What is Lehman Brothers Mortgage-Backed Securities Index
The Lehman Brother mortgage-backed securities index is a benchmark index that consists of residential fixed rate mortgage-backed securities (MBS), and is used to quickly determine the financial health of the pools based on the underlying credit status of the loans.
BREAKING DOWN Lehman Brothers Mortgage-Backed Securities Index
The Lehman Brothers mortgage-backed securities index was created in 1986 by the Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corp (FHLMC) and Federal National Mortgage Association (FNMA) to determine the health of securities, or assets, that are secured by mortgage-based funds. The securities in the index must all meet a minimum principal of $50 million. Terms on the mortgage pool average between 15 and 30-years. The portfolio is rebalanced monthly to calculate changes in the make up of the index based on interest rate fluctuations, bond payments and new securities being issued into the pool. The index groups more than 800,000 mortgage-backed securities into these pools.
The Lehman Brothers Mortgage-Backed Securities Index is a subset of the Lehman Brothers Aggregate Bond Index (ABI). The aggregate bond index includes a larger variety of benchmark bonds, not just fixed-rate mortgage securities like the Lehman Brothers MBS model.
Lehman Brothers is not the only benchmark securities index. There is also the S&P, Barclays and Vanguard to name a few.
What is Lehman Brothers
Lehman Brothers was the fourth-largest investment bank in the United States in 2008 when it filed for bankruptcy. It was one of the largest bankruptcy filings ever and has been the basis for movies and conversations about the subprime mortgage crisis ever since. Most recently the movies "Margin Call" and "Too Big To Fail" were loosely based on Lehman Brother’s involvement in the Great Recession. The company was 158 years old when it ended its run, and it had expanded its services over the years from a dry-goods and grains store in Montgomery Alabama, to include many different financial services all across the world.
Although the assets and operations were liquidated and sold to cover the margin calls that ultimately bankrupted the company, Lehman Brothers is still operating today. It is expected to take quite some time for the financial giant’s operations to fully cease. There are still employees in the New York city office, and they are still turning a profit. Although most of that money is going towards paying back funds that it still owes to its creditors.
Large portions of the operations were purchased by Nomura, a Japanese Bank and Barclays.