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Hear this out loud PauseA mortgage pass-through is the most basic form of an MBS. When homeowners make their monthly mortgage payments, the principal and interest received are passed on to the investors. This means investors receive monthly payments from interest and a partial return on the principal.
Hear this out loud PauseMortgage-backed securities (MBS) are investment products similar to bonds. Each MBS consists of a bundle of home loans and other real estate debt bought from the banks that issued them. Investors in mortgage-backed securities receive periodic payments similar to bond coupon payments.
Hear this out loud PauseMortgage-backed securities exhibit a variety of structures. The most basic types are pass-through participation certificates, which entitle the holder to a pro-rata share of all principal and interest payments made on the pool of mortgage loans.
As a basic example, if a mortgage lender originates 100 loans that meet the standards of a government-sponsored enterprise such as Fannie Mae, the lender might package the loans as mortgage-backed securities to sell to investors.
Hear this out loud PauseMortgage-backed securities consist of a group of mortgages that have been organized and securitized to pay out interest like a mortgage bond. MBSs are created by companies called aggregators, including government-sponsored entities such as Fannie Mae or Freddie Mac.
A mortgage is an agreement between you and a lender that gives the lender the right to take your property if you fail to repay the money you've borrowed plus interest. Mortgage loans are used to buy a home or to borrow money against the value of a home you already own. Seven things to look for in a mortgage.