What Are Mortgage-Backed Securities?
Mortgage-backed securities (MBSs) are a type of investment
that represents ownership in a group of mortgages. Principal and interest
from the individual mortgages are used to pay principal and interest
on the MBS.
Ownership in a group of mortgages is typically represented by
a pass-through certificate (PC). Most pass-through
certificates are issued by the Government National Mortgage Agency,
a branch of the United States government, or by one of two private
corporations: Fannie Mae or Freddie Mac. With these certificates,
homeowners' payments pass from the originating bank through the issuing
agency to holders of the certificates. These agencies also frequently
guarantee that the certificate holder receives timely payment of principal
and interest from the PCs.
 | Mortgage-Backed Securities | | Using Fixed-Rate Mortgage Pool Functions |  |
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