Question

Which of the following will NOT result in a prepayment of a mortgage?

a.Securitization of the mortgage

b. Cash-out refinancing

c. Sale of the property

d. Refinancing at a lower interest rate

e. Borrower paying more than the scheduled payments

Answer 1

So the answer is a. Securitization of Mortgage asset

In securitization, the company holding the assets—known as the originator—gathers the data on the assets it would like to remove from its associated balance sheets. For example, if it were a bank, it might be doing this with a variety of mortgages and personal loans it doesn't want to service anymore. This gathered group of assets is now considered a reference portfolio. The originator then sells the portfolio to an issuer who will create tradable securities. Created securities represent a stake in the assets in the portfolio. Investors will buy the created securities for a specified rate of return.

So in above procedure there is no need of pre-payment of any mortgage.