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Understanding Fannie Mae Mortgage-Backed Securities
Mortgage-Backed Securities
Fannie Mae creates both single-class and multiclass mortgage-backed securities. The mortgage-backed securities represent beneficial interests in pools of mortgage loans or in other mortgage-backed securities.
Single Class
One form of single-class mortgage-backed security is created through either single lender or multilender transactions in which a lender delivers to Fannie Mae mortgage loans in exchange for pass-through certificates. Fannie Mae refers to these pass-through certificates as Fannie Mae MBS.
Another form of single-class mortgage security is the Fannie Mega® security or Mega. Megas are pass-through certificates backed by previously pooled Fannie Mae MBS with similar characteristics and/or other pooled Megas with similar characteristics.
Multiple Classes
Fannie Mae also creates and guarantees multiclass mortgage-backed securities, such as real estate mortgage investment conduits (REMICs) and stripped mortgage-backed securities (SMBS). REMICs are a vehicle by which an issuer can restructure interest and principal payments on mortgage assets into separately tradeable interests. SMBS separate interest cash flow from principal cash flow, and Fannie Mae typically uses SMBS to create classes that pay only principal or only interest.
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