Mortgage-backed Security (Noun)
Meaning
A security created when a group of mortgages are gathered together and bonds are sold to other institutions or the public; investors receive a portion of the interest payments on the mortgages as well as the principal payments; usually guaranteed by the government.
Classification
Nouns denoting possession and transfer of possession.
Examples
- The financial institution packaged the mortgages into a mortgage-backed security, which was then sold to investors.
- The government agency guaranteed the mortgage-backed security, reducing the risk for potential buyers.
- The investment firm poured millions into mortgage-backed securities, hoping to reap the steady stream of interest payments.
- During the housing crisis, many mortgage-backed securities lost significant value as homeowners defaulted on their loans.
- The bank created a new mortgage-backed security by pooling together a group of subprime mortgages, which were then sold to unsuspecting investors.