Residential Mortgage-Backed Security (RMBS)
A Residential Mortgage-Backed Security (RMBS) is a type of security that is backed by a pool of residential mortgages. These mortgages are typically issued by banks, credit unions, and other financial institutions. The mortgages are then packaged into a security and sold to investors. The investors receive a return on their investment in the form of interest payments from the mortgages. The mortgages are typically of a fixed-rate or adjustable-rate type. The security is typically structured as a pass-through security, meaning that the interest payments from the mortgages are passed through to the investors.
History of RMBS
The concept of RMBS originated in the early 1980s when the Government National Mortgage Association (GNMA) began issuing mortgage-backed securities. These securities were backed by pools of mortgages that were issued by the Federal Housing Administration (FHA). The GNMA was the first to issue mortgage-backed securities, and this concept quickly spread to other government-sponsored entities such as the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC).
In the 1990s, the private sector began to issue mortgage-backed securities. These securities were backed by pools of mortgages that were issued by private lenders. These securities were structured differently than the government-sponsored securities, and they were typically more complex. The private sector securities were also more risky than the government-sponsored securities.
Comparison Table
| Type of Security | Interest Rate | Risk Level |
|---|---|---|
| GNMA | Fixed | Low |
| FNMA/FHLMC | Fixed/Adjustable | Low |
| Private Sector | Fixed/Adjustable | High |
Summary
Residential Mortgage-Backed Securities (RMBS) are a type of security that is backed by a pool of residential mortgages. These mortgages are typically issued by banks, credit unions, and other financial institutions. The mortgages are then packaged into a security and sold to investors. The investors receive a return on their investment in the form of interest payments from the mortgages. The mortgages are typically of a fixed-rate or adjustable-rate type. The security is typically structured as a pass-through security, meaning that the interest payments from the mortgages are passed through to the investors. For more information about RMBS, please visit the websites of the Government National Mortgage Association (GNMA), the Federal National Mortgage Association (FNMA), and the Federal Home Loan Mortgage Corporation (FHLMC).
See Also
- Mortgage-Backed Security (MBS)
- Collateralized Mortgage Obligation (CMO)
- Asset-Backed Security (ABS)
- Commercial Mortgage-Backed Security (CMBS)
- Real Estate Investment Trust (REIT)
- Mortgage Servicing Rights (MSR)
- Mortgage Insurance (MI)
- Real Estate Mortgage Investment Conduit (REMIC)
- Real Estate Investment Bank (REIB)
- Real Estate Investment Corporation (REIC)
