What is Mortgage backed Securities?



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What is pros and coins?

2 Answer(s)


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A type of asset-backed security that is secured by a mortgage or collection of mortgages. The mortgage must have originated from a regulated and authorized financial institution.

Ex: When you invest in a mortgage-backed security you are essentially lending money to a home buyer or business. An MBS is a way for a smaller regional bank to lend mortgages to its customers without having to worry about whether the customers have the assets to cover the loan. Instead, the bank acts as a middleman between the home buyer and the investment markets.


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Pros and Cons of MBS are:
The key advantages of mortgage-backed securities are: Reliability ,Transparency and Availability

Disadvantages: low liquidity, there is a risk of early redemption (prepayment risk), which may not accurately determine the duration and yield

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