MBS = Mortgage-Backed Securities

MBS are fixed-income investments that are backed by pools of mortgages. These securities represent claims on the cash flows generated by the underlying mortgages, which are typically residential or commercial real estate loans.

How They Work :

- Banks and financial institutions bundle individual home loans into a single security.
- These securities are then sold to investors.
- Investors receive periodic payments derived from the mortgage payments made by homeowners.