A
mortgage-backed security (MBS) is a type of
asset-backed security that is secured by a
mortgage or collection of mortgages. The mortgages are sold to a group of individuals (a government agency or investment bank) that
securitizes, or packages, the loans together into a security that investors can buy. The mortgages of an MBS may be
residential or
commercial, depending on whether it is an Agency MBS or a Non-Agency MBS; in the United States they may be issued by structures set up by
government-sponsored enterprises like
Fannie Mae or
Freddie Mac, or they can be "private-label", issued by structures set up by investment banks. The structure of the MBS may be known as "pass-through", where the interest and principal payments from the borrower or homebuyer pass through it to the MBS holder, or it may be more complex, made up of a pool of other MBSs. Other types of MBS include
collateralized mortgage obligations (CMOs, often structured as real estate mortgage investment conduits) and
collateralized debt obligations (CDOs).