Mortgage-Backed Security (MBS)
Definition of 'Mortgage-Backed Security (MBS)'A type of asset-backed security that is secured by a mortgage or collection of mortgages. These securities must also be grouped in one of the top two ratings as determined by a accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments. Furthermore, the mortgage must have originated from a regulated and authorized financial institution.Also known as a "mortgage-related security" or a "mortgage pass through." |
|
Investopedia explains 'Mortgage-Backed Security (MBS)'When you invest in a mortgage-backed security you are essentially lending money to a home buyer or business. An MBS is a way for a smaller regional bank to lend mortgages to its customers without having to worry about whether the customers have the assets to cover the loan. Instead, the bank acts as a middleman between the home buyer and the investment markets.This type of security is also commonly used to redirect the interest and principal payments from the pool of mortgages to shareholders. These payments can be further broken down into different classes of securities, depending on the riskiness of different mortgages as they are classified under the MBS. |
|
Related Definitions
Articles Of Interest
-
Profit From Mortgage Debt With MBS
Mortgage-backed securities can offer monthly income, a fixed interest rate and even government backing. -
Understanding Mortgage-Backed Securities
Find out the meaning of this popular asset-backed security and its benefits for banks and investors. -
How The Sharpe Ratio Can Oversimplify Risk
When it comes to hedge funds, this measure is not reliable on its own. -
The REIT Way
Ever considered investing in real estate? Read about the REIT and see if it's the investment for you. -
Asset Allocation In A Bond Portfolio
An investor's fixed-income portfolio can easily beat the average bond fund. Learn how and why! -
Equity Valuation In Good Times And Bad
Learn how to filter out the noise of the market place in order to find a solid way of determing a company's value. -
Why Are Mortgage Rates Increasing?
Learn how the secondary mortgage market and investor demand affect the cost of home ownership. -
Fannie Mae And Freddie Mac, Boon Or Boom?
These two companies are crucial to the mortgage market, but are they ticking timebombs? -
Fatal Seduction Of The Municipal Bond Insurers
Learn how a foray into CDOs and other exotic products ruined an industry's image. -
The Risks Of Mortgage-Backed Securities
Find out how weighted average life guards against prepayment risk.