What Is a Mortgage-Backed Security (MBS)?
An MBS is a type of security that is guaranteed by a mortgage or a collection of mortgages, and is issued by government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac.
Lenders first identify and bundle a group of mortgage loans issued by banks, and then propose this bundle of mortgages as an MBS to a government-sponsored enterprise that has the authority to issue and guarantee MBS. Such government-sponsored enterprises include Ginnie Mae, Fannie Mae, and Freddie Mac. These entities may issue and guarantee the MBS.
MBS can have multiple investors. Depending on the minimum investment required for the MBS, multiple investors could each invest in a single MBS product through different issuers.
- What Are the Advantages of Investing in MBS?
- Should I Invest in an MBS Fund Instead of Individual Mortgage-Backed Securities?
- How Are Mortgage-Backed Securities Different from Other Fixed Income Securities?
- What Are Residential Mortgage-Backed Securities (RMBS)?
- What Are Some Examples of Mortgage-Backed Securities?
- How Are Mortgage-Backed Securities Hedged?
- What Are Collateralized Debt Obligations (CDOs)?
- What Is the Difference between Collateralized Debt Obligations (CDOs) and Mortgage-Backed Securities (MBS)?