Certified Mortgage Banker (CMB) Exam

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A portfolio manager for a large bank holds a substantial portfolio of newly originated, high-quality jumbo mortgages. To reduce the bank's regulatory capital requirements and mitigate credit default risk without selling the actual loans, which of the following strategies would be most effective?

Increasing the interest rates on all the loans in the existing portfolio. Securitizing the loans and selling them on a servicing-released basis. Executing a Credit Risk Transfer (CRT) transaction with institutional investors. Purchasing a portfolio-wide life insurance policy on all borrowers.

Correct Answer:

Executing a Credit Risk Transfer (CRT) transaction with institutional investors.

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