Mortgage Backed Securities - Part 3

This final chapter in the mortgage backed securities lesson reviews the relationship between the special purpose entity and the investors through cash flows from the mortgages in the MBS.  The speaker discusses default and recovery rates  when assessing the risks involved with MBS.  There is a prepayment risk and default risk which will adversely affect the interest payments received on the loans.  The process in valuing these securities is very complex and takes many different assumptions