Mortgage Backed Securities - Part 1

This video is part 1 in a 3 part series explaining mortgage backed securities.  To understand this structure, the speaker first discusses the basics of home loans, which represent the basis for MBS. 

Home loans, or mortgages, are taken by consumers to purchase their home.  With any loan, there are interest payments which are made to the originating bank.  These interest payments represent cash flow to the bank every period.

With the advent of the mortgage backed security, commercial banks are able to sell off the mortgages to investment banks who then package these mortgages and sell of the cash flows.