The collateralized debt obligation in particular enabled financial institutions to obtain investor funds to finance subprime and other lending, extending or increasing the housing bubble and generating large fees. This essentially places cash payments from multiple mortgages or other debt obligations into a single pool from which specific securities draw in a specific sequence of priority. Those securities first in line received investment-grade ratings from rating agencies. Securities with lower priority had lower credit ratings but theoretically a higher rate of return on the amount invested. COUNT 5
QSN1 What is the name of the securities that enabled financial institutions to obtain investor funds to finance subprime? ANS1 collateralized debt obligation QSN2 What was the outcome of collateralized debt obligations? ANS2 extending or increasing the housing bubble QSN3 What type ratings did securities first in line receive from rating agencies? ANS3 investment-grade ratings QSN4 What type pool do collateralized debt obligations place their payments from mortgages into? ANS4 single pool QSN5 What securities had lower credit ratings but potentially a higher rate of return? ANS5 Securities with lower priority