Which of the following statements regarding frictions in the securitization of subprime mortgages is correct?
A.The arranger will typically have an information advantage over the originator with regard to the quality of the loans securitized.
B.The originator will typically have an information advantage over the arranger,which can create an incentive for the originator to collaborate with the borrower in filing false loan applications.
C.The major credit rating agencies are paid by investors for their rating service of mortgage-backed securities,and this creates a potential conflict of interest.
D.The use of escrow accounts for insurance and tax payments eliminates the risk of foreclosure.
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