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Mortgage-Backed Securities (MBS) Explained - Courtesy of khanacademy 3/3

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Uploaded by on Oct 21, 2010

A mortgage-backed security (MBS) is an asset-backed security or debt obligation that represents a claim on the cash flows from mortgage loans through a process known as securitization.

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  • Can you please explain the incentives for the SPE to issue those MBS's? For example if the SPE expect 10% ROI and I expect the same ROI, where are the margins? (Given your example, the SPE needs to sell 1 MBS for over 1000 dollars, which a buyer would not accept given the expected ROI of 10%?)

  • Don't forget all the closing fees, mortgage contract costs, title costs, realtor's fees...etc...that the bank and their employees get on top of the interest when you buy a house.

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