Public Course Delivery Method: Classroom Course
Duration of Course: 1 day

About this Course

What type of structure would an issuer use for pools of prime loans vis-à-vis nonprime loans? Are there structures to cater to different interest rate scenarios? What investor need does a Planned Amortization Class (PAC) structure meet? What collateral type is suitable to build a shifting interest structure? How does one optimize the composition of securities within the selected structure?

It is essential for all real estate finance professionals to have a good appreciation of the means by which mortgages become sellable in the market. To understand this, they must comprehend how secondary markets infuse liquidity into the lending industry, discover the key players and stakeholders and know how the market is structured on the macro level.

Astute professionals realize that Senior Subordinate Over-Collateralization (SSOC) is an essential concept to grasp because therein lies the secret to how pools of mortgages get transformed into securities, known in mortgage jargon as residential mortgage-backed securities (RMBS) or collateralized debt obligations (CDOs).

This course helps students deal with common structures used to create mortgage-backed securities (MBS) and understand what purpose these MBSs serve in different entities, such as loan acquisition and securitization. In addition, students will identify how credit rating agencies, over-collateralization, excess spread, credit enhancements, etc. influence structuring, risks and tranches.

Learning Objectives

At the end of the workshop, students will be able to:

• Demonstrate how mortgages find their way into securities through different instruments.
• Classify common structures used to create MBS vary in degrees of complexity.
• Identify how credit rating agencies like S&P, Moody’s and Fitch play a major role in determining the structure composition of MBS.
• Describe the rating criteria between investment grade and non-investment grade securities.
• Assess the need for over-collateralization (OC) and excess spread (ES) in structuring of MBS and how they provide support to the tranches in terms of maintaining payment schedules.
• Interpret the concept of purchasing external credit enhancements, explore credit enhancement providers, types of external credit enhancements, and the role of GSEs.
• Identify cash flow modeling techniques that would contribute to the accurate pricing of the MBS structure.
• Predict how to optimize tranche sizing for best execution by using tools, such as network cash flow models and constraint based programming.

Who Should Attend

This course will prove informative to product managers, securities analysts, production analysts, risk managers, and business analysts working in the field of mortgage product structuring and secondary marketing.

Successful completion of this event will earn the participant 2 points toward MBA's Certified Mortgage Banker (CMB) Designation.