A mortgage-backed security is a claim on interest and principal payments from a pool of mortgage loans.
After a borrower makes a mortgage loan, banks, mortgage companies, and other originators would usually combine the loan with other mortgage loans and sell it to governmental, quasi-governmental, or private entities like the Government National Mortgage Association (Ginnie Mae), Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac).
Then, in a process called securitization, these entities would