2.12 Asset-Backed And Mortgage- Backed Securities Flashcards
Asset backed securities (ABS)
Bonds that are backed by the cash flows of other kinds of debt
Mortgage backed security (MBS)
Bonds backed by the mortgage payments of a pool of mortgages
Government sponsored enterprises (GSEs)
Privately owned, corporate entities that are chartered by the federal government.
Purpose is to direct funds into areas of national important we’re borrowing is in high demand but lending may be scarce
EXAMPLES;
Fannie Mae
Freddie Mac
Federal national mortgage association
FANNIE MAE
government sponsored enterprises,
Privately owned
Publicly traded Companies that purchase mortgages on the secondary market and Pool them to create mortgage back securities
Issuers of mortgage backed securities
Federal home loan mortgage Corporation
FREDDIE MAC
government sponsored enterprises,
Privately owned
Publicly traded Companies that purchase mortgages on the secondary market and Pool them to create mortgage back securities and
Issuers of mortgage backed securities
Government national mortgage association
GINNIE MAE
NOT Egg government sponsored Enterprise
It is a public government agency
It is a security with interest and principal payments that are backed by the full faith and credit of the US government
FANNIE MAE
FREDDIE MAC
GINNIE MAE
are all?
Agency Securities
Collateralized mortgage obligations (CMOs)
An asset backed security issued by a GSE or a private sector financing corporation and are often backed by FANNIE MAE, FREDDIE MAC and GINNIE MAE
Often rated AAA
CMOs offer a range of coupon rates and maturity dates for investors to choose from
CMOs typically pay investors interest and principal on a monthly basis except for during what period?
Lockout Period
Which is the period of time before a CMO investor will begin receiving principal payments
Interest from CMOs is taxable at the local, state and federal levels
