MBS

Abbreviation for mortgage backed security. Security backed by a pool of mortgages, such as those issued by Ginnie Mae and Freddie Mac. Mortgage-backed securities are created when a company buys a group of mortgages from a primary lender and then uses the monthly payments, and those of thousands of others, as the revenue stream to pay investors who have bought shares of the offering. They allow lenders to sell the mortgages they write, thus allowing them to lend again. (Also called “mortgage related security,” “mortgage-backed certificate,” “mortgage-related security,” or a “mortgage pass through.”)