Are mortgage pass-through securities different from usual asset backed securities?
if yes, can anyone explain with example? If any article or youtube video on this is available, please share.
They’re the same. They just have mortgages as the backing assets instead of other stuff (such as auto loans, credit card receivables, student loans, and so on).
Thanks magician. But, while ABS have a waterfall kind of a structure (i presume trenches - which means there are several classes of ABS with different rights), MBS do not seem to. That is why CMOs were created, which again, appearing confusing, are securities from MBS, their collateral is MBS, whoa! So, it appears that MBS do not have trenches, but ABS seem to have. And so, pass through is different from usual ABS with a waterfall. So confusing!
And upon finishing the chapter, I came across CDOs, which have debt obligations as collaterals. According to me, only assets (receivables) can be collaterals. So, debt obligations (debt, loans) being collaterals makes no sense for me.
Some of these definitions are confusing, but hopefully someone can correct me if I am wrong:
ABS: just means backed by assets. It is not a requirement that they have a waterfall structure. Mostly, I am thinking of mortgage pass through securities
CMO are a type of MBS. A CMO is a pool of pass-through securities, that have been repackaged. These will have tranches, but I don’t know that the tranches must be subject to a waterfall from senior to junior
MBS: this is an umbrella term, referring to CMO, RMBS, CMBS, mortgage pass through securities
CDO: the collateral is non-mortgage debt
Might be helpful:
http://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/91310361