Super Glossary

Pass-Through Security

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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 payments of interest and return of principal that borrowers make on the original loans are funneled, or passed through, to the investors. Unlike standard bonds, whose principal is repaid at maturity, the principal of a pass-through security is repaid over the life of the debt. The best known pass-throughs are the mortgage-backed bonds offered by Fannie Mae, Freddie Mac, and Ginnie Mae. However, you can also buy pass-through securities backed by car loans, credit card debt, and other types of borrowing. Those are known as asset-backed securities.

Related Words

Pass-Through Securities: A pool of fixed income securities backed by a package of assets (i.e., mortgages) where the holder receives the principal and interest payments. Related: Mortgage pass-through security

Security Agreement: Security interests in chattels (personal property) are created by an instrument known as a security agreement. To give notice of a security interest, a financing statement must be recorded.

Security: A pledge made to secure the performance of a contract or the fulfillment of an obligation. Examples of securities include real estate, equipment stocks or a co-signer. Mortgages are a form o . . . View Full Definition

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