securities

MORTGAGES EXPLAINED

Mortgage-Backed securities are debt obligations that are secured on a group of mortgages generally on residential properties. They work on a similar principle to bonds in that the investor lends money to a ?mortgage pool? in return for interest payments. These mortgage loans are purchased from primary lenders (Banks, mortgage companies & various financial organizations) and formed into pools by an investment body representing a government association or private concern. Securities are then issued and sold to investors who are entitled to a share of the principle & interest instalments made on the loans in the pool. Mortgage backed securities enable primary lenders to grant mortgages to their customers without being responsible for the loan in its entirety.