Who Owns Mortgage Backed Bonds?

Mortgage-backed bonds are popular among a variety of investors.

A mortgage-backed bond is a security instrument that is backed by the cash flow from a real estate loan. Lenders and owners of mortgages issue bonds to create working capital to make more loans and other investments. A variety organizations own commercial and residential mortgage-backed bonds.

Government Organizations

Many mortgage-backed bonds are owned by the U.S. government. Organizations such as Fannie Mae, Ginnie Mae and the Department of Housing and Urban Development (HUD) own mortgage-backed bonds. Bonds owned by these entities are secured by mortgages serviced by HUD and other guarantors.

Lending Institutions

Some mortgage-backed bonds are owned by lenders. Backed by mortgages on their books, bonds are issued to create capital. Purchasers, in turn, are promised timely payments, including interest, for a specific period or until the mortgages are paid in full.

Private Label Bonds

Some bonds are owned by private organizations such as real estate developers, brokerage houses and individual investors. These entities buy pools of mortgage loans and issue bonds to raise capital for further investments.

References

• U.S. Securities and Exchange Commission: Mortgage Backed Securities

Resources

• How to Buy Bonds