What are the two types of private–label MBS?

What will be an ideal response?

First, let us address the MBS types. The agency MBS market includes three types of securities: agency mortgage pass-through securities, agency collateralized mortgage obligations or CMOs, and agency stripped MBS. Agency CMOs and stripped CMOs are created from mortgage
pass-through securities. Hence, agency CMOs and agency stripped MBS are routinely referred to as derivative MBS products.Now let us address private-label MBS. Private-label mortgage backed securities are securitized mortgages that do not conform to the criteria set by the Government Sponsored Enterprises Freddie Mac, Fannie Mae and Ginnie Mae. The mortgages that make up these securities do not have the backing of the government and as a result carry a significantly greater risk. Some market participants refer to private label MBS as either "residential deals" or "prime deals."

Private label MBS are nonagency loans. Some private institutions, such as subsidiaries of investment banks, financial institutions, and home builders, also issue mortgage securities. When issuing mortgage securities, they may issue either agency or non-agency mortgage pass-through securities; however, their underlying collateral will more often include different or specialized types of mortgage loans or mortgage loan pools that do not qualify for agency securities. The transactions may use alternative credit enhancements such as letters of credit. These non-agency or so-called private-label mortgage securities are the sole obligation of their issuer and are not guaranteed by one of the GSEs or the U.S. Government. Private-label mortgage securities are assigned credit ratings by independent credit agencies based on their structure, issuer, collateral, and any guarantees or other factors.