Thursday, February 25, 2021

Mortgage Facts: How Mortgage-Backed Securities (MBS) Influence Rates

 Mortgages can be complex if you don't have a professional mortgage lender at Lake of the Ozarks to help you better understand some of the intricacies. That's why I'm here, to share my years of experience and help educate you on mortgages so that you can make informed decisions. In this week's blog, we're going to cover Mortgage-Backed Securities and how they can influence rates. 

What is an MBS?

A Mortgage-Backed Security (MBS) is an investment, similar to a bond that consists of a bundle of home loans bought from banks that issues mortgages. These asset-backed securities provide investors with periodic payments that work similarly to the ones you'd receive from bond coupons.

How they Work

MBS places banks as the middleman between homebuyers and investors. The better the mortgages, the better the MBS performs. So, it's a win-win for granting quality mortgages to home buyers and investors alike. Investors buying MBS are basically lending money to home buyers. To be sold on the market, an MBS must be issued by a government-sponsored enterprise (GSE) or private financial company. There are many regulations and due diligence performed analyzing each mortgage being sold in the bundle to ensure quality standards are met. As for how they influence rates, mortgage rates are set based on financial markets when they open each day. When MBS prices drop, rates are raised, and when prices rise, rates are lowered. 

Types of MBS

Collateralized Mortgage Obligations (CMO):

This type of MBS is made up of multiple pools of securities. These "tranches" are reviewed and given credit ratings to determine the rate of return to investors.


This type of security is set up similar to trusts in which mortgage payments are collected and "passed through" to investors. Since they're set up as trusts, these typically have stated maturities of five, 15, and 30 years. These maturities can vary depending on the number of principal payments on the mortgages that make up the pass-through.

Team Lasson: Your Mortgage Professionals at the Lake

I hope that you have learned some valuable information about the mortgage industry, how MBS work, how they can influence mortgage rates. As the best mortgage lender at Lake of the Ozarks, I take pride in assisting my clients not only in obtaining top-tier mortgages for their homeownership needs but educating them as well so they can make the most informed decisions possible. With that being said, if you're looking to obtain a mortgage at Lake of the Ozarks or are interested in refinancing your home to take advantage of our great rates, give me a call!

Michael Lasson
Senior Loan Officer
NMLS #: 493712

4655 B Osage Beach Parkway
Osage Beach, MO 65065

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.

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