Working Paper: CEPR ID: DP16989
Authors: Andreas Fuster; David O. Lucca; James Vickery
Abstract: This paper reviews the mortgage-backed securities (MBS) market, with a particular emphasis on agency residential MBS in the United States. We discuss the institutional environment, security design, MBS risks and asset pricing, and the economic effects of mortgage securitization. We also assemble descriptive statistics about market size, growth, security characteristics, prepayment, and trading activity. Throughout, we highlight insights from the expanding body of academic research on the MBS market and mortgage securitization.
Keywords: mortgage finance; securitization; agency mortgage-backed securities; TBA; option adjusted spreads; covered bonds
JEL Codes: G10; G12; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| mortgage securitization (G21) | increased liquidity in mortgage markets (E44) |
| mortgage securitization (G21) | outward shift in credit supply (E51) |
| moral hazard effects (G52) | reduced credit quality (G32) |
| Federal Reserve's QE programs (E52) | lower MBS yields (E43) |
| lower MBS yields (E43) | influence market liquidity (G10) |