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• Overview
• Bond Basics
• What You Should Know
• Buying and Selling Bonds
• Types of Bonds
• Strategies
• Bonds at Your Stage of Life

• About Municipal Bonds
• About Government/Agency Bonds
• About Corporate Bonds
• About MBS/ABS
  • Overview
  • Mortgage-Backed Securities (MBS) and CMOs

• How to Use This Site
• Links to Other Sites

Important Considerations For Investing in Mortgage Securities

Before investing in a mortgage security, a number of factors should be considered with the help of an investment advisor.

Important factors to consider include:

• the existence of a guarantee or other credit enhancement, and the credit quality of the guarantor, if applicable;
• the type of security and type of underlying collateral, which can be found in offering documents such as a prospectus or offering circular;
• the quality of the security and its underlying collateral;
•  the level of activity in the secondary market should you need to sell the security before its final principal payment;
• the estimated average life and final maturity, which should match one’s investment time frame, also taking into account of a faster or slower prepayment rate;
• the yield compared to other comparable types of investment such as Treasury, corporate and municipal bonds (adjusted for tax considerations); and
• the impact of changes in interest rates to the estimated yield and average life of the security, particularly in the case of specific CMO tranches.

This list is not exhaustive, but instead provides examples of the kinds of questions that should be answered. Considerations of suitability, aligned with your investment objectives, should always be taken into account before making an investment. Contact your financial advisor to discuss possible investments.

All information and opinions contained in this publication were produced by the Securities Industry and Financial Markets Association from our membership and other sources believed by the Association to be accurate and reliable. By providing this general information, the Securities Industry and Financial Markets Association makes neither a recommendation as to the appropriateness of investing in fixed-income securities nor is it providing any specific investment advice for any particular investor. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and sources may be required to make informed investment decisions.