In the complex landscape of modern finance, understanding structured products like Mortgage-Backed Securities (MBS) and Asset-Backed Securities (ABS) is a cornerstone for any professional aiming to navigate capital markets effectively. These instruments have reshaped how lending and credit risk are managed, offering both significant opportunities for investors and vital liquidity for financial institutions. This training course provides a clear and foundational overview of these securities, demystifying their core components and demonstrating their critical role in today's global financial system. By mastering these concepts, you will be equipped to analyze market trends, evaluate investment opportunities, and understand the mechanisms driving a large segment of the fixed-income market.

This 10-day program is designed for new and aspiring finance professionals, offering a structured learning path that moves from fundamental principles to practical applications. It covers the complete lifecycle of both MBS and ABS, including the process of asset pooling, the roles of various market participants, and the key risks and benefits associated with these products. The curriculum is built to provide not just theoretical knowledge but a practical framework for thinking about structured finance, ensuring that participants can confidently apply their learning in their professional roles. It’s an essential first step for anyone looking to build a career in structured finance, credit analysis, or investment management.

Duration

10 days

Target Audience

• Junior financial analysts and associates
• Investment banking trainees
• Fixed-income and credit analysts
• Asset management and portfolio support staff
• Risk management professionals
• Legal and compliance officers new to structured products
• College graduates and students of finance
• Anyone seeking a foundational knowledge of MBS and ABS

Objectives

• Define and differentiate between Mortgage-Backed and Asset-Backed Securities.
• Identify the key players and their roles in a securitization deal.
• Understand the full process of securitizing assets from start to finish.
• Analyze the cash flow structures and payment waterfalls for different securities.
• Recognize and evaluate the main risks associated with MBS and ABS.
• Explain the role of credit enhancements in protecting investors.
• Describe the legal and regulatory considerations in structured finance.
• Discuss the historical context and evolution of the securitization market.
• Apply concepts through practical examples and case studies.

Course Modules

Module 1: Introduction to Securitization

• What is securitization?
• The benefits and drawbacks of securitization.
• The role of structured finance in capital markets.
• Overview of key terminology and concepts.
• The historical context of securitization.

Module 2: Fundamentals of Mortgage-Backed Securities (MBS)

• Defining MBS and the assets that back them.
• How a pool of mortgages is created.
• The role of government-sponsored enterprises (GSEs).
• The concept of pass-through certificates.
• The importance of prepayment risk.

Module 3: Fundamentals of Asset-Backed Securities (ABS)

• Defining ABS and the assets that back them.
• Examples of ABS asset pools (e.g., auto loans, credit cards).
• The key differences between MBS and ABS.
• How a revolving pool of assets is managed.
• Understanding the risk profiles of different ABS types.

Module 4: Key Players and Their Roles

• The role of the originator and the issuer.
• The function of the underwriter and the servicer.
• The importance of the trustee and legal counsel.
• The role of credit rating agencies.
• How investors participate in the market.

Module 5: The Securitization Process

• The steps from asset origination to security issuance.
• The concept of a true sale and bankruptcy remoteness.
• The role of the Special Purpose Vehicle (SPV) or trust.
• Due diligence and data verification.
• The documentation involved in a securitization.

Module 6: Credit Risk and Ratings

• Understanding default risk in the underlying assets.
• The role of rating agencies in assessing risk.
• How credit ratings influence investor appetite.
• The concept of subordination.
• The relationship between asset quality and security ratings.

Module 7: Credit Enhancement Techniques

• Why credit enhancement is necessary.
• Internal methods of enhancement (e.g., overcollateralization, excess spread).
• External methods of enhancement (e.g., surety bonds, letters of credit).
• How credit enhancement protects different tranches.
• The cost and benefits of various techniques.

Module 8: Cash Flow and Payment Waterfalls

• The concept of a cash flow waterfall.
• How cash flows from the underlying assets are distributed.
• The structure of senior and subordinate tranches.
• The order of payments to investors and other parties.
• Analyzing a simple waterfall structure.

Module 9: Valuation and Pricing of MBS/ABS

• Key factors that influence the price of a security.
• The relationship between interest rates and security prices.
• The role of option-adjusted spread (OAS).
• The impact of market liquidity on pricing.
• A basic introduction to valuation models.

Module 10: Prepayment and Other Risks

• Detailed analysis of prepayment risk.
• Extension risk and its impact on investors.
• The concept of interest rate risk.
• Liquidity risk and market volatility.
• Understanding legal and regulatory risks.

Module 11: Residential vs. Commercial MBS

• The main differences between residential and commercial mortgages.
• The structure of Residential MBS (RMBS).
• The structure of Commercial MBS (CMBS).
• Analyzing the unique risks in CMBS, such as balloon risk.
• A comparison of CMBS and RMBS market dynamics.

Module 12: Specific Types of ABS

• An in-depth look at auto loan ABS.
• The structure of credit card receivable ABS.
• Securitizing student loans.
• The emerging market for other ABS types (e.g., equipment leases).
• Analyzing the specific challenges for each asset class.

Module 13: The Legal and Regulatory Environment

• The impact of regulations like the Dodd-Frank Act.
• The role of regulatory bodies.
• The legal concepts of a "true sale" and "transfer of title".
• Requirements for disclosure and transparency.
• Understanding the role of a prospectus.

Module 14: Servicing and Administration

• The day-to-day responsibilities of the servicer.
• What happens during default and foreclosure.
• The role of the servicer in workout plans.
• The importance of servicer oversight.
• The servicer’s impact on cash flows to investors.

Module 15: Practical Applications and Case Study

• A comprehensive analysis of a simple securitization deal.
• Identifying the key elements of a deal prospectus.
• Calculating basic cash flow distributions.
• Evaluating the risks and credit enhancements in a real-world example.
• A capstone exercise to reinforce key concepts.

Training Approach

This course will be delivered by our skilled trainers who have vast knowledge and experience as expert professionals in the fields. The course is taught in English and through a mix of theory, practical activities, group discussion and case studies. Course manuals and additional training materials will be provided to the participants upon completion of the training.

Tailor-Made Course

This course can also be tailor-made to meet organization requirement. For further inquiries, please contact us on: Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Training Venue

The training will be held at our Skills for Africa Training Institute Training Centre. We also offer training for a group at requested location all over the world. The course fee covers the course tuition, training materials, two break refreshments, and buffet lunch.

Visa application, travel expenses, airport transfers, dinners, accommodation, insurance, and other personal expenses are catered by the participant

Certification

Participants will be issued with Skills for Africa Training Institute certificate upon completion of this course.

Airport Pickup and Accommodation

Airport pickup and accommodation is arranged upon request. For booking contact our Training Coordinator through Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Terms of Payment: Unless otherwise agreed between the two parties’ payment of the course fee should be done 7 working days before commencement of the training.