A type of asset-backed security created by pooling mortgages and selling shares of the pool to investors, who receive payments from the underlying mortgage principal and interest payments.
From Old French 'morgage' (dead pledge), 'back' (to support), and Latin 'securitas' (freedom from care). The modern MBS market developed in the 1970s when government agencies began securitizing mortgages to increase housing finance liquidity.
Mortgage-backed securities turned home loans into tradeable investments, democratizing real estate investing but also spreading risk globally! When homeowners in Nevada stopped paying their mortgages in 2008, pension funds in Norway felt the pain because mortgages had been sliced, diced, and sold worldwide.
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