The Securitization Markets Handbook E-Book

Charles Austin Stone

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Bloomberg Professional
• Sprache: Englisch

Seitenzahl: 364

Veröffentlichungsjahr: 2010

Beschreibung

In this long-awaited handbook, noted experts Charles Stone and Anne Zissu provide an enlightening overview of how securitization works and explain how future cash flows from various asset classes--from credit card receipts to mortgage payments--can be packaged into bond-like products and sold to investors. Once a marginal source of funds, securitization is now an essential corporate funding technique widely adopted by financial and industrial companies throughout the world to finance both working capital and capital budgets. It is also used as a risk-management tool and a source of liquidity. Securitization has been adapted to fund corporate acquisitions, to capitalize future streams of revenue, and to liquidate pools of nonperforming loans. With examples from companies such as GE Capital, Ford Motor Credit, Countrywide Home Loans, and D&K Healthcare, The Securitization Markets Handbook provides descriptions of all major classes of asset-backed securities and offers a practice-oriented commentary on trends in securitization and the value of asset- and mortgage-backed securities across industries and throughout the global markets. The authors approach the topic from both sides of the market: the supply side, where assets are securitized and mortgage- and asset-backed securities are issued, and the demand side, where investors choose which classes of mortgage and asset-backed securities will enhance their portfolios or serve as efficient hedges. The book's detailed explanations and practical examples make it a valuable guide both for experienced money managers trying to put a securitization strategy into place and for those new to securitization looking to acquire a broad and strong foundation in the subject.

Leseprobe

Table of Contents

About the Authors

Title Page

Copyright Page

Dedication

Table of Exhibits

Acknowledgements

Introduction

PART ONE - Key Structures and Cash Flow Dynamics

Chapter One - Mortgage-Backed Securities

Origins of the Market

From the Primary to the Secondary Mortgage Market

Agency and Nonagency Market Segments Compared

Pricing of Newly Originated Mortgages

Chapter Notes

Chapter Two - Price Dynamics of Mortages and Cash Flows

Bond and Mortgage Basics

Chapter Three - Valuation of Mortgage- and Asset-Backed Securities

Modeling Cash Flows of Pass-Through, PO, and IO Securities

Effective Duration

Effective Convexity

Case Study: A Pass-Through Security Issued by FNMA

Case Study: Principal-Only and Interest-Only Securities

Chapter Notes

Chapter Four - Other Structures in Asset-Backed Securities: CMOs, PACs, ...

Collateralized Mortgage Obligations

Planned Amortization Class

Floaters and Inverse Floaters

PART TWO - Corporate Debt and the Securitization Markets

Chapter Five - How Ford Motor Credit Corporation Has Used Securitization

The Case of Ford Motor Credit

Securitized Receivables

Advantages of Securitization

Special-Purpose Structure

Allocating and Funding Credit Risk: Subordinate Classes and Residual Interests

The Two-Step Securitization Transaction

Credit Ratings and On-Balance-Sheet versus Off-Balance-Sheet Cost of Funding

Ford Credit Auto Owner Trust 2000-A: A Case Study

Waterfall of Cash Flows

Credit Enhancement

Overcollateralization

Chapter Six - Asset-Backed Commercial Paper

Why Companies Use Asset-Backed Commercial Paper Programs

ABCP Characteristics

Credit Enhancement and Liquidity Support

Accounting Treatment

Risk-Based Capital Regulations

Conversion Factor for Liquidity Facilities

Restructuring Possibilities

PART THREE - Securitization of Revolving Credit

Chapter Seven - Dealer Floor Plan Loans

Trends in Wholesale Automobile Credit Securitization

Basics of the Securitization Scheme

Securing Liquidity

Shifts in Seller’s Interest and Investor Interest

Seller’s Claim on Receivable Pool

Factors in Credit Line Variability

Pool Size Matters

Chapter Eight - Credit Card Receivables

Elements of a Master Trust Pooling and Servicing Agreement

Basics of the Securitization Scheme

The Seller’s Interest and Investor Interest

Retained Interest

Credit Risk and Credit Enhancement

Tranches for A, B, and C Classes

ERISA Restrictions

PART FOUR - Searching for Value in the Mortgage- and Asset-Backed Markets

Chapter Nine - Investment, Speculation, and Hedging

Target Investment

Subordinate Segment of Private-Label MBSs

Interest-Rate Risk

Interest-Only Strips as a Hedging Tool

Principal-Only Strips as a Hedging Tool

Inverse Floaters as a Hedging Tool

Hedging CMOs with Options on Treasury Bonds

Chapter Ten - Credit Risk

Direct Financing of Risk versus Buying a Financial Guaranty

A Financial Guaranty Is Not an Insurance Contract

Selecting Efficient Forms and Levels of Credit Enhancement

Relative Value in Credit-Enhancement Structures

Index

About Bloomberg

Table of Exhibits

EXHIBIT 1.1 Risk Weights as a Function of Asset Rating

EXHIBIT 1.2 Agency Market for MBS

EXHIBIT 1.3 Nonagency Mortgage Market

EXHIBIT 1.4

EXHIBIT 1.5 Sample Purchase Pricing for 15-Year Fixed-Rate Mortgages

EXHIBIT 1.6 Sample Purchase Pricing for 30-Year Fixed-Rate Mortgages

EXHIBIT 1.7 15-Year versus 30-Year Mortgage Pricing for 10-Day Commitment

EXHIBIT 1.8 Mortgage Points: 30-Year Fixed-Rate

EXHIBIT 2.1 Price/Yield Relationship for Bond XYZ

EXHIBIT 2.2 Price/Yield Relationship for Bond XYZ

EXHIBIT 2.3 Mortgage Outstanding Balance over Time

EXHIBIT 2.4 Mortgage Outstanding Balance over Time

EXHIBIT 2.5 Int(t) and Princ(t)

EXHIBIT 2.6 Value of Fixed-Rate Mortgages

EXHIBIT 2.7 Price/Yield Relationship for a Fixed-Rate Mortgage

EXHIBIT 2.8 Value of Pool of Fixed-Rate Mortgages with Prepayment Option

EXHIBIT 2.9 Value of 100 Mortgages with Prepayment Option

EXHIBIT 2.10 Duration and Bond Valuation

EXHIBIT 2.11 Bond XYZ’s Modified Duration

EXHIBIT 2.12 Effect of Prepayment Option on Mortgage Values

EXHIBIT 2.13 Value of Prepayment Option

EXHIBIT 3.1 The Mortgage Securitization Process

EXHIBIT 3.2 Cash Flows Received at CPR of 0 Percent

EXHIBIT 3.3 Cash Flows Received at CPR of 15 Percent

EXHIBIT 3.4 Cash Flows Received at CPR of 30 Percent

EXHIBIT 3.5 Pass-Through Cash Flows over Time

EXHIBIT 3.6 10 Cash Flows over Time

EXHIBIT 3.7 PO Cash Flows over Time

EXHIBIT 3.8 Valuation of PT, 10, and PO Securities under Different CPR Discounting Scenarios

EXHIBIT 3.9 Market Discount Rates and PT, 10, and PO Securities

EXHIBIT 3.10 Pass-Through Security Issued by FNMA, May 1, 1987

EXHIBIT 3.11 Dealer Prepayment Forecasts

EXHIBIT 3.12 Example of S-Shape in Prepayment Curve as Function of Changes in Yield

EXHIBIT 3.13 S-Curves for FBC, UBS, BS, ML, and LB

EXHIBIT 3.14 S-Curves for SAL, GCM, MS, BOA, and GS

EXHIBIT 3.15 Weighted Average Life for FN 50000

EXHIBIT 3.16 Median Weighted Average Lives for FN 50000

EXHIBIT 3.17 reasury Curves

EXHIBIT 3.18 Cash Flow Graph of FN 50000 Showing Low Prepayment Rate

EXHIBIT 3.19 Cash Flow Graph of FN 50000 Showing High Prepayment Rate

EXHIBIT 3.20 Cash Flow Graph of FN 50000 Showing No Prepaid Cash Flows

EXHIBIT 3.21 Projected Cash Flows for the FH3 PO Strip at CPR of 0 Percent

EXHIBIT 3.22 Projected Cash Flows for the FH3 PO Strip at CPR of 20 Percent

EXHIBIT 3.23 Projected Cash Flows for the FH3 PO Strip at CPR of 40 Percent

EXHIBIT 3.24 Projected Cash Flows for the FH3 PO Strip at CPR of 80 Percent

EXHIBIT 3.25 Weight Average Life and PSA for Lehman Brothers

EXHIBIT 3.26 Weight Average Life and PSA for Salomon Brothers

EXHIBIT 3.27 Quick Yield Analysis

EXHIBIT 3.28 Spread I(Spread/WAL) for FHS Class A

EXHIBIT 3.29 Spread Z (Static Spread) for FHS Class A

EXHIBIT 3.30 Projected Cash Flows for FHS Class B for a 0 PSA

EXHIBIT 3.31 Projected Cash Flows for FHS Class B for Multiple PSAs

EXHIBIT 4.1 Principal Cash Flows at CPR of 0 Percent

EXHIBIT 4.2 Principal Cash Flows at CPR of 15 Percent

EXHIBIT 4.3 Principal Cash Flows at CPR of 30 Percent

EXHIBIT 4.4 Principal Cash Flows at CPR of 45 Percent

EXHIBIT 4.5 Principal Cash Flows at CPR of 0 Percent

EXHIBIT 4.6 Principal Cash Flows at CPR of 15 Percent

EXHIBIT 4.7 Principal Cash Flows at CPR of 30 Percent

EXHIBIT 4.8 Principal Cash Flows at CPR of 45 Percent

EXHIBIT 4.9 Summary of Principal Cash Flows at Different CPRs

EXHIBIT 4.10 Class Structure of MBS Issued by FNMA in 2003

EXHIBIT 4.11 Projected Cash Flows for FNR 2003-1A

EXHIBIT 4.12 Projected Cash Flows for FNR 2003-1AG

EXHIBIT 4.13 Projected Cash Flows for FNR 2003-1AR

EXHIBIT 4.14 Projected Cash Flows for FNR 2003-1AT

EXHIBIT 4.15 Projected Cash Flows for FNR 2003-1B

EXHIBIT 4.16 Interest and Principal Cash Flows for Class B of FNR 2003 at 450 PSA

EXHIBIT 4.17 PAC Established with Prepayment Rate Band Having a CPR between 10 and 15 Percent

EXHIBIT 4.18 Description Screen for FNR 2003-20 QB

EXHIBIT 4.19 Cash Flows for FNR 2003-20 QB with a 200 PSA

EXHIBIT 4.20 Cash Flows for FNR 2003-20 QB with a 50 PSA

EXHIBIT 4.21 Cash Flows for FNR 2003-20 QB with a 600 PSA

EXHIBIT 4.22 Cash Flows for FNR 2003-20 QB under Different PSA Scenarios

EXHIBIT 4.23 Cash Flows Allocated to Investors for FNR 2003-20 QB

EXHIBIT 4.24 PAC Interest for FNR 2003-20 QB

EXHIBIT 4.25 PAC Principal for FNR 2003-20 QB

EXHIBIT 4.26 Leverage Ratio

EXHIBIT 4.27 Coupon on Inverse Floaters with Different Leverage Ratios and Libors

EXHIBIT 4.28 Bear Stearns Inverse Floater Example

EXHIBIT 5.1 Ford Motor Credit Funding Spreads

EXHIBIT 5.2 Spreads of Debt Issued by A-2-Rated Finance Companies over Two-Year Treasury Strips

EXHIBIT 5.3 Securitized Funding as a Percent of Total Debt

EXHIBIT 5.4 Ford Credit Auto Owner Trust 2000-A

EXHIBIT 5.5 The Two-Step Securitization Transaction

EXHIBIT 5.6 FASB 140 on Two-Step Securitization Transations

EXHIBIT 5.7 Ford Credit Auto Owner Trust 2000-A, Supplement to Prospectus, 9/17/99

EXHIBIT 5.8 Yield Spreads between Top-Tier and Second-Tier Commercial Paper

EXHIBIT 5.9 Spreads between Tier One and Tier Two Commercial Paper

EXHIBIT 5.10 Commercial Paper Spreads over Treasury Strips

EXHIBIT 5.11 FMCC March 23, 2000 Receivables Securitization

EXHIBIT 5.12 Cash Flows for Publicly Offered Asset-Backed Notes and Certificates of Ford Credit Auto Owner Trust 2000-A at 0.5% Prepayment

EXHIBIT 5.13 Principal Cash Flow Allocation at 0.5% Prepayment

EXHIBIT 5.14 Cash Flows for Publicly Offered Asset-Backed Notes and Certificates of Ford Credit Auto Owner Trust 2000-A at 1.8% Prepayment

EXHIBIT 5.15 Principal Cash Flow Allocation at 1.8% Prepayment

EXHIBIT 5.16 Weighted Average Lives (WAL) of Asset-Backed Securities Issued by Ford Credit Auto Owner Trust 2000-A

EXHIBIT 5.17 A2-Rated Finance Paper: Spread to Treasury Curve

EXHIBIT 5.18 Allocation of Interest and Principal Cash Flows

EXHIBIT 5.19 Months Outstanding under Four Prepayment Scenarios of Senior Note Classes

EXHIBIT 5.20 FMCC 2000-A Credit Enhancement from Overcollateralization

EXHIBIT 5.21 Cumulative Overcollateralization

EXHIBIT 5.22 Ratings Changes for ABS Issued by Ford Credit Auto Owner Trust 2000-A

EXHIBIT 6.1 Tier-One and Tier-Two Commercial Paper Spreads

EXHIBIT 6.2 General Scheme of Financier Conduit

EXHIBIT 6.3 D&K’s Relationship to the ABCP

EXHIBIT 6.4

EXHIBIT 7.1 CFC Dealer Floor Plan Loan Securitization Scheme

EXHIBIT 7.2 Phases of a Series Issued by a Master Trust

EXHIBIT 7.3 Shifting of Master Trust’s Capital Structure between Seller’s Interest and Investor Interests

EXHIBIT 7.4 Seller’s Interest in Receivable Pool, November 2000 through May 2003

EXHIBIT 8.1 Revolving Consumer Credit Outstanding

EXHIBIT 8.2 Net Change in Securitized Consumer Credit (Millions of Dollars)

EXHIBIT 8.3 Sources of Consumer Credit*

EXHIBIT 8.4 Pools of Securitized Assets as a Percent of Total Revolving Consumer Credit

EXHIBIT 8.5 Capital Structure of Credit Card Master Trust over Time

EXHIBIT 8.6 Key Operating Documents

EXHIBIT 8.7 Series Issued and Outstanding from Hypothetical Credit Card Master Trust

EXHIBIT 8.8 Typical Nonsocialist Trust Allocation of Finance-Charge Collections

EXHIBIT 8.9 Percentage of MBNA Master Credit Card Trust II Financed by Seller’s Interest versus Investor Interest (February 1996-June 2001)

EXHIBIT 8.10 Dollar Amount of the Seller’s and Investor Interest in MBNA Master Credit Card Trust II

EXHIBIT 8.11 Dealer Floor Plan Credit versus Credit Card Receivables

EXHIBIT 8.12 MBNA Credit Card Master Note Trust Scheme

EXHIBIT 8.13 MBNA Credit Card Master Note Trust Tranches 1 and 2 of Classes A, B, and C Notes

EXHIBIT 8.14 Principal Credit Card Receivables Funded by the MBNA Credit Card Master Note Trust

EXHIBIT 8.15 Investor Interest of MBNA Master Credit Card Trust II Net of Series 2001-D

EXHIBIT 8.16

EXHIBIT 8.17

EXHIBIT 9.1 Flow of Mortgage Credit Through U.S. Markets

EXHIBIT 9.2 Three Hyperion Fixed Income Funds: Allocation of Assets

EXHIBIT 9.3 Banc of America Funding Corporation, Mortgage Pass-Through Certificates, Series 2003-1

EXHIBIT 9.4 Residential Funding Mortgage Securities I, Inc. Fitch Ratings Transitions Summary 1992-2002

EXHIBIT 9.5 Freddie Mac REMIC investments as of November 30, 2002

EXHIBIT 9.6 The MBS and ABS Exposure of Three Different Intermediate Bond Funds

EXHIBIT 9.7 CMO Investments of the Bond Fund of America at August 31, 1997 and February 28, 2002

EXHIBIT 9.8

EXHIBIT 9.9 Price/Yield Relationship for Bond XXX

EXHIBIT 9.10 Alternative Prepayment/Yield Scenarios

EXHIBIT 9.11 Comparative Portfolio Values of Bonds and lO Securities

EXHIBIT 9.12 Portfolio Values under a Range of Market Rates

EXHIBIT 9.13 Standard Deviations of Portfolio Values

EXHIBIT 9.14 Comparison of Hedged and Alternative Portfolios

EXHIBIT 9.15 Portfolio Values

EXHIBIT 9.16 Comparison of Hedged and Alternative Portfolios

EXHIBIT 9.17 Portfolio Values

EXHIBIT 9.18 Comparison of Hedged and Alternative Portfolios

EXHIBIT 9.19 Yield on FNMA 10% POs with FNMA 10% Pass-Through Certificates

EXHIBIT 9.20 Summary Description of an Inverse lO Security

EXHIBIT 9.21 Inverse IO Coupon Rates under Different Libor Scenarios

EXHIBIT 9.22 Inverse IO Coupon Rate vs. Libor

EXHIBIT 9.23 Expected Cash Flows of Inverse IO Security at Market Rate of 1.3375%

EXHIBIT 9.24 Expected Cash Flows of Inverse IO Security at Market Rate of 2.5%

EXHIBIT 9.25 Expected Cash Flows of Inverse IO Security at Market Rate of 5%

EXHIBIT 9.26 Expected Cash Flows of Inverse 10 Security at Market Rate of 8%

About the Authors

Charles Austin Stone, PhD, and Anne Zissu, PhD, are the founding editors of The Financier (www.the-financier.com), The Securitization Conduit (www.asset-backed.com), and The Arbitrageur, publications providing commentary on corporate finance, risk management, securitization, and related topics. Stone is a professor of finance at Brooklyn College, City University of New York. Zissu is a professor of finance at Temple University in Philadelphia. They have edited several books on finance, and their research has appeared in leading academic journals including the Journal of Derivatives, the Journal of Applied Corporate Finance, and Financial Markets, Institutions and Instruments. They share their time between residences in New York and Paris.

Also available from BLOOMBERG PRESS

Credit Derivative Strategiesedited by Rohan Douglas

The Credit Default Swap Basisby Moorad Choudhry

Fixed-Income Securities and Derivatives Handbookby Moorad Choudhry

PIPESedited by Steven Dresner with E. Kurt Kim

Inside the Yield Bookby Sidney Homer and Martin L. Leibowitz, PhD

Due Diligence for Global Deal Makingedited by Arthur H. Rosenbloom

A complete list of our titles is available at www.bloomberg.com/books

ATTENTION CORPORATIONS

THIS BOOK IS AVAILABLE for bulk purchase at special discount. Special editions or chapter reprints can also be customized to specifications. For information, please e-mail Bloomberg Press, [email protected], Attention: Director of Special Sales, or phone [phone].

© 2005 by Charles Austin Stone and Anne Zissu. All rights reserved. Protected under the Berne Convention. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher except in the case of brief quotations embodied in critical articles and reviews. For information, please write: Permissions Department, Bloomberg Press, 731 Lexington Avenue, New York, NY 10022 U.S.A. or send an e-mail to press@ bloomberg.com.

BLOOMBERG, BLOOMBERG LEGAL, BLOOMBERG MARKET ESSENTIALS, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG PRESS, BLOOMBERG PROFESSIONAL, BLOOMBERG RADIO, BLOOMBERG TELEVISION, BLOOMBERG TERMINAL, and BLOOMBERG TRADEBOOK are trademarks and service marks of Bloomberg L.P. All rights reserved.

This publication contains the authors’ opinions and is designed to provide accurate and authoritative information. It is sold with the understanding that the authors, publisher, and Bloomberg L.P. are not engaged in rendering legal, accounting, investment-planning, or other professional advice. The reader should seek the services of a qualified professional for such advice; the authors, publisher, and Bloomberg L.P. cannot be held responsible for any loss incurred as a result of specific investments or planning decisions made by the reader.

ISBN-13: 978-1-57660-138-9

The Library of Congress has cataloged the earlier printing as follows:

Stone, Charles A. (Charles Austin)

p. cm.

Includes index.

1. Mortgage-backed securities. 2. Asset-backed financing. I. Zissu, Anne. II. Title.

HG4655. S76 2005

332.63’23--dc22

2004020399

To our children, Ben and Hava Stone— we hope that books will always be as large a part of their life as this one has

And in memory of Ben Zissu and Allan Stone, the grandfathers of Ben and Hava

Acknowledgments

WE WOULD LIKE TO THANK Kathleen Peterson and Tracy Tait at Bloomberg Press. Kathleen had the confidence in our idea and the patience to work with us on the manuscript. Tracy was dedicated and hard-working in bringing the project to successful completion; she has been the closer on this book. We also thank all those at Bloomberg Press—especially Barbara Diez Goldenberg, JoAnne Kanaval, and Mary Macher—who have worked so diligently to make this book more valuable.