An Analysis of the Concept of Mortgage-Backed Securities: An Economic and Legal Perspective

Journal of Law and Financial Management, Vol. 10, No. 1, pp. 22-33, June 2011

17 Pages Posted: 12 Aug 2011

See all articles by Pelma Jacinth Rajapakse

Pelma Jacinth Rajapakse

Griffith University - Griffith Business School

Date Written: August 12, 2011

Abstract

This article examines the concept of mortgage-backed securities (MBS) issued in the securitisation programs in a theoretical context. First, it outlines a general explanation of the securitisation process, focusing particularly on MBS programs, within a context of microeconomic theory. Second, the incentives for participants in the MBS programs are outlined within a contractarian framework, which includes the agency theory1, and provides a framework to analyze the incentives of the various participants at each stage of, or contract in, the overall securitisation process. Finally, suggestions are made concerning some of the key features that might characterize a theoretically optimal regulatory regime for mortgage-backed securities.

Keywords: finance, law, mortgage-backed securities

JEL Classification: M40, M41

Suggested Citation

Rajapakse, Pelma Jacinth, An Analysis of the Concept of Mortgage-Backed Securities: An Economic and Legal Perspective (August 12, 2011). Journal of Law and Financial Management, Vol. 10, No. 1, pp. 22-33, June 2011 , Available at SSRN: https://ssrn.com/abstract=1908588 or http://dx.doi.org/10.2139/ssrn.1908588

Pelma Jacinth Rajapakse (Contact Author)

Griffith University - Griffith Business School ( email )

Brisbane, Queensland 4111
Australia

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