guarantee fees

Definition

A fee charged by issuers of mortgage-backed securities. The fee is meant to help cover the issuer's expenses and reduce the risk of loss or default. It also serves the purpose of making such securities more marketable and liquid, therefore helping to bring in investment capital, and allowing all participants to reduce their risk exposure. Effectively allowing mortgages to be offered to borrowers with lower credit quality, even with an expected higher rate of default.
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guarantee fee guarantee letter