By Charles Austin Stone, Anne Zissu
Securitization specialists Charles Stone and Anne Zissu supply a realistic clarification of the way securitization works and clarify how destiny funds flows from a number of asset classes—from bank card receipts and personal loan funds to motion picture royalties—can be packaged into bond-like items and bought to traders. The dialogue comprises descriptions of all significant sessions of asset-backed securities and gives a practice-oriented observation on traits in securitization and the price of asset- and mortgage-backed securities throughout industries. The Securitization Markets Handbook bargains transparent, finished advice to those advanced markets.
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Extra resources for The Securitization Markets Handbook - Structures And Dynamics Of Mortgage- And Asset-Backed Securities
Sample text
MBS market was kick-started and has been sustained by the activities of GNMA, FNMA, and Freddie Mac. The first GNMAguaranteed MBS was issued in 1970. FNMA securitized its first pool in 1981, and Freddie Mac issued the first CMO, backed by thirty-year fixed-rate mortgages, in 1983. The pool was refinanced with the issue of three classes of securities that matured sequentially. National mortgage conduits such as FNMA and Freddie Mac do not exist in Europe. Without the depth and liquidity of the mortgageand asset-backed securities markets, securitization is not as valuable there nor as popular, especially where banks have alternative techniques of refinancing their mortgage portfolios.
Here is an excerpt of a financial statement from Sovereign Bancorp, the parent of Sovereign Bank, a federally chartered savings institution, that illustrates how mortgage originators use both the private and the agency segments of the secondary mortgage markets to enhance their liquidity and manage risk. Source: Sourceline here Industry Illustration M O RTG AG E - B ACK E D S E C U R I T I E S 17 As part of its mortgage banking strategy, Sovereign originates fixed-rate residential mortgages. It sells the majority of these loans to FHLMC, FNMA, and private investors.
Proceeds from the issues of CMOs are used to finance the purchase of the mortgage pool from the conduit. Mortgage-backed securities received in exchange for pools of mortgages are either retained by the originator or refinanced through 3 4 K E Y ST R U C T U R E S A N D C A S H F L OW DY N A M I C S REMICs. There is also an active forward market for mortgage loans in the United States. Originators sell their production of mortgage pools forward to conduits that warehouse the loans until the pool is large enough to be securitized.