Wait how are the A certificates less riskier (and therefore have a lower return) than the B certificates with higher yields, if the underlying loan which they are derived from are the same? I would assume its just related to the claim on assets if a bankrupcy occurs.. But if only point whatever % of affordable housing units end up bankrupt, does that very small percentage of bankruptcy even justify the more than double yield difference between A and B certificates? Because I would expect wall street would also just buy the B certificate yields as well if the risk are almost identical. Or wallstreet just ends up becoming the issuer of the bank loan for the affordable housing project and skip the middle company all together... Or wallstreet just ends up becoming the issuer of the bank loan for the affordable housing project whilist selling any B certificates to outside investors which encapsulates the majority of the risk, and again, skip the middle person all together.. Overall I absolutely love this interview. This sector of housing for private investors is pretty opaque as far as I know
Wait how are the A certificates less riskier (and therefore have a lower return) than the B certificates with higher yields, if the underlying loan which they are derived from are the same? I would assume its just related to the claim on assets if a bankrupcy occurs..
But if only point whatever % of affordable housing units end up bankrupt, does that very small percentage of bankruptcy even justify the more than double yield difference between A and B certificates? Because I would expect wall street would also just buy the B certificate yields as well if the risk are almost identical.
Or wallstreet just ends up becoming the issuer of the bank loan for the affordable housing project and skip the middle company all together...
Or wallstreet just ends up becoming the issuer of the bank loan for the affordable housing project whilist selling any B certificates to outside investors which encapsulates the majority of the risk, and again, skip the middle person all together..
Overall I absolutely love this interview. This sector of housing for private investors is pretty opaque as far as I know
The A's get paid first so it's just like senior debt vs mezzanine debt.