Pass-through securities

in #esteem3 years ago

Pass-through securities are highly susceptible to interest rate risk. As the interest
rate drops, borrowers are more likely to refinance their debt, thus
paying off the mortgages and returning the principal to the participation investors. The investors would then have to reinvest this money at a lower interest rate.
There is a number of different types of pass-through securities.
Participation in pools of mortgages is called mortgage-based securities and participation in pools of consumer loans is called assetbacked securities. Collateralized mortgage obligations are a type of mortgage-based securities, but they may have some different investment characteristics.

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