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What are Mortgage Backed Securities (MBS)?



  1. A Mortgage-Backed Security (MBS) is an investment similar to a bond that is made up of a bundle of mortgage loans bought from the banks that issued them. Investors in MBS receive periodic payments similar to bond coupon payments.

  2. Mortgage-backed securities (MBS) turn a bank into an intermediary between the homebuyer and the investment industry.

  3. The bank handles the loans and then sells them at a discount to be packaged as MBSs to investors as a type of collateralized bond.

  4. For the investor, an MBS is as safe as the mortgage loans that back it up.



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