Talk:Mortgage-backed security

Simplification required
I understand this is a professional topic which would entail a lot of financial parlance. I however think the article might be a bit too complex for a layman to understand. Anyone up for it? --Olaotan1 (talk) 09:02, 5 August 2012 (UTC)

I have tried to simplify at least the lead into the article. Do let me know if this helps and I could try to expand and simplify the overall article. Indian rediff (talk) 18:52, 29 November 2012 (UTC)

Quote needed
A quote including the duration/lifespan changes due to a +2,+1,-1,-2 percent change in interest rates would be most helpful. Bloomberg should be able to have this for a recently or to be issued bond.

The article needs expansion on the effects of changing interest rates on the lifespan and payment speed. —Preceding unsigned comment added by 99.34.48.129 (talk) 06:19, 12 November 2010 (UTC)

Old Talk
I think this is the "correct" spelling. See google search mortgage+backed+security and asset+backed+security.--Jerryseinfeld 22:38, 4 Jan 2005 (UTC)

COMMENT BY A DIFFERENT USER

"Duration" has a specific technical meaning in this context. The word should link to the article about duration.

The MBS is not underwritten by "the origianl real estate." Anyone: what did the author mean?

Comment by a dfferent user:

The author is saying that IF the MBS wasn't backed by the original real estate, there would be no incentive for the improving crdit rating borrowers to stick with it etc. Fortunatly, they are.

MRBs and types of MBSs

I wanted to write about MRBs (mortgage revenue bonds) and couldn't find a proper place to put it. It seems that MBS classification is not very details at this moment.


 * I notice this article discusses both a "passthrough" and a "pass-through". I suppose the former occurs more quickly than the latter.  Isn't that so?  —Preceding unsigned comment added by 71.62.227.98 (talk) 18:41, 11 July 2008 (UTC)

Questions
1) Can anyone write up on history of mortgage-backed securities and MBS market? Did they exist for as long as Fannie Mae / Freddy Mac, or were they created at some later point?

2) Market value figures from "The MBS market" section seem highly suspect to me. How can total market value of all outstanding securities be on the order of 5 years' worth of issuance of agency MBS, considering that residential U.S. mortgages are usually for 30 years? Is that because the bulk of MBS represent something other than residential mortgages (maybe commercial mortgages or HELOCs), or because agencies practice buyback of their MBS? Does 6.1 trillion refer to agency MBS or all MBS?

3) What fraction of U.S. mortgages (residential/commercial) is covered by MBS? --Itinerant1 10:23, 14 September 2007 (UTC)

Answer #2 - because people refinance when rates drop, and since mtge rates dropped to the lowest point, pretty much ever, hardly any will be left from the '90's. Why keep paying 8.5% when you can refinance to 5%?

Also, 40yr MTGE rarely last the full 30yrs. People prepay or make double payments etc. People sell their house to move (pay-off loan). Also, refinance to a better rate, or different product (ARM) or to tap home-equity etc. Avg life of a 40yr MTGE is usually 6-9yrs. —Preceding unsigned comment added by 75.64.185.240 (talk) 00:16, 29 November 2007 (UTC)


 * 75.64.185.240, this objection is dealt with in the article. Pdbailey (talk) 22:21, 6 May 2008 (UTC)


 * The questions are good and the article did not deal with them correctly. I have endeavored to change that by adding more cited statistics, but definitions will remain a problem. --Dlawbailey (talk) 17:16, 21 April 2009 (UTC)

out of date
I would love to see a flow chart from origination through securitization. Can anyone help with that? —Preceding unsigned comment added by 38.97.238.4 (talk) 21:44, 22 May 2009 (UTC)

This article does not mention how thin this market is, or any of the contemporary happenings in the market. Pdbailey (talk) 22:28, 6 May 2008 (UTC)

sale of assets vs. debt offerings
early mortgage-backed securities (1970s-1980s) had the distinction in that some were a true sale of assets vs. others being a debt offering.

examples

sale of assets - the "pass-through" security such as GNMA pass-through certificates in which the investor owns an undivided interest in the underlying mortgage pool.

debt offering - what was called a "pay-through" bond. The issuer (typically a thrift (S&L or savings bank) or home builder) retains ownership of the mortgage pool and merely issues a bond collateralized by that pool. in this situation there is NO sale of assets.

both were typically issued via a single-purpose-entity structure.

it's been 20 years since i left the MBS field (1988...just as the collateralized mortgage obligation was still a very young pup) and moved to other areas. after leaving i didn't reallly pay too careful attention to the field. --68.173.2.68 (talk) 02:21, 7 October 2008 (UTC)


 * What about Credit Default Swap? CDSs get bundled into securities, get traded on the market, etc.  They also total much more than the amounts shown in this article. --208.54.94.75 (talk) 22:34, 10 January 2009 (UTC)


 * I added it in. --Campoftheamericas (talk) 17:11, 13 January 2009 (UTC)

Current Political Significance?
The section titled "Current Political Significance" added by an unregistered user is unreferenced and erroneous. I have deleted it. Bond Head (talk) 20:58, 28 October 2008 (UTC)

A Duopoly?
Freddie Mac was created to compete with Fannie Mae. But are those the only two firms in the secondary mortgage market? Together they own about half the mortgages, and not many are retained in the initiators' portfolios. But if there are other firms doing what Fannie Mae and Freddie Mac do, I haven't been able to find any names. If there is someone in the know, it would be useful to name names and give estimates of the dollar value or percentage of business they enjoy.

64.61.221.109 (talk) 18:20, 23 November 2008 (UTC)Greg
 * I think that Bear Stearns, Lehman Brothers, and Merrill Lynch were brought down by mortgage-backed securities that were made up of subprime mortgages, among other bad investments. Jesse Viviano (talk) 02:14, 17 February 2009 (UTC)

watermarked images
Hi, I just wanted to post notice that two of the images in the page do not comply with wikipedia's watermark no credits in the image itself policy which can be seen here. I think they should either be regenerated or the attribution in the image should be removed if the license allows this. PDBailey (talk) 20:25, 10 March 2009 (UTC)

Please clarify (revision proposed)
I'm having trouble with this list: I can't figure out how to follow from the loans to the MBSs -- loans are assigned to one or more trusts, and the trusts issue MBSs and documentation -- how do the pools come into it?
 * 1) Mortgage loans (mortgage notes) are purchased from banks and other lenders and assigned to a trust
 * 2) These loans are assembled into collections, or "pools"
 * 3) These trusts securitize the pool and issue mortgage-backed securities, with documentation that identifies the underlying loans

Thanks -- Jo3sampl (talk) 01:36, 7 June 2011 (UTC)

From Securitization: A suitably large portfolio of assets is "pooled" and transferred to a "special purpose vehicle" or "SPV" (the issuer), a tax-exempt company or trust formed for the specific purpose of funding the assets. Once the assets are transferred to the issuer, there is normally no recourse to the originator.

So I propose this revision:
 * 1) Mortgage loans (mortgage notes) are purchased from banks and other lenders and assigned to a trust
 * 2) These loans are assembled into collections, or "pools"
 * 3) The trusts securitize the pool, grouping the loans so as to distribute risk and also eliminating normal recourse to the mortgage originator
 * 4) The trusts  issue mortgage-backed securities, with documentation that identifies the underlying loans

Comment? -- Jo3sampl (talk) 18:54, 16 June 2011 (UTC)

Well, the securitization is done by the act of issuing MBSs as defined by their underlying pool. Also, the purpose of the MBSs is more complicated than what you have listed, and this list of purposes and benefits is potentially quite large, so the "as to ..." part should be removed, leaving:


 * 1) Mortgage loans (mortgage notes) are purchased from banks and other lenders and assigned to a trust
 * 2) These loans are assembled into collections, or "pools"
 * 3) The trusts securitize the pool, grouping the loans
 * 4) The trusts  issue mortgage-backed securities, with documentation that identifies the underlying loans

Which is the same as the original except has more numbers and does not articulate that the securitization is done by issuing the MBSs. Int21h (talk) 07:40, 17 June 2011 (UTC)

So, to be clear, these "pools" are the way the securitization happens. They spread risk, such as prepayment risk, and also have peculiarities. The "eliminating normal recourse to the mortgage originator" statement seems wrong. Interactions would be a contractual issue with the loan originator, and the originator assigning these, or them being transfered by law, would not be a sure thing and is at the very least jurisdictional. For instance, transferring these rights to a servicer. I'm not even sure what "recourse" means in this context. Int21h (talk) 07:51, 17 June 2011 (UTC)

Thanks. Would you please propose a revison to address these concerns with the current version: Point 1 starts wth mortgage loans from multiple lenders and follows them to a trust. Point 2 goes back to the mortgage loans; it doesn't take up the flow with the trusts and it doesn't say who organizes the loans into pools. Point 3 breaks the flow again by starting with trusts rather than pools, and then refers to a singular pool rather than the plural pools of point 2. In addition, it refers to plural trusts (where did they come from?) rather than the singular trust we had from point 1.

(I took "there is normally no recourse to the originator" in Securitization to mean that any complaints based on the documentation had to go to the producer of the pool documentation rather than back to the original lendor . . . ?)

To me it seems that this could be much clearer, and someone who really understands it could probably make it so without breaking a sweat. I would really appreciate a revision or proposal. Thanks very much. Jo3sampl (talk) 18:43, 17 June 2011 (UTC)

Okay, this one is a done deal, thanks to Int21h! Jo3sampl (talk) 00:18, 22 June 2011 (UTC)

Stub?
This is an interesting collection of comments about the subject, some or all of which could be useful material in writing an encylopedia article. But at present it doesn't seem to be anyhing more than an unsorted collection of comments. Until it a proper article can be written, shouldn't it be classified as a stub? — Preceding unsigned comment added by 24.209.22.154 (talk) 02:36, 25 November 2011 (UTC)

Pool of "Mortage" loans?
Seems like the word "mortgage" on this picture is misspelled, someone correct plz. — Preceding unsigned comment added by WolfRAMM (talk • contribs) 22:17, 23 June 2012 (UTC)

Couple possible errors stemming from typos or ambiguous language in "Real World Pricing" section
The fourth paragraph reads, "If the lovina acquired a pool at a premium (>100), as is common for higher coupons then they are at risk for prepayment. If the purchase price was 105, the investor loses 5 cents for every dollar that's prepaid, possibly significantly decreasing the yield. This is likely to happen as holders of higher-coupon MBS have good incentive to refinance."

1) What is "lovina" ? Is it an undefined term, typo, or what?

2) Is it really the "holders of higher-coupon MBS" who have the incentive to refinance? I think it should read, "borrowers in the underlying mortgages comprising the higher-coupon MBS have a good incentive to refinance". Even then the writer should clarify why that is the case (presumably because those tend to be mortgages at above current interest rates).

the next paragraph has a similar issue to #2 above. It reads, Conversely, it may be advantageous to the bondholder for the borrower to prepay if the low-coupon MBS pool was bought at a discount(<100). This is due to the fact that when the borrower pays back the mortgage he does so at "par". So if the investor bought a bond at 95 cents on the dollar, as the borrower prepays he gets the full dollar back and his yield increases. This is unlikely to happen as holders of low-coupon MBS have very little incentive to refinance.? 3) The last sentence should probably read, "This is unlikely to happen as borrowers in the underlying mortgages comprising the low-coupon MBS have very little incentive to refinance.

I have corrected 3 from above Indian rediff (talk) 03:12, 30 November 2012 (UTC)

Yes? Techguy95 (talk)


 * Almost none of the pricing section gives references. IMHO, it is incoherent as well. Just about the only thing I have seen in my reading is the reference to credit risk and prepayment risk. The interest rate exposure risk seems to be related to non-fixed-rate mortgages, which is probably why my-US-centric reading has ignored it. Almost every other sentence after that seems suspect OR, or at the very least "rules of thumb", which should be stated as such to separate them from hard facts.


 * The "Real-world pricing" section is, again, likely OR and/or rules of thumb. It makes reference to some sort of proprietary services, eg. TradeWeb. In addition, whoever wrote it ignored, or alternatively did not know about, standard practices to use units with numbers. Remove the "<100" reference, as without units, it does not make sense; if it means <100%, that is a clearer, albeit still unclear, way to denote a discount rate, which would additionally need to be clarified IMO.


 * IMO, nothing is better than unverified, nonsensical rubbish. Remove it unless you or someone else wants to correct it. Int21h (talk) 18:24, 6 August 2012 (UTC)

External links modified
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Merge
I was about to complete a long-standing merge from Mortgage bond but wondered whether this was only a subset of Mortgage-backed security and hence needed a more careful job done. Thoughts, opinions and actions are requested (not necessarily in that order). Klbrain (talk) 20:42, 23 January 2018 (UTC)
 * Given no objections, ✅

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Deletion of citations to widely cited academic article by MrOllie based on Off-wiki personal attack; see wikipedia's page on reliable sources re: Mortgage Securitization
I wrote the following on MrOllie's talk page following his deletion of citations to a particular academic author. Mr. Ollie did not respond on substance but rather responded with ad hominem attacks. Please discuss so that we can reach consensus.

Dear MrOllie,

You recently reverted edits to articles about mortgage securitization, the GSEs, and the subprime mortgage crisis. I believe these revisions reduced the substantive quality of the wikipedia articles and the edits should be restored. My explanation is below. I look forward to working with you amicably to reach consensus. I believe that our goal should be to improve the article and cite to high quality, relevant sources whenever possible.

The edits you reverted included substantive improvements to the articles and cited an award-winning (see also here), widely-cited, widely-read academic journal article by a tenured professor at a leading research university with relevant expertise.

According to Wikipedia's policy on reliable sources:

″Many Wikipedia articles rely on scholarly material. When available, academic and peer-reviewed publications, scholarly monographs, and textbooks are usually the most reliable sources. . . . Material such as an article, book, monograph, or research paper that has been vetted by the scholarly community is regarded as reliable, where the material has been published in reputable peer-reviewed sources or by well-regarded academic presses. . . . One can confirm that discussion of the source has entered mainstream academic discourse by checking the scholarly citations it has received in citation indexes.″

Thus, the source cited is among the most reliable sources under Wikipedia's definition of reliable sources. You reverted it while suggesting that it might be reference-spamming, but given the relevance of the academic article to the wikipedia article, and the high quality of the academic article--demonstrated by its placement, its citations, its readership, its awards and the institutional affiliation and status of its author--it is not a form of spam but rather a legitimate effort to improve the article.

Please note that news articles in journals with an ideological valence, think tank reports and other materials are considered less reliable sources than academic research. See Biased or Opinionated Sources Many of the other sources in the article are editorials and think tank reports, not academic articles, and the inclusion of more high quality and up-to-date academic articles would therefore improve the article.

Many of the think tank reports cited in the article are written by organizations that receive financial sponsorship from private lenders and therefore have an interest in portraying the financial crisis as having been caused by government policies rather than by private financial institutions. One of the few academic reports cited is years out of date, claims to provide a "comprehensive" bibliography of articles, but was published in 2012. Much has been written in the ensuing 7 years--the article is no longer a comprehensive review, if it ever was. And indeed, the author claiming otherwise has a think-tank affiliation.

In addition, self-published material is generally considered an unreliable source, except when published by well-published academic experts. Per Wikipedia policy, self-published material:

″are largely not acceptable as sources. Self-published expert sources may be considered reliable when produced by an established expert on the subject matter, whose work in the relevant field has previously been published by reliable third-party publications.″"

You cited to self-published blog by a self-employed blogger / part time document reviewer which contains an off-wikipedia criticism of a scholar with whom he disagrees about the benefits of legal education.

It may be helpful to understand the context of this post. The blogger apparently posted this criticism as a form of revenge for having been made to appear foolish for making substantive mistakes about legal education and student loans --subjects about which the blogger purports to be an expert--even in a publication to which he has contributed.

Citing to the post you cited violates wikipedia policies including No_personal_attacks and []. Indeed, the author of the post you cited acknowledged "that this post might be construed as an “off-wiki attack” ... that Wikipedians may perceive as harmful to their community."

Edits are supposed to be evaluated on substance based on established wikipedia policies about reliable sources, not based on snap decisions based on []

I recognize that my edits only added one source and that it would be better to include multiple sources. If you would like to add additional high quality academic sources rather than deleting the few high quality citations that are in the wikipedia article, I would encourage you to do so. I have reviewed Wikipedia's Conflict of Interest policies and I am in compliance. Mbs6446 (talk) 17:00, 31 March 2019 (UTC)

Section on Graham-Leach-Bliley is simply wrong
The paragraph asserting that Graham-Leach-Bliley played a large role in the financial crisis is simply wrong. It cites a source from 2000, which couldn't possibly judge responsibility for the crisis. And it is contradicted by recent scholarship, such as Lichtenstein and Stein's A Fabulous Failure. None of the major financial institution failures of 2008 (Bear Stearns, Lehmann Bros, AIG) were the kind of merger of commercial and investment banks that GLB permitted. Moreover, the Glass Steagall firewall had already been undermined in crucial ways by Federal Reserve rules prior to GLB. This paragraph should be completely rewritten. Pmheideman (talk) 17:20, 22 June 2024 (UTC)