Residential Mortgage-Backed Security


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Residential Mortgage-Backed Security

A derivative whose value is derived from home equity loans and mortgages on properties where people live. As with all mortgage-backed securities, this entitles the owner to a claim on the principal and interest payments on the particular mortgages underpinning the security. MBS's pay an interest rate that is usually related to the interest rates the homeowners are paying on their mortgages. The equivalent of the coupon on a mortgage backed security is a percentage of the interest and principal paid on the mortgages backing the security. An obvious risk to a residential MBS is the possibility that interest rates on home loans may decline, causing homeowners to refinance their mortgages and deprive the holder of the security from future interest payments.
References in periodicals archive ?
3 million of residential mortgage credit risk on an unrated, first-loss tranche of a German residential mortgage-backed security for Germany's DZ Bank AG.
Fitch has observed that the delinquency calculations in the majority of the residential mortgage-backed security (RMBS) deals it rates are prescribed by the pooling and servicing agreements (PSAs), irrespective of the mortgage product, i.
3 million of first-loss credit risk on an unrated tranche of a German residential mortgage-backed security for Deutsche Genossenschafts-Hypothekenbank AG (DG HYP).

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