Financial Risk Manager Part 1

During the Global Financial Crisis of 2008, mortgage brokers acted as intermediaries between borrowers and lenders. They did not use their own funds but facilitated the mortgage application process. Their role was to help borrowers find suitable mortgage loans from various lenders. They earned fees or commissions for their services. This role was crucial in the financial services industry as it helped to connect borrowers with potential lenders, thereby facilitating the flow of funds in the economy. However, it's important to note that while they played a significant role in the mortgage application process, they did not bear the credit risk associated with the loans. That risk was borne by the lenders who provided the funds for the loans.

Choice B is incorrect. Mortgage brokers do not originate mortgage-backed securities. This role is typically performed by investment banks or other financial institutions that pool together mortgages and sell them as securities to investors.

Choice C is incorrect. The process of securitizing mortgages by creating structured investment vehicles (SIVs) was not a function performed by mortgage brokers during the Global Financial Crisis of 2008. This was primarily done by large financial institutions, which used SIVs to offload risk from their balance sheets.

Choice D is incorrect. Providing credit ratings for various financial instruments, including mortgage-backed securities, was the role of credit rating agencies and not mortgage brokers during the crisis.