An introduction to RMBS

This Practice Note provides a summary of the structure of residential Mortgage-backed securities transactions and the key parties, documents and terms involved in such transactions. As with all financing techniques and transactions there are numerous variations as to how the precise terms of each such transaction operates which are beyond the scope of this Practice Note.

Residential mortgage-backed securities (RMBS) are a type of note whereby the income generated by one or more pools of residential loans (loans) is used to fund the payments of interest and principal to noteholders. Security is taken over the loans and the related Mortgages as collateral for the payment of amounts due on the notes. RMBS transactions can be relatively simple pass-through instruments or can be complex transactions which include many parties and may be structured in various forms. The key features of a single issuance RMBS are summarised as follows:

1. •

   A newly incorporated insolvency remote special purpose vehicle (SPV) (the issuer)