MTV and mortgage-backed securities have a few things in common. Both were created 15 years ago, have high volume, and reach millions of homes.
After that, the comparison breaks down. MTV is a cultural phenomenon that just about everybody knows, while mortgage-backed securities remain almost invisible to the public, even though they are the ultimate source of funds to finance more than 40% of all American homes.
The comparison also underscores that the massive MBS market is not only a very young one, but one that has developed with remarkable speed.
Fannie Mae, the biggest issuer, marked the 15th anniversary last week with a breakfast presentation in New York about its own role in the market.
Robert J. Levin, Fannie's executive vice president for marketing, said the company was expecting 1996 to become its second-biggest year ever in MBS issuance, trailing only 1993's volume, which was swollen by a mammoth refinancing boom. Through October, Fannie had issued $129 billion. The total for the year will likely trail only 1993's $221 million.
"Consider that in 1981, we used electric typewriters to type pool data," Mr. Levin said. Now investors can get far more complex pool information electronically through a special service called PoolTalk.
Another speaker, John C. Sites Jr., said back in 1981, investors thought a security with four tranches was complicated. Now, some issues have more than 30, he added. Mr. Sites is general partner of Daystar LLC, a mutual fund company. Previously, he was with Bear, Stearns Companies, where he founded the mortgage department.
Stephen B. Ashley, chairman and chief executive of the Ashley Group and a Fannie board member, said the growth in the size and liquidity of the MBS market had been highly beneficial to consumers by significantly reducing the cost of mortgages.
In 1981, the average spread between the 10-year Treasury security and the commitment rate on 30-year mortgages was 273 basis points. This year, Mr. Ashley said, the spread has averaged 137 basis points.
Mr. Ashley predicted that the MBS market would facilitate the emergence of many more types of mortgages tailored to changing household requirements. "People now use mortgages as a financial tool, refinancing in and out as the need arises.
Material distributed at the breakfast showed that foreign investors, which held just 6.3% of all mortgage securities in 1991, have built their holdings to 9.3%. And Fannie Mae and Freddie Mac are themselves now holding 8.4% of all mortgage securities, against just 1.3% five years ago.
