Research on the development of the MBS market and answer the following questions
A mortgage backed security (MBS) is a debt instrument backed by a pool of mortgages. Most MBSs are issued by the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae), or the Federal Home Loan Mortgage Corporation (Freddie Mac). Ginnie Mae and Freddie Mac issued their first MBSs in1970 and 1971, respectively. Fannie Mae issued its first MBS a decade later, in 1981. Some private institutions, such as brokerage firms, banks, and mortgage companies, also securitize mortgages and issue “private-label” mortgage securities.
You are asked to conduct research on the development of the MBS market and answer the following questions:
- How is a typical MBS structured? Describe the roles of each party involved.
- What are risks borne by MBS issuers, and investors, respectively?
- What are the effects of securitization on the liquidity in the mortgage market? How does securitization affect mortgage originating banks’ lending activities on the positive and negative sides, respectively?
- How did the mortgage market, the MBS market and subprime MBS market grow over the past two decades?
- Who do you think should be blamed for the collapse of the MBS market in the 2007-09 crisis? Why? (You need to name three parties that played a role and explain WHY they should be blamed.)
You are free to use any online resources. If you cannot find data back to 1990s, just present your best effort. The following are some useful data links:
You can find mortgage debt outstanding data for 2009 onwards at http://www.federalreserve.
Data prior to January 2009 can be found at http://www.federalreserve.
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