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 above 25 basis points is stripped from base servicing on loans backing Fannie Mae MBS and issued solely as interest-only (IO) bonds. Excess servicing above 25 basis points is permanently sold. This is distinct from the consent to an excess MSR servicing sale, whereby a servicer transfers an interest in a portion of its servicing fee above a base level to another entity.
Structured Transactions Portal
Fannie Mae's web-based application enables authorized dealers to create structured products and manage settlements. Contact Structured Transactions for more information.
Basics of Structured Transactions
To learn more about Fannie Mae's Structured Product offerings, please click here.
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: 3/2/23