CHAPTER 9

U.S. Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations

Agencies issue two types of securities, straight debt, such as the traditional bonds discussed elsewhere in this book and mortgage-backed securities (MBSs). In Chapter 8, we examined the straight debt issued by agencies. In this chapter, we examine two broad types of mortgage securities. First we discuss agency MBSs, which are those mortgage securities issued or guaranteed by Fannie Mae, Freddie Mac, and another government entity, the Government National Mortgage Association (known as Ginnie Mae).

Next, we discuss the more complex mortgage securities called collateralized mortgage obligations (CMOs). We have divided CMOs into two groups: The first group ...

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