Mortgage-Backed Securities

 
What are Mortgage-Backed Securities (MBS)?

MBS is a specialised product of Asset-Backed Securities. By pooling mortgages, MBS sells them as packaged mortgages. The bank issues mortgages to its customers after receiving payments from institutional investors. In essence, investors who buy MBS ultimately lend the money to the mortgage owners.

Why is it helpful to know about Mortgage-Backed Securities?

Like Credit Default Swaps and collateralised mortgage obligation, Mortgage-Backed Securities was the main product involved in the Financial Crisis of 2008-09.

Topics: ACCA, CIMA, CPD, AAT, FRM