- Collateralized Mortgage Obligations (CMO) and CMO Tranches
- Stripped MBS – Interest Only (IO) and Principal Only (PO)
- Residential Non-Agency MBS
- CMBS: Structure and Call Protection
- Amortizing Loans vs. Non-Amortizing Loans
- Overview of Asset Backed Securities (ABS)
- Internal and External Credit Enhancements
- Pay-through Structures: Prepayment Tranching vs. Credit Tranching
- Home Equity Loans (HEL) Backed Securities
- Manufactured Housing Backed Loans
- Auto Loans Backed Securities
- Student Loan Backed Securities (SLABS)
- SBA Loan Backed Securities
- Credit Card Receivable Backed Securities
- Collateralized Debt Obligations (CDOs) and Synthetic CDOs
- Cash Flow Yield, Nominal Spread, and Zero Volatility Spread for ABS/MBS
- Monte Carlo Simulation for ABS/MBS
- CFA Level 2: Fixed Income Part 2 – Introduction
- Duration and Convexity for ABS/MBS
- Mortgage Cash Flow Characteristics
- Choosing an Appropriate Spread for ABS/MBS
- Mortgage Pass-through Securities: Characteristics and Risks
- Cash Flows and Prepayment Risk
- Single Monthly Mortality (SMM) & Conditional Prepayment Rate (CPR)
- PSA Prepayment Benchmark
Residential Non-Agency MBS
Non-agency Mortgage-backed Securities are securities issued by private institutions in contract with the agency MBS which is issued by governmental or quasi-governmental agencies. The underlying collateral for non-agency MBS usually consists of mortgages which do not conform to the requirements, such as size, documentation, loan-to-value ratios, etc., of MBS issued by government agencies such as Ginnie Mae, Fannie Mae or Freddie Mac.
The mortgages in non-agency MBS can be prime mortgages, Alternative-A mortgages, Option Adjustable rate Mortgages (option ARMS), or Subprime mortgages.
Even though non-agency mortgage pass-throughs lack a government guarantee, many retain a high credit rating through the use of credit enhancement techniques.
In order to “conform” to agency standards, mortgages have loan size limits, loan to value limits, and debt to income ratio limits for the borrower.
Because borrowers can exceed these limits or may wish to have customized loan terms, many mortgages are non-conforming.
Non-agency mortgage securities are commonly structured as CMOs.
Given that the underlying mortgages of non-agency security pools have different characteristics from those of agency conforming security pools, prepayment patterns for the two types will differ.
For example, given the larger size of mortgages in a non-agency MBS security, borrowers have a high incentive to refinance whenever rates fall, so non-agency prepayment rates can be higher in a declining interest rate environment.
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