Residential mortgage-backed securities: 5 smart things to know

1. RMBS are investment instruments backed by pools of home loans, also called residential mortgages.
2. These loans are packaged together and sold to investors as tradable securities called passthrough certificates (PTCs).
3. Returns are earned from the monthly EMIs that borrowers pay on their loan, and this EMI payment is passed directly to investors.
4. RMBS gives access to residential real estate credit without owning physical property and offers stable cash flows and a relatively low correlation with equities.
5. LIC Housing Finance recently listed India’s first public RMBS with a maturity of 20 years.


Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.