tailieunhanh - Encyclopedia of Finance Part 14

Chapter 25 REVIEW OF REIT AND MBS. Abstract In this article, the history and the success of Real Estate Investment Trusts (REITs) and MortgageBacked Securities (MBS) in the . financial market are discussed. | Chapter 25 REVIEW OF REIT AND MBS CHENG-FEW LEE National Chiao Tung University Taiwan and Rutgers University USA CHIULING LU Yuan Ze University Taiwan Abstract In this article the history and the success of Real Estate Investment Trusts REITs and Mortgage-Backed Securities MBS in the . financialmar-ket are discussed. Both securities are derived from real estate related assets and are able to increase the liquidity on real estate investment. They also provide investors with the opportunity to diversify portfolios because real estate assets are relatively less volatile and less correlated to existing investment instruments. Therefore REITs and MBS enhance the width and the depth of the financial market. Keywords REIT MBS real estate mortgage FHA VA Fannie Mae Ginnie Mae Freddie Mac prepayment public securities association . Introduction The revolution in the American real estate market was enhanced by securitization. For real properties public listed Real Estate Investment Trusts REITs create tradable and standardized securities for individuals and institutional investors while providing alternative investments for diversification. Through the capital market real estate practitioners have more reliable funds and no longer limit themselves to bank loans. For real estate related loans Mortgage-Backed Securities MBS establish a capital conduit linking borrowers and lenders directly bypassing financial intermediaries. MBS also release the burden of the bank from holding long-term mortgage debt and bearing credit risk. In addition MBS create a secondary market of mortgage debt and provide an alternative investment. Although REITs and MBS are generated under different backgrounds and developed under different circumstances they play a significant role in real estate financing. Nevertheless challenges in real estate securitization have been important issues for the past four decades and will continue to do so in the future. In this chapter the development of REITs .