MortgageBacked Securities
Mortgage-backed securities (MBS) represent a type of investment that is tied to pools of mortgage loans. These securities are created when a financial institution, such as a bank or mortgage company, bundles together mortgages and sells them to a government agency like Ginnie Mae, or a government-sponsored enterprise like Fannie Mae or Freddie Mac. The agency or enterprise then divides the pools into shares, which are sold to investors as securities. MBS fit into the broader categories of real estate, real estate financing, and real estate debt finance by providing a way for institutions to access the capital tied up in mortgage loans. By selling these loans as securities, financial institutions can free up capital to make new loans, thus facilitating the flow of credit in the real estate market. For investors, MBS offer the potential for attractive yields, as well as diversification benefits, since the performance of these securities is linked to the housing market.