Mortgage-Backed Securities Law and Legal Definition
Mortgage-backed securities are pools of mortgages used as collateral for the issuance of securities in the secondary market, such as those issued by Ginnie Mae and Freddie Mac. MBS are commonly referred to as "pass-through" certificates because the principal and interest of the underlying loans is "passed through" to investors. The interest rate of the security is lower than the interest rate of the underlying loan to allow for payment of servicing and guaranty fees.
