Gross Coupon

DEFINITION of 'Gross Coupon'

A term used to describe the coupon received from a mortgage pool security such as a mortgage backed security (MBS). Gross coupon refers to the average of all the interest rates in the pool paid by the owners of the mortgages and before any administration or service fees are deducted.

BREAKING DOWN 'Gross Coupon'

A mortgage backed security is an investment that contains a pool of mortgages, which generally have similar characteristcics. The coupon paid to the investor is the monthly payment that homeowners pay on their mortgages in this pool. Any prepayments are passed along to the investor as well.