Hey, Can someone please help me with this: "The manager is currently concerned about credit risk but states that, “Although I’m concerned because some non-agency issuers have more credit risk than Fannie Mae and Freddie Mac, credit enhancement can be used to achieve a credit rating equal to that of Fannie and Freddie securities.” Don’t ALL non-agency issues have more risk that Fannie Mae and Freddie Mac. FM have the implicit guaranty of the government so what am I missing here?
I marked it as correct and I remember I’m correct. Those non-agency issues surely have more credit risk but they still can get a AAA rating, which is the rating for Fannie Mae and Freddie Mac, so nothing’s wrong with it. So basically I think that the AAA rating for Fannie Mae and Freddie Mac don’t matter much coz they have the government behind them.
i just remember that credit enhancement can be used to achieve a credit rating of an agency issuer
I think the key thing I was missing here was the word “rating”… Thanks guys