Which type of loan cannot be required to be repurchased?

Which type of loan cannot be required to be repurchased?

• A. Recourse
• B. No recourse
• C. Bid loan
• D. No-bid loan

Answer: (D)

The key idea is that repurchase obligations come from the sale of loans into a securitized pool with representations and warranties. Only loans that were actually included in the pool and sold with those warranties can be demanded to be repurchased if they don’t meet the agreed terms. A no-bid loan isn’t part of the pool because it wasn’t bid into the securitization. Without being in the pool, there are no reps and warranties attached to that loan to trigger a repurchase, so it cannot be required to be repurchased. Recourse or no-recourse terms describe who bears liability between borrower and lender, but repurchase obligations come from the loan’s sale under representations and warranties. If a loan isn’t in the pool, those repurchase provisions don’t apply, which is why a no-bid loan cannot be required to be repurchased.

The key idea is that repurchase obligations come from the sale of loans into a securitized pool with representations and warranties. Only loans that were actually included in the pool and sold with those warranties can be demanded to be repurchased if they don’t meet the agreed terms.

A no-bid loan isn’t part of the pool because it wasn’t bid into the securitization. Without being in the pool, there are no reps and warranties attached to that loan to trigger a repurchase, so it cannot be required to be repurchased.

Recourse or no-recourse terms describe who bears liability between borrower and lender, but repurchase obligations come from the loan’s sale under representations and warranties. If a loan isn’t in the pool, those repurchase provisions don’t apply, which is why a no-bid loan cannot be required to be repurchased.