Introduction

摘要

As of this writing the total write-downs by financial institutions over the course of 2007-2008 has been $290 billion, much - if not most -directly or indirectly related to subprime mortgages. This already exceeds the total cost of the S&L crisis of about $250 billion (in 2008 dollars) (GAO, 1996). How does one securitize a pool of mortgages, especially subprime mortgages? What is the process from origination of the loan or mortgage to the selling of debt instruments backed by a pool of those mortgages? What problems creep up in this process, and what are the mechanisms in place to mitigate those problems? This survey seeks to answer all of these questions. Along the way we provide an overview of the market and some of the key players, and provide an extensive discussion of the important role played by the credit rating agencies.