What Are The Basic Features Of The MBS Securities?
Mortgage-backed securities are debt securities, refinanced through obligations under one or more mortgage loans . Interest payments and payments of principal on such securities are made ??from funds received by providing loans. Mortgage-backed securities is a kind of derivative securities, employees versatile tool refinancing of housing investment, i.e. means for short-term financial investments in the recovery of the construction of residential properties that are purchased on the market by mortgage . At the same time maintain the stability of securities refinancing mortgage construction due to the fact that the refund is made in the period was less than the maturity of the mortgage loan amount (Stroebel, 2009).
MBS is very much similar to bonds, but here the securities are backed by mortgages. A bond is a promissory note where a corporation (or a Government) obliges to pay a certain sum of money every month and at the end of term repay the original sum back. In the case of MBS, the repayment is backed by mortgage payments (by the homeowner). On a broader level, this is what happens. A few mortgages which are similar in nature are pooled together. They are securitized by either a Quasi governmental agency (FNMA, GNMA etc) or a corporation. These pools of MBS are sold to other institutions. Every month, the owner of the pool will receive a portion of the interest payment and principal on the mortgages. There are many risks associated with the cash flow, right from prepayment to loan defaults. Because of MBS the risk of the loan is distributed among all the stakeholders and is not limited to only the small bank which lent the money (Calem, 2004).
Application of mortgage securities in the process of refinancing the mortgage capital is carried out in three ways. Legislation provides for the release of banks providing mortgage, mortgage-backed bonds. But it is also possible concession to banks and mortgage agents of claims on loans (loans) secured by a mortgage and / or mortgage. Finally, the possible assignment of these rights claims management company in exchange for mortgage participation certificates.
Mortgage is a loan in which house functions as the collateral, normally banks gives the mortgage loan 70 to 80% varies with banks and states central banking rules and regulation etc. Computers and calculators allow the calculation of mortgage loan more easy, quickly and accurate , even sometimes solving a complex mortgage loan calculation need more knowledge and proper key strokes but the user should follow the basic principle to a solve any kind of mortgage loan calculations (Roll, 2003).
What Kinds Of Products Are Available In The MBS Markets? Their Risk and Return Profiles?
Appointment of mortgage-backed securities is to minimize the risk of late return of borrowed funds when investing in mortgage construction undertaken by the mechanism of securitization. The essence of the mechanism is to securitization debt conversion procedure associated with refinancing in paper having acceptable collateral and the relatively high ...