MBS (Mortgage-Backed Securities)
Bonds backed by pools of residential mortgages.
In depth
Investors receive monthly principal and interest from underlying mortgages. Sub-types: Agency (Fannie/Freddie/Ginnie — government-backed) and Non-Agency (private). Prepayment risk — homeowners refinancing when rates fall — is unique to MBS. The 2008 crisis was driven by subprime non-agency MBS.