Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Mortgage Pool

What it is:

A mortgage pool is a group of mortgages in a mortgage-backed security (MBS).

How it works (Example):

Once a lender completes a mortgage transaction, it generally sells the mortgage to another entity. The entities that buy mortgages -- for example, Fannie Mae and Freddie Mac -- package hundreds of mortgages together into a mortgage pool. The mortgage pool then acts as collateral for a mortgage-backed security.  

Why it Matters:

An MBS is collateralized by a mortgage pool. Mortgages in a mortgage pool tend to have similar characteristics. For example, they may all be 30-year, fixed-rate mortgages. 

MBSs should not be confused with CDOs, or "collateralized debt obligations." A CDO is collateralized by a pool of loans with varying characteristics. For example, they may have different terms (10-year, 15-year, 30-year) and adjustable rates.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...