固收

问题如下：

Which of the following mechanisms is least likely to offer investors protection from default on the individual loan level?

选项：

A.

Defeasance

B.

Balloon payment structure

C.

Prepayment penalty points

解释：

Typically, commercial real estate loans are not fully amortizing and thus require the unamortized principal to be repaid at maturity through a large “balloon” payment. If the borrower fails to make the balloon payment at maturity and is in default, then balloon risk results. Thus, the balloon payment structure increases risk to investors, rather than protecting against it.

A is incorrect because defeasance, a mechanism that requires the borrower to purchase a portfolio of government securities that replicates the cash flows of the remaining scheduled principal and interest payments remaining on the loan, protects the investor.

C is incorrect because prepayment penalty points (i.e., predetermined penalties that a borrower who wants to refinance must pay to the lender) offer investors call protection on the individual loan level.