The principal and interest generated by the mortgage pool are transferred to the investors of MBS intact, so MBS is also called the passing securities. There are four kinds of mortgage securities in the United States:1) mortgage securities guaranteed by gnma; 2) Letter of participation from Federal Housing Mortgage Corporation (FHLMC); 3) Federal National Mortgage Association (FNMA) mortgage-backed bonds; 4) Private mortgage bonds.
ABS is asset-backed securities, and typical commodities include automobile loan securities and credit card securities. Different from MBS, ABS products have no government guarantee, but after calculating the risk by statistical methods, banks with high credit ratings provide partial guarantee, or arrange priority/lag parts to control the risk of lagging parts, and the priority parts are sold to ordinary investors after obtaining high credit ratings.
The reason why ABS is paid more and more attention is that the financial indicators such as the asset-liability ratio of the sponsors and owners will be improved by financing through asset securitization and handling this part of assets off the books. For example, an auto financing company transfers its auto loan to SPV, and then SPV entrusts its loan to a bank, and obtains a certificate of trust income right (ABS) from the bank, and then sells its ABS to investors through a securities company. In this way, the company achieved the purpose of financing without changing the company's financial indicators and affecting the company's credit rating.