Under Basel II, some originators will soon have the option to call outstanding mortgage bonds at an earlier date, which could put investors who buy these notes at high cash premiums in the secondary at a loss.

Structures incorporate the Basel II call dates so that the originator has the option to bring the underlying mortgage back on balance sheet if it becomes more cost efficient to do so. Under Basel II the risk weighting for the mortgage loans will drop from 50% to 35%.

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