securitization Guides

Mortgage Backed Securities: Investment Failures

A mortgage-backed security (MBS) is essentially an asset-backed security; asset back securities are those securities which are ?backed? by a pool of underlying assets. Pooling of the assets mitigates the risk and converts these securities into bonds which can be sold to investors. This process of freeing up cash from illiquid assets through securities converted into bonds is called securitization. This is a quintessential aspect of mortgage-backed securities.