Canada does not have an institution like Fannie Mae that securitizes mortgages. How do you think...

Canada does not have an institution like Fannie Mae that securitizes mortgages. How do you think this fact affects the types of mortgages offered by Canadian banks? (Hint: Think about interest-rate risk.)

Expert Solution

The securitizes martgages is considered to be one of the risker assets espeically after financial crisis of 2008. Canada which does not have such an institute will affect the mortagages offerred by the banks. As we know bond owners face the risk of interest rate due to fluctuating interest rate. The price of the bond depends upon the sensitivity of its interest rate in the market. It is volatile as per interest rate prevailing in the country. A securitized mortgages is different layer of debt offered to the investors. The risk is shared by the different owners. It is pool of resource consisting of fifferent owners. The risk is distributed among different investors. So, the absence of such an institute affects the types of mortgages offerred by the banks.

jeff jeffy answered 2 years ago

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