Mortgage-Backed Security (MBS)
A Mortgage-Backed Security (MBS) is a fixed-income instrument whose cash flows come from a pool of mortgage loans that have been securitized and sold to investors. Investors receive periodic payments that include principal and interest, derived from borrowers' mortgage payments.
Example: An agency MBS is backed by a pool of residential mortgages; investors receive monthly payments that come from borrowers' principal and interest payments, with the timing and amount affected by prepayment activity.
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