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Finance 431: Property-Liability Insurance - page 14 / 35

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Sub-Prime Crisis

Other securities with many sub-prime mortgages bundled with other normal mortgages were still able to receive investment grade ratings of A or higher.  This was because of the MBSs being a bundle of many sub-prime mortgages, the rating agencies figured the chance of the majority of sub-prime mortgages defaulting was minuscule due to the booming housing market.

Additionally, financial guaranty insurance companies insured many of these MBSs, which led to higher ratings.

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