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Pass through

• A mortgage-backed security on which payment of interest and principal on the underlying mortgages are passed through to the security holder by an agent.

• Is the term used to represent a generic class of securitized mortgage notes. Typically, these mortgage backed securities are issued by agencies of the United States, such as FNMA or FHLMC. The underlying collateral is serviced by banks or mortgage companies. The revenue generated by the servicing is considered fee income. The principal and interest payments go to the investors. Two attractive features of these instruments is that the securitization process lowers the regulatory capital requirements for the originating then holding investor. Secondly, the securitization tends to improve the liquidity of the asset.

 
 Embedded terms in definition
 Agencies
Agent
Asset
Capital
Class
Collateral
Fhlmc
Fnma
Generic
Go
Income
Instruments
Interest payments
Interest
Investor
Liquidity
Mortgage backed securities
Mortgage
Principal
Regulatory capital
Securities
Securitization
Security
Underlying
 
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