What Is A Mortgage Bond?

Mortgage lenders often sell home loans as mortgage bonds on the secondary market, which are considered safe investments backed by the U.S. federal government. Entities like Fannie Mae and Freddie Mac support the housing market by buying these mortgages and turning them into mortgage-backed securities. These bonds offer steady interest payments to investors, help banks generate more mortgages, and diversify investment portfolios. However, they may yield lower returns than corporate bonds and can be influenced by prepayments, extensions, and inflation.