Net Interest Margin Securities - NIMS

AAA

DEFINITION of 'Net Interest Margin Securities - NIMS'

A security that allows holders to access excess cash flows from securitized mortgage loan pools. In a typical net interest margin securities (NIMS) transaction, excess cash flows from the securitized mortgage loan pools are transferred to a trust account. Investors in NIMS receive interest payments from this trust account.

INVESTOPEDIA EXPLAINS 'Net Interest Margin Securities - NIMS'

The creation of NIMS is facilitated by the fact that numerous securitized mortgage pools contain subprime mortgages with interest rates that are much higher than the typical rates offered to mortgage-backed security (MBS) investors. The bigger the difference in these interest rates, the more the excess cash flows generated by the MBS and consequently the higher the value of the NIMS. Of course, the value of the NIMS can decline rapidly if there is a significant increase in the default rate of the mortgages held in the MBS, and a subsequent decrease in excess cash flows.

RELATED TERMS
  1. Collateralized Mortgage Obligation ...

    A type of mortgage-backed security in which principal repayments ...
  2. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  3. Structured Finance

    A service that generally involves highly complex financial transactions ...
  4. Commercial Mortgage-Backed Securities ...

    A type of mortgage-backed security that is secured by the loan ...
  5. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value ...
Related Articles
  1. Bonds & Fixed Income

    A Guide To Real Estate Derivatives

    These instruments provide exposure to the real estate market without having to buy and sell property.
  2. Insurance

    Investing In Securitized Products

    Securitized assets are customizable and have a wide range of yields, making them an attractive asset class.
  3. Economics

    When The Federal Reserve Intervenes (And Why)

    The Federal Reserve doesn't interfere with the economy every time it flounders. Find out more here.
  4. Options & Futures

    How do you trade put options on E*TRADE?

    Learn all about put option trading at E*TRADE. Explore margin accounts and become familiar with the different types of option writing.
  5. Options & Futures

    Do you have to be an expert investor to trade put options?

    Learn about investing in put options and the associated risks. Explore how options can provide risk, which is precisely defined to predetermined limits.
  6. Options & Futures

    Are put options more difficult to trade than call options?

    Learn about the difficulty of trading both call and put options. Explore how put options earn profits with underlying assets fall in value.
  7. Mutual Funds & ETFs

    How do hedge funds use short selling?

    Learn how hedge funds use short selling to profit from stocks that are falling in price. Explore different analytical techniques hedge funds employ to find investments.
  8. Investing Basics

    How long can a trader keep a short position?

    Learn whether there are any limitations on how long may an investor hold a short position, and explore the costs associated with short selling.
  9. Options & Futures

    Is short selling a form of insurance?

    Explore short selling and put options. Learn how put options may be used as insurance to protect positions, and costs associated with using this method.
  10. Bonds & Fixed Income

    What are the benefits and drawbacks of owning preferred stock and common stock?

    Owning a share of a company can be accomplished through the purchase of common or preferred stock, but there are benefits and drawbacks for each option.

You May Also Like

Hot Definitions
  1. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  2. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  3. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  4. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center