Mortgage-Backed Securities
Research
Mortgage Backed Securities (MBS) are in Bailout The Game
We used MBS's in the boardgame as our big debts on the Frantic Mae Frivolous Mac cards in order to capture the essence of the bailout. When the housing market crunch occurred, the mortgage backed security notes became worth less. The big banks needed TARP funds to stay afloat or would otherwise risk failure. The government believed that the big banks where "too big to fail" and if they did fail, our country would have spun into financial ruin.
What Are Mortgage-Backed
Securities (MBS)?
A mortgage backed security (MBS) is a debt obligation that represents claims to the cash flow from a pool of mortgage loans. Typically, residential property was most commonly packaged together within a MBS note. The way that it worked is that mortgage loans were purchased from banks, mortgage companies, and other originators; then the mortgages are assembled into various groupings dictated by a governmental, quasi-governmental, or private entity. The MBS is then issued as a security by the assemblage company that represent claims on the principal and interest payments made by borrowers on the loans in the conglomeration of mortgages. This is a process known as securitization. This MBS is sold on the open market to private investors and banks without completely understanding what types of mortgages are packaged within the mortgage backed security.
