The Case for Senior Residential Mortgage-Backed Securities

Senior Residential Mortgage-Backed Securities Asset Class:
The potential to generate meaningful yield and returns while diversifying from traditional fixed income risks

Legacy or seasoned senior RMBS were issued prior to the U.S. housing market collapse in 2007. Today, these bonds are supported by a resilient housing market, are backed by seasoned mortgages with lower LTVs, possess low interest rate sensitivity, and can benefit from refinancing/prepayment because they tend to trade at a discount.

Fundamentals

• Backed by residential mortgages, an asset many investors understand
• Provide the opportunity to diversify risk exposure
• Strong, resilient U.S. housing market has supported asset class
• A very large market opportunity where active managers can thrive

Incremental (from seasoned mortgages)

• Provides the opportunity for meaningful additional yield and returns
• Mortgages backing these bonds survived the housing market collapse of 2007 and are still paying today and they also have low loan-to-value
• Possess lower interest rate sensitivity
• Because Legacy Senior RMBS tend to trade at a discount, prepayments can benefit investors