- 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
Student Loan Backed Securities (SLABS)
As the name suggests, SLABS are asset backed securities collateralized by student loans.
The majority of U.S. student loans are backed by the U.S. government, which reduces credit risk for the investor.
The most common student loans are the Federal Family Education Loan Program (FFELP) loans, which are guaranteed by the U.S. Department of Education ("DOE"). Under this program, the government provides loans to students through private lenders. These private lenders give loans to students based on their repayment capacity. They also give you the ability to consolidate student loans. In case of a default on the loans, the government will guarantee upto 95-98% of the principal plus interest payments.
The second type of loans are the non-FFELP or private sector student loans. Students use private student loans to bridge the gap between what they can borrow through federal programs and what they actually need for the education.
A government-sponsored enterprise called Student Loan Marketing Association (Sallie Mae) was created to purchase student loans in the secondary market and to securitize pools of student loans.
Prepayment risk is largely associated with defaults; the student defaults and the guarantor pays off the loan.
Student loans are commonly issued with floating interest rates, so declining interest rates might not induce prepayments from refinancing.