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RMBS

Residential mortgage-backed securities, or RMBS, are bonds or notes created by securitisation that are backed by residential mortgages or residential real estate loans. RMBS originators are typically financial institutions that originate residential real estate or residential mortgage loans, including banks, building societies/savings & loans and mortgage finance companies. However, issuers could also include government-guaranteed securities issued following bank bailouts, such as TARP or TALF, and the Government Sponsored Enterprises Fannie Mae and Freddie Mac. To create residential mortgage-backed securities, or RMBS, institutions sell pools of their loans to a special-purpose vehicle, or SPV, which then sells the loans to a trust. The trust then repackages the loans as interest-bearing securities and issues them. This true sale of the loans to the SPV ensures that the RMBS is treated as bankruptcy-remote from the originator. Many different types of assets back RMBS, including prime, non-conforming, sub-prime, Alt-A (or Alternative-A), buy-to-let and single-family rental (SFR) mortgages. The financial crisis caused residential mortgage valuations to plummet, leading to severe losses/defaults in many RMBS transactions (and ABS CDOs), as well as efforts to begin modifying loan documentation and indeed the creation of many credit/dislocation/distressed opportunity/recovery funds to take advantage of opportunities in the RMBS sector. Post-crisis, the Government Sponsored Enterprises Fannie Mae and Freddie Mac have developed a credit risk transfer market, comprising synthetic RMBS structures (whereby the risk is transferred via CDS tranches).


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    Market moves    7 November 2019
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    Market moves    6 November 2019
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    Market moves    5 November 2019
  • SCI Capital Relief Trades Awards 2019

    Credit Insurer of the Year: Arch Capital Group

    Arch Capital Group Ltd (ACGL) is SCI’s Credit Insurer of the Year in recognition of its po...

    News    4 November 2019
  • SCI Start the Week - 4 November

    A review of securitisation activity over the past seven days

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    News    4 November 2019
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    Market moves    1 November 2019
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    Market moves    31 October 2019
  • Niche programme

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    News    31 October 2019
  • SCI Capital Relief Trades Awards 2019

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    News    28 October 2019
  • Overcoming stigma

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    Market moves    25 October 2019
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    Market moves    24 October 2019
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    Market moves    22 October 2019
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  • ESG scores launched

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    News Analysis    18 October 2019
  • Best in class

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