Mortgaged Backed Securities - Literature review Example

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Mortgaged Backed Securities

There are three classes of securities issued and traded, and these are assets backed securities (ABS), mortgage-backed securities (MBS) and collateralized debt obligations (CDO) (Blum & Dingell, 1997). As there are several kinds of securities, the primary focus of this section is the securities issues backed by mortgages – MBS. Understanding MBS is essential because it represents the largest portion of securitization in the United States (Nomura, 2006). In addition, apprehending MBS enables one to know the other forms of securitisation, as MBS is the “original source of securitisation technology”(Nomura, 2006, p. 2). In this regard, as the aim of the research is to gain a deeper understanding of MBS and to know the correlation between MBS and Subprime crisis, this segment of the research will be divided into four sections. The first part will deal with the concept of MBS. This includes the elucidation of the structures, benefits and risks attributed to MBS. The second section will be delving on the credit rating analysis of MBS while the third part will deal with the development of MBS in the United States and its primordial role in the subprime crisis. Finally, the fourth section will be the summary. Mortgage-Backed Securities Mortgages are loans issued against real estate (Hu, 2001). ...Show more


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