Mortgage-Backed Securities: Products, Structuring, and Analytical Techniques, 2nd Edition

Preface

Mortgage-backed securities (MBS) continue to comprise one of the largest securities markets in the world. As of the end of 2010, the face value of all U.S.-issued MBS was greater than $6 trillion, only exceeded by the $8.8 trillion in marketable Treasury securities outstanding. The MBS market's size in turn reflects the enormity of the U.S. residential real estate market. As an example, data from the National Association of Realtors indicate that existing home sales for 2010 were estimated to total 4.9 million units; at an average price of $220,000, the dollar value of all transactions was in the area of $1 trillion dollars for the year.

Both the consumer mortgage and MBS sectors have, however, undergone significant changes since the publication of the first edition. Many of these changes resulted, directly and indirectly, from the collapse in mortgage performance which first became evident in late 2006 and led to the financial crisis of 2007–2008. A primary reason for creating a new edition of this book was to reassess the MBS sector in the context of the changes resulting from that crisis, as well as explore the insights gained in the post-crisis period. Many of these changes can be understood by reviewing some of the trends identified in the earlier edition.

• The growth of lending to borrowers with nontraditional financial profiles. While this helped many underserved borrowers gain access to mortgage credit, an unintended result was that numerous borrowers who received ...