Private-label MBS Collateral Statistics.
The Federal Home Loan Banks generally purchase private-label Mortgage Backed Securities
Structural credit enhancements include subordination and over-collateralization that are designed to absorb losses before an Federal Home Loan Bank will incur a loss on a security. Credit enhancement achieved through senior-subordinated features results in the subordination of payments to junior classes to ensure cash flows are received by senior classes held by investors such as the Federal Home Loan Banks. In addition, monoline financial guarantors provide credit protection on some of the Federal Home Loan Banks’ securities in a form of secondary guarantees based on certain performance triggers.