I am trying to understand MBS and would like to know what investors in MBS and CMO see at the time of purchase of these securities. For example, Fannie Mae has a MBS certificate. Is that all that an investor in the Fannie Mae MBS gets to see or does the investor get more information on the underlying mortgages. Similarly, how about a non-agency MBS or CMO, what information does the investor see. Any help would be greatly appreciated.

Not a great deal - Prior to purchase there's the offering circular (OC) typical of other debt issuance.On a ongoing basis, there's the periodic (normally monthly) investor report from the issuer, which normally includes principal and interest paid during period, any defaults, delinquencies....

The investor gets a prospectus, which details the structure of the deals (water fall, triggers, credit enhancements, etc.). There are also some summary statistics about the underlying collateral.

How does the coupon get calculated for the MBS and CMO? how does teh credit risk of the mortgage get addressed in the valuation?

For non-agency new issues, there is a new issue tape that you can request so that you can run the data through your models. These tapes are also being hosted by 1010data, so you can do some of your checking of the collateral characteristics on 1010 if you have a license. In addition, if you have a model hooked up to 1010, you can run your prepayment and default model under different rate and economic scenarios. These tapes will contain loan level information for each loan such as fico, ltv, combined LTV, debt to income ratio, zip code, state, unpaid principal balance, type of loan, prepayment penalties, etc. If I am not mistaken, an Intex version of the cash flow waterfall may also be made available so that you can test the structure of the deal and determine if it meets your risk appetite, etc.Once the deal is seasoned, you can use Intex, Lehman's point, the yieldbook, etc. to evaluate past performance. If it is a non-agency deal, the historical loan level information will be available in Loanperformance, so you can do any further analysis.On the agency side, the agencies used to provide average collateral characteristics for a pool backing the MBS and you can look at these. If I am not mistaken, Freddie started provided loan level data a couple of years ago. Hope this helps!

QuoteOriginally posted by: UVAstudentdoes the investor get more information on the underlying mortgages.this info is public, weather u can digest it is another issue. u can get a lot of info on each mortgage in the deal if u know how. i know

can you tell me what information can they get on each mortgage. Can they figure out what mortgage is in a specific MBS and CMO?

QuoteOriginally posted by: UVAstudentcan you tell me what information can they get on each mortgage. Can they figure out what mortgage is in a specific MBS and CMO?As i said it's all public, u can find it all yourself on trustee's websites, in SEC and other public sources. did u ever peek into prosupps? start from there, u'll find a great deal of info. i can't list u all fields, there's too many. SSN and home addresses r not there, dont worry. loan origination dates, maturity dates, ltv, cltv... bla-bla... lots of stuff depending on the source

Got it. Thank you.

Hi - to address your specific questions:1) The pools of mortgages are generally in the hundreds of millions of dollars, so no investor really sees a specific mortgage at time of issuance.2) However, as loans default during the course of a deal, some trustees publish loan level information in the monthly statements.3) How to set a coupon? In the most general sense: you combine market spread opinions of the paper with actual cashflows.A note on running mortage cashflows, pricing and coupons:You run the cashflows for the whole pool of mortgages that will pay the bond whose coupon you are setting. There is a market opinion of the corresponding spread over index for each credit rating level (AAA downward). You use that spread on top of an index like LIBOR or, for fixed rate paper, a swap whose duration is close to the average life of the bond. Then, using that yield (index plus spread) as the coupon, you get a price for each bond. Please note that the coupon is also somewhat limited by the collateral coupon as you get into the really below investment grade stuff.It's a bit of an iteration at times, but generally investment grade stuff will price at par (100% of face) and below investment grade will price at a discount. This happens because market opinion of a specific credit rating might be substantially wider than the coupon you can support with the collateral. Intuitively - you generate cashflows at (index plus spread, limited by the mortgages' collateral coupon) but discount their present value at (index plus much wider spread), so a discount occurs.Hope that helps.Stephanie