What is a mortgage loan? What is MBS?

The word "Mortgage" comes from the English word "mortgage", which means "mortgage loan" and "commercial housing mortgage loan".

"Mortgage" has two meanings: real estate mortgage and installment repayment. It means that the mortgagor transfers the property right of the property to the mortgage beneficiary (bank) as a repayment guarantee, and after repayment, the mortgage beneficiary transfers the property right of the property back to the mortgagor. Specifically, the mortgage loan refers to the purchase of the building as collateral to obtain loans from the bank, and the buyers pay the bank in installments according to the repayment method and time limit agreed in the mortgage contract; Banks charge interest at a certain rate. If the lender defaults, the bank has the right to take away the house.

Take buying a house as an example. After you pay the down payment, you will continue to pay back the house every month until you pay off the principal and interest of the bank. The collateral is your new house.

MBS: American mortgage-backed bonds

MBS is the earliest asset securitization product. It was first produced in the United States in the 1960s. It is an asset securitization commodity, which is mainly issued by American professional housing banks and savings institutions with their mortgage loans. Its basic structure is to pool the loans that meet certain conditions in mortgage loans to form a mortgage pool, and use the regular cash flow of principal and interest in the loan pool to issue securities, which are guaranteed by government agencies or financial institutions with government background. Therefore, America's MBS is actually a kind of securitized goods, with a strong color of public finance policy.

The principal and interest generated by the mortgage pool are transferred to the investors of MBS intact, so MBS is also called the passing securities. There are four main types of mortgage-backed securities in the United States:

1) Manual securities guaranteed by the National Mortgage Association (GNMA);

2) Letter of participation from Federal Housing Mortgage Corporation (FHLMC);

3) Federal National Mortgage Association (FNMA) mortgage-backed bonds;

4) Private mortgage bonds.