Are Fannie- and Freddie-guaranteed mortgages exempt from the 10 percent loss given default (LGD) floor for mortgages?
(December 21, 2004) Answer: Because Fannie and Freddie mortgage-backed securities are treated as securitizations in QIS-4, the risk weight (using the look-up table of the securitization section) would likely be 7 percent. Thus, the issue of whether or not to apply a 10 percent LGD floor generally does not arise.
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