Question

Which of the following is NOT true of the "Originate to Distribute" Model?

• A. There is an incentive for the originator to approve as many loans as possible, thereby earning increasing amounts of fees.
• B. The Originate to Distribute Model is believed to have made no material contribution to the Global FInancial Crisis
• C. The originator has little incentive to perform due diligence on the loans, unless there are risk retention requirements,
• D. Loans originated in this model are usually distributed as securitized products and serviced by Special Purpose Vehicles

Answer 1

Originate to distribute model was one of the major contributor to the global financial crisis as the investors who bought the securitized products were clearly in dark as to the risk categorization of these products.

So Answer is B) The Originate to Distribute Model is believed to have made no material contribution to the Global FInancial Crisis.