Investments glossary

Residential Mortgage-Backed Security (RMBS)

Residential mortgage-backed securities (RMBS) are a debt-based security (similar to a bond), backed by the interest paid on loans for residences. The interest on loans such as mortgages, home-equity loans and subprime mortgages is considered to be something with a comparatively low rate of default and a comparatively high rate of interest, since there is a high demand for the ownership of a personal or family residence. Investors are attracted this kind of security also want to be protected from the risk of default inherent with individual loans of this kind. This risk is mitigated by pooling many such loans to minimize the risk of an individual default.

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