Stripped mortgage-backed securities


Also found in: Acronyms.

Stripped mortgage-backed securities (SMBS)

Securities that redistribute the cash flows from the underlying generic MBS collateral into the principal and interest components of the MBS to enhance their attractiveness to different groups of investors.

Stripped Mortgage-Backed Security

A mortgage-backed security with a cash flow that derives exclusively from interest payments or principal payments on the underlying mortgages. That is, the underlying asset of a stripped MBS is interest or principal paid on debt securities, rather than both together. Stripped mortgage-backed securities are extremely sensitive to changes in interest rates, allowing investors to choose either an interest strip or a principal strip depending on the expected direction of interest rates.
References in periodicals archive ?
The policy statement lists standards that an institution should apply when selecting a dealer and describes the interest rate risk characteristics of several extremely volatile instruments, such as stripped mortgage-backed securities, noting that such instruments "cannot be considered as suitable investments for the vast majority of depository institutions.
The bonds are secured by collateral consisting of 29 different classes of multiclass REMIC and stripped mortgage-backed securities issued by the Federal National Mortgage Association (Fannie Mae) and the
The bonds are secured by collateral consisting of 22 different classes of multiclass REMIC and stripped mortgage-backed securities issued by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Association (Freddie Mac).