Understanding Mortgage-Backed Securities
mortgage backed securities or mbs are a type of bond representing an investment in a pool of real estate loans. to understand what a mortgage backed security is, we need to go over what happens when a bank issues a mortgage. let's look at how a mortgage becomes in a mbs. tawney wants to buy a house costing $500,000. usually tawney will go to his bank to apply for a mortgage for $500,000, and in return for loaning this money, the bank will make towney pay interest on the loan at, say, 8%. before the world of mortgage backed securities, the bank would simply keep this loan on its books and receive principal and interest for the duration of the loan, say, 30 years. one downside of this arrangement was that the bank had to keep this loan for 30 years, tying up capital and resources. one day, the bank had an idea. it could sell the stream of interest, the 8%, and principal payments from tawney's loan to investors to get out of the bank's books and free up capital at the same time. the bank will make money simply from originating and servicing mortgages and from other associated fees. in order to sell the interest streams to investors, the bank bundles tawney's loan together with hundreds maybe even thousands of other mortgages. then, the bundle of mortgages is sold to an investment bank in the form of a single bond. the investment bank partitions the pool of loans according to quality and sells the sections to other investors. so, although tawney makes payments to his bank, the loan is actually in the hands of investors. mortgage backed securities are essentially a way for bank to free up capital and provide a way for investors to buy into mortgages.
- mortgage backed security（mbs）・・・不動産担保証券（MBS）→https://ja.wikipedia.org/wiki/%E4%B8%8D%E5%8B%95%E7%94%A3%E6%8B%85%E4%BF%9D%E8%A8%BC%E5%88%B8
- go over・・・～を調べる
- tie up・・・～を固定する
- get out of・・・～から取り出す
- free up・・・～を完全に自由にする
- buy into・・・～を買い持ちする