THE FEDERAL RESERVE & THE 30 TRILLION - weblist - mpg

Asset-backed securities ("ABS") are a type of debt security based on a pool of assets, or collateralized by the cash flows from a specified pool of underlying assets. Such assets are pooled to make otherwise minor and uneconomical investments worthwhile, and also to reduce risk by diversifying the underlying assets. These pools can be made up of any type of receivable - credit card payments, auto loans, home mortgages, and even aircraft leases, royalty payments and movie revenues. Without such pooling the securitized assets might also be highly illiquid.
Mortgage-backed securities ("MBS") are asset-backed securities whose cash flows are backed by the principal and interest payments of a set of home or other real estate mortgage loans, both first mortgages and second mortgages (fixed rate and home equity lines of credit). Mortgage-securities are created when issuers "pool" these loans for sale to investors. The majority of mortgage securities are issued and/or guaranteed by U.S. governmental agencies or enterprises. MBS include numerous sub-types:

Pass-through MBS: The most simple form of MBS, which are essentially a securitization of the mortgage payments to the mortgage originators. Thus, purchasers have a direct ownership interest in a pool of mortgage loans. They can be further subdivided into Residential and Commercial. Residential MBS ("RMBS") are backed by mortgages on residential property and Commercial MBS ("CMBS") are secured by commercial and properties such as apartment buildings, retail or office properties, hotels, schools, or industrial properties.
Collateralized mortgage obligations ("CMO"): CMOs are more complex MBS where the pass-through mortgages are pooled again, and are ordered into tranches based on a "quality" determination, and the tranches are sold as separate securities. They are made up of many pools of securities rather than the like-featured pool seen with pass-throughs. Each tranche includes its own set of rules by which interest and principal are distributed.
Stripped MBS ("SMBS"): With SMBS each mortgage payment is partly used to pay down the principal and part is used to pay down the interest associated with it. SMBS are thus further broken down into two subtypes: interest-only SMBS ("IO-SMBS") and principal-only SMBS ("PO-SMBS"). IO-SMBS are a bond with cash flows backed by the interest component of the property owner's mortgage payments, and PO-SMBS are a bond backed by the cash flows associated with the principal repayment component of the property owner's mortgage.
Collateralized Debt Obligations ("CDO") are a type of asset-backed security and structured credit product. They are structured from a portfolio of fixed-income assets, and are divided into tranches. The tranches are rated senior (AAA), mezzanine (AA-BB), and equity (unrated). CDOs are constructed where a special purpose entity ("SPV") acquires a portfolio of credit. The portfolio commonly includes MBS, commercial real estate debt ("CRE"), and high-yield corporate loans.

updated to cycle 0902-0908