pass-through security

Pass-through Security

A pool of fixed-income securities backed by a package of assets. A servicing intermediary collects the monthly payments from issuers, and, after deducting a fee, remits or passes them through to the holders of the pass-through security. Also known as a "pass-through certificate" or "pay-through security."

Notes:

The most common type of pass-through is a mortgage-backed certificate, where homeowners' payments pass from the original bank through a government agency or investment bank to investors.

See also: Commercial Mortgage Backed Securities (CMBS), Collateralized Mortgage Obligation (CMO), Fannie Mae, Ginnie Mae, Mortgage Backed Security (MBS), Mortgage, Pass-Through Certificate

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pass-through security

A security that passes through payments from debtors to investors. Packages of loans are assembled and sold to investors by private lenders. Although pass-through securities have stated maturities, the actual lives of the securities are likely to be shorter, especially during periods of falling interest rates when borrowers pay off mortgages early. The security derives its name from the fact that interest and principal payments made by borrowers are passed through monthly after deduction of a service fee. Also called pass through. See also Ginnie Mae pass through, production rate, weighted-average coupon rate, weighted-average maturity.