1. Mortgage Securitization and the “TBA” Market
National Conference of State Housing Boards
Educational and Development Workshop
October 14, 2017

2. Mortgage Securitization
The process of combining individual mortgages of similar characteristics in a pool and selling debt securities that draw interest and principal payments from the pool of mortgages. 

3. Types of Mortgage Backed Securities (MBS)
Mortgage pass-through securities: Security owners receive monthly payments that are a proportional share of the interest and principal payment received by a mortgage pool.
Collateralized mortgage obligation: Security where the mortgage pool is carved into separate sections, or tranches, having different payment priorities and characteristics.  

4. Why Securitize? Market Liquidity Risk Diversification/Transfer
Transactional Scale

6. HFA Single-Family Secondary Mortgage Markets
“TBA” Market for Ginnie, Fannie, & Freddie Securities
Whole Loan Cash Sales to Loan Aggregators
Tax-Exempt & Taxable Housing Bonds
Private Placement of MBS
Hold in Portfolio

9. 30-Year Conventional Mortgage Rate

10. TBA Market (To Be Announced Market)
“TBA” is used to indicate that the investor is acquiring some portion of a pending mortgage pool of as-yet unspecified mortgages, which will be specified at a given delivery date.

11. TBA Market What Sellers and Investors Know: Issuer
Guarantor/Mortgage Loan Type
Security Coupon Rate
Mortgage Interest Rate Range
Settlement Date
Investment Amount

12. TBA Security Issuance Process
Homebuyer/Borrower
HFA Pricing Decision
Participating Lender
Secondary Market Commitment/
Financial Hedge
Loan
HFA/Master Servicer
Loans
Pooling and Securitization
(GNMA/FNMA/FHLMC)
Mortgage Security
Security Dealer
Mortgage Security
Investor(s)
Master Servicer
Guarantor
Document Custodian
Fiscal Agent
HFA
Financial Advisor
Secondary Marketing Agent

13. TBA Security Issuance Process
Pricing Decision:
Real-Time Market Pricing
Local Competitive Market
Execution Costs
Profit Margins
Other Factors

14. TBA Program Considerations
Secondary Market Seller/Servicer Approvals
Product Differentiation
Loan Pipeline Management
Transaction Size and Costs
Cash Flow Management

16. Whole Loan Cash Sales to Fannie Mae and Freddie Mac
Homebuyer/Borrower
HFA Pricing Decision
Participating Lender
Secondary Market Commitment/
Financial Hedge
Loan
HFA/Master Servicer
Loans
Fannie Mae/Freddie Mac
HFA
Financial Advisor
Secondary Marketing Agent

17. Tax-Exempt Housing Bonds – MBS (Traditional Approach)
Bond Investors
HFA Pricing Decision
Homebuyer/Borrower
Mortgage Security
Tax-Exempt Bond Trust
Participating Lender
Loan
HFA/Master Servicer
Loans
Mortgage Security
Pooling and Securitization
(GNMA/FNMA/FHLMC)
Trustee
Rating Agency
Bond Attorney
HFA
Financial Advisor
Investment Banker
Master Servicer
Guarantor
Document Custodian
Fiscal Agent

18. Pass-Through Bond Financing
Homebuyer/Borrower
HFA Pricing Decision
Participating Lender
Secondary Market Commitment/
Financial Hedge
Loan
HFA/Master Servicer
Loans
Security Dealer(s)
Pooling and Securitization
(GNMA/FNMA/FHLMC)
Mortgage Security
Tax Exempt Bond Trust
Mortgage Security
Bond Investors
Master Servicer
Guarantor
Document Custodian
Fiscal Agent
Trustee
Rating Agency
Bond Attorney
Investment Banker
Financial Advisor
HFA
Financial Advisor
Secondary Marketing Agent

19. Questions