Mortgage-Backed Securities
Mortgage-backed securities (MBS) are a type of asset-backed security that is secured by a mortgage or collection of mortgages. The mortgages are sold to a group of individuals that securitize the loans into a security that investors can buy. The mortgages of a MBS may be residential or commercial, depending on whether it is an Agency MBS or a Non-Agency MBS, respectively. MBS are an important source of funding for lenders as they allow lenders to free up capital to make more loans.
History of Mortgage-Backed Securities
Mortgage-backed securities have been around since the early 1970s. The first MBS was issued by the Government National Mortgage Association (GNMA) in 1970. Since then, the market for MBS has grown significantly and now includes a variety of different types of MBS, including Agency MBS, Non-Agency MBS, and Collateralized Mortgage Obligations (CMOs).
MBS have become an important source of funding for lenders, as they allow lenders to free up capital to make more loans. In addition, MBS provide investors with an attractive investment opportunity, as they offer a steady stream of income and the potential for capital appreciation.
Table of Comparisons
| Type of MBS | Risk Level | Return Potential |
|---|---|---|
| Agency MBS | Low | Low |
| Non-Agency MBS | High | High |
| CMOs | Medium | Medium |
Summary
Mortgage-backed securities are a type of asset-backed security that is secured by a mortgage or collection of mortgages. MBS have become an important source of funding for lenders, as they allow lenders to free up capital to make more loans. In addition, MBS provide investors with an attractive investment opportunity, as they offer a steady stream of income and the potential for capital appreciation. For more information about MBS, investors can visit websites such as Investopedia, The Balance, and Bloomberg.
See Also
- Asset-Backed Securities
- Collateralized Mortgage Obligations
- Government National Mortgage Association
- Agency MBS
- Non-Agency MBS
- Mortgage-Backed Bond
- Mortgage-Backed Commercial Paper
- Mortgage-Backed Pass-Through Security
- Mortgage-Backed Repurchase Agreement
- Mortgage-Backed Securities Index
