mortgage-backed security

mortgage-backed security
A kind of investment backed by mortgage loans that have been packaged into pools in the secondary mortgage market. Payments on the mortgages generate the return on investment for the people who invest in these securities.
Category: Bankruptcy, Foreclosure & Debt → Foreclosure
Category: Real Estate & Rental Property

Nolo’s Plain-English Law Dictionary. . 2009.

mortgage-backed security
International
mortgage-backed securities, Also referred to as MBS.
debt securities (debt security) (such as bonds or notes), which are issued by a special purpose vehicle in the course of a securitisation and backed, that is funded by and secured over, a portfolio of mortgage loans secured on commercial or residential property.
+ mortgage-backed security (MBS)
USA
When the debt securities (debt security) issued by a special purpose vehicle in a securitization are secured by mortgage loans, they are known as mortgage-backed securities (MBSs). To optimize the risk profile of the securities and therefore maximize the range of investors to whom they can be sold, the securities are divided into different classes. These typically consist of several sequential tranches with differing priorities (priority) as to payment of principal and interest, and carrying differing interest rates. The more senior tranches have the right to priority of payment over more junior tranches, but the more junior tranches carry a higher rate of interest. More sophisticated transactions may include tranches of a combination of securities within the securitization structure (that is, tranches made up of a combination of separate tranches). Each tranche is generally given a different rating by a credit rating agency, based in part on the relative priority of payment.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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Look at other dictionaries:

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  • mortgage-backed security — noun an asset backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans. See Also: MBS …   Wiktionary

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  • mortgage-backed security — A security in which cash flows derive from an underlying pool of mortgages. They are very widely used in the USA …   Big dictionary of business and management

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