John Cyriac’s Blog

There are new risks created because of the securitization transaction other than the traditional risks of failure of obligors meeting their obligations. In the US, mortgage backed issuance (MBS) amounted to $1.6 trillion in 2006. It is important to consider the risks in this type of investments rather than relying completely on the rating agencies.

If you are involved in investing in Asset Backed Securities (ABS) or in the issuance or generally interested to know the way in which the securitisation market works, see this analysis. Risk Analysis of an Asset Backed Security from an investor’s perspective

This is a case study on Asset Backed Securities (ABS) from an investor’s perspective. We will be considering the example of J.P Morgan Alternative Loan Trust 2006-S1, which is a Mortgage Backed Security (MBS), issued in the US. There are four major parts to this case study. The first part gives a historical overview of the ABS market and the importance of Mortgage Backed Securities (MBS) among them. The second part gives an overview of the ABS issue of J.P Morgan Alternative Loan Trust 2006-S1 and its overall compliance with Regulation AB. The third part identifies the disclosure items and transaction parties as per Regulation AB. The study ends with the fourth part, which gives an analysis of the major risks created because of securitization of the mortgage loans. The risk analysis is limited to the new risks created as a result of the securitization transaction without getting into details of the traditional risks of failure of obligors meeting their obligations.