The mortgage-backed securities (MBS) market emerged as a way to decouple mortgage lending from mortgage investing. Until the 1980s, nearly all US mortgages were held on balance sheet by financial intermediaries, predominately savings and loans. Securitiza-tion today allows these mortgages to be held and traded by investors all over the world, and the US MBS market is one of the largest and most liquid global fixed-income markets, with more than $11 trillion of securities outstanding and nearly $300 billion in average daily trading volume.1 MBS and a related instrument, covered bonds, are also used for funding mortgages in many European countries as well as some other parts of the world.

This paper presents an overview of the MBS market, including the institutional envi-ronment, security design, MBS risks and asset pricing, and the economic effects of mort-gage securitization. It also assembles descriptive statistics about the MBS market, includ-ing market size, growth, security characteristics, prepayment, trading activity and yield spreads. We particularly focus on the large agency residential MBS market in the United States, but also discuss other types of MBS both in the US and around the world. We also consider the role of the Federal Reserve through its quantitative easing program.

Throughout, we highlight insights from the growing literature on MBS and mortgage securitization, a body of research catalyzed by the role of MBS markets in the 2008 finan-cial crisis. We also highlight topics for future research. This paper can only scratch the surface of such a complex topic, however, and for other surveys and further information, we refer the reader to Hayre (2001), McConnell and Buser (2011), Green (2013), Davidson and Levin (2014), Fabozzi (2016) and Kim et al. (2022).