Throughout the world where the market for securitized assets has developed, the largest sector is the residential mortgage-backed sector. It is not possible to provide a discussion of the residential mortgage-backed securities market in every country. Instead, to provide a flavor for this market sector and the similarities with the U.S. nonagency mortgage-backed securities market, we will discuss just the market in the United Kingdom and Australia.

In Europe, the country in which there has been the largest amount of issuance of asset-backed securities is the United Kingdom.¹⁴² The largest component of that market is the residential mortgage-backed security market which includes “prime” residential mortgage-backed securities and “nonconforming” residential mortgage-backed securities. In the U.S. mortgage market, a nonconforming mortgage loan is one that does not meet the underwriting standards of Ginnie Mae, Fannie Mae, or Freddie Mac. However, this does not mean that the loan has greater credit risk. In contrast, in the U.K. mortgage market, nonconforming mortgage loans are made to borrowers that are viewed as having greater credit risk-those that do not have a credit history and those with a history of failing to meet their obligations.