What are Mortgage Backed Securities?

The basic structure of mortgage-backed securities is to collect loans that meet certain conditions from the lent home mortgage loan to form a pool of mortgage loans. The loan issuance is made by the principal and interest cash inflows that occur regularly Securities, and the securities are guaranteed by government agencies or government-backed financial institutions. Therefore, the MBS in the United States is actually a securitized commodity with a strong color of public financial policy.

Mortgage-backed securities

Right!

The basic structure of mortgage-backed securities is to collect loans that meet certain conditions from the lent home mortgage loan to form a pool of mortgage loans. The loan issuance is made by the principal and interest cash inflows that occur regularly Securities, and the securities are guaranteed by government agencies or government-backed financial institutions. Therefore, the MBS in the United States is actually a securitized commodity with a strong color of public financial policy.

1. Concept:

MBS: Mortgage-Backed Security, mortgage-backed bonds or mortgage securitization. In finance, a mortgage-backed security (MBS) is an asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans. Payments are typically made monthly over the lifetime of the underlying loans.

MBS is the earliest asset securitization product. First produced in the United States in the 1960s. It is mainly an asset securitization product issued by the United States housing professional banks and savings institutions using their home mortgage loans.

The principal and interest generated by the mortgage collective are transferred to MBS investors intact, so MBS is also known as pass-through securities. There are four main types of US mortgage securities:

1) Pass-through securities guaranteed by the Government National Mortgage Association (GNMA);

2) The letter of participation of the Federal Home Loan Mortgage Corporation (FHLMC);

3) Mortgage-backed bonds of the Federal National Mortgage Association (FNMA);

4) Private mortgage bond.

2. Model classification:

Mortgage securitization (MBS) has three models worldwide: off-balance sheet, on-balance sheet and quasi-off-balance sheet.

The off-balance sheet model, also known as the US model, is where the original equity owner (such as a bank) real sells assets to a special purpose vehicle (SPV). After SPV purchases the assets, it reorganizes the asset pool to support the issuance of securities by the asset pool; the on-balance sheet model Also known as the European model, the original equity holder does not need to sell assets to the SPV but remains on its balance sheet. The sponsor issues securities on its own. The off-balance sheet model, also known as the Australian model, is a wholly-owned subsidiary established by the original equity owner. Or the holding subsidiary is used as the SPV, and then the assets are "sold" to the SPV. The subsidiary can not only purchase the assets of the parent company, but also other assets. After the assets are acquired, the subsidiary forms an asset pool to issue securities.