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Mortgage Baked Securities, MBS

Mortgage Baked Securities, MBS

Mortgage-backed securities (MBS) are bond or other financial obligation secured by a pool of mortgage loans.

Mortgage loans are purchased from banks, mortgage companies, and other originators and then assembled into pools by purchasing entity. The entity then issues securities that represent claims on the principal and interest payments made by borrowers on the loans in the pool, a process known as securitization.

Most Mortgage Baked Securities are issued by the Government National Mortgage Association (Ginnie Mae), or the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). All three are U.S. government-sponsored enterprises.

Some private institutions, such as brokerage firms, banks, and homebuilders, also securitize mortgages, known as "private-label" mortgage securities.


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