This module provides a brief overview of the mortgage backed securities market. The bulk of the session focuses on the most common types of securities and the mortgage loans used to create them. The final segment will introduce TBA trading, the method by which most agency pass through securities are traded.

The presentation begins with a very brief discussion of the basics of mortgages and mortgage-backed securities. This quick overview provides a context to better understand the structure of the instruments as well as the related concepts and terminology.

Building on that foundation, the bulk of the session concentrates on the most common type of mortgage-backed security, agency pass through securities. The first part of the main segment is an overview of the mortgage agencies, Fannie Mae, Freddie Mac and Ginnie Mae. That is followed by an investigation of pass through securities, which details their structure and cash flow characteristics. The discussion of pass through securities concludes with an investigation of the investment characteristics of agency pass throughs. A special focus of the discussion is the risks that are unique to mortgage backed securities.

The final portion of the session provides a brief introduction to two other MBS topics. First is an overview of the other main type of MBS, collateralized mortgage obligations. The video concludes with an introduction to the method of trading that accounts for the majority of MBS trading volume, TBA trading. It a style of trading unique to agency pass-through securities and it is quite unlike the trading of other fixed income securities.

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