MBS is the earliest asset securitization product. It was first produced in the United States in the 1960s. It is an asset securitization commodity, which is mainly issued by American professional housing banks and savings institutions with their mortgage loans. Its basic structure is to pool the loans that meet certain conditions in mortgage loans to form a mortgage pool, and use the regular cash flow of principal and interest in the loan pool to issue securities, which are guaranteed by government agencies or financial institutions with government background. Therefore, America's MBS is actually a kind of securitized goods, with a strong color of public finance policy.
The principal and interest generated by the mortgage pool are transferred to the investors of MBS intact, so MBS is also called the passing securities. There are four main mortgage securities in the United States: mortgage securities guaranteed by the National Mortgage Association (GNMA); Letter of participation from Federal Mortgage Corporation (FHLMC); Mortgage-backed bonds of the Federal National Mortgage Association (FNMA); Private mortgage bonds.
There are three modes of mortgage securitization in the world: off-balance sheet, on-balance sheet and quasi-off-balance sheet.
The off-balance-sheet model, also known as the American model, is that the original owner (such as a bank) "sells" assets to a special purpose vehicle (SPV), and SPV re-establishes an asset pool after purchasing assets, and issues securities with the support of the asset pool; On-balance-sheet model, also known as European model, means that the original owner does not need to sell the assets to SPV but stays on his balance sheet, and the sponsors issue securities themselves; The quasi-off-balance-sheet model, also known as the Australian model, is that the original owner establishes a wholly-owned or holding subsidiary as SPV and then "sells" the assets to SPV. A subsidiary can buy not only the assets of the parent company, but also other assets. After purchasing assets, subsidiaries form an asset pool to issue securities.