgage-backed security (MBS), which is secured by a collection of mortgages. The typical process for the securitization is as below:
1. A financial institution originates mortgages
2. These mortgages are secured by claims against the properties purchased by the mortgagors
3. Bundle individual mortgages into a ...
The risks associated with securitization management are discussed. The key roles in rating agencies to play in managing the risks are given.