# Mortgage-Backed Security (MBS)

*Real Estate — Finicade finance glossary*

An MBS pools mortgages and sells claims on their payments to investors, which is what lets a lender originate a loan and immediately recycle the capital. Agency MBS carry government-linked credit backing; private-label ones don't, and that distinction is much of 2008. Their defining oddity is prepayment risk: borrowers refinance when rates fall, returning your capital exactly when reinvestment is worst.

**Also known as:** MBS, mortgage backed securities, agency MBS

**Related terms:** [Securitization](https://finicade.com/glossary/securitization), [Tranche](https://finicade.com/glossary/tranche), [Mortgage](https://finicade.com/glossary/mortgage), [Prepayment Penalty](https://finicade.com/glossary/prepayment-penalty), [Covered Bond](https://finicade.com/glossary/covered-bond)

Source: https://finicade.com/glossary/mortgage-backed-security