Mortgage-backed securities are financial instruments that consist of a bundle of home loans bought from the banks that issued them. Investors in MBS receive periodic payments derived from the income generated by the underlying mortgage loans. These payments can vary in amount depending on the interest rates, loan terms, and the behavior of the borrowers (e.g., whether they prepay their loans). MBS are typically sold in the form of bonds and can be classified into two main categories: pass-through securities and collateralized mortgage obligations (CMOs). Pass-through securities simply pass through the payments from mortgage borrowers to the bondholders, while CMOs are structured to offer different classes of risk and payment streams. MBS are backed by the cash flow from mortgage payments and can be viewed as an alternative form of raising capital for investing in real estate.