Abstract
Despite the recent negative attention, mortgage securitization provides a vehicle to take assets without much investor appeal and create bonds whose risk and return profiles are customized to those of various investors. This is accomplished by “structuring” the cash flows of the assets into various “tranches,” each with the appropriate level of prepayment or credit risk for the prospective buyer. The extreme credit impairment of the current mortgage market has changed the dynamic of these structural relationships. Understanding the various structures and their nuances will enable a savvy investor to seek value in today’s upside down market. <b>TOPICS:</b>CLOs, CDOs, and other structured credit, MBS and residential mortgage loans, CMBS and commercial mortgage loans
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