Mortgage Backed Securities (MBS) are financial instruments created by pooling together a group of mortgages. Investors buy these securities to receive regular payments, which come from the mortgage borrowers' monthly payments. This process allows banks to free up capital and offer more loans. MBS can be classified into two main types: pass-through securities, where payments are passed directly to investors, and collateralized mortgage obligations (CMOs), which divide cash flows into different risk levels. These securities play a significant role in the housing market and the broader economy by providing liquidity and enabling homeownership.