Mortgage-Backed Security

Mortgage-Backed Security - Mortgage-Backed Security (MBS) is a securitized interest in a pool of mortgages. Instead of paying the shareholders fixed coupons and principal, it pays out the cash flows from the pool of mortgages. The uncomplicated form of the mortgage-backed security is a mortgage pass-through. With this structure, all principal and the interest payments, less a servicing fee, from the pool of mortgages passed directly to the investors each month. A thirty year fixed rate residential mortgage makes a fixed payment each month until the maturity. Each payment represents a partial repayment of principal and interest payments from the pool of mortgages.