Mortgage-Backed Securities Explained
mortgage backed securites explained here for mortgage and refinance
Most people do not really understand what a mortgage backed security is. I’m going to explain that to you in this article, and then I’m going to show you a refinance and mortgage video via YouTube, that you can watch in case you are the type that likes to listen instead of read 
Everyone pretty much knows wehat a mortgage is. You are all familiar with the concept of someone using a mortgage to purchase a house or condo, and how a refinance makes a mortgage term better when you already have one. But not everyone understands how a mortgage is really just an investment instrument on the “secondary market”. First, mortgage loans are purchased from banks, mortgage companies, and other originators. Then, these loans are assembled into pools. These “pools” of loans do get sold on the open investment market for mortgages.
Securitization is the process by which these mortgage backed securities become bonds. They are seen as on of the riskier types of bonds, however. Investors enjoy collecting interest on these bonds when someone pays their residential mortgage loan payments. Investors need to relize that the terms of these securities are not set in stone, and that the interest rate on them may change, or they may be paid off early. So, the investor who buys these mortgage backed refinance and purhcase loan securities, does not have any guarantee of cashflow, but is usually skilled enough to make educated guesses about good investments in mortgages and paper.
There is really not much else to say about mortgage-backed securities, as they are simply a mortgage related investment. They are turned into bonds and sold in large pools to investors. The government has gone through spurts where it started buying them up when the market went sour.
this video explains mortgage backs in more detail!
« Locking a Mortgage Interest Rate Fast! | Home | Mortgage Refinance and Debt »
Leave a Comment