Mortgage pass-through security

Similar financial terms

Mortgage sector
Securities backed by mortgage loans. These are loans obtained by borrowers in order to purchase residential property or and entity to purchase commercial property.

Federal National Mortgage Association (FNMA)
The FNMA is a US government-backed corporation which purchases mortgages from lenders and resells them to investors. It is financed by the issue of debt securities. Equity shares, known as Fannie Maes, are traded on the New York Stock Exchange.

Alternative mortgage instruments
Variations of mortgage instruments such as adjustable-rate and variablerate mortgages, graduated-payment mortgages, reverse-annuity mortgages, and several seldom-used variations.

Wholesale mortgage banking
The purchasing of loans originated by others, with the servicing rights released to the purchaser.

Stripped mortgage-backed securities (SMBSs)
Securities that redistribute the cash flows from the underlying generic MBS collateral into the principal and interest components of the MBS to enhance their use in meeting special needs of investors.

REMIC (real estate mortgage investment conduit)
A pass-through tax entity that can hold mortgages secured by any type of real property and issue multiple classes of ownership interests to investors in the form of pass-through certificates, bonds, or other legal forms. A financing vehicle created under the Tax Reform Act of 1986.

RAMs (Reverse-annuity mortgages)
Mortgages in which the bank makes a loan for an amount equal to a percentage of the appraisal value of the home. The loan is then paid to the homeowner in the form of an annuity.

Open-end mortgage
Mortgage against which additional debts may be issued.

Mortgager
The borrower of a loan secured by property.

Mortgagee
The lender of a loan secured by property.

Mortgage-backed securities (MBS)
Securities backed by a pool of mortgage loans.

Mortgage-Backed Securities Clearing Corporation
A wholly owned subsidiary of the Midwest Stock Exchange that operates a clearing service for the comparison, netting, and margining of agency-guaranteed MBSs transacted for forward delivery.

Mortgage rate
The interest rate on a mortgage loan.

Mortgage-pipeline risk
The risk associated with taking applications from prospective mortgage borrowers who may opt to decline to accept a quoted mortgage rate within a certain grace period.

Mortgage pipeline
The period from the taking of applications from prospective mortgage borrowers to the marketing of the loans.

Mortgage duration
A modification of standard duration to account for the impact on duration of MBSs of changes in prepayment speed resulting from changes in interest rates. Two factors are employed: one that reflects the impact of changes in prepayment speed or price.

Mortgage bond
A bond in which the issuer has granted the bondholders a lien against the pledged assets. Collateral trust bonds

Mortgage
A loan secured by the collateral of some specified real estate property which obliges the borrower to make a predetermined series of payments.

Closed-end mortgage
Mortgage against which no additional debt may be issued.

Collateralized mortgage obligation (CMO)
A security backed by a pool of pass-throughs , structured so that there are several classes of bondholders with varying maturities, called tranches. The principal payments from the underlying pool of pass-through securities are used to retire the bonds on a priority basis as specified in the prospectus.

Conventional mortgage
A loan based on the credit of the borrower and on the collateral for the mortgage.

Growing-equity mortgage (GEM)
A fixed-rate mortgage that provides scheduled payment increases over an established period of time, with the increased amount of the monthly payment applied directly toward reducing the remaining balance of the mortgage.

Agency pass-throughs
Mortgage pass-through securities whose principal and interest payments are guaranteed by government agencies, such as the Government National Mortgage Association (" Ginnie Mae "), Federal Home Loan Mortgage Corporation (" Freddie Mac") and Federal National Mortgage Association (" Fannie Mae").

Pass-through coupon rate
The interest rate paid on a securitized pool of assets, which is less than the rate paid on the underlying loans by an amount equal to the servicing and guaranteeing fees.

Pass-through securities
A pool of fixed-income securities backed by a package of assets (i.e. mortgages) where the holder receives the principal and interest payments.

Pass-through rate
The net interest rate passed through to investors after deducting servicing, management, and guarantee fees from the gross mortgage coupon.

Modified pass-throughs
Agency pass-throughs that guarantee (a) timely interest payments and (b) principal payments as collected, but no later than a specified time after they are due.

Conventional pass-throughs
Also called private-label pass-throughs, any mortgage pass-through security not guaranteed by government agencies.

Variable price security
A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.

Underlying security
For options it is the security subject to being purchased or sold upon exercise of an option contract. For example, Deutsche Bank stock is the underlying security to Deutsche Bank options.

For depository receipts it is the class, series and number of the foreign shares represented by the depository receipt.

Security selection decision
Choosing the particular securities to include in a portfolio.

Security market plane
A plane that shows the equilibrium between expected return and the beta coefficient of more than one factor.

Security market line
Line representing the relationship between expected return and market risk.

Security deposit (initial)
Synonymous with the term margin. A cash amount of funds that must be deposited with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as part payment or purchase.

Security characteristic line
A plot of the excess return on a security over the risk-free rate as a function of the excess return on the market.

Security
Piece of paper that proves ownership of stocks, bonds and other investments.

Primitive security
An instrument such as a stock or bond for which payments depend only on the financial status of the issuer.

Monthly income preferred security (MIP)
Preferred stock issued by a subsidiary located in a tax haven. The subsidiary relends the money to the parent.

Convertible security
A security that can be converted into common stock at the option of the security holder, including convertible bonds and convertible preferred stock.

Cabinet security
A stock or bond listed on a major exchange with low daily traded volume.