You are previewing Mortgage-Backed Securities: Products, Structuring, and Analytical Techniques, 2nd Edition.
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Mortgage-Backed Securities: Products, Structuring, and Analytical Techniques, 2nd Edition

Book Description

An up-to-date look at the latest innovations in mortgage-backed securities

Since the last edition of Mortgage-Backed Securities was published over three years ago, much has changed in the structured credit market. Frank Fabozzi, Anand Bhattacharya, and William Berliner all have many years of experience working in the fixed-income securitization markets, and have witnessed many cycles of change in the mortgage and MBS sectors. And now, with the Second Edition of Mortgage-Backed Securities, they share their knowledge on many of the products and structuring innovations that have taken place since the financial crisis and fiscal reform.

Written in a straightforward and accessible style, and containing numerous illustrations, this timely guide skillfully addresses the investment characteristics, creation, and analysis of mortgage-backed securities. Each chapter contains cutting-edge concepts that you'll need to understand in order to thrive within this arena.

  • Discusses the dynamic interaction between the mortgage industry, home prices, and credit performance

  • Addresses revised valuation techniques in which all non-agency MBS must be treated as credit pieces

  • Examines the shift in this marketplace since the crisis and the impact on industry and investors

Filled with in-depth insights and expert advice, Mortgage-Backed Securities, Second Edition offers you a realistic assessment of this field and outlines the products, structures, and analytical techniques you need to know about in this evolving arena.

Table of Contents

  1. Cover Page
  2. Title Page
  3. Copyright
  4. Dedication
  5. Contents
  6. Preface
  7. About the Authors
  8. PART One: Introduction to Mortgage and MBS Markets
    1. CHAPTER 1: Overview of Mortgages and the Consumer Mortgage Market
      1. OVERVIEW OF MORTGAGES
      2. MORTGAGE LOAN MECHANICS
      3. RISKS ASSOCIATED WITH MORTGAGES AND MORTGAGE PRODUCTS
      4. CONCEPTS PRESENTED IN THIS CHAPTER (IN ORDER OF PRESENTATION)
    2. CHAPTER 2: Overview of the Mortgage-Backed Securities Market
      1. CREATING DIFFERENT TYPES OF MBS
      2. MBS TRADING
      3. THE ROLE OF THE MBS MARKETS IN GENERATING CONSUMER LENDING RATES
      4. CASH FLOW STRUCTURING
      5. CONCEPTS PRESENTED IN THIS CHAPTER (IN ORDER OF PRESENTATION)
  9. PART Two: Prepayment and Default Metrics and Behavior
    1. CHAPTER 3: Measurement of Prepayments and Defaults
      1. PREPAYMENT TERMINOLOGY
      2. CALCULATING PREPAYMENT SPEEDS
      3. DELINQUENCY, DEFAULT, AND LOSS TERMINOLOGY
      4. CONCEPTS PRESENTED IN THIS CHAPTER (IN ORDER OF PRESENTATION)
    2. CHAPTER 4: Prepayments and Factors Influencing the Return of Principal
      1. PREPAYMENT FUNDAMENTALS
      2. FACTORS INFLUENCING PREPAYMENT SPEEDS
      3. DEFAULTS AND “INVOLUNTARY” PREPAYMENTS
      4. CONCEPTS PRESENTED IN THIS CHAPTER (IN ORDER OF PRESENTATION)
  10. PART Three: Structuring
    1. CHAPTER 5: Introduction to MBS Structuring Techniques
      1. UNDERLYING LOGIC IN STRUCTURING CASH FLOWS
      2. STRUCTURING DIFFERENT MORTGAGE PRODUCTS
      3. FUNDAMENTALS OF STRUCTURING CMOs
    2. CHAPTER 6: Fundamental MBS Structuring Techniques
      1. TIME TRANCHING
      2. PLANNED AMORTIZATION CLASSES (PACS) AND THE PAC-SUPPORT STRUCTURE
      3. TARGETED AMORTIZATION CLASS BONDS
      4. Z-BONDS AND ACCRETION-DIRECTED TRANCHES
      5. A SIMPLE STRUCTURING EXAMPLE
      6. CONCEPTS PRESENTED IN THIS CHAPTER (IN ORDER OF PRESENTATION)
    3. CHAPTER 7: Fundamental MBS Structuring Techniques
      1. COUPON STRIPPING AND BOOSTING
      2. FLOATER-INVERSE FLOATER COMBINATIONS
      3. TWO-TIERED INDEX BONDS (TTIBS)
      4. EXCESS SERVICING IOS
      5. CONCEPTS PRESENTED IN THIS CHAPTER (IN ORDER OF PRESENTATION)
    4. CHAPTER 8: Structuring Private-Label CMOs
      1. PRIVATE-LABEL CREDIT ENHANCEMENT
      2. PRIVATE-LABEL SENIOR STRUCTURING VARIATIONS
      3. GOVERNING DOCUMENTS
      4. CONCEPTS PRESENTED IN THIS CHAPTER (IN ORDER OF PRESENTATION)
    5. CHAPTER 9: The Structuring of Mortgage ABS Deals
      1. FUNDAMENTALS OF ABS STRUCTURES
      2. CREDIT ENHANCEMENT FOR MORTGAGE ABS DEALS
      3. FACTORS INFLUENCING THE CREDIT STRUCTURE OF DEALS
      4. ADDITIONAL STRUCTURING ISSUES AND DEVELOPMENTS
      5. CONCEPTS PRESENTED IN THIS CHAPTER (IN ORDER OF PRESENTATION)
  11. PART Four: Valuation and Analysis
    1. CHAPTER 10: Techniques for Valuing MBS
      1. STATIC CASH FLOW YIELD ANALYSIS
      2. Z-SPREAD
      3. VALUATION USING MONTE CARLO SIMULATION AND OAS ANALYSIS
      4. TOTAL RETURN ANALYSIS
      5. CONCEPTS PRESENTED IN THIS CHAPTER (IN ORDER OF PRESENTATION)
    2. CHAPTER 11: Measuring MBS Interest Rate Risk
      1. DURATION
      2. CONVEXITY
      3. YIELD CURVE RISK
      4. OTHER RISK MEASURES
      5. CONCEPTS PRESENTED IN THIS CHAPTER (IN ORDER OF PRESENTATION)
    3. CHAPTER 12: Evaluating Senior MBS and CMOs
      1. YIELD AND SPREAD MATRICES
      2. MONTE CARLO AND OAS ANALYSIS
      3. TOTAL RETURN ANALYSIS
      4. EVALUATING INVERSE FLOATERS
      5. CONCEPTS PRESENTED IN THIS CHAPTER (IN ORDER OF PRESENTATION)
    4. CHAPTER 13: Analysis of Nonagency MBS
      1. FACTORS IMPACTING RETURNS FROM NONAGENCY MBS
      2. UNDERSTANDING THE EVOLUTION OF CREDIT PERFORMANCE WITHIN A TRANSACTION
      3. THE PROCESS OF ESTIMATING PRIVATE-LABEL MBS RETURNS
      4. CONCEPTS PRESENTED IN THIS CHAPTER (IN ORDER OF PRESENTATION)
  12. APPENDIX: An Option-Theoretic Approach to Valuing MBS*
    1. OPTION-THEORETIC MODELS FOR VALUING MBS
    2. AN OPTION-BASED PREPAYMENT MODEL FOR MORTGAGES
    3. VALUATION OF MORTGAGES
    4. A CLOSER LOOK AT LEAPERS AND LAGGARDS
    5. VALUATION OF MBS
  13. INDEX