What is the meaning of mortgage-backed security (MBS) or mortgage-backed bond?

Securities composed of, or collateralized by, loans that are themselves collateralized by liens on real property. MBSs can be categorized into two major types. Pass-through pools are mortgage-backed bonds created by assembling a pool of similar mortgage loans into a single security. Investors in a pass-through pool receive a portion of every interest and principal payment (less serving charges) that is equivalent to the investor's pro rata ownership share in the pool. The other major type is collateralized mortgage obligations (CMOs), usually real estate mortgage investment conduits (REMICs). Investors in a CMO own the rights to receive cash flow from an underlying pool of mortgages in a predetermined order based on priority. CMO securities are secured by pass-through pools. Both types of MBSs may be backed by either liens on residential or commercial properties; however, residential mortgages are more common. Both types of MBSs may be issued by either government agencies or private issuers; however, those issued by government agencies are more common. See: pass-through collateralized mortgage obligation and real estate mortgage investment conduit.