Question

1. Which of the following would make a mortgage less attractive to an investor when included in an agency mortgage backed security?
   1. A low loan balance
   2. An adjustable rate mortgage
   3. The home is located in an economically depressed area
   4. A low borrower credit score
   5. A high borrower credit score

Answer 1

	Just to clerify this problem has been asked from the point of inverster in a mortgadge security not mortgage loan borrower.
	lets evalulvate different options given
a)	A loan balance
	it means more safty to the investor as high priced security is backing the mortgage based security of a lower value
B)	An adjustable rate mortgage
	it will make returns of the invester around market conditions it depends what kind of view an investor has about the intrest rate in future if the view is bullish about interest rate then it is not a good thing otherwise vice-varsa.
c)	The home is situated in iconomically backward area.
	this could surely make security look less attractive to inverstor
D)	low borrower credit score
	this will definitely make security less attractive to the investor as it will have high default riks.
e)	High creidt score of the borrower
	if the borrower credit scroe is high then default risk is less hence it will make security more attaractive
	if only one option needs to be choosed out of 5 then I will go with option D
	however if multiple salections allowed samultainously then I will go with option C and D both