Mortgage-Backed Security (MBS) is a type of asset-backed security (ABS) as a debt security that is collateralised by a mortgage or a collection of mortgages. Mortgages were sold to institutions such as an investment bank or government institution, which then securitise and/or package it into an MBS that can be sold to individual investors who receives periodic payments similar to bond coupon payments. A MBS allows investors to invest a diversified portfolio of mortgage loans with a high degree of transparency, however MBS may also be subject to certain risks, such as prepayment risk, interest rate risk, and credit risk.
Related Definitions in the Project: The Commercial Definitions; Project Controls
