Mortgage-Backed Securities : Products,

The book will cover: Overview of what has happened in the past 3 years in the mortgage securitization market Current state of the market The uncertain futures of the GSEs; The roles of the rating agencies (both past and future); Regulatory changes and their impact Revised valuation techniques: the fact that all non-agency MBS must be treated as "credit pieces" and valued using credit analysis techniques; The interaction between the mortgage industry, home prices, and credit performance.

Frank J. Fabozzi, PhD, CFA, is Professor of Finance at EDHEC Business School and a member of the EDHEC-Risk Institute. Prior to joining EDHEC, he held various professorial positions in finance at Yale University's School of Management from 1994 to 2011 and, from 1986 to 1992, was a visiting professor of finance and accounting at MIT's Sloan School of Management. He is also Editor of the Journal of Portfolio Management.

Anand K. Bhattacharya, PhD, is a Professor of Practice in the Department of Finance, W. P. Carey School of Business, Arizona State University, and a Fixed Income Strategist with Stifel, Nicolaus & Company, Inc. He has consulted with various financial institutions on issues of balance sheet restructuring and asset valuation.

William S. Berliner is the Principal of Berliner Consulting & Research, LLC, a boutique firm specializing in mortgages and mortgage-backed securities. His primary focus is security and loan valuation and hedging, serving both institutional investors and mortgage originators. Berliner also writes a monthly column for Asset Securitization Report.

Preface	p. xi
About the Authors	p. xv
Introduction to Mortgage and MBS Markets	p. 1
Overview of Mortgages and the Consumer Mortgage Market	p. 3
Overview of Mortgages	p. 4
Mortgage Loan Mechanics	p. 12
Risks Associated with Mortgages and Mortgage Products	p. 17
Concepts Presented in this Chapter	p. 22
Overview of the Mortgage-Backed Securities Market	p. 23
Creating Different Types of MBS	p. 24
MBS Trading	p. 35
The Role of the MBS Markets in Generating Consumer Lending Rates	p. 40
Cash Flow Structuring	p. 44
Concepts Presented in this Chapter	p. 46
Payment and Default Metrics and Behavior	p. 47
Measurement of Prepayments and Defaults	p. 49
Prepayment Terminology	p. 50
Calculating Prepayment Speeds	p. 52
Delinquency, Default, and Loss Terminology	p. 66
Concepts Presented in this Chapter	p. 16
Prepayments and Factors Influencing the Return of Principal	p. 77
Prepayment Fundamentals	p. 77
Factors Influencing Prepayment Speeds	p. 85
Defaults and "Involuntary" Prepayments	p. 92
Concepts Presented in this Chapter	p. 97
Structuring	p. 39
Introduction to MBS Structuring Techniques	p. 101
Underlying Logic in Structuring Cash Flows	p. 102
Structuring Different Mortgage Products	p. 103
Fundamentals of Structuring CMOs	p. 106
Fundamental MBS Structuring Techniques: Divisions of Principal	p. 109
Time Tranching	p. 110
Planned Amortization Classes (PACs) and the PAC-Support Structure	p. 116
Targeted Amortization Class Bonds	p. 130
Z-Bonds and Accretion-Directed Tranches	p. 130
A Simple Structuring Example	p. 134
Concepts Presented in this Chapter	p. 140
Fundamental MBS Structuring Techniques: Division of Interest	p. 141
Coupon Stripping and Boosting	p. 143
Floater-Inverse Floater Combinations	p. 147
Two-Tiered Index Bonds (TTIBs)	p. 156
Excess Servicing IOs	p. 160
Concepts Presented in this Chapter	p. 166
Structuring Private-Label CMOs	p. 167
Private-LabeljCredit Enhancement	p. 169
Private-Labell Senior Structuring Variations	p. 176
Governing Documents	p. 189
Concepts Presented in this Chapter	p. 191
The Structuring of Mortgage ABS Deals	p. 193
Fundamentals of ABS Structures	p. 194
Credit Enhancement for Mortgage ABS Deals	p. 199
Factors Influencing the Credit Structure of Deals	p. 201
Additional Structuring Issues and Developments	p. 203
Concepts Presented in this Chapter	p. 208
Valuation and Analysis	p. 209
Techniques for Valuing MBS	p. 211
Static Cash Flow Yield Analysis	p. 211
Z-Spread	p. 213
Valuation Using Monte Carlo Simulation and OAS Analysis	p. 214
Total Return Analysis	p. 226
Concepts Presented in this Chapter	p. 229
Measuring MBS Interest Rate Risk	p. 231
Duration	p. 231
Convexity	p. 238
Yield Curve Risk	p. 241
Other Risk Measures	p. 242
Concepts Presented in this Chapter	p. 244
Evaluating Senior MBS and CMOs	p. 245
Yield and Spread Matrices	p. 246
Monte Carlo and OAS Analysis	p. 262
Total Return Analysis	p. 268
Evaluating Inverse Floaters	p. 274
Concepts Presented in this Chapter	p. 279
Analysis of Nonagency MBS	p. 281
Factors Impacting Returns from Nonagency MBS	p. 281
Understanding the Evolution of Credit Performance within a Transaction	p. 284
The Process of Estimating Private-Label MBS Returns	p. 290
Concepts Presented in this Chapter	p. 304
Appendix: An Option-Theoretic Approach to Valuing MBS	p. 305
Option-Theoretic Models for Valuing MBS	p. 306
An Option-Based Prepayment Model for Mortgages	p. 307
Valuation of Mortgages	p. 311
A Closer Look At Leapers and Laggards	p. 319
Index	p. 327
Table of Contents provided by Ingram. All Rights Reserved.

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Mortgage-Backed Securities : Products, Structuring, and Analytical Techniques

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Table of Contents

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