Residential mortgage-backed security

Last updated

Residential mortgage-backed security (RMBS) are a type of mortgage-backed security backed by residential real estate mortgages. [1]

Contents

Bonds securitizing mortgages are usually treated as a separate class, making reference to the general package of financial agreements that typically represents cash yields that are paid to investors and that are supported by cash payments received from homeowners who pay interest and principal according to terms agreed to with their lenders; it is a funding instrument created by the "originator" or "sponsor" of the mortgage loan; without cross-collateralizing individual loans and mortgages (because it would be impossible to receive permission from individual homeowners), it is a funding instrument that pools the cash flow received from individuals and pays these cash receipts out with waterfall priorities that enable investors to become comfortable with the certainty of receipt of cash at any point in time.

There are multiple important differences between mortgage loans originated and serviced by banks and kept on the books of the bank and a mortgage loan that has been securitized as part of an RMBS. Chief among these is the result that the principal who interacts with the borrower, and drives the decision making of the "Servicer" who is newly introduced into the relationship, no longer has an obligation towards the responsibilities associated with the public trust and banking charter that traditionally controlled the loan relationships between banks and their customers. Unless a loan is reconstituted onto the balance sheet of an original lender, the retail-to-consumer relationship between the borrower and his bank is changed to a relationship that is between the original customer and a sophisticated accredited investor for whom the bank Servicer acts as a front.

An RMBS is often confusingly yet correctly referred to as a "bond-like" financial investment as a RMBS can be portrayed to have similar characteristics, including a "principal investment" and a "yield"; the "principal investment," however, does not represent the purchase of an individual promissory note issued by a homeowner, but rather represents the payment of "principal" for the right to receive cash flow from an investment agreement that involves many other understandings. Likewise, the "yield" is only the calculation of an imputed interest yield that stems from the receipt of the cashflows. The RMBS market represents the largest source of funding of residential mortgage loans to US homeowners (see below).

The performance of these securities has generally been considered more predictable than commercial mortgage-backed securities (CMBS), [2] because of the large number of individual and geographically diversified loans that exist within any individual RMBS pool. There are many different types of RMBS, including mortgage pass-throughs, collateralized mortgage obligations (CMOs), and collateralized debt obligations (CDOs). [3]

Origins

The origins of modern residential mortgage-backed securities can be traced back to the Government National Mortgage Association (Ginnie Mae), [4] although variations on mortgage securitization existed in the U.S. in the late 1800s and early 1900s. [5] In 1968, Ginnie Mae was the first to issue a new type of government-backed bond, known as the residential mortgage-backed security. [6] This bond took a number of home loans, pooled the monthly principal and interest payments and then used the monthly cash flows as backing for the bond(s). The principal of these mortgages was guaranteed by Ginnie Mae, but not the risk that borrowers pay off the principal balance early or opt to refinance the loan, a set of possible future outcomes known as "prepayment risk." [6] [7] Selling pools of mortgages in this way allowed Ginnie Mae to acquire new funds with which to buy additional home loans from mortgage brokers which furthered the agency's Congressionally mandated mission to "expand affordable housing". [8] Because banks and other mortgage originators could sell their mortgages in an RMBS, they used the proceeds to make new mortgage loans. [9]

Because these bonds had the full faith and backing of the United States government, they received high credit ratings and "paid an interest rate that was only slightly higher than Treasury bonds." [10] Following the success of Ginnie Mae's offerings, the other two government-sponsored housing agencies, Fannie Mae and Freddie Mac, [11] began offering their own versions of RMBS. The government's guarantee of the mortgage loans assured investors that if the borrower defaulted, they would be repaid in full. But in return for that guarantee, borrowers were held to strict underwriting standards. For example, with Fannie Mae, homebuyers had to make a minimum down payment of 10 percent of the home value, and the buyer's income had to be well documented and preferably from a periodic salary. [12]

Development of private-label MBSs

Funding for mortgages from S&Ls plummeted by almost the same amount as funding from Fannie and Freddie ("Government-sponsored enterprises") rose. Private-label RMBS ("Non-agency securities") funding peaked at about 21% before the subprime collapse. (source: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, p.69 figure 5.1) Funding for Mortgages.GIF
Funding for mortgages from S&Ls plummeted by almost the same amount as funding from Fannie and Freddie ("Government-sponsored enterprises") rose. Private-label RMBS ("Non-agency securities") funding peaked at about 21% before the subprime collapse. (source: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, p.69 figure 5.1)

In the late 1970s, a team from Salomon Brothers worked with Bank of America to create the first residential-mortgage backed security that wasn't government-guaranteed. [13] A Salomon Brothers' bond-trader by the name of Lewis Ranieri was instrumental in this effort. He coined the term "securitizing" during this period after joining the project in 1977. [14] According to author Alyssa Katz, Ranieri's ambition was to revolutionize the mortgage market, which at this time was heavily dependent on the government sponsored housing insurance institutions (Ginnie Mae, Fannie Mae and Freddie Mac). His plan was to discover a way to make the mortgage market a fully private affair [15] and to bring that goal to a reality, his team wished to create a security product "that could be bought and sold among investors". [16]

The idea was to allow private banks to issue loans and then sell those loans to willing investors looking for a steady stream of income, freeing up capital with which the bank could then issue additional loans. Despite working on the project for three years, the bonds the Salomon team developed were a commercial failure due to various state regulations and federal securities laws dating back to the Great Depression [17]

To fix this problem, Ranieri helped create and defend before Congress the Secondary Mortgage Market Enhancement Act of 1984 (SMMEA). [18] Alyssa Katz, in her 2009 book on the recent history of the American real estate market, writes that SMMEA

called on bond-rating agencies — at the time, Moody’s and Standard & Poor’s — to weigh in on each mortgage pool. As long as a bond got one of the top ratings from the agencies — meaning that in the agencies’ opinions, investors ought to be confident of getting paid — it could be sold. While the Securities and Exchange Commission would oversee the trading of these securities just as it did all investments for sale, no longer would the U.S. government exclusively manage the market in mortgage-backed securities, as it had through Ginnie Mae. “We believe that the ratings services do offer substantial investor protection,” Ranieri testified before Congress in early 1984. [19]

This law opened up the door to allow "federally-charted financial institutions, including credit unions," the ability to "invest in mortgage-related securities subject only to limitations that the appropriate regulating board might impose." [20] It created the market for the private label MBS that did not exist when Ranieri was first developing them in 1977.

source: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, p.73, figure 5.3 RMBS.gif
source: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, p.73, figure 5.3

According to David Maxwell of Fannie Mae, the developers of "private-label" mortgage-backed securities did not seek to — or at least end up — undercutting and replacing the Fannie and Freddie's "agency" MBSs. They wanted "to find products they could profit from where they didn't have to compete with Fannie." [21] Financial journalists Bethany McLean, and Joe Nocera, argue Ranieri and others on Wall Street realized they would never "dislodge [GSEs] Fannie and Freddie from their dominant position as the securitizers of traditional mortgages," but Fannie and Freddie had no business and no interest in non-prime mortgages (subprime or Alt-A mortgages). Thus the subprime market became the realm of private label Mortgage-Backed Securities. [21]

Tranches

The MBSs of the "government-sponsored enterprise", Fannie and Freddie were considered to be "the equivalent of AAA-rated bonds" because of their high standards and suggestions of guarantee by the US government. [22]

While private-label subprime mortgages would never be able to make that claim, by "slicing" the pooled mortgages into "tranches", each having a different priority in the stream of monthly or quarterly principal and interest stream, [23] [24] they could create triple A rated securities from the tranches with the highest priority — the most "senior" tranches.

Since the most senior tranche(s) was like a "bucket" being filled with the "water" of principal and interest that did not share this water with the next lowest bucket (i.e. tranche) until it was filled to the brim and overflowing, [25] the top buckets/tranches (in theory) had considerable creditworthiness and could earn the highest credit ratings, making them salable to money market and pension funds that would not otherwise deal with subprime mortgage securities.

source: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, p. 116 figure 7.2 RMBS selected investors.GIF
source: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, p. 116 figure 7.2

The first private label deals in the late 1980s and early 1990 often had only two tranches, but by 2005–06 the deals became more complex. [26] One "typical" mortgage-backed "deal" from one of the peak years of private label subprime mortgage securities (2006) was described in the Financial Crisis Inquiry Report. [26] (See table to the right.) Dubbed "CMLTI 2006-NC2", the deal involved 4499 subprime mortgages originated by New Century Financial—a California-based lender—and issued by a special purpose entity created and sponsored by Citigroup. The entity issued 19 tranches of mortgage-backed bonds worth $947 million. Since Citigroup and other firms focused on achieving high ratings, the (four) senior ranches rated triple A made up 78% or $737 million of the deal. Eleven tranches were "mezzanine" – three rated AA, three A, three BBB and two BB (junk). The most junior tranche was known as "equity" or "residual" or "first loss". It had no credit rating and was split between Citigroup and a hedge fund. [26] The more "junior" the tranche, the higher its risk and the higher its interest rate in compensation. [27]

According to business columnist Joe Nocera, as of mid-2013, "the market for private mortgage-backed securities ... remains moribund"[27]; its financing has become dominated by Fannie and Freddie. [28]

Growth, innovation, corruption

Residential mortgage-backed securities and similar sounding products would continue to expand and become more complex throughout the 1980s. For example, in 1983 Freddie Mac marketed the first collateralized mortgage obligation (CMO) [29]

Eventually structured finance would explode[ clarification needed ] with the development of the collateralized debt obligation (CDO) in 1987 and even further inventions, like the CDO-Squared. CDOs were originally used to pool many different RMBSs (which were themselves pools of residential mortgages) and then divide them up into tranches and sell them off to investors. The result of these financial innovations was a secondary mortgage market existing outside of the government-sponsored entities that provided a massive growth opportunity for Wall Street banks. According to former International Monetary Fund chief economist Simon Johnson, the "total volume of private mortgage-backed securities (excluding those issued by Ginnie Mae, Fannie Mae and Freddie Mac) grew from $11 billion in 1984 to over $200 billion in 1994 to close to $3 trillion in 2007." [30]

The private mortgage securitization market continued to grow. In 2004 the "commercial banks, thrifts, and investment banks caught up with Fannie Mae and Freddie Mac in securitizing home loans", and by 2005 they overtook them. [5] [31] Private MBS grew primarily by lowering their standards and securitizing more low-quality, high-risk mortgages such as Alt-A, and subprime mortgages. [5] Scholar Michael Simkovic argues that this relaxation of standards was due to greater competition between securitizers for loans, and greater market power for loan originators. [5] Financial journalists Bethany McLean and Joe Nocera argue that Wall Street securitizers encouraged relaxation of standards because poor-quality loans "meant higher yields". [32] [33]

GSEs also relaxed their standards in response, but GSE standards generally remained higher than private market standards, and GSE securitizations generally continued to perform well compared to the rest of the market. [5] However, some[ who? ] believe the dominance of the GSEs distorted the market, leading to overpricing that helped lead to the real estate bubble and the ultimate federal government bailout of the GSEs. As a result, several legislative and other proposals for gradually winding down the GSEs have been developed. [34]

Market collapse

The very rapid growth in low-quality mortgages, financed through securitization, is widely believed to be a major cause of the late 2000s financial crisis, also known as the Subprime mortgage crisis. The private RMBS market largely collapsed after 2008 and has been replaced by government-backed securitization characterized by much tighter underwriting and higher standards. [5]

See also

Related Research Articles

<span class="mw-page-title-main">Government National Mortgage Association</span> Government-owned financial services corporation aimed at low-income housing in the US

The Government National Mortgage Association (GNMA), or Ginnie Mae, is a government-owned corporation of the United States Federal Government within the Department of Housing and Urban Development (HUD). It was founded in 1968 and works to expand affordable housing by guaranteeing housing loans (mortgages) thereby lowering financing costs such as interest rates for those loans. It does that through guaranteeing to investors the on-time payment of mortgage-backed securities (MBS) even if homeowners default on the underlying mortgages and the homes are foreclosed upon.

<span class="mw-page-title-main">Fannie Mae</span> Government-backed financial services company

The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the New Deal, the corporation's purpose is to expand the secondary mortgage market by securitizing mortgage loans in the form of mortgage-backed securities (MBS), allowing lenders to reinvest their assets into more lending and in effect increasing the number of lenders in the mortgage market by reducing the reliance on locally based savings and loan associations. Its brother organization is the Federal Home Loan Mortgage Corporation (FHLMC), better known as Freddie Mac.

<span class="mw-page-title-main">Franklin Raines</span> American businessman and federal executive

Franklin Delano Raines, also known as Frank Raines, is an American business executive. He is the former chairman and chief executive officer of the Federal National Mortgage Association, commonly known as Fannie Mae, who served as White House budget director under President Bill Clinton. His role leading Fannie Mae has come under scrutiny. He has been called one of the "25 People to Blame for the Financial Crisis" according to Time magazine.

<span class="mw-page-title-main">Freddie Mac</span> American government-sponsored enterprise

The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons, Virginia. The FHLMC was created in 1970 to expand the secondary market for mortgages in the US. Along with its sister organization, the Federal National Mortgage Association, Freddie Mac buys mortgages, pools them, and sells them as a mortgage-backed security (MBS) to private investors on the open market. This secondary mortgage market increases the supply of money available for mortgage lending and increases the money available for new home purchases. The name "Freddie Mac" is a variant of the FHLMC initialism of the company's full name that was adopted officially for ease of identification.

<span class="mw-page-title-main">Mortgage-backed security</span> Type of asset-backed security

A mortgage-backed security (MBS) is a type of asset-backed security which is secured by a mortgage or collection of mortgages. The mortgages are aggregated and sold to a group of individuals that securitizes, or packages, the loans together into a security that investors can buy. Bonds securitizing mortgages are usually treated as a separate class, termed residential; another class is commercial, depending on whether the underlying asset is mortgages owned by borrowers or assets for commercial purposes ranging from office space to multi-dwelling buildings.

A collateralized debt obligation (CDO) is a type of structured asset-backed security (ABS). Originally developed as instruments for the corporate debt markets, after 2002 CDOs became vehicles for refinancing mortgage-backed securities (MBS). Like other private label securities backed by assets, a CDO can be thought of as a promise to pay investors in a prescribed sequence, based on the cash flow the CDO collects from the pool of bonds or other assets it owns. Distinctively, CDO credit risk is typically assessed based on a probability of default (PD) derived from ratings on those bonds or assets.

A government-sponsored enterprise (GSE) is a type of financial services corporation created by the United States Congress. Their intended function is to enhance the flow of credit to targeted sectors of the economy, to make those segments of the capital market more efficient and transparent, and to reduce the risk to investors and other suppliers of capital. The desired effect of the GSEs is to enhance the availability and reduce the cost of credit to the targeted borrowing sectors primarily by reducing the risk of capital losses to investors: agriculture, home finance and education. Well known GSEs are the Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, or Freddie Mac.

<span class="mw-page-title-main">Subprime mortgage crisis</span> 2007 mortgage crisis in the United States

The American subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis. The crisis led to a severe economic recession, with millions of people losing their jobs and many businesses going bankrupt. The U.S. government intervened with a series of measures to stabilize the financial system, including the Troubled Asset Relief Program (TARP) and the American Recovery and Reinvestment Act (ARRA).

An Alt-A mortgage, short for Alternative A-paper, is a type of U.S. mortgage that, for various reasons, is considered riskier than A-paper, or "prime", and less risky than "subprime," the riskiest category. For these reasons, as well as in some cases their size, Alt-A loans are not eligible for purchase by Fannie Mae or Freddie Mac. Alt-A interest rates, which are determined by credit risk, therefore tend to be between those of prime and subprime home loans, although there is no single accepted definition of Alt-A. Typically Alt-A mortgages are characterized by borrowers with less than full documentation, average credit scores, higher loan-to-values, and more investment properties and secondary homes. A-minus is related to Alt-A, with some lenders categorizing them the same, but A-minus is traditionally defined as mortgage borrowers with a FICO score of below 680 while Alt-A is traditionally defined as loans lacking full documentation. Alt-A mortgages may have excellent credit but may not meet underwriting criteria for other reasons. During the past decade, a significant amount of Alt-A mortgages resulted from refinancings, rather than property purchases.

The subprime mortgage crisis impact timeline lists dates relevant to the creation of a United States housing bubble and the 2005 housing bubble burst and the subprime mortgage crisis which developed during 2007 and 2008. It includes United States enactment of government laws and regulations, as well as public and private actions which affected the housing industry and related banking and investment activity. It also notes details of important incidents in the United States, such as bankruptcies and takeovers, and information and statistics about relevant trends. For more information on reverberations of this crisis throughout the global financial system see Financial crisis of 2007–2008.

<span class="mw-page-title-main">Causes of the 2000s United States housing bubble</span>

Observers and analysts have attributed the reasons for the 2001–2006 housing bubble and its 2007–10 collapse in the United States to "everyone from home buyers to Wall Street, mortgage brokers to Alan Greenspan". Other factors that are named include "Mortgage underwriters, investment banks, rating agencies, and investors", "low mortgage interest rates, low short-term interest rates, relaxed standards for mortgage loans, and irrational exuberance" Politicians in both the Democratic and Republican political parties have been cited for "pushing to keep derivatives unregulated" and "with rare exceptions" giving Fannie Mae and Freddie Mac "unwavering support".

A synthetic CDO is a variation of a CDO that generally uses credit default swaps and other derivatives to obtain its investment goals. As such, it is a complex derivative financial security sometimes described as a bet on the performance of other mortgage products, rather than a real mortgage security. The value and payment stream of a synthetic CDO is derived not from cash assets, like mortgages or credit card payments – as in the case of a regular or "cash" CDO—but from premiums paying for credit default swap "insurance" on the possibility of default of some defined set of "reference" securities—based on cash assets. The insurance-buying "counterparties" may own the "reference" securities and be managing the risk of their default, or may be speculators who've calculated that the securities will default.

<span class="mw-page-title-main">Federal takeover of Fannie Mae and Freddie Mac</span> Action by the U.S. Treasury to lessen the subprime mortgage crisis

In September 2008 the Federal Housing Finance Agency (FHFA) announced that it would take over the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Both government-sponsored enterprises, which finance home mortgages in the United States by issuing bonds, had become illiquid as the market for those bonds collapsed in the subprime mortgage crisis. The FHFA established conservatorships in which each enterprise's management works under the FHFA's direction to reduce losses and to develop a new operating structure that will allow a return to self-management.

James B. Lockhart III is an American U.S. Navy officer, business executive, and, since September 2009, Vice Chairman of WL Ross & Co, which manages $9 billion of private equity investments, a hedge fund and a Mortgage Recovery Fund. It is a subsidiary of Invesco, a Fortune 500 investment management firm. He coordinates WL Ross's investments in financial services firms and mortgages. Lockhart serves co-chairs the Bipartisan Policy Center's Commission on Retirement Security and Personal Savings.

Credit rating agencies (CRAs)—firms which rate debt instruments/securities according to the debtor's ability to pay lenders back—played a significant role at various stages in the American subprime mortgage crisis of 2007–2008 that led to the great recession of 2008–2009. The new, complex securities of "structured finance" used to finance subprime mortgages could not have been sold without ratings by the "Big Three" rating agencies—Moody's Investors Service, Standard & Poor's, and Fitch Ratings. A large section of the debt securities market—many money markets and pension funds—were restricted in their bylaws to holding only the safest securities—i.e. securities the rating agencies designated "triple-A". The pools of debt the agencies gave their highest ratings to included over three trillion dollars of loans to homebuyers with bad credit and undocumented incomes through 2007. Hundreds of billions of dollars' worth of these triple-A securities were downgraded to "junk" status by 2010, and the writedowns and losses came to over half a trillion dollars. This led "to the collapse or disappearance" in 2008–09 of three major investment banks, and the federal governments buying of $700 billion of bad debt from distressed financial institutions.

The U.S. subprime mortgage crisis was a set of events and conditions that led to a financial crisis and subsequent recession that began in 2007. It was characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages. Several major financial institutions collapsed in September 2008, with significant disruption in the flow of credit to businesses and consumers and the onset of a severe global recession.

<span class="mw-page-title-main">Peter J. Wallison</span> American attorney

Peter J. Wallison is an American lawyer and the Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute. He specializes in financial markets deregulation. He was White House Counsel during the Tower Commission's inquiry into the Iran Contra Affair. He was a dissenting member of the 2010 Financial Crisis Inquiry Commission, frequent commentator in the mass media on the federal takeover of Fannie Mae and Freddie Mac and the financial crisis of 2007–2008 and wrote Hidden in Plain Sight (2015) about the crisis and its legacy.

The Financial Crisis Inquiry Commission (FCIC) was a ten-member commission appointed by the leaders of the United States Congress with the goal of investigating the causes of the financial crisis of 2007–2008. The Commission has been nicknamed the Angelides Commission after the chairman, Phil Angelides. The commission has been compared to the Pecora Commission, which investigated the causes of the Great Depression in the 1930s, and has been nicknamed the New Pecora Commission. Analogies have also been made to the 9/11 Commission, which examined the September 11 attacks. The commission had the ability to subpoena documents and witnesses for testimony, a power that the Pecora Commission had but the 9/11 Commission did not. The first public hearing of the commission was held on January 13, 2010, with the presentation of testimony from various banking officials. Hearings continued during 2010 with "hundreds" of other persons in business, academia, and government testifying.

In structured finance, a tranche is one of a number of related securities offered as part of the same transaction. In the financial sense of the word, each bond is a different slice of the deal's risk. Transaction documentation usually defines the tranches as different "classes" of notes, each identified by letter with different bond credit ratings.

<span class="mw-page-title-main">Mortgage industry of the United States</span>

The mortgage industry of the United States is a major financial sector. The federal government created several programs, or government sponsored entities, to foster mortgage lending, construction and encourage home ownership. These programs include the Government National Mortgage Association, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.

References

  1. ↑ Choudhry, Moorad (2013-01-09). The Mechanics of Securitization: A Practical Guide to Structuring and Closing Asset-Backed Security Transactions. ISBN   9781118234549.
  2. ↑ Lemke, Lins and Picard, Mortgage-Backed Securities, Chapter 4 (Thomson West, 2013 ed.).
  3. ↑ Lemke, Lins and Picard, Mortgage-Backed Securities, Chapters 4 and 5 (Thomson West, 2013 ed.).
  4. ↑ Cassidy, John (2010). How Markets Fail: The Logic of Economic Calamities, Kindle Edition. 3703-3709: Farrar, Straus and Giroux. ASIN   B002VOGQRO.{{cite book}}: CS1 maint: location (link)
  5. 1 2 3 4 5 6 Michael Simkovic, Competition and Crisis in Mortgage Securitization
  6. 1 2 Johnson, Simon; James Kwak (2010). 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. Pantheon Books. pp.  72. ISBN   978-0-307-37905-4.
  7. ↑ Katz, Alyssa (2009). Our Lot: How Real Estate Came To Own Us, Kindle EditionICIC. 395-399: Bloomsbury USA, New York. ISBN   9781608191406.{{cite book}}: CS1 maint: location (link)
  8. ↑ "Ginnie Mae's Mission". Archived from the original on 2011-09-27. Retrieved 2011-07-03.
  9. ↑ Lemke, Lins and Picard, Mortgage-Backed Securities, Chapter 1 (Thomson West, 2013 ed.).
  10. ↑ Cassidy, John (2010). How Markets Fail: The Logic of Economic Calamities, Kindle Edition. 3710: Farrar, Straus and Giroux. ASIN   B002VOGQRO.{{cite book}}: CS1 maint: location (link)
  11. ↑ Cassidy, John (2010). How Markets Fail: The Logic of Economic Calamities, Kindle Edition. 3715-3716: Farrar, Straus and Giroux. ASIN   B002VOGQRO.{{cite book}}: CS1 maint: location (link)
  12. ↑ Katz, Alyssa (2009). Our Lot: How Real Estate Came To Own Us, Kindle Edition . 472-475: Bloomsbury USA, New York. ISBN   9781608191406.{{cite book}}: CS1 maint: location (link)
  13. ↑ Cassidy, John (2010). How Markets Fail: The Logic of Economic Calamities, Kindle Edition. 3717-3718: Farrar, Straus and Giroux. ASIN   B002VOGQRO.{{cite book}}: CS1 maint: location (link)
  14. ↑ Katz, Alyssa (2009). Our Lot: How Real Estate Came To Own Us, Kindle Edition . 355-358: Bloomsbury USA, New York. ISBN   9781608191406.{{cite book}}: CS1 maint: location (link)
  15. ↑ Katz, Alyssa (2009). Our Lot: How Real Estate Came To Own Us, Kindle Edition . 407-408: Bloomsbury USA, New York. ISBN   9781608191406.{{cite book}}: CS1 maint: location (link)
  16. ↑ Katz, Alyssa (2009). Our Lot: How Real Estate Came To Own Us, Kindle Edition . 358-359: Bloomsbury USA, New York. ISBN   9781608191406.{{cite book}}: CS1 maint: location (link)
  17. ↑ Katz, Alyssa (2009). Our Lot: How Real Estate Came To Own Us, Kindle Edition . 407-409: Bloomsbury USA, New York. ISBN   9781608191406.{{cite book}}: CS1 maint: location (link)
  18. ↑ Johnson, Simon; James Kwak (2010). 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown . Pantheon Books. pp.  73. ISBN   978-0-307-37905-4.
  19. ↑ Katz, Alyssa (2009). Our Lot: How Real Estate Came To Own Us, Kindle Edition . 411-416: Bloomsbury USA, New York. ISBN   9781608191406.{{cite book}}: CS1 maint: location (link)
  20. ↑ "S.2040 Bill Summary & Status 98th Congress (1983–1984)" . Retrieved 2011-07-03.[ permanent dead link ]
  21. 1 2 McLean, Bethany and Joe Nocera. All the Devils Are Here: The Hidden History of the Financial Crisis , Portfolio, Penguin, 2010 (p.19)
  22. ↑ Walden, Gene. "Make More with Mortgage-backed Securities". AllStarStocks.com. Securities issued by Fannie Mae and Freddie Mac are also guarantee ... the timely payment of all principal and interest of the mortgage-backed securities they issue. Although their guarantee doesn?'t carry the weight of the U.S. government, Freddie Mac and Fannie Mae are two of the most fiscally sound corporations in America. Their mortgage-backed securities are considered to be the equivalent of AAA-rated corporate bonds. They have never defaulted on a mortgage-backed security.
  23. ↑ The Financial Crisis Inquiry Report (PDF). National Commission on the Causes of the Financial and Economic Crisis in the United States. 2011. p. 70.
  24. ↑ Katz, Alyssa (2009). Our Lot: How Real Estate Came To Own Us, Kindle Edition . 400-407: Bloomsbury USA, New York. ISBN   9781608191406.{{cite book}}: CS1 maint: location (link)
  25. ↑ Here's how a CDO works| Upstart Business Journal| December 5, 2007
  26. 1 2 3 The Financial Crisis Inquiry Report (PDF). National Commission on the Causes of the Financial and Economic Crisis in the United States. 2011. pp. 71–2.
  27. ↑ Cassidy, John (2010). How Markets Fail: The Logic of Economic Calamities, Kindle Edition. 3720-3722: Farrar, Straus and Giroux. ASIN   B002VOGQRO.{{cite book}}: CS1 maint: location (link)
  28. ↑ "an incredible 77 percent of the mortgages being made in America are guaranteed by Fannie and Freddie", The End of Fannie and Freddie?| By JOE NOCERA| nytimes.com| June 26, 2013
  29. ↑ Cassidy, John (2010). How Markets Fail: The Logic of Economic Calamities, Kindle Edition. 3718-3719: Farrar, Straus and Giroux. ASIN   B002VOGQRO.{{cite book}}: CS1 maint: location (link)
  30. ↑ Johnson, Simon; James Kwak (2010). 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. Pantheon Books. pp.  76. ISBN   978-0-307-37905-4.
  31. ↑ The Financial Crisis Inquiry Report (PDF). National Commission on the Causes of the Financial and Economic Crisis in the United States. 2011. p. 102. commercial banks, thrifts, and investment banks caught up with Fannie Mae and Freddie Mac in securitizing home loans. and by 2005, had overtaken government/GSE mortgage backed securities issuance.
  32. ↑ quote= "Wall Street didn't care either. If anything, Wall Street was encouraging the subprime companies in their race to the bottom. Lousier loans meant higher yield." (All the Devils Are Here, MacLean and Nocera, p. 217–18)
  33. ↑ quote=Wall Street "wanted the riskiest subprime mortgages ... because these ... generated the most yield." `While subprime loans cost borrowers much more in fees -- WaMu execs "noted subprime loans were roughly 7X more profitable than prime mortgages"` (All the Devils Are Here, MacLean and Nocera, p. 134)
  34. ↑ Lemke, Lins and Picard, Mortgage-Backed Securities, Chapter 13 (Thomson West, 2013 ed.).
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.