What is mortgage based securities



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What is mortgage based securities

2 Answer(s)


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MBS is something like the shares of a company. When you take a loan of to buy a house. Your bank will parcel your loan along with 1000's of other loans and create something like a company structure around those loans. Then it will issue shares of this company in the market. These shares are called MBS.

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The value of these MBS shares go up and down based on the risk profile of the loans and the risk profile is based on if the house owners are paying their loans on time or not.