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Definition of 'Pass-Through Security'
A pool of fixed-income securities backed by a package of assets. A servicing intermediary collects the monthly payments from issuers, and, after deducting a fee, remits or passes them through to the holders of the pass-through security.
Also known as a "pass-through certificate" or "pay-through security."
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Investopedia explains 'Pass-Through Security'
The most common type of pass-through is a mortgage-backed certificate, where homeowners' payments pass from the original bank through a government agency or investment bank to investors.
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Mortgage-backed securities can offer monthly income, a fixed interest rate and even government backing.
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