mortgage-backed security (MBS) mortgage-backed obligation (MBO) An investment instrument that represents an undivided ownership interest in a group of mortgages. A security or similar form of obligation that is backed by a pool of loans secured by mortgages. The security granted to the investor may provide that the loan is repaid by principal payments received from the underlying mortgages - ‘pass-through’ securities, i.e. the security or obligation represents an undivided interest in the loans secured by the mortgages. Alternatively, the ‘issuer’ of the security may undertake to make payments to the investor without direct regard to the cash flow received from the borrowers - ‘non-pass-through’ securities. Alternatively, the security may be a ‘modified-pass-through’ so that the holder of the security is guaranteed monthly payments of interest, regardless of whether the payments of interest and principal are adequate to meet such payments. Pass-through, unlike non-pass-through, securities are not retained on the balance sheet of the originator or issuer of the securities. Non-pass-through securities normally take the form of bonds, called ‘mortgage-backed bonds’.  The investor in non-pass-through securities may be provided with additional collateral or ‘credit enhancement’ in the form of a letter of credit, additional equity capital or guarantees, or insurance as provided by a mortgage-security insurer, to be drawn on in the event that the mortgage repayments are insufficient or fail to meet the payments due to the bond holders. The offering of the securities, bonds or obligations backed by a pool of mortgages is referred to generally as a ‘securitized-mortgage offering’. Similar securities or bonds backed by other forms of collateral or assets, such as credit-card receivables, car loans or mobile home loans, are called ‘asset-backed securities or bonds’, as distinguished from the various forms of ‘mortgage-related securities’.  M.W. Dennis & M.J. Robertson. Residential Mortgage Lending (4th ed. 1995), Ch. 8 “Mortgage-Backed Securities”.  A.S. Davidson and M.D. Herskovitz. Mortgage-Backed Securities (1993).  R.L. Kuhn. Mortgage and Asset Securitization (1990).  F.J. Fabozzi and F. Modigliani. Mortgage and Mortgaged-Backed Securities (1992).  F.J. Fabozzi. The Handbook of Mortgage Backed Securities (1995).  E. Ferran. Mortgage Securitisation—Legal Aspects (1992).