Mortgage-Backed Security: Mortgage-backed securities are created when the sponsor buys up mortgages from lenders, pools them, and packages them for sale to the public, a process known as securitization. The securities are available through publicly held corporations such as Fannie Mae and Freddie Mac or other financial institutions. Some of the securities are guaranteed by the Government National Mortgage Association, or Ginnie Mae. The money raised by selling the bonds is used to buy additional mortgages, making more money available to lend. The most common mortgage-backed securities, also known as pass-through securities, are self-amortizing, and pay interest and repay principal over the term of the security. Mortgage-backed securities known as Collateralized Mortgage Obligations (CMOs) or Real Estate Mortgages Investment Conduits (REMIC) are structured differently. While a CMO or REMIC pays interest on a regular basis, the principal payments are structured in what are known as tranches and mature in sequence. The principal is repaid to bondholders in the order in which the tranches are stacked, so the holders of the shortest-term tranche are paid principal first, the next shortest second, and so on. You can buy individual mortgage-backed securities or select mutual funds, such as Ginnie Mae funds, that invest in mortgage-backed securities.

 

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Mortgage-Backed Security: Mortgage-backed securities are created when the sponsor buys up mortgages from lenders, pools them, and packages them for sale to the public, a process known as securitization. The securitie . . . View Full Definition

Pass-Through Security: When a corporation or government agency buys loans from lenders to pool and package as securities for resale to investors, the products may be pass-through securities. That means regular pay . . . View Full Definition

Security Deposit: Money deposited by or for the tenant with the landlord, to be held by the landlord for the following purposes: 1. to remedy tenant defaults for damage to the premises (be it accidental or in . . . View Full Definition

Security Characteristic Line: A plot on a graph of the excess return on a security over the risk-free rate as a function of the excess return on the market. The slope of this line is the security's beta.