Discuss the MBS market in the US Essay Example | Topics and Well Written Essays - 2250 words

Discuss the MBS market in the US - Essay Example Fisher Centre for the Economics and Real Estate Journal (Van Order, 2000). The paper also shows a little history about the mortgaged based securities market in the US. It also displays the subtypes of the mortgage-backed security. For instance, it indicates mortgages that have collateral especially those that are secured using bond. It also shows stripped mortgages that are acquired using the relationships. The paper also that there is also the secondary mortgage market where a network of lenders does sell, and the investors buy the existing MBS. The issue of market size and liquidity is. The paper also shows how the Mortgage-backed security is where the weighted average coupon (WAC) and the weighted average maturity are in the valuation of a pass-through MBS (Van Order, 2000). The paper also talks about the issue of credit risk where the credit risk of the mortgage-backed securities will depend on the susceptibility of the borrowers in honouring their credit obligations at the required time. It also shows that the MBS’ credit rating is usually high (Van Order, 2000). The Mortgage backed securities (MBS) entails a debt responsibility that act as a representative of the claims to the cash flows from various loan mortgages brought together. It commonly witnessed in the real estate properties. Mortgage loans are from mortgage companies, banks, and other originators, and they are into pools by the private entity, governmental or quasi-governmental entity. The entity will then issue securities that represent claims on the principal and payments of interest made by investors on the loans in the pool. The process is as securitization (Levin and Davidson, 2008). Most Mortgaged Backed Securities originate from government-based institutions especially those that deals with mortgages. Some of such institutions are NMA and FAM. It also involves other corporation in the