Dictionary of Banking Terms: modified pass-through certificate
modified pass-through certificate
security that represents an undivided interest in pools of mortgages, backed by federally guaranteed loans of the same maturity and coupon date. When a mortgage banker has collected at least $2 million in mortgages, the loans are deposited in a custodian bank and a certificate is issued against the mortgages. Payments of principal and interest are made monthly to certificate holders, and are guaranteed by the Government National Mortgage Association regardless of whether payments are received, as borrowers pay down the loans. There is no holding back of interest payments as with collateralized mortgage obligations and mortgage backed bonds.
