How is this statement incorrect?

That is fine. El. The question was kinda weird. Do not have the exact question, but can post it up later on. What puzzled me about it was - the talk in the passage was about Credit Risk of non-agency securities. The question suddenly talked about Credit Risk - and they talk about being able to use “any kind of enhancement” – somehow the wording did not gell together. Will post up the question later.

El Matarife Wrote: ------------------------------------------------------- > I still have absolutely no idea what your point > is. Fannie and Freddie have the highest credit > rating and lowest credit risk, bar none, no > questions asked. ^this is what I am saying. But original poster used SOME. I think that ALL non-agency issuers have lower credit ratings than GSEs except it is mentioned that non-agency have solid credit enhancements and it has higher rating than FNM and FNA

cpk123 Wrote: ------------------------------------------------------- > That is fine. El. The question was kinda weird. Do > not have the exact question, but can post it up > later on. > > What puzzled me about it was - the talk in the > passage was about Credit Risk of non-agency > securities. The question suddenly talked about > Credit Risk - and they talk about being able to > use “any kind of enhancement” – somehow the > wording did not gell together. Will post up the > question later. No worries. I’m obviously going off just what was posted so it could be entirely different.

So on the test, if they say “some” instead of “all” it’s wrong? Wow that’s nucking futs.

Why is that nuts? It’s wrong isn’t it? If I asked you: “Are humans mammals?” and you answered “some”, you would be wrong.

El: So are you saying that if I get on my Bloomberg right now that I wouldn’t be able to find you a single RMBS that has a AAA rating (this is the rating of the US government, and technically a bit higher than the rating of the GSEs at the time of writing, since the guarantee wasn’t explicit at that time as it is now). The point of credit enhancement is that you can use it to achieve any rating desired and some non-agency RMBS do this while other s don’t thereby making this statement correct so long as there is at least one non agency RMBS with the same rating as Fannie or Freddie the statement remains true! Besides the point of the question is that he shouldn’t have this worry because credit enhancement takes care of “any” credit issues, so if the statement is incorrect it should be incorrect on the side that ALL non-agency RMBS have the same credit rating as Fannie/Freddie because they must ALL be credit enhanced (degree of enhancement varies however making the statement true) as opposed to the side that you are proposing which is the statement is incorrect because ALL non-agency RMBS should have a lower credit rating than Fannie/Freddie (which I have refuted in the first paragraph of this post). What do you think El? Good discussion going now.

This is what happens when you overthink, just answer the question and move on.

Its not overthinking, its knowing the material, and the statement is clearly correct!