Review:
Mortgage Backed Securities (mbs)
overall review score: 4.3
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score is between 0 and 5
Mortgage-backed securities (MBS) are investment products that are created by pooling together various residential mortgages into one security that investors can buy. These securities are then sold to investors, who receive payments based on the interest and principal payments made by homeowners on their mortgages.
Key Features
- Diversification of risk
- Regular income stream
- Traded in the secondary market
Pros
- Provides liquidity to the housing market
- Allows investors to earn a steady income stream
Cons
- Subject to prepayment risk
- May be exposed to credit risk