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The Origins and Evolution of the Market for Mortgage-Backed Securities

Author

Listed:
  • John J. McConnell

    () (Krannert Graduate School of Management, Purdue University, West Lafayette, Indiana 47907)

  • Stephen A. Buser

    (Department of Finance, Fisher College of Business, The Ohio State University, Columbus, Ohio 43210)

Abstract

The first mortgage-backed security (MBS) was issued in 1968. Thereafter, the MBS market grew rapidly with outstanding issuances exceeding $9 trillion by 2010. The growth in the MBS market was accompanied by numerous innovations such as collateralized mortgage obligations (CMOs) and the emergence of private label alternatives to MBS issued by government-sponsored entities. We trace the evolution of the MBS market and we review debates surrounding such questions as whether the MBS market has reduced the cost of housing finance, whether the MBS market is a market for lemons, and what role, if any, MBS played in the run-up and subsequent decline of home prices during the decade of the 2000s. We also detail the evolution of models for MBS valuation as developed by academics and practitioners.

Suggested Citation

  • John J. McConnell & Stephen A. Buser, 2011. "The Origins and Evolution of the Market for Mortgage-Backed Securities," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 173-192, December.
  • Handle: RePEc:anr:refeco:v:3:y:2011:p:173-192
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-financial-102710-144901
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    Citations

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    Cited by:

    1. Bonnie G. Buchanan, 2016. "Securitization: A Financing Vehicle for All Seasons?," Journal of Business Ethics, Springer, vol. 138(3), pages 559-577, October.
    2. Gorton, Gary & Metrick, Andrew, 2013. "Securitization," Handbook of the Economics of Finance, Elsevier.
    3. Omneya Abdelsalam & Marwa Elnahass & Sabur Mollah, 2018. "Religiosity and Bank Asset Securitization," Working Papers 2018-13, Swansea University, School of Management.
    4. Buchanan, Bonnie G., 2017. "The way we live now: Financialization and securitization," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 663-677.
    5. Christian Calmès & Raymond Théoret & François-Éric Racicot, 2014. "La titrisation aux États-Unis et au Canada," RePAd Working Paper Series UQO-DSA-wp032014, Département des sciences administratives, UQO.

    More about this item

    Keywords

    collateralized mortgage obligations; subprime; mortgage agency;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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