Mortgage-Backed Securities (MBS) are investment instruments created when lenders bundle groups of mortgages and sell them to investors. These securities are backed by the cash flow from the underlying mortgage loans.

Investors receive interest and principal payments derived from homeowners' mortgage payments.

MBS are often issued by government-sponsored entities like Fannie Mae, Freddie Mac, or Ginnie Mae.

They help provide liquidity in the mortgage market by allowing lenders to free up funds to make more loans.

Reference (Virginia Real Estate & Finance):

Virginia Principles of Real Estate textbook discussions on financing and secondary mortgage market

Real Estate Settlement education material in A490-02REGS.pdf (Mortgage Finance section)