On the heels of the “recap and release” of Fannie and Freddie, comes this story from Bloomberg on the continued revival of the mortgage backed securities market. Indexes based on mortgages are being contemplated, but no, not the subprime variety. Since 2013, these are now called credit-risk transfer securities (LOL), they are pools of higher grade mortgages, investors will be forced to bear losses if home-owners default on their loan payments. All without the implicit government guarantee as F and F are soon to be saved! Hallelujah!
Seriously though, nine years after the crisis, risk appetites are to be tested again. These CRTs are akin to the higher tranches of CDOs in some sense, but hopefully some lessons have been learnt.