When individual mortgages are originated by lenders like banks or credit unions, they may
bundle groups of these mortgages together into financial vehicles called mortgage-backed
securities (MBS) that are then sold to investors on a secondary market.

This allows investors to gain exposure and returns from the mortgage market, while the lenders gain immediate capital to issue new mortgages.

However, if a mortgage in an MBS bundle defaults or contains errors, there is a “repurchase
risk.” This means the entity that assembled and sold the MBS is obligated to buy back any details ⇒

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