Post by Ismail AbdulAzeez on Jul 29, 2017 17:44:30 GMT 1
WHAT YOU SHOULD KNOW ABOUT COMMERCIAL AND RESIDENTIAL MORTGAGE-BACKED SECURITY
Mortgaged-backed security:
It is a type of asset – backed security that is secured by mortgage or mortgages. These securities should also be grouped in one of the top two ratings as determined by an accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments.
The mortgage must have originated from a regulated and authorized financial institution: and it is also known as a ‘’mortgage – related security’’ or a ‘’mortgage pass through’’.
When you invest in a mortgage – backed security, you are essentially lending money to a home buyer or a business. As MBS is a way for similar regional bank to lend mortgages to its customer without having to worry about whether the customer have assets to cover the loan; instead, the bank acts as a middle person between the home buyer and the investment outfits.
Commercial Mortgage Backed Securities (CMBS) are a type of Mortgage – Backed Security that is secured by the loan on a commercial property. A CMBS can provide liquidity to real estate investors and to commercial lenders. As with most types of CMBS, the increase use of CMBS can be attributed to the rapid rise in the real estate prices over the years.
However, because CMBS is not standardized there are still a lot of details associated with CMBS which make them difficult for valuation. When compared to a Residential Mortgage Backed Security (RMBS), a CMBS provides a lower degree of payment risk because commercial mortgage are most often set for a fixed term and condition.
Residential Mortgage Backed Security (RBMS) is a security whose cash flows come from residential debt such as mortgages, home equity loans and sub-prime mortgages.
This is the type of mortgage – backed security that focuses on residential instead of commercial debt.
Holders of an RMBS receive interest and principal payments that come from the holders of the residential debt.
The RMBS comprise a large amount of pooled residential mortgages.
Mortgaged-backed security:
It is a type of asset – backed security that is secured by mortgage or mortgages. These securities should also be grouped in one of the top two ratings as determined by an accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments.
The mortgage must have originated from a regulated and authorized financial institution: and it is also known as a ‘’mortgage – related security’’ or a ‘’mortgage pass through’’.
When you invest in a mortgage – backed security, you are essentially lending money to a home buyer or a business. As MBS is a way for similar regional bank to lend mortgages to its customer without having to worry about whether the customer have assets to cover the loan; instead, the bank acts as a middle person between the home buyer and the investment outfits.
Commercial Mortgage Backed Securities (CMBS) are a type of Mortgage – Backed Security that is secured by the loan on a commercial property. A CMBS can provide liquidity to real estate investors and to commercial lenders. As with most types of CMBS, the increase use of CMBS can be attributed to the rapid rise in the real estate prices over the years.
However, because CMBS is not standardized there are still a lot of details associated with CMBS which make them difficult for valuation. When compared to a Residential Mortgage Backed Security (RMBS), a CMBS provides a lower degree of payment risk because commercial mortgage are most often set for a fixed term and condition.
Residential Mortgage Backed Security (RBMS) is a security whose cash flows come from residential debt such as mortgages, home equity loans and sub-prime mortgages.
This is the type of mortgage – backed security that focuses on residential instead of commercial debt.
Holders of an RMBS receive interest and principal payments that come from the holders of the residential debt.
The RMBS comprise a large amount of pooled residential mortgages.
