The dubious mortgage securities are so called mortgage backed securities.

You call them stock, or stock options, derivatives, mortgage backed securities.

The prices of traded mortgage backed securities have followed house prices down.

Mortgage backed securities were urged onto investors for whom they were too risky.

Mortgage banks kept some claims on their books, but sold most of them to investment banks as mortgage backed securities.

Mortgage banks kept some claims on their books, but sold most of them to investment banks as mortgage backed securities. The investment banks blended these securities into asset backed securities and collateralized debt obligations (CDOs) and sold them on to financial institutions throughout the world.

As a result, mortgage brokers maximize their income by generating larger volumes of mortgages, as do the banks that package these loans into mortgage backed securities (MBS s).

It may make sense for central banks (or Fannie Mae, America s major government sponsored mortgage company) to buy mortgage backed securities in order to help provide market liquidity.

The mortgage backed securities that US banks succeeded in selling to the world are not comparable to European assets with similar names.

That gave the Fed the ability in 2010 to begin its massive monthly purchases of long term bonds and mortgage backed securities.

This creates an incentive to default, which increases foreclosures and lowers the value of the mortgage backed securities on financial firms books.

Asymmetric information between sellers and buyers of financial products can easily leave buyers vulnerable to abuse, as we saw with mortgage backed securities.

The issue centres on the sale of mortgage securities.

When home prices stop rising, recent homebuyers may lose the enthusiasm to continue paying their mortgages and investors lose faith in mortgage backed securities.

It involved a complex synthetic security that was derived from existing mortgage backed securities by cloning them into imaginary units that mimicked the originals.

Central Mortgage Agency Director Yevgeny Shubin

The rating agencies miscalculated the value of asset backed securities.

It involved a complex synthetic security that was derived from existing mortgage backed securities by cloning them into imaginary units that mimicked the originals. This synthetic collateralized debt obligation (CDO) did not finance the ownership of any additional homes or allocate capital more efficiently it merely swelled the volume of mortgage backed securities that lost value when the housing bubble burst.

That's how loans worked before the mortgage backed security industry really got developed. Now let's do the example with a mortgage backed security. Now there's still me.

Asset Backed Securities The Dangers of Investing in Subprime Debt , Fortune .

In the current crisis, even the private rating agencies dramatically underestimated the risks involved, which helped lure international financial investors into purchasing mortgage backed securities at exaggerated prices.

We then call on credit rating agencies to certify that the less risky of these mortgage backed securities are safe enough for pension funds and insurance companies to invest in.

In the US, the penalties have been dominated by fines for sales of misleadingly marketed mortgage backed securities, often to the two government supported entities Fannie Mae and Freddie Mac.

We then call on credit rating agencies to certify that the less risky of these mortgage backed securities are safe enough for pension funds and insurance companies to invest in.

Some distressed banks clearly possess large quantities of mortgage backed securities, and are holding onto them in the hope that their prices will rise in the future, saving them from failure.

Paulson s proposal to purchase distressed mortgage related securities poses a classic problem of asymmetric information.

Moreover, the asset backed securities market is to be revived by the purchase of ABSs.

America exported its toxic mortgages around the world, in the form of asset backed securities.

But lower short term interest rates have led to higher medium term interest rates, which are more relevant for the mortgage market, perhaps because of increasing worries about inflationary pressures. It may make sense for central banks (or Fannie Mae, America s major government sponsored mortgage company) to buy mortgage backed securities in order to help provide market liquidity.

And, if the downward spiral in house prices continues, the value of mortgage backed securities held by financial institutions around the world will continue to decline, affecting the supply of credit far beyond the US.

The investment banks blended these securities into asset backed securities and collateralized debt obligations (CDOs) and sold them on to financial institutions throughout the world.

First, investors, recognizing that the dollar is overvalued and that they are likely to suffer large losses when it returns to its fundamental value, could start selling their Treasury bonds, corporate bonds, and mortgage backed securities.

In Europe, particularly Germany, a mortgage backed security ( Pfandbrief ) is an ultra safe asset, as normally banks finance no more than 60 of a house s value. By contrast, such US securities are like a lottery ticket.

Further quantitative easing, such as by the European Central Bank, could be directed toward greener asset backed securities.

Established in 2000 as the Ho Chi Minh City Securities Trading Center (HoSTC), it is an administrative agency of the State Securities Commission, along with the Hanoi Securities Trading Center.

The US Federal Reserve, for example, is currently purchasing assets (many of them mortgage backed) worth 85 billion each month.

At the federal level, Canada Mortgage and Housing Corporation (CMHC) is Canada's national housing agency.

In the last quarter of 2007 alone, Mexican issuers sold 1.5 billion in new mortgage backed securities a significant portion of 4.4 billion outstanding with only a slight drop in prices to reflect globally induced risk, according to the publication Asset Securitization Report .

Banks naturally avoided traditional business loans (which would have to be backed by more capital), and instead loaded up on the highest yielding and thus riskiest AA or AAA mortgage backed securities that they could find. The global banking system and economy was thus vulnerable to the mistakes of the three main rating agencies and their flawed risk models.

In order to ensure that mortgage securitizers have some skin in the game, they are required to retain an interest in 5 of the mortgage securities that they create (unless they qualify for an exemption).

Often, securities are created that are backed by sophisticated portfolios containing good and bad assets whose true risk cannot easily be assessed.

Often, securities are created that are backed by sophisticated portfolios containing good and bad assets whose true risk cannot easily be assessed.

Securities...

Even so, the explosion in the quantity of collateralized debt obligations and similar securities went far beyond what was needed to sustain mortgage lending.

As they absorb their losses on US treasury and agency securities, capital flows toward the US will diminish.