MBS are financial instruments created by pooling individual mortgage loans, often residential, into one security. Borrowers make regular payments on these loans, which flow to investors holding the MBS, providing a steady income stream. Issued primarily by government-sponsored entities like Fannie Mae and Freddie Mac, as well as private institutions, MBS come in various risk levels based on loan quality. Factors influencing MBS value include interest rate changes, prepayment rates (early loan payoffs), and loan default rates.