mortgage loans as an asset class

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cgrady40

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what would this ential exactly?
does the insurance company purchase the loans themselves form lenders?
 
Typical mortgage lenders will ‘pool’ mortgages based on their various risk factors (maturity, rate, interest % etc) and sell the packaged mortgages as a ‘MBS’ security to investors/banks etc.
 
Galli wrote:
Typical mortgage lenders will ‘pool’ mortgages based on their various risk factors (maturity, rate, interest % etc) and sell the packaged mortgages as a ‘MBS’ security to investors/banks etc.
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thats what i thought it was referring to at first, but there are MBS listed as another asset class in this example though
(CFAI book 3 pg 278)
 
Guys where are you getting this from the curriculum…i can only see Mortgage REITs as an alternative asset class and mortgageREITs ownmortgages ie they end money to builders and they pass the interest income and capital repayments to investors.
 
insurance companies can buy mortgage backed securities (like pass-through certificates or MBS bonds), but they are also lenders and hold the loans (mortgages) as as assets on their balance sheet. Prudential, for example, is a big CRE lender.
 
Oh, and I should mention that a typical lender does not ‘pool’ their mortgages. The vast majority originate and then sell them individually to issuers who can package them different ways. Nowadays the issuers are usually only contributing 5-15% of the pool. If you are a Ginnie Mae or Fannie DUS issuer you may sell those, but not typically on a pooled basis (mosty individual pass-throughs). The residential market is a bit different and almost all of those lenders are not pooling private label RMBS right now due to Basal III.
 
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