Like a bond, $5,000 units with five year maturities backed by a share in a pool of home mortgages insured under the National Housing Act. The securities pay interest and a small portion of principal on a monthly basis.
Is a broad term which encompasses both generic and pool specific securities predicated on real property. The term also refers to private label or agency securities, pass-throughs, or derivatives such as Collateralized Mortgage Obligations. It can refer to the Over-the-Counter options on mortgage backed securities as well. These mortgage backed securities are viewed as either plain vanilla or exotic. Some of the more common issues are: Accrual or Accretion Bond, ARMs, Companion or Support, Constant Maturity Treasury (CMT), Floaters, Gnomes, Gold, Inverse Floaters or Reverse Floaters, IO or Interest Only, IO-ette or IOette, Jump Bonds, Jump Z, Mega, PAC PO, Pass Throughs, Planned Amortization Class, PO or Principal Only, Reverse TAC, Scheduled Bonds, Stripped Mortgage Backed Securities, Super Floater, Super PAC, Super PO, Support, Targeted Amortization Class, VADM Z Bond, and Z PAC. There are other types and the list is growing because of the unique nature of these instruments.
Similar to bonds, these securities are backed by a share in a pool of home mortgages insured under the National Housing Act. The securities pay interest and a part of the principal each month and, if home owners prepay their mortgages, may pay out additional amounts of principal before normal maturity. They trade in the bond market at prices reflecting current interest rates.