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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  Capital Relief Trades    5 June 2020

• Senators seek TALF expansion

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• May payments slump

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  News    5 June 2020

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• Risk mitigation

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  News    1 June 2020

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• SCI Start the Week - 1 June

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• Forbearances falter

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  News    29 May 2020

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• CLO manager performance assessed

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• Moratoria mulled

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  News Analysis    21 May 2020

• TALF subscription date announced

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• Covid-19 relief initiative launched

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  Market moves    19 May 2020

• SCI Start the Week - 18 May

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  News    18 May 2020

• Forbearance frontiers

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• Corporate actions slow down

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  Market moves    14 May 2020

• Liquidity support

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  News Analysis    14 May 2020