Since their creation in 1970, mortgage pass-through securities have played an increasing role in the portfolios of depository institutions.

• By 1988, savings and loan associations held 16 percent of their assets in mortgage-backed securities (MBSs).

• Commercial banks also have been increasing their share of the MBS market in recent years; they currently hold 3 percent of their assets in MBSs.

• Moreover, the participation of commercial banks in this market is likely to increase since mortgage pass-throughs receive favorable treatment under risk-based capital guidelines recently approved by federal regulators.