Very interesting. A couple comments: - Is there any credit enhancement? Mortgage bonds didn't take off in the US until Fannie Mae and Freddie Mac agreed to g

Very interesting. A couple comments: - Is there any credit enhancement? Mortgage bonds didn't take off in the US until Fannie Mae and Freddie Mac agreed to guarantee timely payment of principal and interest on MBS they issued. Private label MBS got around this via overcollateralization or senior/sub structures. But these structures provided insufficient credit enhancement, and have been shunned by investors -- private label MBS are extremely illiquid these days and trade around 40 or 50 cents on the dollar, while Fannie and Freddie MBS remain among the most liquid securities in the world and trade near par. - Are there any facilities to combine the Danish bonds into a single instrument? In the US, a typical MBS is backed by anywhere from half a dozen to tens of thousands of mortgages. This makes them easy to trade for the large investors involved in the market. In the domestic MBS market, trades less than ~5mm are often punished for liquidity reasons -- you'll get a better price trading a ~50mm block. Liquidity would be tough if you can only trade pieces corresponding to a single mortgage. - The US already has MBS that are as creditworthy as the government's own debt. Ginnie Mae MBS are explicitly backed by the full faith and credit of the government. - It's a bit unrealistic to think that distressed homeowners could cheaply get out of their mortgage by purchasing the corresponding MBS for 40 cents on the dollar. The homeowners whose mortgages are in the most troubled bonds are subprime and alt-A borrowers who often are too credit impaired to refinance into an 80% LTV, 30-year fixed 5% prime mortgage. There's no way these guys could afford to buy back their mortgages. It's an interesting idea though.