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.