Stripped mortgage-backed securities (SMBS) are multiclass, pass-through, grantor trust securities created by "stripping apart" the principal and interest payments from the underlying mortgage-related collateral into two or more classes of securities. The securities so created address two distinct investment needs. SMBS deals create one or more classes of securities:
- Interest Only (IO) classes receive the interest cash flow from the underlying assets.
- Principal Only (PO) classes receive the principal cash flow from the underlying assets.
- Additional classes that may receive different portions of principal and interest.
Most SMBS can be recombined at a future date and are commonly identified by a trust number and class (e.g., SMBS Trust 318, and class 1 or 2).
In another type of SMBS transaction, excess servicing is stripped from base servicing on loans backing Fannie Mae MBS and issued solely as interest-only (IO) bonds.
Structured Transactions Portal
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Basics of Structured Transactions
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For Single-Family securities, access disclosure data, including at-issuance and monthly data, Legal documents, consumable data files and search capabilities for UMBS, MBS, Supers®/Megas, SMBS, and REMICs. Click here to access.
Page last revised: 03/15/22