Mortgage-Backed Securities - MBS

Mortgage-Backed Securities - MBS

An investment instrument that represents ownership of an undivided interest in a group of mortgages. Principal and interest from the individual mortgages are used to pay investors' principal and interest on the MBS. Also known as "mortgage pass-through."

Notes:

When you invest in a mortgage-backed security you are lending money to a homebuyer or business. An MBS is a way for a smaller regional bank to lend mortgages to its customers without having to worry if the customers have the assets to cover the loan. Instead, the bank acts as a middleman between the homebuyer and the investment markets.

See also: Commercial Mortgage Backed Securities (CMBS), Collateralized Mortgage Obligation (CMO), Dwarf, Fannie Mae, Ginnie Mae, Mortgage, Pass-Through Security, REIT, To Be Announced (TBA)